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Consumer Archive

Consumer

Check your credit report for unpaid medical bills

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NEW YORK (12/29/10)--We expect a late car payment to bring down a credit score a few notches. We accept that a maxed-out credit card won’t look good on a credit report. But what a shock to find medical bills sent to collection on your credit report, especially if it’s the first time you’ve seen them. An estimated 14 million Americans are dealing with medical bills they believe have been sent to collection agencies in error (The New York Times Dec. 17). Darryle Watson of Willow Park, Texas, first learned of his outstanding bills when he and his wife attempted to refinance their mortgage. Despite a solid record of paying back credit on time, their low credit scores would cost them more than $9,000 in closing costs. Four unpaid medical bills, the largest only $400, had gone directly to collection. Hospitals, labs, and physicians are more likely to sell unpaid medical bills to collection agencies for just pennies on the dollar, avoiding the rules and regulations of creditors who report unpaid debts. “Collections are weighted more heavily than other unpaid or late bills,” said Rod Griffin, director of public education at credit reporting agency Experian. “They will have a more serious effect on your credit score. This can stain a credit report for seven years, even after the bill is paid. Pending federal legislation would require paid medical debt to be removed from credit reports after 45 days. Follow this prescription to monitor the effect of medical bills on your credit score:
* Order a free credit report. Medical bills are sometimes sent months after service; it can be difficult to decipher what portion is still unpaid. Play it safe and review your credit report at least annually. You can get a free report from each of the three major reporting agencies at annualcreditreport.com. Order from one agency in January, another in May, and the third in September for thorough monitoring. * Dispute errors in writing. If you find an unpaid medical bill on your credit report, send documentation showing payment to all three major bureaus. The Federal Trade Commission’s website offers guidelines for disputing errors. * Negotiate payment. Even if it’s the first time you’ve seen the bill, work with the collection agency. If it’s a legitimate charge for which you are responsible, secure a promise in writing to remove the bill from your credit report if you pay.
For further guidance, listen to “Correct Credit Report Errors” on Home & Family Finance Resource Center. You’ll also find a video to guide you through ordering a free credit report.

Understand debit card features

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NEW YORK (12/22/10)--Debit cards are becoming the payment method of choice for Americans. Debit card use helped payments made electronically rise more than 9% during the past year, while credit card transactions fell an estimated 0.2% (foxbusiness.com Dec. 13). Using debit cards can help consumers avoid racking up credit card debt. But as CBSMoneyWatch.com (Dec. 7) points out, consumers need to be aware of how debit is different from credit to use debit well:
* Hold policies. Hotels and gas stations commonly place holds on a transaction when consumers use debit cards. Be aware of hold policies when using a debit card to make a purchase. Make sure you have enough in your account to cover that amount plus any additional expenses you plan on making. That will help you avoid overdraft fees. * Disputed charges. Funds are subtracted from your account at the time of purchase when you use a debit card, possibly even before you receive the goods. It becomes the consumer’s responsibility to recover any funds from a merchant if there’s reason to dispute the charges. * Stolen cards. Federal law helps protect you when your debit card is stolen by limiting your liability to $50 for fraudulent charges when the card is reported stolen within two days of theft. Take too much time and your account could be drained without recourse.
For more information, view the video “Debit vs. Credit” in the Home & Family Finance Resource Center.

Popular online Retirement Estimator now in Spanish

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WASHINGTON (12/20/10)--Social Security’s most popular online service--the “Retirement Estimator”--is now available in Spanish, providing the same immediate and accurate retirement benefits estimates to Hispanics that it does for those using the English version (Social Security Dec. 13). Almost four million people accessed the English-language version of the “Retirement Estimator” in 2010, and the Social Security Administration (SSA) expects the Spanish version will help Hispanics plan for their financial security. A 2009 study by the Hispanic Institute for Americans for Secure Retirement revealed that Hispanics on average are less likely than non-Hispanics to have an employer-sponsored retirement plan, putting them at a disadvantage for accumulating retirement income. The estimator has three key attributes:
* Secure: SSA consulted with privacy experts to make sure your personal information cannot be used by identity thieves. In addition, you can choose a “blocking” feature to prevent anyone else from estimating your retirement benefit. If you choose this feature, though, you cannot apply for benefits online. * Interactive: Once you key in the required information, you can change your “stop work” date or expected future earnings to test and compare different scenarios. * Accurate: The estimator automatically uses information from your Social Security statement to provide immediate retirement benefit estimates.
Visit segurosocial.gov for the Spanish version, and socialsecurity.gov/estimator for the English version. And for more information about retirement preparation, view the video “Investing in an IRA” in the Home & Family Finance Resource Center.

Taxes Get breaking news from the IRS

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NEW YORK (12/15/10)--As tax laws change in this uncertain economic climate, you can get reliable federal tax news directly from the Internal Revenue Service (IRS) (MSNBC Dec. 8). Congress is rushing to finalize a $900 billion tax deal that will affect all Americans, and you can arm yourself with information in a variety of ways (/The New York Times Dec. 6):
* Twitter: The newest route is via the Twitter news feed, @IRSnews. Twitter’s feed will provide tax tips, law changes, information about the Earned Income Tax Credit, “Where’s My Refund,” and how-to sections such as “how to e-file.” You can even sign up for text messages from this site. If you’re not familiar with Twitter, sign up and log in to Twitter.com. Then go to IRSnews and click on "follow." * YouTube: If video is your favorite way to get information, subscribe to the IRS tax information channel on YouTube to get tax tips and help about filing for free. Click on “subscribe.” You can set up a YouTube account at the link. Then go to IRSvideos and choose how you want to be notified of new material. * iTunes: You can download free MP3 files with answers to typical tax questions from iTunes. If you aren’t familiar with using an iTunes account, you can hear the same podcasts on the IRS website. * E-mail: Sign up to receive tax tips from the IRS via e-mail--every business day during the tax-filing season and periodically throughout the year.
For more information, view the video “Getting Tax Records Organized” in Home & Family Finance Resource Center.

More consumers consider strategic default viable

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MADISON, Wis. (12/13/10)--More and more consumers are thinking the previously unthinkable: that a strategic default--when a borrower who can afford to pay walks away from an underwater mortgage--is a viable tactic. In a survey of 2,034 homeowners and renters conducted in November, RealtyTrac and Trulia found that 48% of homeowners with a mortgage said a strategic default is an option they would consider if they owned more on their home than what it was worth (The Palm Beach Post Dec. 7). That was a seven percentage point increase from a study earlier this year. That backs up results of a study by researchers from the European University Institute, Northwestern University, and the University of Chicago in July that reported the strategic default trend among homeowners with an equity shortfall of at least $100,000 was “large and rising.” As of March 2010, the study concluded, strategic defaults accounted for 35.6% of all foreclosures, compared with 23.6% in 2009 (The New York Times Dec. 2). “It’s one thing when consumers default because they lost their jobs or suffered some other hardship and could not afford to make their payments,” notes Jim Hanson, of the Credit Union National Association's center for personal finance. But The New York Times reported that affluent homeowners have been walking away from second homes and investment properties even though they can afford to make their payments. “Some money advisers say this is just good business strategy. And there has also been speculation that more consumers are reacting to the robosigning underwriting that went on among many mortgage lenders,” Hanson continued. “These individuals are saying, 'If banks don’t have to play by the rules, why should I?' “What’s that old adage, two wrongs don’t make a right?” Hanson said. “Keep in mind the effect a strategic default will have on your credit rating and your ability to get credit in the future.” Such a move may make short-term economic sense but likely will keep you from getting a loan of any other kind for seven to 10 years. In June, Fannie Mae announced several new penalties for strategic defaults, including a ban for at least seven years from qualifying for a Fannie Mae loan. And walking away doesn’t mean lenders have no recourse. In some states, lenders can sue borrowers who had the capacity to pay and did not complete a workout agreement with their lender. In nonrecourse states, lenders can sometimes go after borrowers who strategically default on a previously refinanced property if the mortgage was not for a first purchase. For help managing a problematic mortgage, read “New Hope and Help for Struggling Homeowners,” and listen to “Home Foreclosures Continue to Soar: What to Do if You Are at Risk,” in the Home & Family Finance Resource Center.

HandFF Radio Save on holiday shopping gift-giving

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WASHINGTON (12/10/10)--Sunday’s H&FF Radio program covers holiday shopping tips, National Regifting Day, consumer spending, and financial service fee increases. The show, which you also can hear later via the Internet, features Paul Berry, Washington, D.C., journalist and broadcaster, discussing these topics with special guests:
* “Holiday Shopping Tips to Get the Best Value.” Tanveer Jafri, marketing manager, The Company Store, La Crosse, Wis., has advice to help you plan ahead for purchases and stick to your budget. * “National Regifting Day.” Kim McGrigg, community manager, Money Management International, Denver, suggests having a regifting party on Dec. 16 to celebrate National Regifting Day. * “Consumers Intend to Spend More This Holiday Season Than Last, Says Survey.” Mike Schenk, vice president, economics and statistics, Credit Union National Association (CUNA), Madison, Wis., discusses survey results indicating that consumers plan to spend more this holiday season than in 2009. * “Don’t Get Trapped in ‘Fee Frenzy’ This Holiday Season.” Adam Levin, founder and chairman, Credit.com and IdentityTheft911.com, New York, explains how lenders are finding novel ways to charge you additional fees on insurance, minimum payments, and prepaid cards.
Home & Family Finance is a resource center for personal finance information at CUNA. The radio show is sponsored by CO-OP Network, the national credit union ATM network; Cabot Creamery Cooperative, maker of award-winning cheddar; and the Defense Credit Union Council and member credit unions, serving those who serve the country worldwide. Home & Family Finance airs Sundays at 3 p.m. ET on the Radio America Network. The show also is carried on American Forces Radio Network. The one-hour program devoted to consumer finance issues is brought to you by America's credit unions and their 90 million members, and is presented by CO-OP Network. CUNA and Radio America are podcasting Home & Family Finance through iTunes, Podcast Alley, Odeo, and other popular podcast library sites, as well as on Radio America and CUNA's websites. For more information, read “Smart Spending Puts Holiday Shoppers in Control of Cart” and use the “Keep Your Checkbook Up-to-Date” calculator in the Home & Family Finance Resource Center.

Charitable giving Be wise this holiday season

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McLEAN, Va. (12/8/10)--’Tis the season for giving to family and friends, and donating to charity. But before you donate, make sure you’re giving to an organization that will put your money to good use and that you’re donating wisely and safely (USAToday.com Nov. 30). The Charities Review Council, St. Paul, Minn., recommends taking these steps before making a contribution:
* Verify the charity. Research the organization at the Charities Review Council website (smartgivers.org) to confirm that it’s legitimate. Look at the online giving guide to find more about the organization, its mission and programs to know what your donation supports. Don’t just give to an organization because it has a heart-warming story on TV. * Beware of phony sites. Scammers often use Web addresses that are similar to official addresses of legit organizations to trick users. * Review the organization’s privacy policy. Check the website or ask the organization for its policy to learn how it will use and safeguard your information. * Protect confidential information. Look for “https” in the browser to make sure you’re on a secure site. Never click on links in unsolicited e-mail appeals asking for confidential information such as passwords, credit card numbers, or financial account numbers. Also beware of attachments--they may contain viruses that can harm your computer. * Observe check donation safety. If you’re donating through the mail and not online, make your check payable to the charity, not to the individual collecting the donation, recommends the Better Business Bureau. Never send cash.
For more information about giving wisely, listen to the “Operation False Charity” Home & Family Finance Radio segment in Home & Family Finance Resource Center.

Say no to celebrity debit cards

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MADISON, Wis. (12/6/10)--Prepaid debit cards are hot. Worth $330 billion in 2009, their collective value is expected to triple in the next two years (Mercator Advisory Group Nov. 2010). They’re also convenient. Using a debit card is a more streamlined transaction than writing a check. Governments prefer to issue prepaid debit cards for payments such as unemployment and Social Security benefits to people who don’t use financial institutions. Debit cards also can be very profitable, especially when issued to young consumers. This market has become of greater interest to banks, given new restrictions on issuing credit cards to minors under the CARD Act of 2009. This has led to a worrisome marketing tactic—the release of “celebrity-branded” cards. Recently, for example, MasterCard announced a new prepaid debit card, dubbed the “Kardashian Kard” because it carried the likenesses of reality TV stars Kim, Khloé, and Kourtney Kardashian. Its intended market was teenage girls. Unfortunately celebrity endorsements don’t always mean consumer savings. Within days of the launch announcement, negative publicity led to the Kard’s “kancellation.” (American Banker Nov 30). Objections centered on two dangers characteristic of prepaid celebrity debit cards, according to experts at CUNA’s Center for Personal Finance:
* High fees. Consumers Union, publishers of Consumer Reports, cited 12 potential debit card fees, including point-of-sale transaction fees and balance inquiry fees. Celebrity-endorsed cards can be particularly aggressive in this regard. Consumer writer Annie Lowrey (slate.com Nov 19) constructed a plausible scenario in which a $1,200 prepaid six-month Kardashian Kard generated $80 in fees compared with fees of “somewhere between zero and $36” for a debit card linked to a conventional checking account. * Uncertain loss protection. Prepaid cards are as good as cash, and don’t carry the same protections as standard debit and credit cards. When lost, all of their current value is at risk, with no guarantee that the consumer will get it back. In comparison, your liability for a lost or stolen conventional debit card is limited to $50 if you notify the card issuer within two business days.
A debit card account will be safer and far less expensive to use than a prepaid debit card, with or without a famous person’s endorsement. Generally, as with most financial products and services, you’ll find the best deal on a debit card at your local credit union.