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).

Ask a question.

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.