One of our readers, Gene, had a couple of questions for us:
How do you start a repayment plan with a credit card company? and
I get a paycheck bi-weekly. can i split my credit card bill payment in half and pay them bi-weekly and will this help me pay them off quicker ?
Thank you for your questions Gene!
Let’s start with the first one:
How to start a repayment plan with your credit card company:
Normally, all you have to do is call your credit card company. If you are not currently past due, and you do not plan to be, then you really don’t need to make a payment arrangement.
If you call to make a payment arrangement when you are not past due, your credit card company will probably still tell you that you have to be past due or they can’t set it up.
Credit card repayment plans really only exist to help seriously past due accounts get back on track.
If you are past due with your credit cards, then be sure that you negotiate with the collections department. Collections reps can set up payment arrangements, remove any of the fees on your card, and possibly even reduce your interest rate. All you have to do is ask.
Now, let’s take a look at your other question:
Will paying your credit cards bi-weekly help you to pay them off faster?
There are a couple of issues with this. In theory, yes you will pay them off faster by sending in bi-weekly payments because you will essentially be sending in a couple of extra payments in a years time. (This is assuming that you are splitting the minimum payments up between two payments.)
However, that is not a good way to pay your balance off faster. Also, some credit card companies may not let you make less than the minimum payment - even if you plan to pay the other half later.
There is no hard and fast rule that you can only make a credit card payment once a month. You can make a payment every day if you want to - they’ll accept your money any time. Be sure that you aren’t getting charged “telephone” or “processing” fees though. If that’s the case you may just want to make one payment a month to avoid an additional fee.
So, the best situation would be to call and make a payment plan if necessary. Promise them only one payment a month (in case you find you need your money) and then make an extra payment with your next check.
As long as you are paying more than the minimum payment each month, then you will be getting your balance paid off faster. Just make it a habit to send in as much over the minimum payment amount as you can. Even if it’s only $25. Over time, it will add up.
If you have to make a payment arrangement, whatever you do, stick to the payment arrangement. Make sure you make at least the minimum payment on time as agreed each month, and then send in any extra money you have when you have it. Just don’t miss the payment you agreed to.
Thanks again for your question!
Have a question for us? Leave a comment below!
If you would like to receive regular tips on repairing your credit and maximizing your credit card rewards, you can subscribe to our rss feed - it’s free. You can also have our tips and answers delivered to you by email each day.
One of our readers, Teresa, sent us this question:
I don’t have any delinquent cards. In fact, my credit score is about 680. I simply have too many credit cards and would like to pay them off before any trouble arises being the economy is what it is.
I would like to achieve a higher credit score, pay lower apr’s and reduce my monthly payments on those credit cards.
Can I reduce my apr’s by simply calling the creditor and asking them to lower my apr? If they refuse to; should I threaten to close the account? I ask about the threat process because that is usually when they take you serious and then pass you along to management with authority to negotiate.
I can follow through on account closure threat up to about $5,000. I have some accounts with 26.9% APR and a max credit line of $1,000. My highest major credit card line is $7,000 and the APR is 14.9%. My current balance is about $4,500. All the other cards are $1,000 less with higher APR’s.
I am willing to pay off up to $5,000 in debt on the higher interest cards but I would rather negotiate lower APR’s, get the payments reduced and then pay them off. Is that possible with the threat process? Where do I start? How should I professionally and seriously approach the creditor?
Thanks for your question Teresa!
You can absolutely call your credit card companies to have your APR lowered. There are a few key things to keep in mind when you do:
1) The better your payment history is, the better chance you have to get your APR lowered- If you have been a customer in good standing for a while, and you do not have a history of late payments, this this will be a pretty standard procedure.
2) You are probably going to have to talk to a manager, no matter what you do - General “customer service” representatives probably do not have the authority to do anything to help you.
3) Keep your cool, and be prepared to call back multiple times if necessary - If you get an unhelpful rep, don’t be rude. Just ask to speak with a manager. If the manager does not help you, then don’t be afraid to hang up, and call back a little later to speak with someone else. Don’t let a rude rep, or a manager who is having a bad day keep you from saving money. After all, this is your money we are talking about not theirs, so you are obviously going to care more about the situation than they do. Be friendly, professional and above all, persistent until you can come to an agreement.
Now, about threatening to close the account. I would not do this unless you have no other recourse. The problem here is that if you close out the account you will be stuck with the high interest rate, and no account. The best thing to do here is to tell them that you have several attractive balance transfer offers (whether you do or not.)
From the bank’s perspective: Whether or not you close the account, they get to collect your balance and your interest. However, if you balance transfer they lose your debt and all the interest that they would have been able to charge you. So the best thing to do is not threaten to close the account, but threaten to transfer the balance.
Also, you do not have to accept the first rate reduction that they offer you. At first, they might be willing to knock off two to five points. Be prepared to negotiate further. Keep telling them about your good payment history, how happy you have been with the company, and how you really hate to have to transfer the balance, but if they can’t work with you a little more then that is what you are going to have to do.
The best thing that you can have happen is to be transfered to an account manager, or to someone in their retention department. Just be calm, polite and keep negotiating until you get the best rate they can offer you.
Also, you need to be very sure that when they lower your APR that it is a permanent change, not an “introductory rate”.
You can also ask them to simply move you to a new account with a better interest rate. In other words, see if they can upgrade your card completely.
I cannot stress enough that just being firm, and keeping your cool will win out. Since you have some cash on hand, you can also offer to pay your balance in full on a couple of these cards - especially if they are willing to upgrade you to a new card with better terms.
Also, be sure that you get your last statement together before you call them since it will reflect your most current information.
As a final note, if you are trying to raise your credit score, then do not close out any of your accounts unless you absolutely have to. It will be a very bad thing because it will lower the average age of your accounts, and increase your debt to credit ratio. If you have to you have to, but it would be best for your credit score to leave them open.
Hope this helps, good luck in your negotiations!
Have a question for us? Leave a comment below!
If you liked this article, you may want to consider joining our RSS subscribers. That way you will get our future articles delivered to you for free. You can click here to view them in your favorite RSS reader, or you can enter your email address in the box below to have them delivered to you by email. Thanks!
One of our readers, Jennifer, sent us this question:
I have a cc from 10 years ago that my late ex husband opened in my name and charged it up and now the cc company has said that they were gonna take $600 a month out of my check until the card is paid off. Is this correct?
Hi Jennifer, thanks for your question!
Here’s the deal:
The credit card company cannot take any money out of your check unless you specifically authorize them to, and then it would still not normally be removed from your check. Usually a payment arrangement would come out of your bank account at regular intervals that you agree on. If you haven’t agreed to it, then no money can come out.
One exception:
If you have a judgment against you for the debt, then yes, they can legally garnish your wages. If you have a judgment, then you should have been notified of it. If you have moved several times, and are not sure whether or not you have a judgment against you, then you need to check your credit reports at all three credit bureaus. It will be listed there as a public record.
Now the thing that bothers me about this is that the debt is ten years old. Usually by this time, the statue of limitations has expired. So, let’s take a better look at that.
What is the statue of limitations?
The statue of limitations is the legal amount of time that creditors are allowed to attempt to collect a debt from you. Usually the statue of limitations is between 4 and 6 years, but the laws vary by state.
Problems with the statue of limitations:
If you speak to a creditor about your debt, set up a payment plan, promise to pay the debt, or even call to inquire about it, then you effectively reset the statue of limitations. This means that if the laws in your state say that they have four years to collect from you, and a collection company calls you and speaks to you about the debt at three years and eleven months, then the statue of limitations is reset for another four years.
So, if you have not spoken to anyone about the debt then you should be protected under the statue of limitations. If you have spoken to them however (and it sounds like you have) then this will probably not apply to you.
Now, there’s another issue here. You said that your ex-husband opened up an account in your name, and then charged the account up. If this is the case, and you are being sued for the debt, then you are either going to have to treat the debt as identity theft (meaning that he did not have your permission to open the account) and possibly attempt to prosecute him for it, or you are going to have to find a way to pay the debt back.
Regardless, this is a very old debt, and the collections agency cannot garnish your wages without a judgment. So, the first step for you right now is to pull your credit reports and see if you have a judgment against you. You can request a free copy of all three of your credit reports here.
If you do not have a judgment against you, then rest assured that they cannot take any money out of your check without your permission.
Thanks again for your question.
Have a question for us? Leave a comment below!
If you liked this article, you may want to consider joining our RSS subscribers. That way you will get our future articles delivered to you for free. You can click here to view them in your favorite RSS reader, or you can enter your email address in the box below to have them delivered to you by email. Thanks!
Universal default clauses are one of the sneakier ways that credit card companies can pick your pockets. The best thing you can do is to understand exactly what this policy is, and what it could mean to you.
What is universal default?
A “Universal Default Policy” is a clause that is found in some credit card agreements. Basically it means that if you pay late, or default with any of your lenders, then your credit card company can permanently raise your interest rates - even if you have never been past due with them.
Here’s an example:
Sue lost her job, and while she was looking for another, she missed a few payments on one of her credit cards. Once she had a new job, she worked out the balance, and paid her bill. The next month she was shocked to find that her interest rates had gone up - not just on the account she missed payments with, but on her other credit card accounts too.
What happened? When Sue missed payments on one of her credit cards, her other lenders took the opportunity to put their universal default rights into play, and they raised her interest rates- despite the fact that her missed payments were with a completely different creditor.
You also need to know that missed or late payments on auto loans, mortgages, personal loans, or any other type of loan can be considered grounds for raising the interest rates of your credit cards via the universal default policies.
So, how much can my credit card company raise my interest rates if I’m late with someone else?
If your interest rates are raised because of a universal default policy, then they will be raised to the “default” rate that was given to you when you first signed up for your credit card. It will have been listed in your terms and conditions. Usually it is listed as the rate your account will default to if you miss X number of payments.
For example:
You may have a 9% interest rate regularly, but if you miss a few payments, your interest rate will default to 24% interest.
If you credit card company chooses to raise your rates via universal default, then you will automatically be charged 24% interest form that point on.
Each credit card policy is different, and some credit cards do not have universal default policies. You will have to look at the terms and conditions for your individual cards to see whether or not they have a universal default policy, and how much interest you are likely to be charged.
What can you do if your credit card company raises your interest rates because of it’s universal default policy?
Slightly less than 50% of credit card companies use universal default policies. Each year there is new legislation proposed to outlaw, or limit the negative impact that this clause has on consumers.
Despite those efforts universal default policies are still in effect.
So, if you find yourself in this position, then the best thing you can do is to pay the balance on the card off immediately. You can also consider transferring the balance of the affected card to a different card with a better interest rate.
It never hurts to contact your credit card company, and ask them to reduce your interest rates back to where they were before the increase. Not all companies will be willing to do this, but you will never know unless you ask.
Always remember to read the fine print carefully before you sign up for a new credit card. In particular, look for cards which do not contain universal default policies.
The following information comes from the Consumer Action 2008 Credit Card Survey. Below you will find a list of banks which do not currently use universal default policies. However, I cannot stress enough that you are still going to have to check your individual agreement with your credit card company.
Most of these banks have used universal default policies in the past, and depending on your agreement with them, it could still be in effect.
Also, check the terms and conditions carefully before signing on with a new credit card company - even if they are on this list. For the full results of the 2008 Credit Card Survey you can click here.
Credit Card Companies not currently using universal default policies:
Citi Cards (They were not included on the survey list, but they have a public policy which states that they do not use universal default. )
If you liked this article, you may want to consider joining our RSS subscribers. That way you will get our future articles delivered to you for free. You can click here to view them in your favorite RSS reader, or you can enter your email address in the box below to have them delivered to you by email. Thanks!
I have a couple of credit cards that I have been 30 days past due on. This is just because I’m a little tight strap for cash right now. One of my options is to enter a prepayment plan with the credit card company, I am willing to do it but will this hurt my credit score? What effect that this have on my credit history? Please advise.
Hi CB, thanks for your question!
Creating a prepayment plan with your credit card company will not hurt your credit score at all. In fact, it’s the very best thing you can do in this situation. Just make sure that you stand by whatever agreement you make with them - to the letter. I say this because if you do not pay as agreed you can expect, at a minimum, to have your interest rates on the card raised, as well as incur additional penalties and fees. Your credit card company could also close your account.
The only things that show up on your credit score as far as your credit cards are concerned, are your limit, your available balance, and whether or not you pay late, or on time.
As long as you keep to the agreement, and keep making your payments on time, then your credit card company will not report you as being late, and your credit score will not suffer.
If you want to check and see how recent late payments may have affected your credit score then you can always use the recent TransUnion Class Action Settlement to take advantage of some free credit monitoring.
Just know that making a payment arrangement with your credit card company is the best thing you can do to protect your credit score right now.
Thanks again for your question!
Have a question for us? Leave a comment below!
Did you like this article? You can get our future articles for free! (Click Here)
One of our readers, Sharon, sent us this question:
I am considering credit counseling services. Someone told me if I decided to go through with the program, it could impact my credit - making it worse than bankruptcy. Is this true? I’m having a hard time believing it is, but I’d like to get another opinion. Thanks
Dear Sharon,
Thanks for your question! There is not really a simple answer to this question, because it depends on the credit counseling service that you use. Just using a credit counseling service by itself will not hurt your credit score. Meaning that when you go, and sign up to have them help you manage your debt repayment, it will not show up on your credit score.
However, many credit counseling services can definitely damage your credit score as they attempt to negotiate your debt.
Here are the facts:
When I worked in collections for Providian Financial, we were allowed to negotiate settlements, balance reductions, remove interest, late fees, and over the limit charges. The normal customer service reps were not allowed to do this though.
What that means is that you usually have to be past due, and sometimes seriously past due on your credit cards to get many of these benefits. Credit counseling agencies know this, and it is a pretty common practice for them to hold the money you give them until you are seriously past due, and then negotiate a deal with your credit card companies.
So, yes, doing things that way will definitely hurt your credit score - sometimes more than a bankruptcy does. A bankruptcy is one incident as far as your credit score goes, and it is followed by an immediate reduction in what you owe. So while yes, bankruptcy hurts your credit score, months and months of late payments on several accounts can actually hurt it more.
Before you go to a credit counseling service, it never hurts to get all of your paperwork together, and contact the companies that you owe money to. Tell them you are considering credit counseling, or possibly bankruptcy. Ask them what they can do to help you.
All credit card companies have a policy for removing late fees, over the limit fees, accepting settlements, etc. If you take the time to find out what the policy is, and ask them to remove those fees, then you can probably handle the issue without a counseling service.
However, if you have a lot of accounts that have already been sold to collection companies, then you are probably better off just going to a credit counselor. They have a lot of experience in negotiating settlements with collection companies, and it will save you a lot of time and headaches.
Just be sure that whatever counseling agency you choose, that you understand their policy on debt repayment. Ask them if they plan to hold your money, and for how long? The last thing you need is to have months and months of bad marks going on your credit report while you are trying to do the right thing and resolve your debt.
Thanks for your question!
Have a question for us? Leave a comment below!
Did you enjoy this article? You can get our future articles for free! (Click here)
We have a family member who constantly lies to her husband about her credit cards.
He thinks they have a great credit rating because he occasionally takes out “Six months same as cash” deals on furniture or electronics.
I know that they have a great credit rating because she has six credit cards that she’s had for years, and always makes the payments on time.
I dread the conversations where he advises me “All you have to do is take out a few six months same as cash loans, and then pay them off - it worked for us!” Inwardly I groan. We’re repairing our credit after bankruptcy, which is a serious ordeal. I don’t think a few six-months-same-as-cash loans (which we qualify for in our dreams) is going to fix anything for us.
So, I grit my teeth and cry a little inside. Not just because I know better, but because realizing their true situation makes me a party to the lie…
Yes, paying off those loans probably helped them, but it’s the wheeling and dealing going on behind his back that makes up most of their score. So I was thinking about it, and I wondered, “Is this normal?”
I mean, in our pre-bankruptcy days, I’ll admit that I occasionally made purchases and did not inform my spouse of the amount, but I was the one that handled the money.
So, does my family member who’s hiding her cards feel the same way? She handles the money, so there’s no harm done?
After we declared bankruptcy my husband and I made a promise to be honest with each other, and to both try to handle the money together so that we really could have a fresh start.
So far, I’ve kept my promise. I don’t put much money on my credit cards, but when I do, my husband knows about it. I don’t give him the amount to the penny, but I do say “It was about $60” or whatever.
I think this policy has actually helped our marriage, and we have better control over our money than ever before. I can’t help but wonder though, are we the exception? Are you honest with your significant other about your debt? What about when you first met?
After I spent some time thinking about this, I surfed around a little online, to see what I could find. I came up with a few excellent articles that I wanted to share with you - in case you were interested too:
So, how about you? Have you ever told a “white lie” to your spouse about money? Do you know of family members who lie to each other about credit card debt? Are you ever caught in the middle? Tell us about it in the comments section below - It’s fine to be anonymous.
Did you like this article? You can get our future articles for free! (Click here)
Good morning everyone! We had a couple of quick reader questions I wanted to share with you today.
One of our readers, Brian, sent us this question:
Can one person transfer a balance to another person’s card? Allow me to elaborate.
I have two cards in my name. One was obtained 6 months ago to use the 0% balance transfer feature. My fiance has no cards yet and would like to start building some credit as her score is not stellar. Would it be possible for her to get her own card with a balance transfer deal and transfer a balance from one of my cards? Or can someone transfer only between cards with one name on it?
Thanks for your advice on this topic.
Thanks for your question Brian!
The short answer is no, you cannot do a balance transfer from one person to another, just from one account to another account with the same person’s name on it. It is excellent that your fiancée wants to improve her credit. My recommendation to her is this:
Start with a couple of secured credit card accounts. I highly recommend the Orchard Bank Secured Credit Card. In my opinion, it is the best of the secured credit card accounts out there. You can find out more about secured credit cards by checking out our detailed page that discusses the rates and terms for the available secured credit card accounts.
Just in case you’re thinking “A secured credit card?? Why would she want to get one of those? You can read our recent article on the subject here. They really are the very best way to rebuild your credit.
Also, I would recommend that you add her as an authorized user on your credit card accounts. FICO has just released a statement saying that they will now factor “authorized user” accounts into your credit score.
Just be sure to keep your own balances under 30% of the total amount you can borrow, and make your payments on time. Otherwise you will not be doing her any favors. If you are carrying a zero balance on the card you just transferred the balance from, then it would be best to put her on that account and not charge anything on it.
Thanks again for your question, and good luck to you both as you build your future together!
A double feature!
We also had another reader, Sherri, who wondered:
Can you use a credit card to purchase a house?
I don’t see why not, if you had an available limit that high. That would be rare though, even if you were looking at purchasing a foreclosed home. Also, charging that much money to one account (or several) in a single month would lower your credit score because you would almost certainly be over the recommended 30% of your available balance. It would be a bear to try to pay off as well!
Interesting question! Thanks for taking the time to ask.
Have a question for us? Leave a comment below!
You can get our future articles for free when you click here.
If you are in the process of repairing your credit, then getting a secured credit card is an excellent option.
In the past, secured credit cards were viewed warily by lenders; they were a mark of mis-managing your debt. Today though, secured credit cards do not really have the same stigma attached to them, and in some cases they can be a very positive sign that you are taking steps to re-build your credit after a disaster.
You are an excellent candidate for a secured credit card if you have ever been through any of the following:
Bankruptcy
Judgments
Credit Card, Loan, or Debt Charge-offs
Frequent Late Credit Card or Loan Payments
Unpaid Medical Bills
There are more reasons than ever before to take secured credit cards seriously. Here are just a few of the many reasons you will want to start with a secured credit card while you re-build your credit:
Secured Credit Cards have lower interest rates than bad credit, unsecured credit cards:
Yes, you can probably still qualify for an unsecured credit card of some sort, even with a bankruptcy. However, most cards that cater to people with low credit scores have high fees. It is not unusual to see a $250 application fee, and a $100 yearly fee coupled with a 20% (or higher!) interest rate on an unsecured, bad-credit credit card.
Secured credit cards, on the other hand, require $200 - $300 dollars to open, and you will eventually get that money back. They also usually have interest rates under 10%, and low, or no yearly fees.
Many secured credit cards do not report as “secured credit cards” on your monthly credit bureau reports. This means, that to a lender, those secured credit cards are exactly the same as having unsecured credit cards.
With a secured credit card, you can raise the credit limit any time you want to by depositing more money:
Now, this is huge. With most credit cards (especially if you have bad credit) getting a credit limit increase is like pulling teeth.
Thirty percent of your credit score depends on your debt-to-credit ratio. This means that if you ever charge more than 25% - 30% of your total available balance, your credit score will drop.
So, what happens if you want to put your monthly bills on your credit card to make things easier? Well, with an unsecured credit card, you would be out of luck. With a secured credit card however, you can total up the amount you want to charge each month, and figure out how much you need to increase your limit so that you stay under that 25% rule.
Secured Credit Cards act as a failsafe:
If you lose your job, or have trouble paying your bills, and cannot pay down your credit card, then you can use the money you have in your secured savings account to pay the balance on the card.
You will never again have to worry about defaulting on a credit card because the amount you borrow has been previously set aside. That is real peace of mind – especially if you have defaulted on a credit card before and experienced a number of collection calls.
Banks that issue secured credit cards are more likely to issue you unsecured limit increases, or an unsecured credit card after a couple of years:
If you have an excellent payment history with your issuing bank, wait a year or two, and see if they will issue you an unsecured credit card in place of your old secured one. You will then get your deposit back, and depending on the issuing bank, you may even be paid a small amount of interest on your original deposit.
All in all, secured credit cards are one of the best deals out there for people who are working to re-build their credit. With so many things in their favor, they really are the best place to start out.
Secured credit cards are also an excellent tool for people with no established credit history, or anyone who needs to be able to regularly increase the limit on their credit cards.
To find out more about which secured credit cards are available, and what their terms and interest rates are, please visit our secured credit card pages.
Have a question for us? Leave a comment below!
Get our future articles on rebuilding your credit for free - click here.
Sir, I am a credit card defaulter. I changed my address and likelihood of bank finding me is almost zero. But I feel guilty to do this and want to settle my account with bank, However, i am not in a condition to pay the full amount, but would like to get my name written off from bank’s defaulter list. How do I settle my account with bank? What kind of rebate i can expect? Is there any agency to help me out in this?
Thanks for your question Ashok!
You are wise to want to settle the account out for several reasons:
Credit card companies employ entire departments of people they call “skip trace”. Which basically means when someone skips out, they harass everyone you know until they find you.
The credit card company will keep reporting the debt to all three credit bureaus until they write it off. When they write it off, they will sell your debt to a new collection company, who will also report your debt to all three credit bureaus. When they give up on trying to find you, they will simply sell your debt to another company.
If anyone ever does catch up to you, you can expect them to sue you, and garnish your wages.
Now, assuming that they do not ever find you, you will still have to deal with the damage that delinquent account is doing to your credit score. So, you are exactly right to want to make good on the debt. It will begin the process of repairing your credit.
There is one thing you need to be aware of before you begin. Now, I do not know how old your debt is, but I can tell you that if your credit card company has written off your debt already, calling them will “re-open” it, and they will begin collections all over again. This could actually cause you to have multiple negative accounts on your credit report over the same debt - so do a couple of things first.
If you want to make good on your debt what you have to do is pull all three of your credit reports, and find out who currently owns your debt. From that point, you have two options:
Call the collection company who owns your debt now, and offer a settlement for a reduced amount.
Send a certified letter to the collection company that currently owns the debt telling them that you refuse to deal with anyone but the original owner of the account (the bank that issued the card.) This is your right by law.
There are pros and cons to both of these:
Collection companies are used to making settlements, and they will likely settle for less than your original bank will. However, they may have tacked on quite a few additional fees to your account that would not be charged to you if you deal directly with the bank that gave you the card.
The best way to know if fees have been added is to look at your credit report. Look at the amount your bank charged off, and then compare it to the amount the new collection company says you owe.
Settling the debt with the original bank will look better on your credit score because it will show a paid charge off. If you pay your original bank you can wait a few months, and challenge any negative information on your reports that resulted from the collection companies (not the original bank.)
As far as what kind of a settlement you can expect: it depends on how much you are willing to negotiate. In situations like yours, you should easily be able to cut the total by 50% if you are dealing with a collection company. If you deal with the original bank, upwards of 30% is a reasonable expectation.
As far as organizations that can help, yes, you will get the help you need from a credit counseling agency. Just be careful which one you choose, because not all of them do a good job. They will negotiate with your creditors on your behalf, and get the account settled for you.
For more information on how to choose a credit counseling agency, you can check out these articles:
We have a family member who constantly lies to her husband about her credit cards. 
If you are in the process of repairing your credit, then getting a secured credit card is an excellent option.