Credit Card Relief - 2011

 

A common question we hear from people trying to get out of debt is, "I can only afford to make the minimum payment on my monthly credit card statement(s). How long will it take me to pay off my debt?"

Here’s a quick example. Let’s say you owe $18,000 in credit card debt and you’re paying 18% interest. If you managed to pay the $285 minimum monthly payment, it would take about 16 1/2 years to pay it all off. Plus, you would end up paying pay more than $38,000 in interest alone.

Those numbers are overwhelming. It gets even worse if you can’t afford to make the minimum monthly payment. Paying less than the minimum won't stop the credit card company from adding penalties and late fees. They basically treat it like you didn't make a payment. So if you're getting penalized like you're paying nothing, you might as well hold on to your money.

In situations like this it’s time to reach out to the credit card company. Ignoring the problem only makes things worse. The creditor wants to get paid, so they'll work with you to settle the debt. Just keep in mind, climbing out of a hole that big is nearly impossible to do on your own.

If you try and negotiate payments yourself, you'll have to first figure out just how much you can afford to pay each month. Then you still have to try and convince the customer service representative. The problem with this strategy is that they will likely see things differently and try to push for a bigger payment.

Even if you manage to find a minimum payment you both agree on, you have to convince the credit card company to restructure your interest rates. Credit card companies have well trained negotiators on their side and they don’t like the idea of lowering interest rates. This is where CCRNow can help.

CCRNow underwriters will work with you to prepare a detailed financial statement of your income and expenses. Everything is based on your personal situation, so we help you figure out exactly how much you can afford to pay each month.

But it’s the next step that truly makes the CCRNow program unique. Every month you put your money into a safe, secure Member Trust, instead of making payments directly to the creditor. The Member Trust is run by a national bank, acting as a third party trustee. Only you and the Trustee have access to your money.

We also match you with a local attorney, who does the negotiating for you. They handle all of the haggling while you focus only on making payments into the Trust. You don’t have to worry about late fees, interest rates or minimum balances.

As the trust builds up, your program attorney negotiates a settlement with your creditor, usually allowing you to pay off the debt for pennies on the dollar and in a lot less time than if you were making minimum payments.

Facing your financial problem doesn’t have to be scary, and it doesn’t have to take decades to pay down your debt. Call CCRNow at 1.866.345.3077 to speak with a trained enrollment specialist who will answer all of your questions honestly and openly. We will custom build a solution just for you, so you can regain your peace of mind get back to sleeping at night.

 

Everyone understands that credit scores affect how much you pay when it comes to interest rates on credit cards, home loans and other lines of credit. But did you know your credit score also impacts how much you pay to get behind the wheel?

Most consumers don’t realize their credit score is a big factor when it comes to car insurance premiums. According to estimates from an insurance research firm, 92 percent of insurance companies use credit information when underwriting new policies.

Insurance companies use variables like: outstanding debt, length of credit history, late payments, new applications for credit, types of credit used, payment patterns, available credit, public records, and past-due amounts.

The insurance companies argue that there’s a strong correlation between a consumer's financial history and his/her future insurance loss potential. They claim someone with a credit score of 750 or above is less likely to file an insurance claim.

Your credit score doesn’t just influence your rate, it’s actually a major driver of car insurance prices. It’s just one more reason to try and establish a good credit history.

CarInsurance.com estimates that drivers with credit scores above 750 save an average of $783 a year on car insurance. But it’s not just bad credit that drives rates up. Drivers with little or no credit history wind up paying even more.

Average premium for drivers age 16 to 24 — $3,152

- Credit score above 750 — $2,515

- Credit score of 650 to 749 — $2,387

- Credit score of 500 to 649 — $2,692

- No credit file — $4,191

Average premium for drivers age 25 to 34 — $1,938

- Credit score above 750 — $1,155

- Credit score of 650 to 749 — $1,658

- Credit score of 500 to 649 — $2,023

- No credit file — $2,182

        * Estimates according to CarInsurance.com

There are a handful of no credit check insurance companies out there, but if you use one, expect to pay slightly higher premiums. It’s important to figure out if the higher rate is still less expensive than what you’d get charged for having poor credit.

Contact CCRNow for more tips on managing your debt and repairing bad credit. Click here to learn more about eliminating debt without bankruptcy, or call 1.866.345.3077 to get advice from a trained credit relief specialist right now.

 

In a previous post, we talked about using secured credit cards to rebuild a bad credit history. Secured cards are a good option for anyone looking to establish a good payment schedule and showing lenders you’re serious about making payments on time.

Secured credit cards are a good alternative for anyone who has a credit score so low, they can’t open up a checking account or get a loan from a traditional bank. But there is another alternative. Have you ever thought about joining a credit union?

Just about anyone can join a credit union. There are plenty of ways to do it. There may be a credit union serving people in your town or neighborhood. You may be eligible through your job, a family member, community group, or association.

Credit unions help people pool their financial resources, working as a team to create solutions to meet their financial needs. Credit unions are non-profit, and exist to provide members with a place to save money. That’s why they typically have lower fees associated with all of their products and services. Because they are not-for-profit institutions, credit unions offer better rates on loans and credit cards and higher percentage rates on checking and savings accounts.

Compared to traditional banks, credit unions are also more willing to work with people who have checkered credit histories. Many offer free credit counseling or have products tailored for people with poor credit.

Here are a few tips to keep in mind when looking for a credit union you can join:

-- Start at work. If you have a job ask your boss or HR manager if your company sponsors a credit union, or if you’re part of a select employee group (SEG) that has access to a credit union.

-- Ask the neighbors. Some credit unions only accept members from certain areas. There might be one close by that serves your neighborhood.

-- Check with family. If your employer doesn't sponsor a credit union, maybe your spouse or another family works for a company that does. Most credit unions allow family members to join.

-- Join civic and social groups. Many civic and associations offer credit union membership to their members. These include Homeowners’ Associations, Scouting organizations, and more.

-- Do your research. Check the yellow pages for a list of credit unions. Call a few in your area and ask about membership eligibility.

-- Call the Credit Union National Association at (800) 358-5710 to find the name and number of a person at the credit union league in your state. They can help you find a credit union to join.

Are you struggling to rebuild credit or get a loan? CCRNow can help. We’re a true attorney driven program that can help you get out of debt safely, legally and with peace of mind. We don’t collect any fees until your debt is settled. Click here to learn more about eliminating debt without bankruptcy, or call 1.866.345.3077 to get advice from an enrollment specialist right now.

 

Are you tired of getting new credit card offers in the mail? Maybe you're struggling to pay down debt and don't want to tempted by the pre-approved offers that keep filling your mailbox.

Not only do these offers kill trees, fill up your trash bin and tempt you unnecessarily, but you also run the risk of having someone steal the paperwork and your identity. But there is a way to stop these credit card offers from showing up.

All you have to do is have your name removed from the mailing lists of the three major credit bureaus. Equifax, Trans Union and Experian are some of the biggest offenders when it comes to selling your name and information to the credit card companies.

Taking your name off their mailing list takes only a few minutes, and you can choose to block credit card offers for two years, 5 years or even permanently.

There are two ways to opt out. The first is to call the Opt Out Request Line at 1-888-567-8688. You can also fill out the form online to block credit offers from being sent to you in the mail. The entire process takes less than 15 minutes and won't hurt your credit score. You won’t have to submit a lot of personal information, just your name, address and telephone number. In most cases you can opt out without providing a social security number. (You can also choose to opt back in at anytime.)

It may take a few months before you see the offers start to taper off as the request works it’s way through the system. But it's worth the effort if you're trying to pay down debt and avoid opening up new lines of credit.

Contact CCRNow for more tips on managing your debt or finances. Click here to learn more about eliminating debt without bankruptcy, or call 1.866.345.3077 to get advice from a trained specialist right now.

 

It looks like Americans are getting better about paying down credit card debt. Default rates are down at five of the six biggest Credit Card issuers. Bank of America Corp. reported the biggest drop in defaults, with JPMorgan Chase & Co. and Discover Financial Services also showing significant improvement.

According to an Associated Press report, the nation’s top six lenders all saw profits rise significantly in June 2011, as they had to set less money aside to cover lost debts. The latest news followed reports that show credit card users have far better payment habits than a year ago.

The drop in defaults could be attributed to a few different factors. First, many financial experts say banks have already written off so many default cases over the past few years, that most of those card holders are now off the books. Lenders have also been quicker to restrict access to accounts for those who have had trouble paying their bills in the past.

The drop in defaults may be a little surprising when you consider that the poor economy is forcing Americans to use their credit cards more.

What ever the reason, the numbers continue to show that more and more credit card customers are working to pay down debt and establish a solid payment history, even as they use their cards more frequently.

Are you struggling to pay down high credit card balances? CCRNow can help. We’re a true attorney driven program that can help you get out of debt safely, legally and with peace of mind. We don’t collect any fees until your debt is settled. Click here to learn more about eliminating debt without bankruptcy, or call 1.866.345.3077 to get advice from an enrollment specialist right now.

A new Federal Law is helping consumers get a better understanding of their credit scores. Starting July 21st 2011, anyone who gets turned down for new lines of credit will be able to find out why... and they'll be able to do it for free.

The new law means that lenders will have to explain why they turned someone down for a new home loan or credit card based on their credit score. When consumers are denied, the lender will have to provide them with a free copy of the credit score it used to determine their ineligibility. In the past, consumers would have had to pay to see that type of credit report information.

This new rule isn't just for people who were denied credit flat-out. It will also cover consumers who get a line of credit but with higher than normal interest rates. The lender will also have to explain what portion of the consumers’ credit history was weighing down their rating.

According to CBS Money Watch, 

"The rule says that any lender that charges more or rejects your application because it deems your credit substandard will have to tell you why. If you were submarined by a sub-par credit score, you’ll get a copy of the score your lender used and an explanation of what dragged it down."

Sixty-five percent of a credit score is made up of the payment history and the amount of available credit being used across all accounts, so knowing more about these important factors can go a long way toward helping you improve your overall credit score.

If you need help getting your finances under control you can contact one of CCR’s specialists toll free at 1.866.345.3077. Or click here to check out our new easy to use debt calculator.

A bad economy, slumping wages and high unemployment rates are forcing more Americans to turn back to plastic to pay their bills. Consumers recently stepped up borrowing as the economy started slumping and hiring slowed down to a trickle.

Americans took on more overall debt in May of 2011, including a jump in credit card use for just the second time since August 2008.

Households started borrowing less and saving more during these turbulent times that many are referring to as the Great Recession. A lot of people avoided credit cards in the two years since then, trying to avoid racking up high interest charges in a bad economy. But with so few jobs out there, many folks are forced to use credit cards to cover things like bills, food and gasoline.

There is a silver lining to the new credit card numbers.

In an effort to appeal to new customers, banks are offering better terms and lower interest rates with new credit cards. Credit card balances are up, but credit card delinquencies are still falling.

Payments over 30 days late are considered delinquent. In March 2011, the delinquency rate had dropped for 17th straight months.

The 90 day delinquency rate was down almost 10 percent in the first quarter of 2011 and down nearly 33 percent year over year.

If you need help getting your finances under control you can contact one of CCR’s specialists toll free at 1.866.345.3077. Or click here to check out our new easy to use debt calculator.

 

 

 

You may have heard a lot of talk about “swipe fees” recently. Swipe fees are the amount of money banks are allowed to charge every time you swipe your debit or credit card at the store. The fee varies depending on what kind of card you use, but the bottom line is this: banks are making billions from swipe fees and they’re costing you more money every time you go shopping.

The bank usually charges the swipe fee to the retailer, meaning the store pays a small fee for every credit or debit card transaction. But stores are passing some of the costs to you in the form of higher prices.

In July, the Federal Reserve nearly doubled the amount it would let banks charge for swipe fees on credit card purchases. Why?

Well, it costs a bank about 4 cents to process a debit card transaction, but they’ve been charging retailers as much as 56 cents to cover the costs. That put nearly 16 billion dollars in the pocket of big banks in 2009 alone.

2010’s Wall Street reform bill required the Federal Reserve to write a rule capping swipe fees on debit cards. The Fed had said it was going to cap swipe fees at 12 cents, but the swipe fee debate dominated Congress for months, with the U.S. retail industry fighting against big banks.

In July, the Fed caved to pressure from big banks, raising the cap to a maximum of 24 cents per swipe. That might not sound like much, but it adds up to billions of dollars per year.

The Fed also said its rule won’t go into effect until Oct. 1 2011 instead of July 21, when the regulation was originally expected to be put in place. The extra months of higher swipe fees will mean much better 2011 earnings for banks. In fact, Wall Street scores $1.35 billion for every month that the rules are delayed.

Since most of the fee is paid by retailers, they have no choice but to raise prices, passing the pain to you the consumer.

For now, it seems the only way to avoid spending more at the store is to spend less overall. By not splurging on impulse items you’ll keep more money in your pocket. Stick to a budget, use cash when possible and pay with a check rather than a debit card. Avoid using credit cards that can saddle you with debt and high interest fees.

If you need help getting your finances under control you can contact one of CCR’s specialists toll free at 1.866.345.3077. Or click here to check out our new easy to use debt calculator.

 

With the cost of higher education on the rise, college graduates are leaving school with record debt. But it isn’t just student loans that are putting grads in a credit hole. College students are using credit cards at rapidly growing rate.

The average college graduate racks up $20,000 in student loans and credit card debt . Nearly 20% of 18- to 24-year-olds are in "debt hardship," up from 12 percent in 1989.

Here are some more startling facts about college students and graduates when it comes to credit card debt. (Source: Sallie Mae, "How Undergraduate Students Use Credit Cards," April 2009)

     - 84% of the student population had credit cards in 2009. That’s a jump of approximately 11% since the fall of 2004.

     - Only 2% of undergraduates have no credit history. 

     - Half of college undergraduates had four or more credit cards in 2008. That's up from 43% in 2004 and just 32% in 2000. 

     - Since 2004, students who arrive on campus as freshmen with a credit card already in-hand increased from 23% to 39%.

     - From 2004 - 2009, median debt grew from $946 to $1,645.

     - In spring of 2008, only 15% of freshmen had a zero balance, down dramatically from 69% in the fall of 2004.

     - Undergraduates are carrying record-high credit card balances. The average balance is $3,173.

     - 21% of undergraduates have balances of between $3,000 and $7,000.

     - Seniors graduate with an average credit card debt of more than $4,100, up from $2,900 in 2005.

     - Close to 20% of seniors carry credit card balances greater than $7,000.

If you’re struggling to pay down student loans or credit card debt, CCRNow can help. We’re a true attorney driven program that can help you get out of debt safely, legally and with peace of mind. We don’t collect any fees until your debt is settled. Click here to learn more about eliminating debt without bankruptcy, or call 1.888.674.6540 to get advice from an enrollment specialist right now.

 

In Part 1 of this series, we broke down common questions you may have when dealing with debt collectors. We looked at what types of debts are covered under the Fair Debt Collection Practices Act (FDCPA) and when collection agencies can contact you.

In Part 2, we covered what types of unfair or deceptive practices are off limits for debt collectors.

In this post, we look at what you can do if you think a collection agency has violated the law or harassed you while trying to collect a debt.

Do I have any recourse if I think a debt collector has violated the law?

You have the right to sue a collector in a state or federal court within one year from the date the law was violated. If you win, the judge can require the collector to pay you for any damages you can prove you suffered because of the illegal collection practices, like lost wages and medical bills. The judge can require the debt collector to pay you up to $1,000, even if you can’t prove that you suffered actual damages. You also can be reimbursed for your attorney’s fees and court costs. A group of people also may sue a debt collector as part of a class action lawsuit and recover money for damages up to $500,000, or one percent of the collector’s net worth, whichever amount is lower. Even if a debt collector violates the FDCPA in trying to collect a debt, the debt does not go away if you owe it.

What should I do if a debt collector sues me?

If a debt collector files a lawsuit against you to collect a debt, respond to the lawsuit, either personally or through your lawyer, by the date specified in the court papers to preserve your rights.

Where do I report a debt collector for an alleged violation?

Report any problems you have with a debt collector to your state Attorney General’s office and the Federal Trade Commission. Many states have their own debt collection laws that are different from the federal Fair Debt Collection Practices Act. Your Attorney General’s office can help you determine your rights under your state’s law.

For More Information

The FTC works to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, visit ftc.gov. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

It’s important to understand that your debt won’t go away if a debt collector breaks the law, but you may be entitled to damages if you think you’ve been harassed. CCRNow is a true attorney driven program that can help you deal with creditors to get out of debt safely, legally and with peace of mind. Click here to learn more about settling your debt without bankruptcy, or call 1.888.674.6540 to get advice from an enrollment specialist right now.

 

Dealing with collection agents can be a confusing process when you’re trying to climb out of debt. Sometimes debt collectors can seem intimidating or even threatening over the phone. And letters full of legal jargon are hard to understand. Knowing what creditors can and can’t do will make things a lot less scary when it comes to settling your debt.

In a previous post, we laid out when a debt collector can contact you and how often. In this post we look at what types of unfair or deceptive practices are off limits for debt collectors.

It’s important to know that The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices to collect from you.

According to the FTC, here are some of the things creditors and debt collectors can’t do when trying to collect.

Harassment. Debt collectors may not harass, oppress, or abuse you or any third parties they contact. For example, they may not:

* use threats of violence or harm;

* publish a list of names of people who refuse to pay their debts (but they can give this information to the credit reporting companies);

* use obscene or profane language; or

* repeatedly use the phone to annoy someone.

False statements. Debt collectors may not lie when they are trying to collect a debt. For example, they may not:

* falsely claim that they are attorneys or government representatives;

* falsely claim that you have committed a crime;

* falsely represent that they operate or work for a credit reporting company;

* misrepresent the amount you owe;

* indicate that papers they send you are legal forms if they aren’t; or

* indicate that papers they send to you aren’t legal forms if they are.

Debt collectors also are prohibited from saying that:

* you will be arrested if you don’t pay your debt;

* they’ll seize, garnish, attach, or sell your property or wages unless they are permitted by law to take the action and intend to do so; or

* legal action will be taken against you, if doing so would be illegal or if they don’t intend to take the action.

Debt collectors may not:

* give false credit information about you to anyone, including a credit reporting company;

* send you anything that looks like an official document from a court or government agency if it isn’t; or

* use a false company name.

Unfair practices. Debt collectors may not engage in unfair practices when they try to collect a debt. For example, they may not:

* try to collect any interest, fee, or other charge on top of the amount you owe unless the contract that created your debt – or your state law – allows the charge;

* deposit a post-dated check early;

* take or threaten to take your property unless it can be done legally; or

* contact you by postcard.

Can I control which debts my payments apply to?

Yes. If a debt collector is trying to collect more than one debt from you, the collector must apply any payment you make to the debt you select. Equally important, a debt collector may not apply a payment to a debt you don’t think you owe.

Can a debt collector garnish my bank account or my wages?

If you don’t pay a debt, a creditor or its debt collector generally can sue you to collect. If they win, the court will enter a judgment against you. The judgment states the amount of money you owe, and allows the creditor or collector to get a garnishment order against you, directing a third party, like your bank, to turn over funds from your account to pay the debt.

Wage garnishment happens when your employer withholds part of your compensation to pay your debts. Your wages usually can be garnished only as the result of a court order. Don’t ignore a lawsuit summons. If you do, you lose the opportunity to fight a wage garnishment.

Can federal benefits be garnished?

Many federal benefits are exempt from garnishment, including:

• Social Security Benefits
• Supplemental Security Income (SSI) Benefits
• Veterans’ Benefits
• Civil Service and Federal Retirement and Disability Benefits
• Service Members’ Pay
• Military Annuities and Survivors’ Benefits
• Student Assistance
• Railroad Retirement Benefits
• Merchant Seamen Wages
• Longshoremen’s and Harbor Workers’ Death and Disability Benefits
• Foreign Service Retirement and Disability Benefits
• Compensation for Injury, Death, or Detention of Employees of U.S. Contractors Outside the U.S.
• Federal Emergency Management Agency Federal Disaster Assistance

Federal benefits may be garnished under certain circumstances, including to pay delinquent taxes, alimony, child support, or student loans.

Dealing with creditors and collectors should be easier now that you know more about your rights. In our next post we’ll take a look at how you can report a debt collector that’s violated the law and what you can do if you’re sued by a debt collector.

Ignoring collection agencies is never a good strategy for resolving your debt issues. CCRNow is a true attorney driven program that can help you deal with creditors to get out of debt safely, legally and with peace of mind. Click here to learn more about settling your debt without bankruptcy, or call 1.888.674.6540 to get advice from an enrollment specialist right now.

Falling behind on bills can be a frightening experience, especially when it comes to 

dealing with collection agencies. While it may be painful to face the problem, it’s always better to deal with the situation than it is to ignore it. Dealing with creditors can be a whole lot easier if you know your rights.

It’s important to know that The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices to collect from you.

A debt collector is someone who regularly collects debts owed to others. This includes collection agencies, lawyers who collect debts on a regular basis, and companies that buy delinquent debts and try to collect them. According to the FTC, here are some commonly asked question when it comes to settling a debt with a collection agency.

What types of debts are covered?

The Fair Debt Collection Practices Act covers personal, family, and household debts, including money you owe on a personal credit card account, an auto loan, a medical bill, and your mortgage. The FDCPA doesn’t cover debts you incurred to run a business.

Can a debt collector contact me any time or any place?

No. A debt collector may not contact you at inconvenient times or places, such as before 8 in the morning or after 9 at night, unless you agree to it. And collectors may not contact you at work if they’re told (orally or in writing) that you’re not allowed to get calls there.

How can I stop a debt collector from contacting me?

If a collector contacts you about a debt, you may want to talk to them at least once to see if you can resolve the matter – even if you don’t think you owe the debt, can’t repay it immediately, or think that the collector is contacting you by mistake. If you decide after contacting the debt collector that you don’t want the collector to contact you again, tell the collector – in writing – to stop contacting you. Here’s how to do that:

Make a copy of your letter. Send the original by certified mail, and pay for a “return receipt” so you’ll be able to document what the collector received. Once the collector receives your letter, they may not contact you again, with two exceptions: a collector can contact you to tell you there will be no further contact or to let you know that they or the creditor intend to take a specific action, like filing a lawsuit. Sending such a letter to a debt collector you owe money to does not get rid of the debt, but it should stop the contact. The creditor or the debt collector still can sue you to collect the debt.

Can a debt collector contact anyone else about my debt?

If an attorney is representing you about the debt, the debt collector must contact the attorney, rather than you. If you don’t have an attorney, a collector may contact other people – but only to find out your address, your home phone number, and where you work. Collectors usually are prohibited from contacting third parties more than once. Other than to obtain this location information about you, a debt collector generally is not permitted to discuss your debt with anyone other than you, your spouse, or your attorney.

What does the debt collector have to tell me about the debt?

Every collector must send you a written “validation notice” telling you how much money you owe within five days after they first contact you. This notice also must include the name of the creditor to whom you owe the money, and how to proceed if you don’t think you owe the money.

Can a debt collector keep contacting me if I don’t think I owe any money?

If you send the debt collector a letter stating that you don’t owe any or all of the money, or asking for verification of the debt, that collector must stop contacting you. You have to send that letter within 30 days after you receive the validation notice. But a collector can begin contacting you again if it sends you written verification of the debt, like a copy of a bill for the amount you owe.

These are the first steps you should take when it comes to dealing with collection agents.  In our next post, we break down what type of practices are off limits for debt collectors.

CCRNow is a true attorney driven program that can help you get out of debt safely, legally and with peace of mind. Click here to learn more about dealing with creditors without bankruptcy, or call 1.888.674.6540 to get advice from an enrollment specialist right now.

 

 

Digging yourself out of debt can be a major challenge, especially when you have a checkered credit history. Paying off your creditors is tough enough, but what are you supposed to do when you finally get out of debt and can’t get a loan because of a bad credit score?

You may have heard claims that using a prepaid debit card can be a good way to patch up a bad credit history. But this is mostly a myth passed along by companies offering prepaid cards loaded with fees.

In reality, prepaid cards won’t help you fix your credit score. They’re not really credit cards because they don’t let you to borrow money you don’t have. They’re really just debit cards that aren’t connected to a checking account. And they come riddled with monthly, ATM, and reloading fees. 

Prepaid cards have nothing to report to the big three credit bureaus (Experian, Equifax, and TransUnion) because you’re not borrowing money and making monthly payments. Since the cards aren’t connected to the major credit agencies, there’s no way they can improve those credit scores.

So how can prepaid card companies get away with making claims they can help improve your credit?

Some of them do report to an alternative credit agency, called the PRBC (Payment Reporting Builds Credit.) PRBC gathers information about non-traditional sources like payments to landlords and utility companies. If you pay bills with your prepaid card, those payments can be reported on your PRBC credit report (for a monthly fee of course).

Unfortunately most banks and businesses don’t use PRBC scores when deciding whether to give you a loan or approve you for a credit card. So for now, prepaid cards may be an option when you can’t get a traditional credit card or checking account, but a credit or debit card makes the most sense if you can get one.

That doesn’t mean there aren’t ways to rebuild credit by using a card. The best way to do it is with a secured credit card. Secured credit cards are much more like a typical credit card. They let you make a deposit in the same way as a prepaid credit card, but your purchases are loaned to you instead of being subtracted from the balance of the deposit. The deposit gives the creditor added security in case you default on your payments.

A secured credit card comes with a credit limit, usually between 50-100% of the deposit you make. For example, if you make a $1000 deposit for a secured card, your credit limit will be between $500 and $1000.

Secured credit cards can help build better payment habits and show banks you can make payments on time. But before you apply for a secured card, make sure the creditor reports to all three major credit agencies. If not, future creditors won’t be able to see the payment history because it won't show up on your credit report or in your credit score.

When using a secured credit card, remember that you’re trying to build a positive credit history, not rack up more debt. Use secured credit cards to make small purchases you can pay off every month. If you can’t afford to pay for a purchase, don’t charge it.

Millions of Americans are using prepaid debit and credit cards to avoid adding debt. But hidden fees could be costing you a lot more than you know. Types of fees vary from one card to the next and what you pay for depends in on how you use the card. The quickest way to start saving money is by knowing when you’re getting charged.

From 2008 to 2009, the use of prepaid cards shot up 61 percent. Analysts predict shoppers will load nearly $120 billion onto the cards in 2012. Credit Card giant, MasterCard, predicts that will jump to more than $840 billion by 2017.

Demand for prepaid cards is up, so more companies are offering them… along with new fees. That means you’ve got to understand the how much you’ll be charged to use a prepaid card. Here are four simple ways to save more of your money when using a prepaid card.

1. Skip the activation fee. Some cards charge you $20 or more just to get one, but there are several  free prepaid credit cards out there. There’s really no reason to pay for a prepaid card.

2. Avoid ATM fees. Nearly all prepaid credit cards charge you to get cash from an ATM. But you don’t have to pay more to get your money. Ask for cash back next time you’re at the store and you use your card for a debit purchase. Get the cash and skip the ATM fee.

3. Pick credit over debit. There will be times when you should use the credit option when you swipe your card. Picking credit means you’ll sign the receipt: a debit transaction means using a PIN (personal identification number). The price at the register is the same either way, but picking credit could save you extra money in the long run. Here’s how:

Anytime you buy something with a prepaid card, the retailer pays an “interchange fee.” The store pays more when you pick credit, so they’ll generally ask you to pay with debit. But that could put some of the burden back on you. Some card companies don’t like missing out on that extra charge. Many try to make up the difference by charging you, the card holder, an extra fee every time you use your PIN. To avoid that hidden charge, remember to pick credit next time you’re at the cashier. Let the retailer cover the cost.

4. Use direct deposit. Another easy way to eliminate fees is by using direct         deposit. Nearly all prepaid cards offer free direct deposit of paychecks and government benefit checks. Several cards even offer cash bonuses when you sign up for direct deposit. Loading your card at consistent times every month will slash monthly maintenance fees by making it easy to keep minimum balances and requirements.

Using a prepaid card can be a good way to keep spending and debt under control, but it’s important to find a card that’s right for you. Understand the fees and when you’re being charged.

It’s also important to realize that these cards aren’t really credit. Banks that issue the cards are charging you for the privilege of spending your own money. Despite the claims from some card companies, using prepaid cards won’t help you rebuild a bad credit score. We break down that myth in our next post.

A Client Success Story

(Based on an actual recorded interview with Robert K. in California, a Client of The Credit Card Relief Program)

The Situation
As a retired business owner, Robert invested in a venture to supplement his income.  For a time, it proved a nice complement to his Social Security income.  Eventually, however, the investment turned bad and his income was reduced by a full one-third, at which point he found himself seriously in debt and unable to keep making payments to his Creditors.  These Creditors were unwilling to work with Robert...his situation seemed hopeless.

Due Diligence
Robert knew that he would need help in getting out of debt, so he asked around and got on line and did his homework.  He decided that a debt settlement program would be the best option for his financial situation.  After talking with 3 companies, however, he learned a couple of important things: 1) Each company was just outsourcing the debt settlement work to another company; and 2) when he checked  with local BBB's (Better Business Bureaus), they gave these 3 companies an "F" rating.

The Solution
He knew that there was an answer out there, so Robert continued his research and found The Credit Card Relief Program (CCR).  Robert quickly noted that CCR had no unresolved issues with any Better Business Bureau in the country; had a proven track record of successful Debt Mediation services since 1999; and was one of the earliest truly attorney-driven debt settlement programs in the country. Robert also learned that the CCR Program required NO Up-Front Fees...in fact NO Fees at all until the first debt was settled, altered, reduced, or cancelled.  He learned that the CCR Program used real attorneys in his own state, and that his money was deposited in an independent Trust Account at a National Bank and that he had complete control over the distribution of funds: that only with his approval could funds be transferred to a Creditor.  In fact, Robert was even given a 90-day 100% money back guarantee.

Robert was convinced he had found the right solution.

In talking with his Representatives at the CCR Program Robert realized that besides enrolling in the program he would need to make some other big adjustments too.  And to his credit Robert rolled up his sleeves and got down to business.  He gave up a few golf outings and nice dinners, so he could allocate even more money to fund his Trust Account.  And whenever possible, Robert added larger lump sums to his Trust Account. 

The Result
Graduation day came as no surprise to Robert.  He was never more pleased than to get out of debt in months instead of what could have taken him 10, 15, or 20 years...and he saved thousands of dollars in future interest and fees over all those years that he now would not have to pay.  Robert's triumph provides financial lessons for everyone: carefully manage your money in good times and bad, before it manages you; think first before spending; use cash for most purchase - but when you can't, be very careful about how and when to use Credit.  Robert now has growing savings, and maintains only limited credit lines for emergencies. Life is meant to be lived, but live responsibly Robert says.  Oh, and by the way, Robert has no outstanding balances on his credit cards and his car is now paid off too!

Often times our clients arrive at our door step after having been burned and lured in by other so-called debt relief and/or debt management programs.  Admittedly, it's been difficult to compete with the overstated promises of these companies and even more difficult to see how many consumers, who just needed some genuine help and guidance, were abused by these unworthy competitors.

It's become old news now, but on October 27^th, 2010, the Federal Trade Commission stepped in with a ruling to protect consumers.  However, the ruling also finally put many questionable debt settlement companies out of business. It was much welcomed legislation for debt relief providers who have been honest, up front, and doing a good job for their customers.

Consumers, regardless of industry, deserve to work with companies that are doing what they say they can do. 

And, in the Debt Settlement business, believe it or not, creditors need these companies too!  When you look at the amount of debt that is stacking up on American soil, you might say to yourself, we are a society living on credit, mismanaging our money, and living a life of entitlement.  Well, in some cases you would be right, but in other instances, maybe it's not so cut and dry.   Regardless of the circumstances, whatever they may be, many people's situation has become hopeless and desperate. 

Many hard working Americans, who are just trying to live "the dream", are fraught with the reality that late payments, which can lead to increased interest rates, coupled with late and over limit fees, can become a viscous cycle.  One that based on debt service to income, they can just barely squeak by paying minimums at best, and in some cases, can't even do that.  So what should people do?  Filing bankruptcy isn't necessarily the answer now is it? 

Come on now!  We all have a responsibility to one another and the institutions that extend opportunities financially.  Equally important, these same institutions have a responsibility to be equitable with their clients.  Unfortunately, both sides seem to reach an extreme where push comes to shove, responsibility meets embarrassment, and each party...Creditor and Consumer, need an advocate to help them reach a resolution without trial and heartache.  In steps the Debt Settlement companies that are qualified, capable, and proven to get the job done; helping identify solutions to each unique debt situation before it becomes a disaster. 

Don't be afraid to seek help.  Look for a company that's been around for years with a proven track record, one that has an attorney supervised program, one that protects your money...because it's your money....until a settlement can be reached and agreed to by all parties. 

You don't need to go it alone! 

The FTC, the Federal Trade Commission, put the government's very large foot down on the debt settlement industry in the fall of 2010.  This government consumer watchdog agency was finally acting on the tens of thousands of complaints they had received from people who had paid huge up-front enrollment fees and hefty monthly maintenance fees to unscrupulous debt settlement companies who took these fees but did very little if any work for their customers: no customer support, no real attempts at debt negotiations with their customers creditors, and rarely any actual debt settlements. Just go on line and try to find some of these companies - they're gone.

Both federal and state regulators had been trying for years to obtain refunds for the customers of those shady companies, but without much success.  Even threats of criminal penalties by state regulators didn't seem to work. And the few legitimate companies in the industry who actually do what they promise by helping consumers get out of debt in months instead of years suffered because they were tarred by the same brush.

However, on October 27, 2010 the Federal Trade Commission, in the Final Ruling on Debt Settlement Companies, put in place strict enforceable guidelines for our industry that would compel the unscrupulous companies to shut down their operations. However, it would give new life to legitimate companies who are legally compliant, truly customer oriented, and who provide valuable debt mediation services to American consumers.

Among other things, these Rules prohibited the collection of any fees until a customer's debt was actually settled, altered, reduced or cancelled; established a clear, 100%, ninety day refund policy; no monthly "maintenance" fees were allowed; and required that the fees that are allowed have to be fair and equitable.

In the last quarter of 2010, new FTC rules went into effect to protect consumers seeking debt relief through debt settlement type companies. This change spells good news to those struggling with mounting credit card debt or other unsecured debt for two important reasons:

1) it cleans up the deceptive and abusive practices that have been associated with some debt relief services and

2) it reinforces the legitimacy of negotiating-down and settling debts with creditors as a way to get out of debt.

You can now feel comfortable in pursuing this option to eliminate your debt with the protection of the FTC.

How Did the Debt Relief Changes Come About?

Since 2005, when Congress passed The Bankruptcy Abuse Prevention and Consumer Protection Act - which actually limited consumers ability to file Chapter 7 bankruptcy to discharge unsecured debts - consumers have been desperate for ways to unburden themselves of mounting debt, especially credit card debt. With the reduction of home values due to the mortgage crisis, debt-consolidation loans were no longer a viable option. Programs such as Consumer Credit Counseling were also ineffective for many people. Their debt was just too big and the time to pay it back just too many years!

As consumer debt grew, so did the debt settlement industry as a way for people to settle and discharge their debts with their creditors for less than what they owed. While many people have found true relief using a debt settlement company, unfortunately, as is the case in many industries, the rise in demand also lead to the rise in unscrupulous companies making unrealistic promises of how much they could save you and how quickly they could get you out of debt. In addition, many so-called experts in the financial reporting world were skeptical of the industry and critical of options that enabled people to settle debts for less than what was owed. Their philosophy was: "It's your debt problem; buckle down and pay back what you owe!" The unethical practices of some, along with the negative press, cast a shadow on the industry.

Yet, during all of this, banks and credit card companies themselves were under scrutiny by Congress for their own ruthless practices that kept people in debt by raising interest rates without warning and mounting up over-draft charges and late fees.  In 2009, in response to consumer complaints and the rampant rise in debt, Congress passed a new law to protect consumers from these kinds of practices.  While this helped to stem the blood flow, it did little to cure the epidemic.

With the FTC's enactment of the new provisions governing debt relief services under the TSR (Telemarketing Sales Rule), there is now a glimmer of hope for debt-strapped consumers. A better product has emerged from the industry cleanup that provides consumers with a doable solution to debt problems, allowing them to discharge their debts honorably and, in most cases, for less than what they owe.

The new Debt Relief Rules and What They Mean for You

1.       It's illegal to charge upfront fees. Debt Relief service providers cannot collect any fees from you until they have settled at least one of your debts. They can, with certain restrictions, require you to set aside money in a dedicated account for your fees and for payments to creditors. The benefit to you is that the service provider has a real incentive to settle your debts as quickly as possible; meaning, you will start to reduce your debt burden in a much shorter period of time.

2.       Certain information must be disclosed before signing. Before you sign up for debt settlement services, the provider must disclose specific information about the service, including: how long it will take to get results, how much will it cost, the negative consequences that could result from using debt relief services, and key information on how your account is set up and managed. The benefit to you is that you should have a clearer understanding of how their debt relief program works and what you can reasonably expect before you engage their services.

3.       No misrepresentation of services. Debt relief service providers are prohibited from making false or unsubstantiated claims about their services. Again, the benefit to you is a clearer understanding of what you can expect based on the amount of debt you have and the amount of money you can afford to pay towards discharging those debts. Gone are the deceptive, to-good-to-be-true practices of leading you to believe you can be debt-free for just pennies on the dollar.