Monday, November 30, 2009

When your credit's still married and you're not

Make sure all your financial ties have been severed

By Todd Ossenfort

The Credit Guy
'The Credit Guy,' columnist Todd Ossenfort
The Credit Guy, Todd Ossenfort, is a credit expert and answers readers' questions about credit, counseling and debt issues.

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Question for the expert

Dear Credit Guy,
Help! I just reviewed my credit report. I was divorced in 1999 and just found out my ex has a credit card bill of almost $30,000. This was charged AFTER the divorce. On my credit report, it states that the account owner is the authorized user. Can I be liable for this debt? Who is the authorized user, myself or my ex? I'm scared to death! -- Rick

Answer for the expert

Dear Rick,
Don't panic. The first thing you need to do is determine what is going on with this account. Is it an account that you had when you were married that you forgot about, a new account opened after you divorced or something else?

Without seeing your credit report, it is difficult to say, but if you are the authorized user on the account, you would not be responsible for the debt. However, you need to be sure. The account listing on your credit report should include contact information for the card issuer. Call the issuer and ask if you are an authorized user on the account or if you are the primary account holder. If the issuer says you are an authorized user, they cannot discuss the account with you further because you are not the cardholder.

If you are the authorized user, you need to have your name removed from the account. The main reason being that the account could negatively affect your credit if mishandled by your ex. Unfortunately, a divorce does not separate credit accounts shared jointly by two spouses. The only way to be relieved of responsibility on a credit contract that you jointly signed as a married couple is to close the account, alter the terms of the loan or, in the case of an authorized user account, have the authorized user's name removed from the account.

To have your authorized user status removed, contact the card issuer and request that your name be removed from the account. You will need to have the security information for the account to request the change. The security information for many card issuers is the cardholder's account number, billing address and the last four digits of the cardholder's Social Security number. If you cannot provide this information, you will need to have the primary cardholder, your ex-spouse, make the request.

Should you learn from the card issuer that you are the person responsible for the account and your ex-spouse is the authorized user, ask the issuer to send you verification that you are indeed the primary account holder. Because you were not aware of the account and the charges were made after the divorce, she may have opened a new account in your name and named herself the authorized user. If that is the case, your ex-spouse stole your identity, and you could report the account as such. Doing so would legally implicate your ex-spouse in a crime.

Before you take such drastic steps, however, you might let her know that you are aware that she opened an account in your name without your permission and that if she moves the balance to a card in her own name and closes the account, you will not report the identity theft. Keep in mind that until the balance is moved to an account in her name or you report the account as identity theft, you are financially responsible for the balance on the account.

One last thing: To avoid unpleasant surprises like this one, it is an excellent idea to check your credit reports once each year. You can do so for free at

Take care of your credit!

Enforcement delayed on Internet gambling ban

Credit card-wielding gamblers, regulators have 6 more months

By Martin Merzer

With a regulatory deadline hanging over their heads, credit-card issuers and others in the banking industry have been granted a reprieve -- an additional six months to comply with new rules intended to ban online gambling.

The Federal Reserve and the Treasury Department announced Friday that the controversial and somewhat ambiguous new rules, which had been scheduled to take effect on Dec. 1, won't be enforced until June 1.

Regulators delay Internet gambling law banAnd maybe not even then.

Rep. Barney Frank, D-Mass., a leading critic of the new rules, said the delay would permit legislators to press ahead with new legislation that would largely overturn the widely criticized Unlawful Internet Gambling Enforcement Act, passed in 2006.

That law, which rode to passage with little discussion when tacked onto another bill, essentially banned U.S.-based firms from conducting or assisting online gambling operations. In practice, credit card accounts are the financial vehicles used most often by gamblers to place their bets, pay their losses and collect their winnings.

The bill generally prohibited transfers of money from U.S. financial institutions to gambling sites, but it required banks and credit card networks to navigate a thicket of confusing and often contradictory definitions and rules. Among other things, it never got around to defining the term "illegal Internet gambling."

'Midnight regulations' criticized
"The Department of the Treasury and the Federal Reserve Board of Governors deserve a great deal of credit for suspending these midnight regulations promulgated by the Bush administration, which would curtail the freedom of Americans to use the internet as they choose and which would pose unrealistic burdens on the entire financial community," Frank said in response to Friday's action.

"This will give us a chance to act in an unhurried manner on my legislation to undo this regulatory excess by the Bush administration and to undo this ill-advised law," he said.

Frank's bill, called the Internet Gambling Regulation, Consumer Protection and Enforcement Act, would establish a federal framework under which Internet gambling operators could obtain licenses to accept bets from residents of the United States.

His bill mandates thorough investigations of potential licensees and it requires technological barriers to deter underage gambling, fraud, money laundering and tax avoidance.

Quite a lot of money is at stake. Even amid all the controversy, Internet gambling remains a $10 billion-$12 billion per year industry in the United States, according to Congressional testimony and various industry experts.

Banks also seek delay
In announcing the delay Friday, the federal agencies said they were acting in response to requests from Frank, as well as from Wells Fargo, the American Bankers Association, the Credit Union National Association and a wide range of groups associated with the gambling industry.

"The agencies acknowledge some of the challenges regulated entities are experiencing with the act's definition of 'unlawful Internet gambling," the Federal Reserve and the Treasury Department said in a joint statement. "Moreover ..., several members of Congress have indicated interest in revising the Act.

"The agencies are thus persuaded that a limited extension of the compliance date for regulated entities is appropriate," the statement said.

The action was cheered by a variety of gambling interests, including the Poker Players Alliance, a group that claims more than 1 million members and has lobbied hard to overturn the Unlawful Internet Gambling Enforcement Act.

"This is a great victory for poker, but an even greater victory for advocates of good and fair public policy," said Alfonse D'Amato, the group's president and a former U.S. senator from New York in a release. "These additional months are critical to provide legislators time to clarify UIGEA and pass legislation to license and regulate poker early next year. It is our hope that another extension would be granted should the [June 1] deadline approach before these pieces of legislation can be passed."

Simply delaying the compliance date serves no interest except that of the Internet gambling enterprises that have long evaded American gambling laws ...

-- Rep. Spencer Bachus, Sen. Jon Kyl
Proponents of Internet gambling ban

Some Republican lawmakers, however, were less pleased. They sponsored the 2006 law and have consistently defended it.

"Simply delaying the compliance date serves no interest except that of the Internet gambling enterprises that have long evaded American gambling laws and will continue to do so until effective enforcement is in place," Rep. Spencer Bachus, R-Ala., and Sen. Jon Kyl, R-Ariz., said earlier this month in a letter to Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke.

Saturday, November 28, 2009

How to escape the credit card fee cycle

Being buried with fees? Get out now!

By Sally Herigstad

To Her Credit
To Her Credit, Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006).

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To Her Credit archive

Question for the expert

Dear To Her Credit,
Can a credit card company continue to charge you late fees, over-limit fees and maintenance fees after your account has been closed by the bank?

I missed one payment with my credit card company for the first time in three years. I called and asked if I could make reduced payments until my financial situation improves, but they refused to work with me. I've been making less than the minimum payment because I can't afford to make the total due with the fees. The more fees and interest they tack on, the more impossible it becomes for me to make the minimum, let alone make any progress on it.

I have sent in letters and made numerous calls to the company to try and work out my account. I called today and was told my account was closed, but they plan to continue to charge my account over-limit fees and late fees.

Can they do that? What can I do to stop it? -- Quana

Answer for the expert

Dear Quana,
Once you get behind on payments, the fees can start coming like a barrage of snowballs. It makes it hard to get back on your feet! A few years ago, a friend of mine owed about $1,000 that, for one reason or another, got away from her. The late fees and over-limit fees started piling up, the interest rate went up to 33 percent, and before she knew it, she owed $3,000. Ouch!

Unfortunately, yes, they can do that. If you owe money on an account, even though the bank has closed the account and you can no longer make charges on it, you are still subject to late fees, over-limit fees and continuing interest expense on all of the above.

Every time your payment is late or is less than the minimum, you pay a fee. And every month your balance remains over your credit limit, you pay another fee.

The exception is the annual fee. If the account is closed, you should not have to pay the annual maintenance fee.

The Credit CARD Act of 2009 contains provisions to regulate fees, including over-limit fees. Under the section of the law dealing with over-limit charges, consumers can choose whether they want to pay over-limit fees if they buy something that puts them over their credit limit, or if they want the transaction to be rejected instead.

The new law also limits the over-limit fee to once every billing cycle. This portion of the law goes in effect Feb. 22, 2010.

On Aug. 22, 2010, additional provisions go into effect. One of them states that over-limit fees, late fees and other fees must be reasonable and proportional to the violation. As of this moment, exactly what that means hasn't been spelled out.

Contacting your credit card company was a good first step. However, the banks are inundated right now with people asking for help, many of whom are in worse shape financially than you are.

The next step is to get help from a nonprofit consumer credit counseling agency. A credit counselor can help you explore all the options for your situation. In addition, the counseling agencies have negotiated guidelines with credit card issuers for setting up debt management plans or forbearance programs. Under these programs, the bank may reduce your interest rate, waive fees and let you make lower minimum payments, giving you a chance to start making payments on time again.

Laws and regulations can only do so much to protect you from high fees and interest charges, but you can find the help you need to get back on your feet again. Once you get relief from high fees and interest expense, you can take control of your finances and start working your way out of debt once and for all.

BofA rate hikes push national average credit card APR higher

Higher rates, economic struggles likely to dampen holiday spending

By Jeremy M. Simon

Interest rates on new credit card offers rose slightly this week, according to the Weekly Credit Card Rate Report, as Bank of America increased rates on two of its cards.'s weekly rate chart
Avg. APR Last week 6 months ago
National average 12.71% 12.68% 12.24%
Business 9.74% 9.49% 16.74%
Low interest 11.65% 11.65% 12.22%
Cash back 12.08% 12.08% 12.06%
Balance transfer 12.13% 12.07% 10.99%
Reward 13.29% 13.29% 13.01%
Instant approval
13.32% 13.32% 10.74%
Airline 13.60% 13.60% 12.96%
Bad credit 13.74% 13.74% 11.37%
Student 14.89% 14.89% 14.52%
Methodology: The national average credit card APR is comprised of 95 of the most popular credit cards in the country, including cards from dozens of leading U.S. issuers and representing every card category listed above. (Introductory, or teaser, rates are not included in the calculation.)
Updated: 11-25-2009

The national average credit card annual percentage rate rose to 12.71 percent, up from 12.68 percent the previous week and 12.24 percent six months ago. The average is calculated from about 95 of the most popular credit cards in the country, including cards from dozens of leading U.S. issuers and representing nine major categories of credit cards. Introductory (teaser) rates are not included in the calculation. Among the average APRs in the nine categories, two jumped higher and seven were unchanged.

This week's increase in the average was due to Bank of America hiking the interest rates on some of its cards. It's far from alone: Two months ago, the average stood at 12.32 percent; six months ago, it was 12.24 percent.

With BofA and many other banks continuing to raise APRs, some experts say cardholders will remain hesitant to charge purchases, limiting the economic recovery. On Tuesday, data showed third-quarter gross domestic product growth was weaker than previously estimated, due to restrained consumer spending.

That trend is likely to continue: A survey released Monday by the Consumer Federation of America and the Credit Union National Association showed that 43 percent of consumers plan to cut back on holiday spending this year, with nearly a quarter of poll respondents expressing concern about meeting monthly credit card payments.

Those numbers represent an improvement over last year's holiday survey, but they still display far more consumer pessimism than the numbers seen before the economic recession began.

"During these recessionary times, more people have been seeking to pay down debt and build up their savings," CUNA Chief Economist Bill Hampel said in a press release."We certainly have seen that behavior among the nation's 92 million credit union members. Our survey indicates the pattern is continuing into the holiday season."

Wednesday, November 25, 2009 survey: Retail credit cards boost rates, cut rewards

Retailers' cards go delinquent more often, so their terms become harsher

By Tamara E. Holmes

Once known for offering instant savings and incentives to keep customers shopping, retail credit cards have scaled back rewards in favor of higher rates, lower limits and closed accounts, according to a survey of 37 leading retail cards.

Retail stores' credit cards have grown less friendly in 2009Consumers have long been warned to be cautious with store credit cards since they typically come with higher interest rates and discounts that promote impulse spending. This year, many of us seem to be heeding that advice, with the National Retail Federation reporting that consumers are favoring cash to pay for purchases. That trend is not surprising given the less-consumer-friendly terms that characterized retail credit card offerings in 2009. (See's 2009 retail credit cards chart.)

This year was tough for all credit card companies, but retail credit card issuers experienced greater losses than general purpose credit card issuers, says Meghan Neenan, senior director of New York-based Fitch Ratings, which tracks retail credit card losses. In October alone, the charge-off rate on retail credit card losses was 11.75 percent, compared to 10.75 for general market cards, Neenan says.

Bad news for card issuers has meant bad news for cardholders. While in recent years, store card issuers rolled out rewards programs designed to entice shoppers through savings and discounts, this year issuers have been focusing more on reducing the level of risk in their portfolios, cutting their losses by cutting access to credit.

A perfect storm
Not only were card issuers concerned with the faltering economy, but they had the Credit CARD Act of 2009 to contend with. Beginning in February 2010, the law will limit their ability to raise interest rates and fees on future balances. In preparation for the changes, many have been adjusting rates upward and "re-pricing their portfolios," Neenan says, leading to even more unfavorable changes for consumers.

"All the card issuers have taken drastic steps over the last year in underwriting," says Neenan. "They pulled back on growth, and they pulled back on credit lines."

Even in good economic times, store credit cards are likely to have higher interest rates than general-market credit cards because they tend to be the first bill consumers will default on, making them a riskier form of debt. "If I don't pay my bill at a retail chain, I just can't shop or I'll be uncomfortable shopping in that store chain," says Robert Hammer, founder of R.K. Hammer Investment Bankers, a bank card advisory firm in Los Angeles. "But if I'm delinquent on my MasterCard or Visa, I can't use it anywhere in the world, so who do you pay last?"

That tendency to default first on retailers' cards has held true, even as the market has changed, and many retailers' cards became more widely accepted. Many of today's retail credit cards have three parties involved: the retailer, the card issuer and the network. The retailer will partner with a bank to issue the card, rather than enter the banking business itself; the bank then often has a "co-brand" partnership with a payment network such as MasterCard and Visa, letting consumers use the card anyplace that accepts cards in that network.

In 2009, retailers faced a double whammy: Consumers were both reluctant to buy and hesitant to pull out their credit cards. With their stores' bottom lines were pinched by the economy and their banking partners in worse shape, credit card rate increases became as common as a President's Day sale. survey surveyed 35 retailers' credit cards in 2008 and 37 retailers' cards in 2009. Of the cards surveyed both years, 19 retailers raised their interest rates in the 2009 survey.

The changes were felt by both bargain and luxury shoppers alike. For example, Wal-Mart's interest rate for its co-branded credit card last year ranged from 11.87 percent to 20.87 percent, whereas this year, it ranged from 13.9 percent to 22.9 percent. On the other side of the spectrum, the minimum APR for Saks Fifth Avenue's co-branded offering was 11.99 percent in 2008 compared to 15.99 percent this year.

Retail credit cards have scaled back rewards in exchange for higher rates and lower limits.

The market for store credit cards is expected to pick back up after it fell $4 billion from 2007 to 2008, according to the market research firm Packaged Facts. Use is expected to rise in 2010, reaching $114.1 billion.

While many consumers saw their interest rates rise, others saw their accounts closed. Some companies, like Nordstrom, let cardholders know that their accounts would be terminated if they didn't use them, says Hammer. Others simply shut down inactive accounts, giving customers no choice in the matter. Still other accounts were closed when retailers such as Circuit City declared bankruptcy (though cardholders with balances still had to repay their debts).

Regardless of the reason, closing an account can potentially hurt cardholders since a credit score is partly determined by the credit utilization ratio -- the amount of debt owed in relation to total credit availability. "If you start closing credit card accounts, it will bring down your available limit and it could make your limit to balance ratio above 50 percent, possibly harming your score," says Dorothy Guzek, a certified financial counselor with Troy, Mich.-based GreenPath Debt Solutions.

Even if cardholders didn't experience rate increases or lowered credit limits, they likely saw a change in the quality of rewards and perks that come with their accounts. "The rewards are still out there, but they're not as rich as they used to be," says Hammer. For example, Barneys last year offered cardholders 3 percent back on everything spent up to $4,999. This year they cut that back to 2 percent. Last year, Kroger offered cardholders three points to go toward free groceries for every dollar spent on Kroger brand products. This year, that was scaled down to one point per dollar.

Benefits for some
Despite the changes, some cardholders can still reap financial rewards from store credit cards if they use them right. "For people who pay their bills timely, track their expenses and know what they can afford, store cards can be a good thing," says Guzek. Often cardholders receive exclusive discounts or special savings. Of course, shoppers must pay the entire balance each month so interest doesn't offset those savings, Guzek adds.

Store credit cards can also provide flexibility to those who are buying costly items such as appliances. For example, cards sometimes offer a period of no-interest payments such as six months or a year. Those types of deals can be of benefit to consumers as long as they can afford to pay for the item during the promotional period before higher interest rates kick back in, Guzek says.

Though retail credit card issuers are beginning to see fewer charge-offs, says Neenan, consumers shouldn't expect to see better credit terms any time soon, and retail card issuers will continue to be stringent with their lending requirements in the near future. "The year 2010 is going to be tough for us in banking and in credit cards," predicts Hammer.

That means the savviest shoppers will use retail credit cards as a savings tool, getting deals and discounts for items they can pay for immediately. Those who carry a balance will continue to pay more for the privilege. "Everyone needs to know their budget and that's going to help them to understand whether they have money for future card payments," says Guzek. "And if they don't, they shouldn't be charging, bottom line."

How going to jail impacts your credit

Credit card issuers don't automatically learn of your woes or shut your account

By Jeremy M. Simon

Credit Score Report
Reporter Jeremy M. Simon
Jeremy M. Simon covers credit scoring and other issues as a staff reporter for

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Question for the expert

Dear Credit Score Report,
My brother is serving an 18 month sentence. He has no credit card debt (paid before he started his sentence), and the cards aren't being used. Will inactivity affect his score? -- Concerned Sibling

Answer for the expert

Hey Concerned Sibling,
Even if your brother doesn't use his credit cards during the time he is behind bars, his credit score shouldn't be damaged solely by inactivity.

Inactivity alone doesn't hurt a cardholder's credit score in the short term, since existing credit history data will continue to help generate a credit score. Several banks confirmed that they continue to share existing account information with the credit bureaus -- Equifax, Experian and TransUnion -- as long as the accounts remain open. And as long as the credit bureaus have that information, they will, in turn, share it with credit scoring companies, such as FICO.

"A card that is open and carries a zero balance will just be reported as current for three years," says Experian spokeswoman Danica Ross. "As long as the card is open, lenders are obligated to report updates on the account." Since your brother's sentence is for 18 months, he will be out of jail well before his account information would stop being shared.

The real threat to your brother's credit score comes from the possibility of an account closure. His card accounts could be closed due to the banks' policies about imprisoned cardholders. Citi, for example, says it will close a credit card account once that issuer learns the cardholder is incarcerated. However, experts say information about an incarceration won't come from a credit report.

"I can tell you that credit reports do not include criminal arrest or incarceration records, so there would be no indication as to why there was no activity," says Experian's Ross.

Even so, you may want to call his bank and (anonymously) inquire about their policy regarding imprisoned cardholders, just in case.

Of course, you don't have to be in jail to have your credit card account closed. In the current economic environment, banks are closing accounts on all sorts of cardholders. As unemployment continues to rise, issuers have been canceling credit cards -- both used and unused -- in an effort to control the amount of credit available to borrowers. That's because consumers who eventually run into financial trouble could potentially default on their loans and cause banks to lose money. Whether or not the cardholder is behind bars, the decision to keep accounts open is the individual issuer's. "The closure of accounts is at the discretion of the lender," says Peter Garuccio, senior director of public relations with the American Bankers Association. "We don't force banks to lend money to anyone."

If one of your brother's accounts is closed or a credit line reduced, it could increase his utilization ratio. That's the comparison between existing debt and total credit access -- and a factor in determining credit scores.

Whether the banks close your brother's credit cards due to his incarceration or simply because they are limiting their risk levels, you can still help him generate a credit history while behind bars by adding your brother as an authorized account user on your credit card. Then continue to use your credit card and pay it off each month, adding positive payment information to your brother's credit history. "If attempting to maintain good credit scores while incarcerated, a family member could add the incarcerated individual as an authorized user to stimulate credit activity," says Bank of America spokeswoman Anne Pace.

If you don't let yourself worry -- and you add your brother as an authorized user on your card account -- you've done all you can. Meanwhile, the fact that your brother paid off his debt before going to prison bodes well for his continued responsible credit use after his release.

Good luck!

Monday, November 23, 2009

Credit card etiquette: Avoid these 8 examples of bad plastic manners

Crediquette taboos include squabbling over (or shying from) paying the tab

By Erica Sandberg

You recoil from financially tactless people -- but does your own credit etiquette cause others to squirm or groan? Here are the worst plastic manners to recognize and refine.

1. Bad (credit) etiquette: Advertising debt troubles.1. Bad (credit) etiquette: Advertising debt troubles.
Have credit problems? Choose confidants carefully. Complaining about your overwhelming balance, collection activity or bankruptcy puts listeners in an awkward position. Further, if your audience doesn't know you well, they'll likely base their opinion of you on that negative information rather than your more positive qualities.

Polite plastic move: Respect your audience -- if they aren't intimate friends, keep your money troubles out of the conversation. Speak in generalities, says Lydia Ramsey, business etiquette expert and author of "Manners that Sell." "It's one thing to make global statements, like 'Gosh, times are tough.' But you don't want to bring it to a personal level."

2. Bad (credit) etiquette: Hogging credit card receipts.

2. Bad (credit) etiquette: Hogging credit card receipts.
What a convention! You've taken taxis, had drinks at the hotel, dined in fine establishments ... and hoarded every single charge slip so you can expense all of it, whether the charges were yours or not. If you're in a group, grabbing the receipts so you can write the costs off on your personal expense report is rude.

Polite plastic move: Be mindful of taking payment turns, and only keep your own charge receipts. Never ask for someone else's, either.

3. Bad (credit) etiquette: Playing card wars at the table.3. Bad (credit) etiquette: Playing card wars at the table.
Dinner is finished, the waiter brings the check, and suddenly everyone is pulling out their plastic, with loud cries of "I got this!" "Please, let me!" or "No, it's my turn!" Thus begins the embarrassing brawl over who has the honor of charging the meal. Such raucous displays are no-nos, especially in a high-end restaurant.

Polite plastic move: If you truly want to pay, don't make a big show of it. Before being seated, present the waiter with your credit card, saying you'll be responsible for the bill. Indicate that you'd like to sign the receipt in private. When the meal commences, others will wonder about the bill. Just say, "It's covered," and move on to another subject.

4. Bad (credit) etiquette: Never reaching for your card.
Conspicuously fighting to pay is loutish, but the reverse is also egregious. If you know someone who constantly waits for your card to emerge, you appreciate how annoying such passivity is. But you may do the same, thinking your companion's company is reimbursing the charge, or that his line of credit is more expansive then your own.

Polite plastic move: Whether you're with a friend, associate or date, never assume he or she should or will pick up the tab. Unless there's a clear recompense pre-agreement, lay your card down, offer to split the charge or say, "next time's on me" -- and really do it.

5. Bad (credit) etiquette: Flashing your status card.5. Bad (credit) etiquette: Flashing your status card.
It's perfectly marvelous that you got an extra-special credit account, but not everyone needs to know. Showing off your Black, White or other elite credit card by whipping it out with flourish (or worse, passing it around) is crass. If others happen to notice and ask about it, fine, but flaunting the card will irritate, not impress.

Polite plastic move: Getting the goodies associated with a status card should be thrill enough. Don't have it mysteriously fall from your wallet so someone can pick it up and exclaim, "Hey, it's graphite -- I've heard about these things!" Use it as you would any piece of plastic: discreetly.

6. Bad (credit) etiquette: Bragging about your credit score6. Bad (credit) etiquette: Bragging about your credit score
Your FICO score just cracked 800? Fabulous -- better tell everyone! Well, no. It's akin to that obnoxious student who boasted about her perfect report card. Imagine you're talking to someone who's just been laid off or is in the middle of home foreclosure. The last thing he wants to hear about is your awesome credit score.

Polite plastic move: Achieving high credit scores is cause for pride and your happiness is justified. Etiquette, however, is about making others feel comfortable. Keep mum.

7. Bad (credit) etiquette: Prying about other people's credit.
"How many credit cards do you have?"
"What's your credit limit?"
"How much do you owe now?"

Quizzing others about their credit is unacceptable. In fact, discussing debt has become the new social taboo, surpassing talking about religion, politics or sex. "These financial matters are not a point of discussion," says Ramsey. "Not even with close friends. It's totally out of line and off limits."

Polite plastic move: Don't ask. It's that simple.

8. Bad (credit) etiquette: Openly misusing the company card.
Breaking the law is not OK, but dragging a companion into your impropriety is an extreme blunder. If you charge a night of cocktails and with a wink, whisper "We talked business, didn't we?" -- well, that's precisely what you're doing. Displaying poor credit ethics is particularly damaging in business settings. "The last thing you want is for a colleague to think you're immoral," warns Ramsey. "It will come back to you."

Polite plastic move: It goes without saying that one should always strive to be upstanding, when using plastic or not.

Now that you have assured yourself that you are not Visa vulgar or Discover déclassé , we invite you to print this story out for those in your social circle who are less versed than you in crediquette. Blue or black ink only, of course.

How bad credit affects a new marriage

Protect your new spouse from your past credit mistakes

By Sally Herigstad

To Her Credit
To Her Credit, Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006).

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To Her Credit archive

Question for the expert

Dear To Her Credit,
A year before we got a divorce, my ex-husband had our house foreclosed on. We ended up having to file for joint bankruptcy. Thanks to my ex's shenanigans, my credit score is about as bad as it can get.

I'm dating someone now and would like to get married, but I'm worried about messing up my new husband's credit. Will my irresponsible ex's problems get dragged into my new marriage? -- Lora

Answer for the expert

Dear Lora,
Wow -- a foreclosure and a bankruptcy. One or the other is bad enough. In fact, people often go through bankruptcy to help them avoid foreclosure. Bankruptcy often allows you to keep your home, plus it may eliminate other debts so it's easier to keep up with your mortgage payments.

Of course, if your ex was irresponsible as you say, he wasn't exactly seeking the best advice, let alone taking it.

So here you are now. Thank goodness for second chances.

First the good news. "If you marry, it's not going to hurt his credit score," says New York bankruptcy attorney Edward E. Neiger. There's no such thing as a joint credit score, and the negative items from the past on your credit history cannot somehow work their way over to his report just because you marry.

Now the not-so-good news: Any time you and your new husband apply for credit together, your credit history will affect you both. Say you want to buy a house together. "If the banks require two incomes to qualify, he might not be able to buy the house," says Nieger.

It's not the end of the world, however. If you've already told your husband about your financial struggles, he won't be shocked. And although it may be more difficult for you to buy a house, it's not impossible. People who have bankruptcies in their past buy houses -- they may need to save a little longer and work on building their credit histories for a year or two, but it can be done.

When you remarry, remember these points to protect his credit and start improving yours:

  • Do not add your new husband to any old accounts with a negative history -- not even as an authorized user. You don't want these accounts to show up on his credit report.
  • New joint accounts with you will not hurt his credit as long as the accounts are always paid on time.
  • He can help you improve your credit score, without hurting his own credit, by adding you to his current accounts as a joint account holder.
Perhaps one of the most important things you and your intended can do as your relationship becomes serious is to start communicating and learning about finances together. You could take a class at a local community center or library, or find books or courses online. You may both be financially literate already, but going through a course gives you an opportunity to talk about expectations and goals in a way that isn't likely to come up otherwise. It's so important to understand each other, your financial styles and where you want to go with finances before the wedding!

Congratulations on your new relationship. The man you are dating sounds great -- people who are responsible financially tend to be responsible and dependable overall. I wish you both the best of everything!

Credit card APRs fall sharply, but you shouldn't get too excited

By Jeremy M. Simon

The average interest rate on new credit card offers fell sharply this week, according to the Weekly Credit Card Rate Report, but don't expect your rate to drop, too.'s weekly rate chart
Avg. APR Last week 6 months ago
National average 12.68% 12.79% 12.38%
Business 9.49% 9.49% 16.74%
Low interest 11.65% 12.12% 11.95%
Balance transfer 12.07% 12.27% 10.99%
Cash back 12.08% 12.11% 12.06%
Reward 13.29% 13.29% 13.01%
Instant approval
13.32% 13.32% 10.74%
Airline 13.60% 13.60% 12.96%
Bad credit 13.74% 13.74% 12.15%
Student 14.89% 14.89% 14.52%
Methodology: The national average credit card APR is comprised of 95 of the most popular credit cards in the country, including cards from dozens of leading U.S. issuers and representing every card category listed above. (Introductory, or teaser, rates are not included in the calculation.)
Updated: 11-19-2009

This week, the national average credit card rate fell to 12.68 percent due to a reshuffling of card offers in the database -- not because of any APR cuts by issuers. Banks previously present in the representative sample of about 95 national cards held their rates steady this week, taking a break from what has been a steady stream of increases throughout 2009.

This week's break likely won't last long, though, as banks struggle to protect their profits in the face of increased regulation, as well as cardholder delinquencies spurred by the economic downturn.

In general, credit card interest rates have been on an upward swing. Six months ago, the average rate was a half-point lower, at 12.38 percent. Someone who borrowed $5,000 on a credit card today, and consistently paid a typical minimum balance at today's rate would have to pay $9,498 to pay off the debt. That's $113 more than would have been required six months ago.

Consumers are still struggling
With cardholders already hesitant to go shopping, experts say those higher APRs are discouraging consumer spending and -- by extension -- economic growth, since consumer spending accounts for a significant portion of the overall U.S. economy.

"It is unfortunate that [rate hikes are] going on now while we're looking for the consumer to really kick in here," says George Mokrzan, senior economist with Huntington Bancorp in Columbus, Ohio.

One indication that consumers are reining in their spending: Overall consumer debt has fallen for a record eight straight months, according to recent Federal Reserve data. This aversion to debt seems unlikely to change anytime soon -- with the nation's unemployment level reaching 10.2 percent in October and some economists predicting that it will continue to rise into next year. The threat -- or reality -- of job loss makes cardholders less able to repay their card balances, increasing the delinquencies and charge-offs experienced by banks.

Issuers have, in response, increasingly turned to variable rate offers with interest rates that will increase when the Federal Reserve raises its key lending rate. Variable rates are set using the prime rate, which is 3 percentage points above the federal funds rate. Currently, the fed funds rate rests at a level near zero and the prime rate stands at 3.25 percent.

However, this week, Fed Chairman Ben Bernanke said a rate hike is unlikely in the near term. In his concluding remarks made during a speech Monday, Bernanke said that economic conditions will likely encourage the Fed to maintain "exceptionally low levels" of its fed funds rate "for an extended period."

Mokrzan says he doesn't expect the Fed to increase rates before the second half of 2010. "Until the recovery is on firmer ground, I don't think the Fed will think about raising rates," he says. For now, though, Mokrzan says that even as the recovery takes hold, nagging threats mean that lenders are being cautious.

Economists say that, eventually, it will take both banks and borrowers doing their part to aid the economic recovery. "The environment will change, and the perception of risk by the banks will improve, and the risk taking by consumers will improve," Mokrzan says.

"Everybody's involved in the process. Everybody's driving it and reacting to it," he added.'s weekly credit card rate survey is based on a sample of about 95 national credit cards; the sample is chosen to be representative of the most frequently used cards by both popularity and type. That sample is updated as cards come and go from the market, and as the popularity among different types of cards shift.

Escaping co-signing: How to get out of a co-signed loan, credit card

Experts say don't, you did anyway. Can you escape that co-signed loan?

By Dana Dratch

Consumer advocates and financial advisers are unanimous on the subject of co-signing: Don't do it.

Escaping co-signing: How to get out of a co-signed load, credit card

When you co-sign, you're not vouching for the person's good name or character. You're not promising to tell the creditor where to find the cardholder if those payments stop coming. You're agreeing to foot the bill. All of it. Along with fees and interest.

"That is the main role," says Nessa Feddis, vice president and senior counsel for the American Bankers Association. "They are not a co-applicant or joint borrower."

"Just put the pen down and walk away," says Catherine Williams, vice president of financial literacy for Money Management International, a Houston-based nonprofit credit counseling program.

"Please, don't co-sign for anybody," says Bruce McClary, spokesman for ClearPoint Credit Counseling Solutions, a nonprofit service based in Richmond, Va. "Because it's a gamble. I may be jaded, but I haven't seen any really great outcomes."

But if you did co-sign ....
Yet, you went ahead and did it.

Maybe only now do you realize that any black marks associated with the account can go on your credit report, too. And, since you've stepped up to accept full responsibility for the debt, you could have (depending on how the issuer reports the debt), that much less credit available to you when you need it for a house, car or credit card of your own.


Take the case of one bride-to-be. Her intended picked out a ring from a local shop, presented it to her and popped the question: Will you co-sign for this?

She said "yes."

When they broke up, she kept the rock -- and the financial weight of a loan with a 20 percent interest rate. He stopped making payments; she ended up forking over more than $2,400 for a ring worth less than half that, says Catherine Williams of Money Management International.

"I've seen hundreds of cases where people's credit is destroyed," says David Jones, who heads up the Association of Independent Consumer Credit Counseling Agencies, a national network of nonprofit credit counseling services based in Fairfax, Va. Co-signers "have all of the responsibilities with none of the benefits."

Of the 10 largest credit card issuers, eight -- Chase, Citi, American Express, Capital One, Discover, Wells Fargo, HSBC and USAA Savings -- say they don't currently allow co-signers.

"It's a long-term commitment," says Todd Mark, vice president of education for the Consumer Credit Counseling Service of Greater Dallas. Too often, he says, co-signer responsibilities outlive the relationships that prompted the arrangements in the first place.

Co-signing exit strategy
So now that you've wised up and want to get out of co-signing, what do you do?

It's not nearly as easy to exit a co-signing deal as it was to enter one.

Exiting the role of co-signer can be tricky. If the cardholder still doesn't have the credit to qualify for an account without you, the company may refuse to remove you as a co-signer unless the balance is paid. That leaves you two options:

  • Finding a replacement co-signer (if the company allows the practice).
  • Closing the account yourself. You may have to specifically request an account be closed; if you ask to be "taken off" the loan, they may refuse. Again, the loan must be paid off, or small enough so that the other party can qualify for a loan in that amount.

When a couple hit a financial and marital rough spot, they got credit counseling. The biggest financial hurdles were his bills on two cards that she had co-signed. The combined total: roughly $9,000.

By the time the couple split up 18 months later, they had paid down nearly half the balances. Then the husband left town and stopped making payments. The issuers came after the wife for almost $4,000.

"There was no way she could manage on her income," Bruce McClary, spokesman for ClearPoint Credit Counseling Solutions.

The woman declared bankruptcy.

Policies on ending co-signing agreements vary with the issuer, and the best time to ask how it works is before you sign. That way, if the potential cardholder or the issuer can't or won't answer all your questions, or if it seems too difficult to exit the arrangement, you can decline the arrangement.

And even after you manage to quit as co-signer or close the account, "you are still liable for any transactions made up to that point," says Feddis.

In some situations, if the cardholder converts the card to a solo account (without a co-signer) or gets a replacement co-signer, the issuer might not hold you responsible for earlier charges. Ask the issuer how that works in advance.

Another problem for co-signers: keeping an eye on the account balance and payment history may be difficult. Before you sign, find out from the issuer whether you can request and receive statements on the account. Typically, an issuer will require your permission to raise the credit limit on the card, but ask about that, too.

And if you're ever tempted again, , and remember what the experts say.

Co-signing situations, which mix a volatile combination of close personal relationships and money, are a prescription for problems, says Williams. "In 28 years of counseling, I've only seen one of those situations work out," she says.

Saturday, November 21, 2009

4 questions to ask before you co-sign on a credit card

Explore alternatives, find out what you're in for with this cheat sheet

By Dana Dratch

Co-signing for a credit card has been an option for decades, but the issue of co-signing is especially relevant recently, says Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group. In February 2010, the Credit CARD Act of 2009 -- a credit reform law -- will require co-signers for card applicants under 21 who don't have sufficient income to qualify on their own.

If someone asks that you to sign on the dotted co-sign line, here are a few questions to ask yourself and the wannabe cardholder:

1. Why do you need a card?
This isn't food, housing or a ride to work. No one "needs" a credit card. There are alternatives. Here are some options for different scenarios:

  • Building credit or repairing bad credit: Try a card from a small retailer or a secured card. Both are relatively easy to get, and they help the cardholder build a positive history.
  • Paying bills conveniently: Check out electronic billing, prepaid cards or debit cards.
  • Traveling: Use secured credit cards or debit cards.
  • Supplementing income: Credit cards are debt, not income. Brainstorm other ways to raise cash.

2. Why can't you get a card on your own?
If an issuer -- which stands to make money from the deal -- doesn't want to take the risk, why should you? If you're agreeing to take on the debt, you need to ask why the person can't get a card solo. Here are some answers to common co-signer arguments:

If the applicant says: "I'm under 21, and the law requires it."
Your response: "No, it doesn't."
After the Credit CARD Act's major changes take effect in February of 2010, adults 18 to 20 can still get cards on their own -- provided they have the income to qualify. If applicants can't get cards, they probably can't afford to repay those charges.

If the applicant says: "The economy's tight. No one's getting credit anymore."
Your response: "Plenty of people get cards every day."
If a cardholder is turned down, it's because something in that credit report signals that prompt repayment is unlikely. If you co-sign and the issuer is right, you'll end up with the bill.

If the applicant says: "There are mistakes on my credit report."
Your response: "Clean them up -- it's free -- and then reapply."
If there are errors, an applicant is better off correcting them than ignoring the situation and getting another card.

If the applicant says: "I have too much credit already. My other cards are maxed out. I need another card to keep things going."
Your response: Just walk away. Better yet, run..

3. Are there other options that give me more control?
An option for parents of college students who want to give their kids exposure to credit without risking financial disaster is to add them as authorized users to the parent's card. Some credit cards allow you to limit charges by authorized user, which could limit major damages. The upside: Authorized user status also helps build credit. The downside: The bills come to you every month, and you're still responsible for them.

Don't forget your local credit union. Not only do credit unions issue cards, but if someone doesn't qualify, a credit union can offer pointers for improving that credit history.

4. Can I afford to pay off the entire account balance if the cardholder doesn't?
If you don't have the means to pay off the full balance up to the credit limit, with fees and penalty interest rates, the answer to co-signing is always "no."

And if your own future financial picture is clouded by shaky employment prospects, pending retirement, fixed income or medical conditions, you can't shoulder this burden, either.

Too many times, personal guilt or misplaced responsibility trumps common sense when it comes to making the decision to co-sign.

"It becomes an emotional decision," says Lynne Strang, vice president of the American Financial Services Association, a member group of credit lenders. "A person needs to step back and look at it as a business transaction and evaluate it on those terms."

Thursday, November 19, 2009

Agencies release new consumer privacy rights notice forms

Consumer groups: New format is clearer, but should be mandatory

By Connie Prater

Consumers may start to see a new look in those oh-so-boring-but-important privacy rights notices that they get in the mail each year from their banks, brokers, insurance companies and credit card issuers.

Agencies release new consumer privacy rights notice forms

What: Federal agencies released samples of simplified, consumer-friendly privacy rights notices that banks and other financial institutions can send to customers.

Key points: The forms are not mandatory; banks can continue to mail out the old, legal notices.

Why it's important: Consumers have the right to opt out of having their personal information shared with third-party companies. This helps filter out junk mail and telemarketing calls and reduces the risk of identify theft through data breaches.

View the sample privacy notice.

Federal agencies released samples of model privacy rights notices Tuesday that are designed to be consumer-friendly and easier to understand. Instead of two to three pages of tiny, gray type, the new notices are set up in tables with clear language and larger print. However, the new model privacy rights forms are not mandatory, so some consumers may continue to get the old legalese-rich notices.

Privacy rights advocates called the new model forms an improvement and urged banks and other financial institutions to adopt the new format. Others, however, said if banks and other institutions aren't required to use the consumer-friendly forms, consumers will lose out.

"Obviously this is a lot more consumer friendly than the hodgepodge of privacy notices that have gone out in the past," says Paul Stephens, director of policy and advocacy for the Privacy Rights Clearinghouse, a San Diego-based nonprofit consumer advocacy group. "In our experience, we found that most individuals just receive the notices, don't bother to read them and toss them out."

"Hopefully, now that they may be in a more user-friendly format, a greater percentage of consumers will take the time to read these notices and have a better understanding of what types of information may be disclosed and to whom that information may be disclosed," Stephens added.

What the law says
By law, a host of financial institutions -- from insurance companies to brokerage firms to credit card issuers -- must send initial and then yearly notices informing consumers of their rights to keep information collected by the firms private. Companies must often share personal information about its clients with contractors who process transactions or maintain credit card and bank accounts. Law enforcement officials may also gain access to credit card and other private financial information if investigating criminal acts.

Since the form isn't mandatory, it can't be useful to consumers unless all banks issue the notices using the model form.

-- Michelle Jun
Consumers Union

Companies in the financial services industry also often share information about their clients with other marketers that then attempt to sell other products and services to consumers. If you ever wonder why you're getting junk mail or calls from a company you've never heard of after you purchase life insurance or open a new checking account, it may be because your contact information, salary or credit score may have been shared by your bank or insurance agent. Identity theft experts say the more information is shared, the more vulnerable consumers become to data breaches. Consumers who do not wish to have their information shared with other, nonaffiliated companies are allowed to opt out.

The law that requires the privacy rights notices is the Gramm-Leach-Bliley Act, named after the U.S. lawmakers who sponsored the 1999 legislation. The act requires financial institutions to disclose:

  • Their policies and procedures for collecting information about clients.
  • Whether other companies (both affiliated with the institutions and third-party outsiders) receive information about the consumer.
  • What steps the company takes to safeguard the consumer's personal information.
  • How consumers can opt out of having certain information disclosed to nonaffiliated third-party companies.

Ability to compare privacy safeguards
According to a joint press release issued by eight federal regulatory agencies, the Financial Services Regulatory Relief Act of 2006 requires the agencies to develop more reader-friendly notices that allow consumers to compare privacy policies of different companies.

"Because the privacy rule allows institutions flexibility in designing their privacy notices, notices have been formatted in various ways and as a result have been difficult to compare, even among financial institutions with identical practices," according to the privacy rights notice guidelines issued Tuesday.

Stephens from the privacy group said the "model notices may provide an opportunity for consumers to compare different financial institutions and see which ones are providing notices that are more privacy-friendly and enable individuals to, in some part, make a decision about the financial institutions they wish to patronize."

Michelle Jun, an advocate from Consumers Union, the nonprofit owner of Consumer Reports magazine, said it will be difficult for consumers to make those comparisons if all banks and financial institutions don't use the new forms.

"It's worthless if it's optional," said Jun. She likened the simplified, table format of the new model forms to the Schumer box required on credit card applications and solicitations. "Since the form isn't mandatory, it can't be useful to consumers unless all banks issue the notices using the model form."

A spokeswoman for the Federal Trade Commission (FTC), one of the agencies that developed the model forms, said the consumer-friendly disclosures are not mandatory because the 2006 law stated they were to be optional for financial firms. Those institutions that use the new disclosure forms will be exempt (also called having a safe harbor) from the law's other requirements.

In addition to the FTC, the agencies issuing the guidelines were: the Federal Reserve, the Comptroller of the Currency, the Office of Thift Supervision, the National Credit Union Administration, the Securities and Exchange Commission, the Commodities Futures Trading Commission and the Federal Deposit Insurance Corp.

Monday, November 16, 2009

In default on car loan: What to do?

Negotiating with the lender face-to-face might help

By Todd Ossenfort

The Credit Guy
'The Credit Guy,' columnist Todd Ossenfort
The Credit Guy, Todd Ossenfort, is a credit expert and answers readers' questions about credit, counseling and debt issues.

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Question for the expert

Dear Credit Guy,
I lost my job and my wife just got one in June. We're behind on one car and the lender wants $1,000. We have another car through the same finance company, and they said if we default on one car they would take both. Can they do that? Also, would they put the money at the end of the loan for us because we can make both payments but we can't pay the $1,000? -- Paul

Answer for the expert

Dear Paul,
I'm not sure exactly what your lender can or cannot do concerning your loan because I haven't read your loan papers. I recommend you track down the loan agreement and review the section that covers how a default is handled. Unless it is included in the agreement, I don't believe your lender can repossess your other vehicle unless it is also in default.

Once you know what is included in your loan agreement, make an appointment to speak with your lender. If possible, I'd request a meeting in person. Typically your vehicle cannot be repossessed until after the loan is more than 90 days late, so be sure you act before you reach that point.

Be prepared to demonstrate that you are now able to make the payments on both of your vehicles. Regardless of what is included in the loan agreement, most lenders would much rather you make your loan payments so they can earn the interest charged on the loan rather than deal with the costs of repossessing the vehicle. So, keeping that in mind, be prepared to negotiate how you will pay the past due amount of $1,000.

Adding the past due amount to the end of the loan may require a modification of the loan into a new loan agreement, and I would be willing to bet your lender may be hesitant to do that. In addition, it may not be in your best interest to do so, especially if the new terms will increase your monthly payment. However, if your current agreement can be extended by the number of months it would take to pay the $1,000 without changing any other terms in the agreement, then that would be a very reasonable solution.

Another alternative is to request that you pay off the past due amount over an extended period of time by adding an agreed upon amount to your existing monthly payment until the past due amount is paid in full. For example, if the lender agreed to allow you four months to pay off the $1,000, you would need to add $250 to your existing monthly payment. Assuming you could afford to make the additional payment, your lender may be willing to allow you to pay what you owe in this manner. Regardless of how the negotiations are resolved, request that the solution you decide upon be put in writing.

Moving forward, you might consider purchasing loan payment protection insurance that would provide money for your car loan payment should you be unable to so due to unemployment, death or disability. The insurance can be expensive, especially if added to your loan with the auto dealer. It is best to seek this type of insurance from an independent agent if you are interested. I'd review the affordability of the insurance with your current insurance agent at the time of your next car purchase.

Of course, if you buy a new car in the near future, many manufacturers are offering free payment protection as incentives to buy. However, I wouldn't recommend buying a new vehicle until you are once again gainfully employed and are able to put down a significant down payment.

Take care of your credit!

Saturday, November 14, 2009

Fed: Consumers must opt in to debit card overdraft fees

New overdraft rule is mandatory by July 1, 2010

By Connie Prater

Consumers will be able to avoid getting hit with costly overdraft fees on their debit cards under new rules released Thursday by the Federal Reserve.

Lawmakers and consumer advocates, however, said the new Fed rules don't go far enough in protecting consumers from abusive overdraft practices and vowed to continue efforts to pass more stringent legislation.

Starting July 1, 2010, banks will be required to allow debit card customers to opt-in to overdraft fees rather than automatically enrolling card users in programs that charge $20 to $30 whenever there are insufficent funds to cover purchases. That means consumers who do not opt in and who attempt to make transactions without sufficient money in their accounts to cover the purchase could have their debit cards denied at the cash register. (See 6 ways to avoid debit card overdraft fees.)


What: The Federal Reserve issued rules Thursday requiring banks to get consumers' permission to charge overdraft fees when there are insufficient funds in an account to cover purchases.

Who is affected: Anyone with an ATM or debit card. The rules apply to existing as well as future cardholders.

How soon does it take affect: Banks must implement the rules no later than July 1, 2010. They cannot charge overdraft fees to existing customers without prior consent after Aug. 15, 2010.

What's not covered: Banks can still charge whatever they want for overdraft fees. They can also assess multiple fees during a single month. Members of Congress are vowing to push for legislation to address these practices.

Under the Fed rules, banks would have to explain what overdraft protection is, the details of how it works and the fees associated with it before asking consumers to opt in to the program. (See model opt-in disclosure.)

"The final overdraft rules represent an important step forward in consumer protection," Federal Reserve Chairman Ben S. Bernanke, said in a press release on the rules. "Both new and existing account holders will be able to make informed decisions about whether to sign up for an overdraft service."

Another blow to banks
The new rules are the latest setback for the nation's banks and credit unions already reeling from the effects of the economy and new consumer credit card rules coming online. Thursday's overdraft regulations are sure to trim back what had become a growing income source, estimated at $23.7 billion in 2008 and projected to hit $38.5 billion in 2009.

In third quarter financial statements filed this month, Wells Fargo indicated it expects to take in $300 million less in fee revenues in 2010 because of policies the bank has implemented to help consumers limit overdraft and returned item fees. Facing a rising tide of consumer complaints, Bank of America and Chase have also revised their policies to give customers the choice of using overdraft services.

Edward L. Yingling, president and CEO of the American Bankers Association trade group, said the bankers have created an overdraft task force to look at consumer concerns as well as how technology can be improved and the role of retailers and merchants processing transactions.

"This new rule addresses the primary concerns that have been raised by consumers and policymakers and will help bring consistency and clarity to overdraft programs. Our goal is to have a system that works well for banks and customers and keeps the payment system running efficiently," Yingling said in a statement.

The Fed rules also come as lawmakers in both houses of Congress are considering bills (H.R. 3904 and S. 1799) to curb overdraft abuses. The proposed bills are more far reaching than the Fed rules and include bans on multiple overdraft fees during a single month. Those bills also seek to regulate how debit card transactions are processed by banks. Consumer advocates have complained that transactions are processed to maximize fees for banks rather than chronologically as they occur. A hearing on the Senate bill is scheduled for Nov. 17 before the Senate Banking Committee.

Lawmaker: Fed rules don't go far enough
Rep. Carolyn Maloney, co-sponsor of the House bill, applauded the Fed for recognizing that the overdraft fee problem needs review, but said the Fed rules don't go far enough to address all of the practices harmful to consumers.

While these rules are a good, solid step forward, they don't eliminate the need for congressional action on this issue.

-- U.S. Rep. Carolyn Maloney

"While these rules are a good, solid step forward, they don't eliminate the need for congressional action on this issue," Maloney said in a statement. "The Fed still allows institutions to charge an unlimited quantity of overdraft fees, would do nothing to make fees proportional to the amount of the overdraft, and would not address the manipulation of posting order of charges to accounts. Under the Fed's new rule, a $5 cup of coffee could still become a $40 cup of coffee after an overdraft fee is added!"

She added: "My bill does all that -- it caps the quantity of fees at one per month or six per year, requires that fees be reasonable, and prohibits posting-order manipulation, and includes all transactions, not just debit cards. Those are provisions I believe make for the strongest consumer protections, that's why Chairman [Barney] Frank and I have proposed this legislation, and that's what I believe the House will be passing."

Consumer groups have called overdraft fees "high-cost loans" and note that banks can decline debit transactions when there aren't enough funds but don't because of the profits they can make from the fees consumers pay. Advocates say banks often don't explain to consumers that they can avoid overdraft fees by linking their debit cards to other savings accounts or opening a line of credit -- less expensive alternatives to overdraft fees.

Eric Halperin, director of the Washington, D.C., office of the Center for Responsible Lending, criticized the Fed's "failure to propose or enact necessary safeguards against a host of unfair practices."

"Congress needs to step in to stop the abusive practices the Fed has known about for nearly a decade, but once again has failed to address," Halperin said in a statement.

Fed research: Consumers want choice
According to the Fed, which conducted consumer research on overdraft practices, most consumers would prefer to have a choice in enrolling -- or "opt in" for -- overdraft programs for ATM and debit card transactions. The research also showed that most people do want overdraft coverage for important bills such as rent, telephone and other utilities. Thus, the new rule applies to ATM and one-time debit card transactions but not checks. A 2009 study by the Center for Responsible Lending found most overdraft fees were generated at the point of sale, when consumers are using their cards at check-out.

The Fed rule also took steps to prevent banks from discriminating against customers who do not opt in by requiring that they have the same account terms, conditions and features as account holders who opt in to the fees. Anyone with ATM or debit cards prior to July 1, 2010, cannot be charged overdraft fees after Aug. 15, 2010, unless the bank or credit union has first gotten the consumer's consent to participate in an overdraft program.

"Overdraft fees can be costly," Fed Gov. Elizabeth A. Duke, who heads the agency's Committee on Consumer and Community Affairs, said in a press release. "Our rule will help consumers better understand the terms and conditions of overdraft services and will give them an opportunity to avoid fees when these services do not meet their needs."

Said Maloney at an Oct. 30 congressional hearing on her overdraft bill: "The overdraft problem is significant and getting worse. The quantity of debit card transactions now exceeds the quantity of credit card transactions."

Money and credit lessons learned from TV

What our favorite TV characters teach us about finances

By Gina Roberts Grey

The loveable television characters we welcome into our homes once a week can actually teach valuable lessons about managing money and protecting credit. Take another look at the financial pratfalls of these classic characters, this time without the laugh track. Their antics cause only imaginary harm to a budget, but beneath the comedy lay real money lessons:

Actors Matt LeBlanc and Courteney Cox, who portrayed Joey and Monica in the hit TV series 'Friends'

Matt LeBlanc and Courteney Cox, who portrayed Joey and Monica in the hit TV series "Friends."

The show: 'Friends'
The Character
: Joey
A recurring role on a soap opera means Joey finally has wads of money. Instead of budgeting his disposable income and saving some for a rainy day, Joey hastily moves into a lavish apartment. Without considering the "what ifs," he furnishes it with expensive extravagances, such as porcelain greyhounds, and racks up massive credit card bills. When his soap opera character is suddenly killed off, his income stream also dies. The change forces Joey to move back in with Chandler and rebuild his financial life.
The lesson: There's nothing wrong with treating yourself to a little extravagance once in a while, as long as you feed your savings account first. Living for today might be fun, but it could leave you out in the rain if your income is reduced, you lose your job or face a medical, car or other emergency.
The fix: Always pay yourself first. If you come into money, whether from a job bonus or large raise or inheritance, "don't be in a rush to spend it," says Melanie Donaghy, vice president of Wells Fargo Online Banking. Use extra cash to stash money in a retirement fund, pay off credit cards, invest in laddered CDs or a savings account. Then you can treat yourself to a "want purchase."

The cast of 'King of Queens' included actors Jerry Stiller, Leah Remini and Kevin James, who played Arthur, Carrie and Doug.

"King of Queens" cast Jerry Stiller, Leah Remini and Kevin James, who played Arthur, Carrie and Doug.
Photo: Sony Pictures Television
The show: 'King of Queens'
The characters: Doug and Carrie
When Doug and Carrie notice they've made progress with their money management skills and are starting to get out of debt, they decide to "treat" themselves. The $400 price tag on Carrie's new jacket sends Doug into a tailspin. Carrie goes to return the jacket, but finds a "loophole in the system" that convinces her if she returns things she buys -- even if she wears them -- it's as though she never really spent money. Proud of her discovery, Carrie tells Doug she's being thrifty. Doug tells her she's being "shoplifty."
The lesson:
It's understandable to want to splurge after meeting a financial goal, but Jim Randall, author of "The Skinny on Credit Cards," urges keeping your eye on the ultimate goal. "You don't want to fall into a routine of taking one step forward, two steps back."
The fix:
Randall says if you are going to allow yourself a small splurge, make sure it won't put you deeper in debt. "Don't reward yourself for digging out of debt by tacking on a little more," he says.

Unctious Edward W. "Eddie" Haskell was portrayed by Ken Osmond.

Unctuous Edward W. "Eddie" Haskell was brought to the small screen by Ken Osmond. Watch the full clip.
The show: 'Leave It to Beaver'
The character:
Eddie Haskell
The charming troublemaker brags to his buddies about his father giving him a credit card earmarked for emergencies. When Wally's car battery dies, Eddie happily steps up, flashing his card to all his friends. Although Eddie's heart was in the right place, he shows off his buying power and charges without regard for how to pay the bill. When Mr. Haskell finds out, Eddie finds himself in a familiar tight spot.
The Lesson: Randall says it's not necessarily a kid's fault if they can't control spending. "Giving a kid a credit card without proper supervision or education of the ramifications of impulse spending can leave you stuck with a hefty bill." That can also send a parent's credit score tumbling if the bill can't be paid or if the balance maxes out the card's credit limit.
The fix: Be proactive. Randall suggests sending your kid back to school before adding your child as an authorized user on your credit account. "Give your kids a lesson in tracking purchases and balances online, saving receipts and how nearing credit limits can impact credit scores," he says.

Actor Jason Alexander portrayed perpetually parsimonious George Costanza in 'Seinfeld.'

Jason Alexander portrayed perpetually parsimonious George Costanza in "Seinfeld."
The show: 'Seinfeld'
The character
: George Costanza
His thriftiness didn't just border on cheap -- George Costanza gleefully crossed that border and moved in to stay.

To cut corners, George ordered bargain wedding invitations that were discounted because they had subpar adhesive. His "deal" wound up killing his fiancee since the too-good-to-be-true glue was toxic, which she ingested while licking the envelopes.
The lesson: Sometimes saving a buck or two can cost you twice as much in the long run. "If a price sounds too good to be true, it probably is," says Bruce McClary, credit counselor at ClearPoint Credit, a nonprofit debt counseling agency.
The fix: Weigh all your buying options. Price match to make sure you're truly getting a good deal.

"Read all the fine print," says McClary. "Sometimes, a price appears lower, only to learn there are hidden fees built in that can blow your budget."

The show: 'Everybody Loves Raymond'
The characters:
Ray and Debra

Ray finds out the diamond in his wife's wedding ring is fake and sets out to replace it without Debra knowing.

Actress Patricia Heaton played Ray Barone's wife Debra on the sitcom 'Everybody Loves Raymond.'

Patricia Heaton played Ray Barone's wife Debra on the sitcom "Everybody Loves Raymond."

Grabbing her ring off the table while she's in the shower, Ray leaves Deb in a panic, thinking she lost it and sets off to replace the counterfeit stone. The catch: He wasted his money. Debra confesses she found out years ago the diamond was fake and had the original stone replaced with her grandmother's very expensive real diamond. The couple ends up dumpster diving trying to find the family heirloom Ray mistakenly threw out.
The lesson: It pays to be honest. "In this episode, it would have prevented a major, unnecessary expense," says McClary. Financial deception among spouses can cost money, cause stress and weaken your relationship. For example, McClary says one negative hit resulting from a jointly held maxed out "secret" credit card or other financial deceptions can negatively impact future car loans, mortgage rates and insurance premiums.
The fix: Designate a neutral spot (perhaps a park or other public place) to routinely discuss financial matters and decisions. Agree to listen, not just talk. "Honesty truly is the best financial policy," McClary says.

The final scene
The networks are always lining up casts of new characters and scripting hilarious situations to befall them. As you welcome these sitcom sensations into your home, McClary suggests watching with an open mind. "Even though you tune into sitcoms for a few laughs, there are plenty of valuable lessons to learn, too."