Recently in Credit Category

THE PROBLEMS

Phony debt collectors are calling consumers and falsely claiming they have defaulted on a payday advance loan. These bogus debt collectors demand that the alleged loan be paid back immediately by wire transfer or by providing bank account or credit card information. Sometimes, these phony debt collectors claim to be attorneys and threaten the customers with lawsuits or arrest if they don't pay back the alleged loan immediately. In addition, there have been reports of sham companies sending fraudulent letters and emails to customers under the guise of legitimate payday businesses without their authorization or knowledge.

WHAT TO DO

When contacted by a debt collector, you should always ask the debt collector to provide official written documentation that substantiates the debt. DO NOT provide any personal information on the phone to inbound callers, such as bank account or credit card information. If you ever receive a suspicious telephone call, email, or letter regarding an outstanding debt, you should take at least one of the following actions:

• Immediately contact the payday advance company being referenced by the debt collector to inform the company of the potentially fraudulent activity.
• Alert your local law enforcement or your state attorney general's office or go to www.naag.org.
• File a complaint with the Internet Crime Complaint Center by going to: www.ic3.gov/complaint/default.aspx if the suspicious activity occurs online.
• File a complaint with the Better Business Bureau at www.bbb.org/us/Consumer-Complaints/ if you are aware of the name of the debt collecting company committing the act.

The 1.8 million Californians who receive unemployment insurance will now receive benefits on a debit card instead of a traditional check, according to a Los Angeles Times report.

The Employment Development Department, the state agency that runs the unemployment and disability insurance program, announced on Tuesday that it has finished the process of issuing the debit cards, the L.A. Times reported and the agency says the cards will make it easier for recipients to receive and use the payments.

"It modernizes the purchasing power of our customers and puts them on par with the rest of the buying public," Employment Development Department chief deputy director Pam Harris told the L.A. Times.

The cards will not have ATM fees, if used carefully, according to the article, and they can be used for most purchases anywhere Visa debit cards are accepted.

Read the full story at www.LATimes.com.

WASHINGTON -- Sen. Sheldon Whitehouse has reintroduced legislation that would allow states to cap the interest rates on credit cards used by their residents.

Although the measure is not expected to pass Congress, it marks the renewal of a push by a group of Senate Democrats to get around a landmark 1978 Supreme Court decision that has long rankled consumer advocates.

Under the Supreme Court decision, national banks must comply with the lending laws of the states where their credit cards are issued, but not the lending laws of other states where their customers live.

"This legislation would restore historic, long-standing states' rights to protect consumers from improperly high interest rates," Whitehouse, D-R.I., said in a press release.

His legislation is being co-sponsored by Sen. Carl Levin, Sen. Dick Durbin, Sen. Jack Reed, Sen. Bernie Sanders, Sen. Mark Begich, Sen. Jeff Merkley, and Sen. Al Franken.

The legislation, which is strongly opposed by the credit-card industry, was last considered by the Senate in 2010 as an amendment to the Dodd-Frank Act. It failed by a 60-35 margin, at a time when Democrats held six more Senate seats than they do today.

Analysts said its chances today remain dim.

"We believe this news presents more of a headline risk vs. there being actual risk that this legislation gets passed," Keefe, Bruyette and Woods wrote in a research note. "We think the likelihood of the Whitehouse bill passing Congress is quite low."

Money in the bank beats credit cards any day of the week.

Manipulative marketing by financial institutions has conned people into believing that they MUST have a credit card or they will lose out on gimmicks like "cash back on purchases," or frequent flier points or they will somehow be caught short in a desperate moment.  There is not a single benefit to credit cards that exceeds the benefits of having a rainy day fund--either in cash or in a savings account.

Banks do not give ANYTHING away.  Unless you are among the tiny minority of Americans who pays off their credit cards every month, you are paying dearly for that cash back and those frequent flier miles.  Even those who pay off their credit cards every month may still pay an annual fee for their cards.  The people who are really getting soaked are those who carry a balance from month to month (revolving credit) paying interest all along, and those who pay late fees and the accelerated interest rates that result when payments are late.

Despite all of the excuses, there are no compelling reasons to own a credit card.  The use of credit cards simply means that:

1. You're too lazy to swing by your bank or ATM to get cash
2. You don't really have the money for what it is that you want to buy
3. You believe it offers some sort of abstract protection
4. You are unaware that hotels, flights and rental cars can be reserved with debit cards
5. You feel that credit cards are status symbols that elevate you and impress others

People who are truly panicked about carrying around cash can still use DEBIT cards, which accomplish everything a credit card does, without the gimmicks.  Debit cards offer similar protections if they are stolen, but the money for your purchases comes directly out of your checking or savings account rather than becoming one more IOU to pay at some point in the future.

A really important concept to grasp moving forward is that of "cognitive disconnect."  People who use cash, and to some extent people who use debit cards, engage a COGNITIVE CONNECTION between what money they actually possess and the depletion of that money as they make purchases.  This "cognitive connect" is essential for people to experience in order to become fundamentally responsible with their money.  They must FEEL that bittersweet sensation of parting with their money as they acquire goods and pay for their chosen services.  Credit cards, on the other hand, insidiously disguise this "cognitive connect" by dulling the pain of expending hard-earned money.  Consumers swipe their credit card and momentarily feel rewarded with their purchase.  There is a cognitive disconnect between the expenditure they just made and the long, drawn out, lesser pain of parting with future earnings.   Bit by bit, with each monthly statement, they will still  have to pay for those purchases, but with interest.  This is a ridiculous and unnecessary situation to put yourself in.  Why suffer over time, just because you lack the will power to wait until you actually have the money you need to buy what you want?  Cash forces you to make prudent decisions about how you spend your money.

Credit card companies and banks count on this aspect of human nature to make billions of dollars every year off of people who delude themselves into thinking not only that debt is okay, but that it is somehow a mark of high status.  This is pure folly.  Once you enter the Consumer Underground, you will learn that high status is achieved by having ZERO debt and plenty of cash in the bank.

The credit bureaus have facilitated America's addiction to debt by requiring indebtedness in order to prove credit worthiness.  "You can't build credit without using credit."  What a complete trap.  People inflate their egos and actually brag about their credit scores, when all the while they are simply dupes, falling prey to a system that seeks to enslave them in a lifetime of indebtedness.  Look at where all of this pride in "good credit" has gotten us.  Americans are slaves to monthly payments, which then makes them slaves to their jobs.  Slaves have no choices, no future and no quality of life.

Isn't it infinitely better to bite the bullet right away and prevent that cloud of debt altogether?  Why create a situation of anxiety for yourself by making purchases that will then loom oppressively overhead, slowly eroding any sense of exhilaration you felt while shopping?  People who run up their credit, acting as though they have the same lifestyle as Carrie Bradshaw or the Kardashians, fail to understand that there is not only a huge penalty to pay for such fantasy, but there also exists an equal sensation of exhilaration to be felt by saving up and paying cash for that long-desired item.  Unlike credit card purchases, paying in cash, in full is an exhilaration that lasts indefinitely.  The item you bought outright is entirely yours, with no future payments to confront later on.

This credit delusion has consequences far beyond any individual's indebtedness.  Credit cards have created a new normal in America, where debt has become acceptable and has actually disguised an erosion of wages going back to the 1980s.  Rather than people growing angry at their loss of income, through wage stagnation and a persistent decline in buying power, Americans have anesthetized themselves by making up for this loss of income with credit.  Take away the credit cards, force the people to live on what they actually earn, and the people will suddenly see that corporations have made out like bandits, while wage earners have been driven into the ground.

Background on the true state of workers, debt, wages, jobs and the American economy can be found in this article:

Wage Stagnation, Growing Insecurity, and the Future of the U.S. Working Class

So, getting back to entering the Consumer Underground, you must first begin by changing your entire perspective on debt.  If you truly want to free yourself from the current American system of debt enslavement, you must resolve to give up ALL debt.  You must resolve to live the life you should have been living if you had never had a credit card or line of credit to begin with.  It is sobering at first to not have the false security blanket that credit cards hypnotize people into growing dependent upon, but going underground requires courage.  Not having debt and having a cushion of money in the bank gives you a REAL sense of security that credit cards couldn't possibly match.  Money in the bank and no debt means you now have choices for such things as changing your job and it means having power as a consumer for things like airline specials and discounts that are offered by paying for health club memberships and auto insurance in full or by having the money to buy things when they go on sale.  Debt is enslavement and slaves do not have choices or power.

Here's how to begin your journey underground:

• Get rid of your debt RIGHT NOW!

If you can switch gears and begin living your life as though you have no access to credit, then do so immediately.  Use any extra money to pay off your debts and to begin building your savings.  If you do not have extra money then you really need to make some hard choices.  People have really impressed me with giving up things I really didn't think they would allow themselves to go without.

One friend gave up his slightly used, but very nice car AND in Los Angeles.  It can be done.  I used to listen to his weekly whining that he just couldn't keep up with his payments, that his life was hardly worth living if he was just working, that he had no QUALITY OF LIFE.  He finally sucked it up one day and sold his car on Craigslist.  Do you know what I hear from him now?  No, not whining that he can't get around, but about how free he feels without the car payments, the insurance payments, the parking tickets and the stress of finding a parking spot every night.  With the freed up money, he was able to accelerate payment on his other credit accounts and now he only has student loan payments left.  With all his extra income every month, he is going out and enjoying himself with friends, traveling and growing more secure as his savings account balance increases.  On top of this new found security in cash, he is enjoying the greatest sensation of all--a total lack of anxiety and dread as he checks his mailbox everyday.  Gone are the invoices, gone is the looming fear of whether he will have enough in his paycheck to cover his bills for that week.  He has defied the credit system by adjusting his lifestyle to match what he actually earns.  Somewhere a bank is crying as they mourn the breakup that he initiated.

• If you absolutely cannot pay off your debt, file for bankruptcy.

People freak out way too much over this option.  Bankruptcy law is a foundational protection in our country--it is a RIGHT.  An absurd stigma is placed on people who file bankruptcy, yet where is the stigma for the BANKS and CREDIT BUREAUS who recklessly approved all of this debt, that people are now drowning in?  By relying on a ridiculous FICO score, (outsourcing due diligence) rather than really getting to know their customers, banks and credit card companies brought this era of massive default and foreclosure on themselves.  Do not give a single thought to discarding your debt and throwing it back on the banks, who destroyed our economy, got bailed out and then took ZERO responsibility for it.

The human life span is only so long, so you cannot let your ego prevent you from starting over as soon as you possibly can.  "But what about my credit rating" the people cry.  What about it?  You're never going to use credit again anyway, right?  Only slaves worry about their credit rating.  And here's another secret:  Within two years, your credit will be good enough to rent, or get a mortgage anyway--provided you have a healthy amount of cash saved up.  Do not live in Hell because of some irrational notion that you need to protect your credit score.  Chances are that if you cannot pay down your credit cards and loans, then you have most likely entered a state of bad credit anyway.

Because the banking industry has grown so dependent on struggling people, who overdraw their checking accounts regularly and who are late on payments, which then lead to higher interest rates and penalty fees, they shudder in fear at bankruptcy.  These carefully-placed traps make banks a fortune every year.  For many, by the time bankruptcy is filed, borrowers have probably already paid the original principal that was charged or loaned out, so all the bank loses is years of future fees and interest--continued profiteering off of your misery and enslavement.  Banks depend on suffocating indebtedness so much that they had their lobbyists change the U.S. bankruptcy code to make it even more difficult for people to free themselves from their financial shackles.  Do not let this discourage you.  Stop paying your credit cards and loans and use your money to save up around $1500.  This is generally what a standard bankruptcy costs.  If you can do this in two to three months, all the while ignoring collection calls and notices, your creditors will not have enough time to sue you, much less garnish your wages.  Make sure during this time that you pay on your secured debt, like your car, as repossession can occur very shortly after missing your first payment.  The only good thing about these giant banks is that they've become too big to sue everybody who defaults on their loans.  They just send it to collections knowing that people live in constant fear of a lower credit score and will be intimidated into paying.  Don't let yourself feel threatened by these corporate henchmen.  Even if the bank, credit card company or collection agency can get a judgment, the bankruptcy will clear it away.

You can avoid collection calls by canceling your home phone and getting something like Vonage or by getting a PREPAID cell phone, with a new number and canceling your current cell phone.  Don't worry if you have a contract because that can be bankrupted on too.

The only other hassle when filing for bankruptcy is that you now have to take some online financial management courses, but it's worth it and you might learn something.  Life after bankruptcy is like walking out of a cold, dreary penitentiary.  Rather than waking every day to fear and dread about bills and monthly payments, your existence becomes one of opportunity and peacefulness.  Everyone I know who filed for bankruptcy came out stronger, wiser and happier.  They were able to move on with their lives.  But the option of bankruptcy should be a mechanism of freedom, not the beginning of another cycle of indebtedness.

• Resolve to PREPAY for everything

The road to freedom, through the Consumer Underground, also requires ridding yourself of monthly payments.  People sign up for the stupidest things and then end up getting bled to death every month through recurring payments and automatic withdrawals from their accounts.  Do NOT do this.  First of all, NOTHING should come out of your checking account automatically.  This is just another hazard, disguised as a "convenience" that can mess you up and get you into overdraft trouble.  Get your monthly payments down to rent or mortgage ONLY.  This is so freeing and so doable.  And don't be lazy.  You can write one or two checks a month and put them in the mail.

What are your monthly payments?  First of all, get rid of stupid credit "protection" things like Lifelock and freecreditscore.com.  These cottage industries are the byproduct of a dysfunctional credit system that you are no longer a part of.  If you're worried about identity theft, then FREEZE your credit.

Get rid of ANY monthly payment for a service you can pay in full.  This means health club memberships, car insurance, online subscriptions, etc.  Really scrutinize what accounts you have and ask yourself if you REALLY need them.

If you must keep any monthly payments open, switch out the bank account they are drawn from with a prepaid debit card.  Your checking and savings accounts are sacred and should NEVER be open to automatic withdrawals.  There are so many horror stories associated with automatic withdrawals that it would take another website just to go into them.  Just because everyone else has been duped into thinking automatic payments are convenient, or the new normal, doesn't mean you have to fall for it.  Setting up monthly payments on prepaid debit cards (if you absolutely feel you have to have these services) is a good way to satisfy gym memberships (if they can't be prepaid a year at a time) without the hassle of them taking payments after your membership has run out--which happens OFTEN.   And by often, I mean YOU Ballys.  Similarly, online stores and so forth are prevented from taking more than they are entitled to, which sometimes happens--forcing you into a time-consuming fight to get your money back.  Only put the amount on the prepaid debit card that ought to be coming out each month.  Most places will let you know if a payment didn't go through and will give you a chance to make the payment.  It's better that they have to chase you down to get their money than the other way around or for you to incur overdraft charges because they screwed up the debit--all because you naively gave them full access to your checking account.

• Make YOURSELF your credit card

By methodically adding money to your savings account that is no longer going to credit card and loan payments, you are creating the optimum situation where YOU can by your own credit card.  If you have an unexpected emergency, need tires for the car or need standby money for hotel room holds and security deposits, you can borrow from YOURSELF, interest-free, without fees and then pay yourself back just as you would your former credit cards.

When you're no longer in debt, you are in a much better position to pay for things in full instead of making installment payments.  This will not only save you money, but the ease of living you will experience by not having to constantly stay on top of recurring payments will be totally fulfilling.  You will no longer have to go into debt when an unexpected expense or emergency arises.  You will find yourself ahead of the game and with cash surpluses building up every month.

When I suggest the above strategy to people, a lot of times their initial reaction is to become defensive about their expenditures and financial habits.  It resembles any kind of denial associated with addiction--smoking, drinking, eating unhealthy foods, refusing to exercise.  What people need to be made aware of is that the credit and banking system, as it exists, is designed to fleece you and trap you into habits that are profitable and convenient for THEM.  Do not be fooled by slick marketing like "plastic is faster than cash" (probably the stupidest thing I've ever heard).

Technology may appear convenient, but when it comes to your money, it is riddled with hidden booby traps and you are vulnerable to errors that can become a huge problem later.  Cash is ALWAYS better than credit, so enter the Consumer Underground by getting rid of your debt, getting rid of your monthly payments and starting to save!

Fixing the Bad Credit

If you have been denied a loan or turned down when you applied for a credit card, the first step is to obtain a copy of your credit report. By law, you can get a free credit report once each year from the major credit rating bureaus.

Before addressing the problem you need to understand what that problem is. If there is incorrect information on your credit report there are steps to take to remove that bad information.

You would need to contact the credit bureaus in writing to challenge the black mark on your credit file and might need to provide proof that the item listed is incorrect. The credit bureau will then contact the company or person that made the report and require them to verify their information. If the bad credit item is clearly wrong the credit bureau will remove it though it often takes several months to make the change.

If the information in your credit file is correct and clearly shows you have bad credit due to collections, late payments or other problems, you will need to find ways to rebuild your credit.

Bad credit can be overcome in time with a record of timely payment and obligations met. Unfortunately, many people with bad credit may think there is nothing they can do except pay on a cash basis going forward. This does nothing to improve their credit.

Using Pre-Paid Debt Cards

Anyone can obtain a pre-paid debit card with a Visa logo on it that will be accepted by merchants online and offline. These cards are widely available. The credit line available is not truly credit but is the amount of money you paid to the card in advance. The prepaid debit cards are useful if you make purchases online as you determine how much money is on the card and this limits identity theft and overcharging by merchants.

The prepaid debit card, however, does nothing to help your credit rating as these accounts are not reported to the credit rating agencies. There is no reason to make reports as the card can only be used to the limit of funds you deposited on that card.

If your goal is to fix your bad credit by establishing a good payment history in the future, you can apply for a secured credit card. Like the prepaid debit cards, a bad credit rating credit card requires payment in advance but that is where the similarity ends.

Orchard Bank provides one of the best secured credit cards and almost anyone can obtain this card. The credit line will depend on the amount of money you pay up front. Those funds are deposited in a savings account that is used to guarantee the credit line. Your credit line will often be a percentage of the amount you deposit rather than the full cash amount.

The bad credit credit cards carry a lower spending limit than standard credit accounts but the best lenders report monthly to the credit bureaus. If you obtain a secured credit card you might provide $500 to secure the account. That credit card may then have a spending limit of $300-400. The $500 you paid remains in an interest bearing savings account and will be used only if you fail to meet your payment obligations when using that credit account.

There are fees associated with these accounts such as fees to open the account, to manage the account, annual fees, etc. These fees are the price consumers pay when they need to rebuild a damage credit file. To overcome a bad credit rating, credit card use is essential and secured credit account is the place to start correcting a bad payment record.