Don't cash this check!

I received a letter from Chase Bank and it has a check payable to me.

At first, I thought it is a reward check from my Chase Reward Card.

It turns out to be a bait from Trilegiant Corp. -

If I cash the check, my Chase credit card will be charged $59.99 for six months of Shoppers Advantage benefits.

It claims it will give me a dollar back for every dollar charged to my Chase credit card up to $200, year after year.

I googled Trilegiant and I found

Trilegiant Corp. and Chase Bank have settled with AG from 15 states to resolve allegations that the companies misled consumers into paying for membership programs that purported to provide consumers with discounts on auto and home repairs, shopping, and other goods and services.

Shoppers Advantage is one of the programs.

Too bad my state is not one of the 15 states.

In the end, I tore up the check.

Bad debt to avoid

Source: DEAL WITH YOUR DEBT

BAD loans to avoid

1) Payday loans

2) Rent-to-own deals

3) Tile or "pink slip" loans

4) Direct-deposit advances

5) Refund anticipation loans

6) Pawnshop loans

7) 125 or high-loan-to-value mortgages

8) Debt-consolidation loans

9) Margin loans

Also myths on housing

1) Real estate prices always rise

2) A house is a great investment

3) Buying is always better than renting

4) homeownership comes with great tax breaks

Five Credit Card Surprises

5 nasty tricks from your credit card companies

1. Universal default

If you make late payments or exceed your credit limit, you could be shifted to a default penalty interest rate on your credit card, sometimes exceeding 30 percent. But you could also get socked if you are late paying your electric bill or mortgage, or take out an auto loan, or do anything that hikes your credit score.

2. Future shock

If your credit card company does decide to shift you to a higher interest rate, expect the penalty price to apply not only to future charges but to your past charges.

3. Two-cycle billing

In double-cycle billing, you are charged interest on the average daily balance of two months of charges instead of just one. So if at the end of 30 days you pay off most—but not all—of your balance, the next month you will still pay interest on the sum that you already paid.

4. Grace period

The 30-day grace period for paying your credit card without interest is true only if the bill is paid in full.

5. Pay to pay

Close to your credit card due date, you decide to use pay-by-phone or an online payment at the bank's website instead of the mail to get the payment in on time. Expect to pay a fee of $5 to $15 for the convenience.

Maxed out

Maxed out is a documentary by James D. Scurlock on America's credit card debt.

On average, American has credit card balance over $9,000.

Half of credit card holders only made the minimum payment.

The 2005 bankruptcy reform bill was written by MBNA, one of the top credit card issuers.

On average, credit card debt at the bankruptcy proceeding is $1 in principle & $2 in interests and fees.

Credit card companies do issue credit cards to people who declared bankruptcy because they know that those people can't file for bankruptcy again for another 8 years.

Suze Orman has a deal with FICO's parent company and FICO is the preferred credit score in the consumer lending industry..

Although college students don't have much income, they can get credit cards easily. One student had 12 credit cards!

Collection agencies can call on your neighbors or anyone in order to hassle and embarrass you.

There are no laws to protect your financial privacy from business.

People today have less income to pay for necessities.

Also, one more debt ...

An American family's share of the federal debt is $90,000.

The federal government spends more on interest payments than on homeland security, education, & health care combined.

Stop debt collection agencies calling you

All debt collection agencies love to call you at the most inconvenient hours.

FinanceIsPersonal.com has a sample letter for you to write, and send it certified mail, return receipt requested; telling the debt collection agencies that under the Fair Debt Collection Practices act, they are not allowed to contact you further in regards to the debt in question. If they do illegally contact you after that, you could sue them and will win quite easily.

Below is FinanceIsPersonal.com’s a sample cease and desist letter:

[Date]

To Whom It May Concern:

Your company has contacted me about a debt that you allege I owe, and I am instructing you to not contact me further in regards to this debt in question. Under the federal law (Fair Debt Collection Practices Act), you and your company may not contact me any further as I have notified you not to do so.

Sincerely,

[Your Name]

[Your Address]

2004 Federal Reserve survey on credit cards

The 2004 Survey of Consumer Finances from the Federal Reserve gives a snapshot of American household on credit card.

	2004	2001
Carrying a balance	46.2%	44.4%
Average balance	$5,100	$4,400
Median balance	$2,200	$2,000

This table shown American households are carrying higher balances. The average income of American household is currently $43,200 and the typical household's credit card balance is now almost 5% of their annual income.

But the survey is not a completely discouraging picture for American households.

While 74.9% of all households have a credit card, 42% of this group of households pays off their card each month.

Examples of credit card balance transfer

Lesson learned: The minimum payments could cause problems to your cash-flow management.

Example 1

Card: Citi
Amount: $6000 transferred to checking account
Rate: 2.99% until payoff
Fee: None
E-statement & automatic minimum payment
Where: 26 weeks & 13 weeks T-bills
$ made: 11.6 per month for last 15 months

Example 2

Card: M&T
Amount: $30000 transferred to checking account
Rate: 0% for 11 months
Fee: 2%
Paper statement & automatic minimum payment
Where: 26 weeks, 13 weeks, & 4 weeks T-bills
$ made: 612.86

Credit card debt in the US

By Elizabeth Harrison

American carry an average of 2.7 bank credit cards, 3.8 retail credit cards, and 1.1 debit cards, which averages to 7.6 cards per cardholder.

According to CardWeb.com, the recommended number of credit cards for the average consumer is 3. At most 4, if you use a card for business expenditures. And one of those cards should only be kept for emergencies.

The reason for this?

Preservation of your interest rates and your credit score. Not to mention your sanity.

30% of your overall credit rating is determined by how much debt you carry. The ideal picture of your debt: Low balances spread over several different types of accounts, like a mortgage, a student loan, and a few credit cards.

Another danger in carrying 6 or 7 balances: Credit card companies routinely scan your credit report to watch for signs of financial trouble. If just one of your accounts becomes delinquent, or if you suddenly revolve a balance at or near the maximum, this could induce your other lenders to raise their interest rates. Your interest payments could skyrocket.

Credit card companies want your business, and will spend $80 - $200 to acquire it. And its no wonder- in the US, we owe $785 billion in credit card debt, according to data analyzed by Cardweb.com. That's about $9000 of credit card debt per card-carrying household in the US. All that interest we're paying contributes to the lender's profits.

Note that $785 billion is just the amount of credit card debt; the actual figure for Americans' non-mortgage debt is $2 trillion.)

There are about 6,000 general purpose credit card companies in the US, mostly credit unions. That's a lot of options. Credit can be a great tool when used the right way.

So get your boutique-cards down to a minimum. They are not versatile, they can't help you in an emergency and they don't earn miles. Remember if you ever close an account to be sure the lender marks it 'closed by account holder.'

Keep a few general-purpose cards and leave it at that. And keep the balances low.

Credit card debt statistics

Total credit card debt in the United States has reached about $665 billion on bank credit cards and about $105 billion on store or gas credit cards. The total is roughly $800 billion. (January 2006, Cardweb and the Federal Reserve)

Average household or individual debt (or both) is about $9,300 per household holding at least one credit card. (Source: Cardweb)

According to the advocacy group Demos, the average balance among lower- and middle-income households is $8,650.

More statistics from Mark Brinker (updated June 2007)

In 1968, consumers’ total credit debt was $8 billion (in present dollars). Now the total exceeds $880 billion.(SOURCE: Federal Reserve Bank)

Approximately half of all credit card holders pay only their minimum monthly payments.(SOURCE: Experian-Gallup Personal Credit Index survey)

According to the Federal Reserve Bank, 40% of American families spend more than they earn.(SOURCE: www.federalreserve.gov)

23.8% of American households have no credit cards at all -- no bank cards, no retail cards, nothing. 31.2% of the households. paid off their most recent credit card bills in full.(SOURCE: Liz Pulliam Weston, www.asklizweston.com)

Only one household in 50 (2%) carry more than $20,000 in credit card debt. However, that "one in 50 households" figure represents more than 2 million American homes.(SOURCE: Liz Pulliam Weston, www.asklizweston.com)

Statistics can be misleading

Liz Pulliam Weston complained the following misled statistic:

The average American household with at least one credit card has over $9,300 in credit card debt, according to CardWeb.com.

She claims that the average is skewed by a small % of households with very high credit card debt.

However, her concern is that this statistc gives false comfort to those people who think they're only "average" for having $9,300 in credit card debt.

In fact, they could be on the road to financial ruin.

According to Federal Reserve's 2004 Survey of Consumer Finances:

Most American households don't have any credit card debt.

- About a quarter of household, or 25% have no credit cards.

- Additional 30% or so pay off their balances every month.

- Of those households that do owe money on credit cards, the median balance was $2,200.

- Only 8.3% of households owe more than $9,000 on their credit cards.


For a group of 100 American households

55 households don't have any credit card debts.

25 households don't have credit cards at all.

30 households pay off their credit cards balances every month.

45 households do carry balance on their credit cards.

22.5 households have balances less than $2,200, and 22.5 households have balances higher than $2,200.

8.3 households carry balances higher than $9,000.

10 bad habits that lead to debt disaster

By Leslie Hunt, Bankrate.com

Learn from these mistakes and try these tips to start paying off your debt.

Bad Habit No. 1: Misusing balance transfers.

Transferring balances on high-interest cards to lower-rate cards can be an effective technique, but it's easy to make it a good idea gone wrong.

Transfer a balance onto a card with a low introductory rate and you can potentially save money on interest if you refrain from charging on it and focus on paying off the balance before that introductory rate expires.

But most people continue to charge on the new card and wind up with more debt once the teaser rate expires.

Try this:

Put the money you save toward paying off your balances. Pay for new purchases with cash or a debit card.

Bad Habit No. 2: Not checking credit reports - you can't change them anyway.

Wrong. If you have credit cards, pull your credit report at least once a year and check it for errors. Purging your record of inaccuracies can be crucial for getting better interest rates, landing the job you desire and stopping an identity thief from ruining your credit rating.

Your credit report also affects your credit score, which determines how high your interest rates will be on future loans. Dispute anything you think should not be there. The Fair Credit Reporting Act allows for the correction or deletion of inaccurate, outdated or unverifiable information, provided that a reinvestigation into the disputed data sides in your favor.

Unfortunately, negative but truthful data must stay put. A Chapter 7 bankruptcy filing, for instance, will remain on your credit report for 10 years, a Chapter 13 for seven years.

Try this:

You can request one free copy from each of the big three credit reporting bureaus, Experian, TransUnion and Equifax, every year. Why bother? Errors on your report, such as a payment marked late that came in on time, could raise your interest rates, lower your credit score and affect your ability to obtain credit in the future.

If you do find a mistake, send a correction letter to each of the credit bureaus that show the error. All three credit reporting bureaus allow you to dispute errors online.

Don't bother with so-called credit-repair clinics that aim to charge you hundreds or thousands to fix your credit record. Anything you can legally do to repair it you can legally do for free.

Bad Habit No. 3: Failing to alert creditors about a financial hardship.

Try this:

The best time to negotiate is before the problem spirals downhill. Call the credit card company and explain the problem you're about to have. Ask if they could temporarily lower your interest rate or extend your payment deadline.

Bad Habit No. 4: Thinking of 'budget' as a dirty word

Try this:

To find out what's draining your finances, keep track of where your money goes for a month. Use a spreadsheet, financial software or a pen and paper and categorize your expenses.

Doing this will reveal whether you're spending too much on expenses you could trim, such as restaurant outings and gas. Then you can consider cooking at home more often or consolidating driving trips.

Cut back as necessary without cutting out expenses important to you.

Bad Habit No. 5: Using retail store credit cards to make use of discounts

The retail store card often carries a high interest rate you'll be forced to deal with if you don't pay off your balance each month.

Try this:

If you must charge your purchase, use your general-purpose credit card.

Limit the total number of credit cards you have to just two, if you can: one you can pay off each month and one with a low interest rate for those large purchases you'll pay back over time.

Bad Habit No. 6: Procrastinating on creating an emergency fund

That rainy day will happen. It's not a matter of if, it's a matter of when.

Try this:

Start the emergency fund by a small amount - let's say $1000.

Maintain an emergency fund of at least three to six months' worth of living expenses, and keep your insurance policies up to date.

Work toward that goal by socking away 10% of your take-home pay each month in a liquid savings account. If you receive a raise or bonus, add that money to savings. Since you're not used to the extra cash flow, you won't miss it.

Bad Habit No. 7: Paying bills in no particular order

While the order may not matter if you can pay all the balances, it will matter if you fall short one month.

Try this:

Pay for living expenses first.

After the house or rent payment, necessities such as utilities, groceries and medical care should top the priority list. Next comes the car payment -- you want to avoid repossession, obviously. On down the line, secured loans and co-signed debts follow in importance, then unsecured loans and credit cards.

Bad Habit No. 8: Charging purchases instead of paying in cash or with a debit card

Try this:

Make a habit of paying for purchases under $50 with cash, debit or check.

Knowing that the money has to clear the bank sooner could help curb your spending habits. Just be sure to check your balance regularly to ensure that you have enough funds.

Bad Habit No. 9: Making credit payments late

After all, it's only a $39 late fee. Besides wasting money you could've put toward the balance, a payment that arrives at least 30 days past due can throw your account into default and triple your interest rate. Plus, other creditors may start charging you a default interest rate as well, thanks to a universal default clause buried in your contract.

Creditors are constantly reviewing your credit activity, and if they see you falling behind with one creditor, even if you have a perfect payment history with them, they can raise your interest rate.

Try this:

On a calendar, mark upcoming paydays and payments that should come out of that paycheck. If you're mailing payments, send them seven to 10 business days in advance.

Better yet, sign up for online bill pay. Just check that the address on file and the address on the statement match, or the payment might not arrive on time.

If you're still late, call the creditor, explain the situation and ask them to forgive the late fee. Check your credit report and be sure the information shows up correctly.

Bad Habit No. 10: Making the minimum payment only

Paying the minimum is better than paying nothing, but it doesn't do much to pay off most balances and forces you to keep paying interest.

Try this:

If you can afford to pay more or in full, go ahead and pay as much of the balance as you can. You never know when you're going to have a tough month. Pay in full every month and you can avoid interest charges altogether.

Or, if paying more than the minimum proves difficult, consider working an extra part-time job or decreasing your expenses - or both.

Cashing-in on credit card 0% transfers

Wsj.com also had an article on how to cash-in on the 0% offers from credit cards.

The strategy involves applying for one or more credit cards that charge 0% interest on balance transfers, then put these borrowed funds in high-yield online savings accounts, which often pay 5% or more.

However, card companies are taking steps to make it tougher.

Some card issuers have reduced their offers of interest-free balance transfers to six months from 12 months or have tacked on bigger fees to transfer balances.

Previously, such fees were often waived or limited to 3% of balances, with a cap of $50 to $75. But recently, Bank of America and Chase eliminated their transfer-fee caps on more of their offers, while Citibank raised its maximum fee on some offers to $250.


Liz Pulliam Weston had an article on people make money on low-rate credit cards balance transfers.

However, she warned that chasing these 'free' cash may dent your good credit score.

Credit card transfer arbitrage

1) A good place to invest the money
2) Offer of 0% or very low interest rate on the borrowed money
3) Borrowed money not treated as "cash advance"
4) No or very low fees on balance transfers
5) After transfer, don't use the cards for any other purpose

My experience

Since last year, I have done a few of these 0% balance transfers. I put the money from transfers into T-bill to earn 4% to 5% of interests.

So far, I made over $1,000 on the interests.

Universal default clause - However, if I miss one payment to any credit card and all these 0% rate offers would end.

The hard parts for me are:

- To remember and make all those minimum payments before they are due.
- To remember when all the 0% rates offers would expire - call to confirm with credit card companies.
- To manage the process from T-bill to bank, and then to credit cards.