Tag Archives: credit cards

Budgeting

Reasons To Have At Least One Credit Card

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Credit cards can be dangerous in the wrong hands. They can also not only be beneficial at times, but they’re necessary at other times.

There’s an interesting debate between financial experts on whether people should pay off all their credit cards as soon as possible or keep a balance on some of them and pay them down via a schedule to show that you know how to pay off debt. It’s a crazy conversation where, strangely enough, both sides make sense. There’s no doubt that if you have a lot credit cards you need to wean yourself off them but what are some of the thoughts on having credit cards in the first place? Check these out.

First, having at least one credit card turns out to be necessary if you ever plan on going anywhere or staying in a hotel. You can’t rent a car without one, can’t stay in a hotel, and if you’re flying in these days of terrorism worry you might have to find ways of proving who you are before you’re allowed to buy a ticket.

Second, you can probably alleviate some of these issues by using a bank debit card that’s either a Visa or Mastercard but there’s something you need to know. If you’re renting a car they’ll hit your account up for a much higher amount than what they believe your balance will be and that could leave you without access to your account if you don’t have way more money in it than you expected to need. The same goes for some hotels. They’ll only keep it that long for up to 24 hours but that could be quite stressful.

Third, though we’d probably side with those who believe if you can pay off your credit card immediately do so, within the context of a budget if you need a big ticket item and can pay it off within 3 – 6 months without hurting yourself overall it’s not a bad idea to do that.

Fourth, there’s a fine line on just how many credit cards you can have, even if they’re all pulled off, and how credit agencies will judge your worthiness. If you have more than what makes them comfortable they see you as a potential credit risk who could run up unconscionable debt within a short period of time, even if that’s never been your pattern. Having too few credit cards, or at least a history of having them, makes them feel they can’t get a gauge on the type of financial risk you might be. We can’t make that recommendation for you but it’s something you should know.

Fifth, if possible it never hurts to have at least one store credit card of some type, and the best type is a department store. In an emergency you might need clothes, and even if the interest rates can be higher on store cards having the ability to get clothes where the monthly payments will be lower than normal credit cards can be crucial.

There you go, some thoughts on why having a credit card might be worthwhile. Let us know your thoughts on this.
 

Collections

Why You Need To Always Make Collection Agencies Prove Your Debt

Last year we wrote a post titled 5 Rights You Have With Collection Agencies. The beginning of our second right was this sentence: “You have the right to ask them to prove you owe what they say you owe”. Turns out this is important advice and we’re going to tell you why.

Over the last year there have been some collection agencies that were fined for trying to collect on debts that didn’t exist. One of those companies, Expert Global Solutions, was hit with a $3.2 million fine for that and other illegal practices. In September, National Attorney Collection Services Inc was fined $1 million for the same, as well as representing themselves as a law firm and violating the confidentiality of those it was trying to get money from.

There’s two things most people don’t know about credit.

First, since most large companies get their money from insurance claims if they’re not paid, they’re getting paid a second time when they give these accounts to collection agencies, and they’ll do almost anything, including lie and harassment, when they’re able to earn anywhere from 80-92% or sometimes even more of their initial investment.

Second, it’s true that if you have something hit your credit report that if you don’t pay it in 7 years it falls off your credit report (well, not medical bills or anything owed to the government, but everything else). However, if a collection agency gets its hands on this stuff they can legally keep chasing you for the money.

One other thing collection agencies are counting on is your not having any record of an outstanding claim, thus feeling pressured and anxious when you get that sudden phone call. These days they’ll even call you on your cellphone, although if you tell them they’re violating the Telephone Consumer Protection Act and that you’re going to report them to the federal government they’ll probably hang up and leave you alone for a while because the fine they’ll get is sometimes higher than any money they get from you.

In any case, what happens sometimes is they’ve laid their hands on some paperwork and falsified a number, but you’ll never be able to investigate it for yourself if you don’t request anything from them. And sometimes when you request information, they’ll never call you again because they don’t really have anything to send you, since they have to send you not only proof of the outstanding debt but proof that the original company billed you for it.

It’s always wise to ask for proof whenever someone wants your money, but when it comes to collection agencies, who can hurt your credit, it’s critical to do.