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Published April 2010

Overwhelming Obligations

© 2010 Council of Better Business Bureaus.

Introduction Credit can be a strong financial

tool to help consumers

and small business owners

manage their money. Effectively

managing credit requires a solid

understanding of some key credit

“Rules of the Road.” Borrowers

must understand the agreements

that they enter with lenders.

They must have a healthy dose

of personal responsibility, and

should establish patterns that

will keep them in good standing

with their creditors.

Most credit users understand the need

to manage credit effectively, but they

are not a “One Size Fits All” group. The

needs and perspectives of credit users

differ, based on their level of experience

with credit and how large their out-

standing balances are.

BBB created Managing Credit – Made

Simpler to give customized credit man-

agement guidance to different types of

credit users, based on their specific

needs and perspectives. Each of three

customized versions give credit users

the strategies and guidelines they need

to take charge of their specific financial

situation.

Select and open the version of

Managing Credit - Made Simpler that

best offers guidance to fit your needs:

“NEW TO CREDIT”

Here are clear guidelines that will be

helpful to consumers interested in

securing their first credit card and man-

aging a personal credit line for the first

time. Having a good credit record may

help you qualify for lower interest rates,

and your credit record may also affect

your ability to get a job, an apartment

or affordable car insurance, among

other things.

“BALANCING ACT”

If you have generally tried to manage

your money well, but your financial situ-

ation changed over the past year or

two, this version may be for you. You

may have been able to manage your

new financial situation for a while, but

mounting bills and limited resources

have made you aware that you need to

develop a new plan before your finan-

cial situation gets worse.

“OVERWHELMING OBLIGATIONS”

This version offers advice that can help

someone who needs to pay down high

balances.


You knew that credit cards could be great tools

to help you manage your money, but now your

outstanding balances are over whelming. The bills

keep coming but you’re missing payments because

your cash flow does not meet your payment obliga-

tions. Perhaps creditors are now trying to reach

you and you just don’t know what to do next.

We’re here to help. BBB’s Managing Credit – Made

Simpler will give you the steps and guidelines you

need to take charge of your financial situation.


I. Two Strategies to Pay Off Balances Faster . . . . . . . . 2

II. Good Ways to Get Help Now . . . . . . . . . . . . . . . . . . . . 3

Ill. Some Advice about “Quick and Easy” Solutions . . . 5

a. Debt “Settlement, Negotiation,

Consolidation, or Elimination” Services . . . . . . . . 5

b. Other Loan and Balance Repayment

Solutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

lV. Going Forward —How to Improve Your

Credit Score (and why it will help you) . . . . . . . . . . . 7

V. Fraud Prevention Guidelines —

A Valuable Checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Addendum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Frequently Asked Questions . . . . . . . . . . . . . . . . . . . . . . . . 11

Topics We’ll Cover:


I. Two Strategies to Pay Off Balances Faster

Strategies to reduce your inter-

est payments can help you

reduce your balances faster, even

if you’re nowhere near able to pay

your balance in full at this point.

1. Make the highest possible payment

you can each month. The faster you

pay off your balance, the less you’ll

pay in interest charges. Increasing

your monthly payments by even a few

hundred dollars can help you get out

of debt much faster (see the case

study below).

2. Find a lender that will give you a

lower APR.

� A lower APR translates into lower

interest charges as a percentage

of your outstanding balance.

� Switch to a lower rate card and

benefit from balance transfer offers.

Introductory or “Teaser” rates must

last for at least six months and the

rules must be clearly disclosed.

2

BBB Tip

“Teaser” Rates

Watch the calendar carefully, and

pay as much of the balance as possi-

ble in the first few months.

Most “teaser rates” last only six

months, and then the interest rate

will jump after the introductory offer

expires.

Case StudyHow to Pay Less in Interest

Situation — You have a $5,000 credit

card balance and your lender requires

a minimum monthly payment of 4%

of your balance. This translates to

a $200 minimum payment in the first

month.

Problem — If your card charges 18%

interest and you make only the mini-

mum monthly payments, it will take

you 11+ years to pay off the balance.

By that time, you will have paid the

card company more than $2,800 in

interest even if you never make any

new charges on the card. That means

that $5,000 balance actually cost

you $8,000.

Solution 1 — Pay more than the mini-

mum each month and pay off your

balance faster. Even if you can’t pay a

huge chunk of the bill, you can still

accelerate the payoff process, which

will minimize your out-of-pocket costs

from interest charges.

Solution 2 — Transfer your outstand-

ing balance to a card company that

will offer you a lower interest rate,

and boost your monthly payment a

bit. If you switch to a card that gives

you a 6% interest rate and increase

your monthly payments to $500 each

month, you’ll pay off your balance in

11 months and pay only $142 in interest

— that’s a whole lot less than the

$3,000 interest out-of-pocket

described above!

As soon as you stop paying those high

interest rates, you’ll free up a lot of

money to cover your other expenses!


II. Good Ways to Get Help Now If you are having trouble making

your payments or feel like you

might have trouble qualifying for a

balance-transfer offer ask for help

now. Many people have found

themselves in this situation for a

wide variety of reasons. What

matters now is how to get on the

road to recovery.

Signs You Need Help

o You’re struggling with multiple forms

of debt, such as credit cards, home

mortgage, auto loan, utilities and/or

medical bills.

o You cannot make the minimum

payments on all your credit cards

and other bills, or are making late

payments.

o You’re using your credit cards to pay

other bills, such as utilities.

Strategy 1 – Call Your Lenders Directly

Lenders want to work with their cus-

tomers and have hardship programs to

assist cardholders who have difficulty

making their payments. If you’re having

trouble making your payments, they

probably know this and may have

already tried to reach out to you to start

a conversation about how to work

together in a way that works for both

the bank and for you.

Here are some ways to start this kind of

conversation.

o Call your issuing bank’s customer

service line. Tell them why you’re

calling, that you want to take respon-

sibility for your finances, but you

cannot do it under the current terms.

Ask to speak to someone who can

explore some options with you.

o Focus on what you can do when you

begin a detailed conversation with the

right kind of banking representative.

When you’ve initiated the contact,

they already know you’re having trou-

ble with the current plan and terms.

At this point in time, they’re most

interested in what you can suggest

as possible new plans and terms, so

be prepared to share some ideas.

Sometimes a small change can make a

big difference, such as asking to shift

your due date to a better time of

month if you’re frequently struggling

to make your payments just before

your payday.

o If your issuing bank tries to contact

you — respond, and have this type of

conversation. Don’t be afraid to talk

with the bank, which may be able to

make some changes that could make

it easier to pay off the debt.

Strategy 2 – Make an Appointment with aReputable Credit CounselingAgency

If your attempts to negotiate with your

lenders have not been successful, then a

credit-counseling agency may be helpful.

These organizations can review your

overall financial and credit situation,

discuss your options with you, help you

prioritize your bills, and may ultimately

negotiate with your creditors to stop

the finance charges and late fees and

develop a repayment plan that will

work for you.

3


4

Interview several agencies.

If you know someone who has used

such an agency in the past, ask them

for a recommendation. Or, ask friends

or relatives who they would consider

if they needed budgeting advice.

You can also find credit counselors

in the Yellow Pages, by contacting

the National Foundation for Credit

Counseling (http://www.nfcc.org)

or the Association of Independent

Consumer Credit Counseling Agencies

(http://www.aiccca.org) for a list of

members or by using an Internet

search engine.

Signs of a reputable credit-counseling agency

o Recognized as non-profit by the IRS.

o Counselors are required to maintain

all proper licenses.

o Provide reviews of customers’ income

and debts, along with a written plan

for reducing and eliminating debt.

o Disperse the proper payments to

creditors at proper times, typically

twice a month.

o Provide clients with written

statements at certain intervals.

o Offer various educational programs

and other ways to help consumers

overcome debt.

Questions to ask before you make anappointment

o Is this agency a non-profit organiza-

tion?

o Is your agency accredited? By whom?

o Are your counselors certified? By

whom?

o Are your services confidential?

o Will I be notified — in advance —

of any fees associated with services

being offered?

o Will you develop a plan that’s

customized to fit my financial

circumstances?

o Will my funds be protected? How?

o Are budget and credit education

opportunities offered?


III. Some Advice about ‘Quick andEasy’ Solutions

A. Debt “Settlement,Negotiation, Consolidation, or Elimination” Services

Numerous companies offer services

such as debt settlement/negotiation or

debt elimination. Consumers should be

wary of any company that promises

something that seems to be too good

to be true, and should be cautious in

agreeing to any service that requires

fees to be paid up front. Some compa-

nies offering such services can actually

worsen your financial situation.

o Debt “Settlement/Negotiation”

Debt settlement/negotiation compa-

nies promise they will negotiate with

consumers’ creditors to reduce the

amount owed…in most cases for an

upfront fee. As a general rule, debt

settlement/negotiation should be

considered only as a “last resort”

before filing bankruptcy.

Many consumers complain that debt

settlement/negotiation companies

take their money but don’t deliver

promised results.

Consumers may be liable for late fees

and penalties that accrue while pay-

ments are not being made during the

debt settlement/negotiation process,

and may be sued with respect to any

debts owed. Also, failure to pay debts

during debt settlement/negotiation

will likely have an adverse effect on

the consumer’s credit report.

o Debt “Elimination”

Companies that advertise debt elimi-

nation rely on many different

schemes that all hinge on the incor-

rect notion that credit lines are illegal.

Debt elimination companies typically

provide, for an upfront fee, a docu-

ment for the lender that supposedly

absolves the consumer of the debt.

The document generally has no validi-

ty whatsoever. Consumers paying

for such “services” have found

they’ve wasted money that would

have been better spent on actually

paying back their debts.

B. Other Loan and BalancePayment Scenarios

Collections

Collection agencies are separate

companies that are used by creditors to

collect a delinquent debt. The agency

may be collecting the debt on behalf of

a creditor, or they may have purchased

the debt and are now attempting to

collect the debt directly.

Collection agencies will contact you

frequently until you either pay the

debt, or make payment arrangements.

Having an account in collections may

appear on your credit report and may

negatively impact your credit rating.

If you have an account in collections,

communicate with the collection

agency. Putting off debt collectors

will not make the problem go away.

When you receive a collection call,

see if they are able to work with you

on a payment plan.

Consumers can stop communications

from debt collection agencies if the

consumer notifies the agency in writing

to stop. Federal law requires that debt

collection agencies honor such written

requests.

5

!BBB Alert

BBB advises caution with anycompany that makes any of thesestatements:

● We can remove your debt

● Do not communicate with yourcreditors

● Pay us and we’ll pay your bills

● Pay us a percentage of the billswe eliminate

● We can eliminate negativemarks on your credit report

● Use our system and you’ll avoidbankruptcy


6

Short-term Loans

o Payday loans. Often referred to as

“quick cash” or “check cash” loans,

payday loans are easy to obtain

because no credit check is required.

CAUTION: They carry steep interest

rates, and consumers may find they

are trapped in a cycle of debt if they

cannot pay back the loan by their

next payday. Many states have

banned payday loans or limited the

interest that can be charged, and

federal law limits the interest that

can be charged by payday lenders to

military service members and their

dependents.

An FTC alert on payday loans can be

found at http://www.ftc.gov/bcp/

edu/pubs/consumer/alerts/alt060.

shtm.

o Car Title Loans. You offer your car

as security when you apply for a car

title loan. You must provide your car

title and a set of car keys to the

lender, who holds them until the loan

is repaid. CAUTION: Like payday

loans, car title loans carry a high

interest rate, can trap you in a cycle

of debt, and you risk losing your

automobile if you fail to pay.

o Pawnshops. Pawnbrokers take a

consumer’s possession (a piece of

jewelry, for example) as collateral

for a loan that usually carries a high

interest rate. CAUTION: If you do

not repay the loan with interest by a

certain date, the pawnbroker can sell

your possession.

Bankruptcy

Bankruptcy is a legal procedure that

permits an individual (or business) to

obtain relief from most or all of their

unsecured debts. It enables people

to seek a solution to their financial

problems through the federal court.

Bankruptcy is typically viewed as a

“last resort” when other options to

solve financial problems have failed,

and there is impending financial

disaster…such as losing a home to

foreclosure, losing an automobile to

repossession, or wage garnishment.

o Chapter 7 (liquidation). Allows you

to eliminate most, if not all, of your

unsecured debt. This may include

medical bills, credit card debt, unse-

cured loans, utility payments, etc.

Any property of value may be sold or

turned into money to pay your credi-

tors. You may be able to keep some

personal items and possibly your

house, depending on the law of the

state where you live. Chapter 7 is

typically filed by people who have

few assets, little income, and a heavy

burden of debt.

o Chapter 13 (debt adjustment).

Reorganizes your debt into an afford-

able payment plan. A trustee is

appointed and will collect the pay-

ments from you, pay your creditors

and make sure you abide by the

terms of your repayment plan. Your

bankruptcy is not complete until you

pay off all your creditors according to

the terms of the plan. You are usually

able to keep your property, but you

must earn wages or have some other

source of regular income and agree

to pay part of your income to your

creditors. This plan allows you to

catch up on past due auto or home

loan payments and temporarily halts

foreclosures and collection actions.

It can also help you pay off past due

taxes, child support and loans.

Steps to take when considering

bankruptcy

o Review the potential benefits.

Bankruptcy can provide legal

protection from creditors and take

care of all or much of your debt.

o Know the consequences. There are

no guarantees that bankruptcy will

cure all of your financial problems.

There are certain debts that cannot

be wiped out by bankruptcy. A

bankruptcy filing may also have a

significant negative impact on your

credit rating, which could have impli-

cations for housing, employment,

and obtaining future credit.

o Seek assistance from a professional.

Consult an experienced bankruptcy

attorney to review your options.

BBB Tip

Fair Debt Collection Practices Act

Collection agencies must abide by

the FDCPA, which prohibits debt col-

lectors from harassing you, calling

you at unreasonable times, using

abusive language, using false state-

ments, adding unauthorized charges

to your account, and other practices.

Depending on your state, different

rules may apply for your creditor’s

collection departments. You may

wish to contact a lawyer if you feel

the terms of the FDCPA have been

violated.


IV. Going Forward —How to ImproveYour Credit Score (and why it will help you)

While you’re focusing on

lowering balances, it’s also

important to make a few key

moves to start improving your

credit score, which may help you

qualify for lower interest rates

over time.

Your credit score and credit report are

key tools that measure your financial

risk, giving lenders a way to predict

how likely you are to pay your bills on

time. Many lenders — and others — use

your credit score to help determine

whether or not to give you a line of

credit, whether you’re applying for a

credit card, buying a car or planning to

buy a home. The higher the score, the

lower the risk…and the more favorable

account terms you’ll usually be offered.

Your credit record may also affect your

ability to get a job and find affordable

insurance. So it’s always important to

build — or rebuild — a good score…even

if you aren’t about to take out a new

loan.

How Your Score Is Calculated

There are several types of credit scores,

but lenders often use the FICO score,

which ranges from 300 to 850.

Your FICO score measures five key cri-

teria and can vary slightly, based on

which credit reporting agency issues

the score. The information that shapes

these criteria comes from your credit

report, and includes:

o Length of credit history

o Types of credit lines

o Payment history on those credit lines

o Amounts owed on those credit lines

o New credit lines — how many and

over what period of time

7

BBB Tip

Credit Reports

Check your credit report for errors

or potential fraud once each year.

You can order a free copy of your

credit report from each of the three

credit reporting agencies once

every 12 months by visiting

www.annualcreditreport.com.

This site is run jointly by the three

credit reporting agencies (Equifax,

Experian, and TransUnion).

It’s a good idea to stagger your

requests for a copy of your credit

report, requesting it from one bureau

every four months. This will help

you monitor your credit over the

course of a year and detect potential

fraud early.

Case Study

A High FICO Score Can Translate

Into Big Savings

Let’s say the average lender was

offering a 30-year mortgage at a

4.743% interest rate for borrowers

with a FICO score between 760 and

850. But the average lender charged

a 6.332% interest rate for borrowers

with a FICO score between 620 and

639.

Impact of FICO Score on Payment —

On a $250,000 loan, that monthly

payment for borrowers with the

higher FICO score range would be

$1,303…versus $1,533 for those in

the lower FICO score range. That’s

a difference of nearly $90,000 in

interest payments over the 30-year

life of the loan!

For more information and a calcula-

tor to run your own numbers, visit

FICO’s consumer web site at

www.myfico.com


8

How to Improve Your CreditScore

o Fix any errors on your credit report.

� Get a free copy of your credit

report at

www.annualcreditreport.com

� If you find any mistakes, contact

each of the three credit reporting

agencies

www.equifax.com

www.experian.com

www.transunion.com

o Pay your bills on time.

� On average, more than one-third

of a credit score is based on pay-

ment history. The later you are,

the more points you lose. If you’ve

missed payments, get current…and

stay current.

o Keep your credit card balances low.

� Generally another one-third of

your credit score is based on the

amounts you owe, often expressed

as your “credit utilization ratio,”

which is the percentage of your

credit limit that you’ve actually

used. If you’re close to the limit,

it’s a flag to potential lenders that

you’re maxing out your cards.

� It’s a good idea to keep your

purchases to less than 25% of

your credit limit at any time, even

if you pay off your bill in full every

month.

o Limit the number of credit cards you

open….including retail store cards.

� Generally, the length of your credit

history accounts for 15% of your

credit score. Opening several new

cards within a short period of time

can hurt your score, because it

lowers the average age of your

accounts. Lenders worry that you

plan to borrow money you may

not be able to repay.

� It’s usually a good idea to keep

open old cards with a long credit

history, which also helps your

credit score, because they con-

tribute to your “credit utilization

ratio.”

� If you determine you want to close

old cards, close them one at a time

over a period of time. But, choose

carefully, because the oldest may

be important to a better credit

score.

o Promptly pay any traffic or parking

tickets or library fines.

� If the bill ends up going to a

collection agency, your credit

score could drop by as much

as 100 points. Pay these bills

on time, and keep records of

the payment.

BBB Tip

Automatic Electronic Payments

Consider activating an automatic

electronic payment schedule with

your bank, so you’ll never be late

for a payment.

NOTE – Some lenders have

recently increased their minimum

payment requirement from 2% of

the outstanding balance to 5%. If

you’re only paying the minimum

balance due, make sure your lender

has not increased its minimum

payment requirement.

It’s a good idea to have the

automatic payment pay much

more than the minimum. You’ll

owe less in interest and can pay

down your balance much faster.


V. Protect Yourself from Fraud You are your own best line of

defense to protect yourself

from credit card fraud. Here’s how.

o Sign your card immediately when you

receive it in the mail.

o Carry only the cards you expect to use,

and keep them secure.

o Secure — in your home — other cards

you may not regularly use.

o Keep a list of account and telephone

numbers for your card issuers in case

your cards are lost or stolen. Once you

report the loss or theft, you will not be

liable for unauthorized charges.

o Keep a copy of this list both at home

and at your work.

o Notify your card issuer/s in advance if

you have a change of address.

o Notify your card issuer/s in advance if

you plan to travel outside the US and

use the credit card.

o Be very cautious about giving anyone

your account number.

o Do not give your cards to anyone.

●

o Keep your pass code and personal

pin number secure. Do not put it in

writing and do not share it with any-

one.

o Use only reputable companies with

secure websites for online shopping.

o Email is not secure. Never include

your credit card number (or SS

Number) in an email.

o Shred all paper documents containing

your personal identifiers (account num-

ber, name, address) before disposing.

o When you are expecting a new or

replacement credit card or debit card,

look for it in the mail.

o Report a lost or stolen credit card or

debit card immediately.

9

!BBB FrAUD Alert

Card-issuers will never call oremail you asking you to ‘verify’your account information. Theyalready have it.

Ignore any threats or expression ofurgency you receive by phone oremail indicating that your accountwill be de-activated if you do notrespond immediately and ‘verify’your information.

BBB Tip

Indicators of a Secure Web Site

Look for well-known seals…and then

roll your cursor over the seal to see

if it’s active and clicks through to

the seal-issuer.

Common online seals of authenticity

or security include (among others)

• BBB Accredited Business

• Yahoo Merchant

• Verisign-secured

• TRUSTe

• McAfee-secured


Addendum CREDIT CARD ACCOUNTABILITY,RESPONSIBILITY AND DISCLOSURE ACT OF 2009 – (“Credit CARD Act”).

The Credit CARD Act represents a fun-

damental change for the credit card

industry, marking the beginning of a new

era of consumer empowerment. Signed

into law in May 2009, the Credit CARD

Act provides consumers with protec-

tions from unfair practices such as unex-

pected interest rate increases and

ensures better disclosure of credit card

terms and fees. Understanding these dis-

closures can make it easier for you to

manage your credit wisely – helping you

to meet your payment deadlines, avoid

late fees, and know in advance if your

interest rate will be increasing giving

you plenty of time to plan ahead and

make an extra effort to use cash and/or

opt-out of certain terms.

What the Credit CARD Act Meansfor Consumers:

o Your interest rate will be honored for

one year after you open an account.

However your rate can be increased:

� if your card has a variable interest

rate (if the index goes up, so can

your rate)

� if you are more than 60 days late in

paying your bill

� if you are in a workout agreement

and you don’t make your payments

as agreed

o Introductory rates will be honored for

at least six months, after that your

rate can revert to the "go-to" rate (the

rate must be clearly disclosed when

you first get the card).

o Banks will not charge you a fee if you

exceed your credit limit…unless you

agree in advance to “opt-in” and pay

the fee in return for the flexibility to

exceed that limit.

o Banks will provide at least 45 days

notice before increasing your interest

rate, changing certain fees or making

any other significant changes to the

terms on fixed-rate cards.

o Banks will honor your interest rate

on an existing balance, unless your

minimum payment is at least 60 days

overdue. If this occurs — and you

pay on time for six months in a row —

your previous rate will be restored.

o Banks will no longer charge interest

on balances you paid on time the

previous month. (No double-cycle

billing)

o Banks will no longer raise your

interest rate just because you missed

a payment deadline with another

lender. (No universal default.)

o Bills will be sent at least 21 days

before the due date.

10


11

Frequently AskedQuestions

How does a potential credit issuer

use a credit score?

Many lenders — and others — use your

credit score to help determine whether

or not to give you a line of credit. Your

credit score can also affect your ability

to get a job, rent an apartment, get a

cell phone, and even find affordable car

insurance.

What goes into creating a credit

score?

The most commonly used score, called

the FICO score, generally measures five

key criteria:

o Length of credit history

o Types of credit lines

o Payment history on those credit lines

o Amounts owed on those credit lines

o New credit lines – how many and over

what period of time

In addition to looking at a credit

score, what do creditors look for

on a credit report?

They look at several things, which

ultimately come together to build

a financial profile of you. This can

include:

o Your monthly and annual income.

o Your monthly payment

obligations…including rent, student

loans, medical bills, car payments, util-

ities, telephone/cell/cable bills, etc.

o Are your financial obligations in line

with your total income?

o Are your monthly payments in line

with your monthly income?

o Do you pay your bills on time?

o Do you have outstanding traffic or

parking tickets or other government-

issued citations?

o Do you have any kind of credit

history?

o How many credit cards have you

applied for in the last few months?

How do I know if what’s on my credit

report is accurate? And what do I do

if I find out there’s a mistake on it?

A federal law allows you to request a

FREE COPY of your credit report from

EACH of the three major credit bureaus

once every 12 months. The only free

resource to get a copy of it is at

www.annualcreditreport.com.

If you find mistakes on your credit

report, you should contact each of the

three credit reporting agencies to report

the error/s, and start the process to cor-

rect them.

www.equifax.com

www.experian.com

www.transunion.com

I like having several credit cards to

choose from – especially retail store

cards. Is there anything I should be

aware of with that?

Yes – two things to be aware of.

a) The number of credit applications you

submit – even for retail store cards –

may show up on your credit report

and can be a “red flag” to potential

creditors. Any red flag may cause

them to deny your application or

charge you a higher interest rate on

your credit line.

b) Opening several lines of credit may

also lower your credit score, because

it will reduce the “average age” of

your accounts — a key criteria in

determining your credit score.


12

What can I do if I have trouble

qualifying for a credit card?

There are two possible things you

can do:

a) Contact your bank and ask what you

can do to get a credit card. One pos-

sible option the bank might suggest is

to issue you a card with a low credit

limit that you can gradually increase

as you show that you can pay your

bills on time.

b) Another possible option the bank

might suggest it to apply for a

Secured Card. This product requires

you to deposit a certain amount of

money into a savings account before

you can use the credit card. Most

banks who offer secured cards will

then match your credit limit with the

amount of money you’ve deposited

into the account. As you build a

strong track record with your bank

over time, you can request an applica-

tion for a general purpose credit card.

What can trigger the bank to

increase my APR?

There are a number of things that can

trigger an increase in the APR, but the

most important one that you should

guard against is missing a payment

deadline.

What is a “Teaser” rate on a credit

card?

A Teaser rate is the same thing as an

“Introductory” rate, which is a lower APR

designed to attract credit applicants.

Teaser rates last for a set period of time

(all must be honored for a minimum of

six months), and then the rate will

increase. Read the rules closely so you

understand the agreement you are mak-

ing with the credit issuer.

How can I protect myself from fraud-

sters attempting to trick me into

divulging my bank or credit account

information?

Your bank will never call or email you for

the purpose of “verifing” your account

information. They already have it.

Also…ignore any threats or expression of

urgency you receive by phone or email,

indicating that your account will be

de-activated if you do not respond

immediately and “verify” your informa-

tion.

I’m behind on my payments, and I’m

uncertain if I can catch up on my

own. What do you suggest?

o First, call your lender/s directly, by

calling the issuing bank’s customer

service line. Ask to speak to someone

who can explore some repayment

options with you. When you get the

right kind of banking representative

on the line:

� Focus on what you can do. Be

prepared to share some ideas.

Sometimes a small change can

make a big difference, such as

asking to shift your due date to a

better time of the month if you’re

frequently struggling to make your

payments just before your payday.

� If your issuing bank tries to contact

you – respond, and have this type of

conversation. Don’t be afraid to talk

with the bank, which may be able to

make some changes that could

make it easier to pay off the debt.

o Make an appointment with a rep-

utable credit counseling agency, if

your attempts to negotiate with your

lenders have not been successful.

There’s additional advice on this step

in the next Q&A, immediately below.

How do I find and work with a

reputable credit counseling agency?

Interview several agencies.

If you know someone who has used

such an agency in the past, ask them

for a recommendation. Or, ask friends

relatives who they would consider if

they needed budgeting advice. You can

also find credit counselors in the Yellow

Pages, by contacting the National

Foundation for Credit Counseling

(http://www.nfcc.org) or the Association

of Independent Consumer Credit

Counseling Agencies (http://www.

aiccca.org) for a list of members or

by using an Internet search engine.

Further, The CARD Act mandates that

issuers provide three licensed and

Government approved credit counseling

agencies or a toll-free phone number

that provides that information on each

statement.

What are some good signs of a

reputable credit counseling agency?

Here’s a list of seven (7) criteria to look

for/ask about.

1. Recognized as a non-profit by the IRS.

2. Required to maintain all proper

licenses.

3. Provides review of customers’ income

and debts, along with a written plan

for reducing and eliminating debt.

4. Disperses the proper payments to

creditors at the proper times —

typically twice a month.

5. Provides clients with written

statements at certain intervals.

6. Offers various educational programs

and other ways to help consumers

overcome debt.

7. Audits accounts.

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