Info for Your Potential

DEBT, a new dirty word for those adults who are so deep in debt, they can’t see the light at the end of the tunnel. “Did you hear about Jane and Tom? They’re in DEBT!” Amazing how a simple, innocent four letter word can take on a whole new meaning, isn’t it?

Before we get started, let me warn you, this post is long and is jam packed with useful information about how we get in debt, debt responsibility, getting out of debt as quickly as possible, dealing with creditors and debt collectors, laws that protect you as a consumer and links to important information. So…go get something to drink and nosh on and let’s get started!

It all starts with…

How do we get in debt? It usually starts with the odd concept of “get it now, pay later.” We are a credit driven society. We are also an instant gratification society. We are stressed to the max, work 60 hours a week, wired with caffeine from our local coffee shop, junk food junkies, in debt up to our eyeballs, driven to succeed society. Think about it! Wouldn’t it be nice to get out of debt, be financial independent and pay cash for everything? It sounded good to me, so I embarked on a journey to do just that. Here’s what I learned…

Debt Responsibility

The number one intention of this blog is to help those who want to get out of debt by repaying their debt and follow-up by being responsible with credit in the future. There are those who cannot repay ALL their debts due to justifiable circumstances; therefore, certain info in this blog is especially important to them.

I find that most people find themselves in a situation of not being able to repay their debts due to the loss of a job, death of a spouse, divorce or illness. Then there are those who have created a situation where they have too much debt, are sick to death of it and just want it to go away and never darken their doorstep again.

I would like to think that creditors would deny credit to anyone who has a low credit rating and/or a low debt to income ratio, but this usually not the case. Creditors can be greedy and they think they’re being smart by giving John or Jane more credit than they can afford because they know they’re going to make a bundle in interest. They will look at the customer’s credit and if it shows payments have been made on time to other creditors, they will give the customer a loan even if they know the customer can’t afford it. This is debt at its worst.

I have had people tell me that they continued to apply for credit because the creditor didn’t deny their credit application. To this I say, “You know how much money you make. Why did you apply for credit cards and loans knowing you couldn’t afford it?” The answer is always the same, “I thought I could afford it.” Is it an honest answer? Well, not really. They honestly knew they couldn’t afford it. If they could afford it, they wouldn’t be having credit problems and could pay their bills. If they could really afford it, they would be paying cash!

I have a question for you. “If there are checks in your checkbook, but there is no money in your checking account, are you still going to write checks?” It’s the same with applying for credit.

Learn to be responsible with your credit. Credit cards are THE number one source of serious debt problems. I have learned that I do not need credit cards and I live extremely well without them. As a matter of fact, it gives me great satisfaction to realize that I am no longer paying extremely high interest on a credit card. I also discovered that I do not need credit cards to have good credit.

To make matters worse, I found an e-book by a popular author that stated that in order to have good credit, one must have two major credit cards. One card for regular purchases and on time payments and the other with no charges to show responsibility with credit. How utterly ridiculous is that? No wonder so many people are confused and ill informed about credit and debt. Consumer credit counseling is just as bad. Yes, they will help you to arrange to pay off your debt and then turn right around and hand you two or three applications for credit cards. How crazy is that? Credit cards in my opinion are over rated and are a consumer’s worst nightmare. They are not needed to build good credit. Repaying any debt on time builds good credit – PERIOD! Credit cards are not the only means of building excellent credit.

Watch Out! Debt Avalanche!

Pay off all your debt as quickly as possible. The fastest and most rewarding is the debt avalanche. The debt avalanche requires paying the smallest balance first to the largest balance last. The first thing you need to do is gather all your debt – credit cards and loans (including your mortgage). Make a list of every creditor and the balance you owe. Now make a second list with the smallest balance first in ascending order. You will pay the first creditor on the list double the amount due, known as an accelerated payment. If you can’t pay double, pay the amount due plus 50%. The idea is to pay more than the minimum amount due. Example: the minimum amount due is $100. You will pay $200 (double) or $150 (minimum plus 50%). In addition, you will need to make a minimum payment on all your other debts at the same time.

Do not apply for credit cards or loans during this pay off period. Paying off debt is not an open invitation to go get more debt and put yourself in a continuous debt cycle. Remember the reason you wanted to get out of debt. Being in debt and worried about money all the time is no fun.

Once the first debt on the list is paid off, you will progress to the next debt on your list and you will pay the minimum plus the amount you paid on the previous debt. For example, the first debt’s accelerated payment was $200. The second debt’s minimum payment is $175. You will pay an accelerated payment of $375 on the second debt. Continue with this method until all the debts on your list are paid off.

I have seen people who can’t pay more than the amount due. I have seen people who can’t pay the amount due. The only recourse they have is to skip paying one or two creditors while they pay off their remaining debt. If you find yourself in this situation, you will need to make the decision of whom to skip paying while you pay off other debt. You will pay these skipped creditors later, but they may write off your debt or send it to a collection agency. The next section will explain how to deal with your creditors when your debt becomes delinquent or is written off.

Restarting the Seven Year Clock with the Credit Bureau and the Statute of Limitations for Your State

For the past three days, I have let several folks confuse me over the truth of the matter with restarting the seven year clock at the credit bureaus and the Statute of Limitations. Here’s the truth, plain and simple: You owe a debt until it is paid. If you never pay off the debt, then you will ALWAYS owe it until it is paid. Good credit stays on your report for ten years, bad credit for seven…HOWEVER, here is where the confusion starts.

Supposedly, there is this idea that once a debt is considered delinquent by the “last date of activity” and you later decide to pay delinquent debt, the seven year clock should not restart. The fact is, paying delinquent debt does restart the seven year clock with the credit bureau and the Statute of Limitations for each state. I have seen it personally and so have friends and family.

When you make contact with a collection agency by phone or mail, they will consider it an attempt to pay and will report it to the credit bureaus as such. Again, I have seen this happen to friends and family and every single time it resets the seven year clock and statute of limitations.

By law, a derogatory item can remain on your credit report for seven years from the “last date of activity.” That’s pretty straight forward. When you pay a delinquent debt, the collection agent reports the payment made and that IS the “last date of activity” for that debt. When you make contact with a collection agency either by phone or by correspondence, that is activity and it will be reported as such.

Confusion over, facts stated, let’s get on with more info…

Statute of Limitations for Your State

There is a law known as the Statute of Limitations (SOL) for each state in the US which limits creditors from taking legal action to force you to repay old or delinquent debt. This is not legal license to run out and apply for credit cards and loans just to get “stuff” and then not pay it back. It is wrong and shows a lack of ethics and responsibility.

When your debt becomes 180 days delinquent, most creditors will write off your debt and turn it over to a collection agency. At this point, you no longer owe the original creditor, you now owe the collection agency. If you pay a delinquent debt before the SOL has expired, it will restart the SOL clock for your debt in your state. I have been told that it will not, but from what I have seen it certainly does restart the SOL clock.

Your Credit Score

Here’s a little something that may shock you! If you think repay delinquent debt will improve your credit score, think again! In every case I have seen (including my own personal experience), it lowers your credit score. Here’s what happens: (1) you pay the delinquent or written off debt, (2) the creditor reports it to the credit bureau as paid and (3) which restarts the seven year debt clock from the date it you paid it. Resetting the seven year clock is going to do what? You guessed it! Lower your credit score! You think you’re doing the right thing by being responsible and repaying your debt and the creditor along with the credit bureau slaps you in the face for being responsible by resetting the seven year clock and lowering your credit score. Amazing!

I talked to a gentleman a few years ago who told me his story of going through bankruptcy when his business collapsed. He was taught that you always repay your debt, so he vowed that as soon has he had the money, he would pay everyone to whom he owed money. When that day arrived, he paid all his delinquent and written off debt. He checked his credit before repaying, and knew every single delinquent debt had fallen off his credit report. His credit score was 760. Ninety days after he had paid all his delinquent debts, he pulled a new credit report. His credit score dropped to 480 and restarted the seven year clock for each delinquent debt he paid. He disputed it and provided bankruptcy documents, but it took six months to get everything corrected.

Credit bureaus need to realize that something very good happens when people pay past due, delinquent or written off debt. This man paid his delinquent debt; he should have been rewarded with the higher credit score. The seven year clock should never be restarted on any delinquent debt that has been paid. Seven years is seven years. These debts are not new, they are old and have only recently been paid, not to mention any debts discharged in a bankruptcy.

A few years ago, I pulled my credit report to find I had two derogatory items I didn’t even know existed. The report even told me that if I paid these two items, it would raise my credit score. I researched these two items to make sure they were indeed my responsibility, which they were, so I paid them. You can imagine my surprise when I discovered that paying these debts lowered my credit score! It also reset the seven year clock with the “last date of activity.” I called the credit bureau and complained and filed a report with the Attorney General’s office. The only thing that happened…the credit report no longer states that paying delinquent debts will raise your credit score.

Here’s another warning: if you find you simple cannot repay your delinquent debt, DO NOT make contact with the creditor or collection agency in any way UNTIL you can pay it. This includes taking their phone calls to you, you calling them, you writing to them or they write you. Why? Because the day you make contact with them, they will view it as an attempt to pay a delinquent debt and they will report it as such to the credit bureaus.

What I have seen is that no matter what the “last date of activity” is, if you pay a delinquent debt before the seven year period has expired, it will restart the seven year clock for that debt on your credit report. Any payment made on a delinquent debt is activity and the last payment you make on a delinquent debt is the Last Date of Activity.

I have to admit, this is not good incentive to pay delinquent debts. As a matter of fact, it is lingering punishment for trying to do the right thing.

What happens when a debt becomes delinquent?

The original creditor has the right to contact you about your delinquent debts and will do so for 180 days (six months). There is no law that says you must answer their calls, return their calls or reply to their correspondence. You make contact with them when you are ready to make payment arrangements and get all payment arrangements in writing before you make the first payment. Do not let them draft automatic payments or make a payment by “check by phone” from your checking account.

If you decide to talk to the collection agency or creditor, they must obey the Fair Debt Collection Practices Act (FDCPA), which is a Federal US law. Each state also has their own laws concerning debt collection, but all states require that a debt collector must comply to both the state and the FDCPA’s laws. If creditors or debt collectors break the laws, then you can report them to the FTC and the Attorney General’s office for your state and the state of the collection agency/creditor.

• They must call between 8:00 am to 9:00 pm seven days a week.

• They may call your home, your place of employment, and some may call friends and family. By law, you may inform them in writing that they may not call your friends, family or employer sighting the possible loss of your job, then they must cease and desist in calling your friends, family and employer.

• They cannot threaten you with violence, harm your reputation (by calling or writing friends, family or employer) or take your property – except in the case of repossession or foreclosure.

• They cannot call you repeatedly. This is harassment and should be reported to your police department, FTC and Attorney General’s office for your state as well as the state of the collection agency or creditor. I had a lady who told me that a creditor called her 12 to 16 times a day. Even if you are not home to answer the phone, that many calls a day is harassment.

Creditors and collection agencies must abide by the laws presented by Fair Debt Collection Practices Act (FDCPA), state laws and the Statute of Limitations (SOL) for each state.

When Paying Delinquent Debt…

You DO have to deal with the original creditor when paying a debt within the 180 day window from the day the debt became delinquent. A debt is delinquent when it is not paid on or before it’s due date. Your original creditor will try to collect on a delinquent debt for up to 180 days. After 180 days, creditors usually turn delinquent debts over to collection agencies.

You DO have to deal with the collection agency when the creditor has sold or assigned your debt to them. You DO NOT have to take the collection agent’s word that his company bought your delinquent account. Call you original creditor and make certain. They will tell you if they sold the account or not.

Statute of Limitations (SOL) for Delinquent Debt in Your State

Consumers do not realize there is a little known law that all states have regarding the statute of limitations for collection of delinquent debt. If you find that the creditor or collection agency is preparing to file legal action to force you to pay and the SOL for your debt in your state has not expired, you need to know the laws to protect yourself and use them to your advantage.

The SOL applies to the state in which you lived when you signed the contract (credit card agreement/application, loan contract, promissory note) or the state in which you live when the creditor decides to take legal action as stated in the FDCPA section 811. The SOL for the state in which the creditor does business is arguable, since most creditors have offices in several states.

For example, the state of Texas has a four year statute of limitations on all debt contracts: written contracts, oral contracts, promissory notes and open accounts. Credit cards and Signature Line of Credit are Open Accounts, because they allow you to charge repeatedly from an account as long as your limit and balance allow. Loans (i.e. mortgage, personal and auto) are Written Contracts and do not allow you to repeatedly borrow money from the account.

Some states have a different SOL for each contract type and some even have an SOL that is longer than the Credit Bureau’s Seven Year Rule for derogatory items which legally allows negative items to fall off your credit file. I have never fully understood this, but it seems that creditors almost always get the laws in their favor. It will fall off your credit, but the creditor has the right to sue to get their money. Many do not, but some do. It’s best to wait and see if your will be sued before you pay. You will be notified and at that time, you may be able to work out payment arrangements.

Steps for deciding if it is in your best interest to pay a delinquent debt:

1. Has the SOL for your state expired? If the SOL has expired, the creditor/collection agency cannot take legal action to force you to pay the delinquent debt.

2. If the SOL for your state has expired, then you need to know if the delinquent debt has fallen off your credit report. If the Seven Year Rule has expired for the delinquent debt, then the it has fallen off your credit file and it is best to not pay this delinquent debt, since repaying will restart the seven year clock. If a delinquent debt is seven years old or older and it is still on your file, you need to dispute it to have it removed.

If the SOL and the Credit Bureau’s seven year rule have not expired and you have received notice from a creditor, debt collector or attorney that legal action is being taken against you, it is most certainly in your best interest to pay this debt as soon as possible. If you cannot afford to pay it in full, see if you can make payment arrangements. Get all payment arrangements in writing before you make the first payment and pay with a money order sent by mail to the address the debt collector provides.

3. Caution: If the delinquent debt has fallen off your credit report at the credit bureau, but the SOL is still in effect, then the creditor or collection agency has the right to sue to get paid for delinquent debt and this will cause a judgment to be reported on your credit file. Some states have SOLs that are longer than the Credit Bureau’s seven year rule. If you have not made contact with the creditor/agency since the debt became delinquent, more than likely the creditor will not sue. If they threatening to sue, you will get advanced warning of their intent to sue and this is a good time to make arrangements to pay the debt.

4. If both the SOL and Seven Year Rule have expired, then it would be to your benefit to NOT pay this debt. Why? Because if you pay the debt, you will restart the Seven Year clock on your credit report as well as the SOL for that debt. In other words, you will being paying a debt that the creditor or collection agency could not legally force you to pay and has already fallen off your credit file.

Use the laws to your benefit. They were written to protect you. If you have had financially difficulties in the past, then you have paid for it by having bad credit for seven years. Don’t restart the SOL and the Credit Bureau’s seven year clock by paying old derogatory debt that has legally expired.

Creditor and Collection Agency Nightmares

Collection agencies can be a nightmare, but they must obey the laws. Some collection agencies hope you do not know the laws. They will call you repeatedly to harass you, threaten to take your possessions that have nothing to do with the debt you owe and ruin your reputation by calling your boss, friends, neighbors and family…all the while, they know they are breaking the law. Legally, they cannot do any of those things. If they do, report them to the Attorney General’s office for your state and the state of the collection agency.

The same is true for the original creditor. They must abide by the laws set forth in the FDCPA. If they break the laws, report them to the Attorney General’s office. The original creditor has the right to contact you about your account, but they do not have the right to harass you, call you at work, take your possessions or ruin your reputation.

You can stop collection agency calls. Send them a Cease and Desist letter telling them that you know the laws according to the FDCPA and ask them to stop calling you at home, on your cell and at work, your employer, friends and family and if they do call, you will be recording the conversation. Be sure to state very clearly that they are not to call you at your home, work, cell, employer, friends or family’s phone numbers. Tell them that you will only accept written communication. If they break the law, report them to the Attorney General’s office for your state and the state of the creditor/collection agency.

The original creditor is a little different. You may send them a Cease and Desist letter telling them not to call you at on your cell, at work, friends, family or your employer which may result in your being terminated. They have the right to call you at home and by written communication.

They do not have the right to call you repeatedly at home – this is harassment and they are breaking the FDCPA. You do not have to tolerate harassment by a creditor. Creditor harassment is the number one complaint by consumers. Most creditors will abide by the FDCPA. You will find that the collection agencies will be your biggest problem, since they have no respect for the law and will break it every chance they get. They are depending on the fact that few debtors (YOU) know Credit laws.

Settlement Offers

If you can pay your delinquent debt, you need to pay the company that now owns the debt. Most creditors will sell delinquent debt to a third party (usually a collection agency) for pennies on the dollar. You may find this is the case when you contact the original creditor. They will tell you they sold the debt to a third party or collection agency and they cannot take your payment or make payment arrangements.

You will then contact the third party that bought your delinquent debt. Some times, collections agencies will settle for half the amount you actually owe. If this is the case, you can accept their offer, but be prepared to get a year-end statement from the collection agency that they will send to the IRS for the other half you owed. Why? Well, you borrowed or charged the full amount you actually owed and to pay anything less than the full amount owed is considered a windfall (income) by the IRS.

The Latest Scam

Same song, new verse! The latest scam involves third party debt collectors trying to collect on old, SOL expired debt. They know the debt has an expired SOL, but they hope that consumers do not know this. It seems that there are lists of SOL barred debt and debt collectors have started businesses based on collecting SOL barred debt! Why? If they can get you to pay, they make 100% profit!

Do not ignore these attempts to collect! I will say it one more time for effect…do not ignore these collectors who are attempting to collect on SOL expired debt! Why? Legally, they can take you to court, sue and usually win a judgment against you for a debt that you legally did not owe! If you do not let them know that you are savvy about the laws and tell them to cease and desist, they will follow through with their threats of legal action. Read this post for more info on what to do.

I can’t say this enough! Use the laws to your advantage. Check to see if the SOL has expired and check to see if the debt has fallen off your credit report due to the Credit Bureau’s seven year rule for credit bureaus on any delinquent debt you decide to repay before you pay!

If you find that you have to deal with a third party collection agency:

1. You can make payment arrangements over the phone, but verbal payment arrangements mean absolutely NOTHING! Get your payment arrangement in writing.

2. Do not make even one payment until your have your payment arrangement in writing.

3. Do not set up automatic draft payments from your checking account. Just don’t do it. Most collection agencies cannot to be trusted, especially if they are rude and abusive to you on the phone. If the collection agent tells you that’s the only way they take payments, they’re lying. They can and they will take payments by mail. If they refuse to take a payment by mail. Do not say one more word to the agent, hang up the phone and contact the Federal Trade Commission and file a complaint.

4. DO NOT GIVE CREDITORS OR COLLECTION AGENCIES YOUR SOCIAL SECURITY NUMBER, BIRTH DATE, AND/OR YOUR CHECKING ACCOUNT NUMBERS…EVER! You can verify your address, but absolutely do not give them your sensitive personal info.

A Word About Automatic Payment Drafts

Do not allow a creditor to automatically draft payments out of your checking account – period, end of statement, no exceptions! Something weird happens when creditors get your checking account number in their hands for automatic payment drafts (APD) for delinquent debts. Double debiting is the number one problem, followed by the debiting the wrong payment amount, usually more. Some creditors see it as an invitation to take money out of your account for hidden fees, deposits or that ever elusive double meaning behind “Handling Fee.”

Some third parties collection agencies are notorious for taking more than what was agreed even when it is in writing. This can cause huge expenses in the form of NSF checks and fees not to mention causing you frustration and stress. It is near impossible to get them to stop deducting payments from your account once the debt is paid. I talked to a lady who had to close a checking account she had had for 30 years, because a collection agency continued to deduct payments after the debt was paid.Fix Your Credit and Do It Yourself

Credit repair companies in my opinion are a rip off. It’s your credit, it’s your responsibility. You will learn to be much more careful in the future and it will give you a wonderful sense of pride and self-accomplishment. You can do anything the credit repair companies do. As a matter of fact, you will do exactly what the credit repair companies do.

You cannot remove negative (derogatory) items from your credit, but you can dispute an inaccuracy on any item listed on your credit report. When you dispute an inaccurate item on your credit report with all of the three major credit bureaus, the creditor may or may not reply to the credit bureau concerning your dispute and if they do not reply within 45 days, the Credit Bureau will remove the inaccurate item from your credit.

Credit card companies of late have become notorious for reporting incorrect balances and/or credit limits. Why? Well, it seems that they do not want to lose your business to a competitor and if they over-state your balance or limit, it just makes it look like you have more credit than you need. It will also lower your credit score. Check those credit card limits and balances on your credit report and make sure they are correct.

Inaccuracies can be any of the following:

• the balance due,
• your credit limit,
• the amount borrowed,
• the payment amount,
• the account number,
• any item that you know is not yours,
• two items listed for the same debt. You cannot owe two companies for one debt,
• derogatory item that is over 7 years old,
• your personal info, name, address, employment

Order your credit report. Look it over very carefully. Look for any inaccuracies and dispute the inaccuracies with the credit bureaus. It’s that simple! There is no need to pay someone to do for you what you can do yourself. Some of the credit bureaus will allow you to order your report and dispute online, which is a very convenient and time saving.

Responsible Money Management

This section is my personal opinion. I wish I knew thirty years ago what I know today.

1. Credit cards. No one really needs credit cards. Corporate credit cards provided by your employer are a totally different matter. There is a school of thought that in order to have good credit and get a mortgage, you must have two major credit cards. One credit card for charges and on-time payments and one other in which you charge nothing. One card is for payment history and the other to show you are responsible and have self-control. This is not only absurd, it lacks common sense! Paying any debt on time builds good credit.

I know some people manage their credit cards very well, but I have seen people who managed their credit cards very well who suddenly find themselves dealing with overwhelming debt after: a lay off, a disabling illness, a divorce or the death of a spouse. They can’t pay their bills and 90% of their debt is credit cards and loans.

A very good friend of mine divorced. She kept the house and had $5,850 in payments to 22 credit cards, one auto loan at $560 per month and her mortgage was $650! Every payment was made on-time until the divorce. She closed all the credit cards, paid them off, sold her home and sold her car to buy a used car for cash. She immediately started reanalyzing her finance and her new lifestyle. She no longer has credit cards - not even one! She is financially independent and pays cash for everything. Some times all it takes is a wake-up call!

Why would you want to pay all the interest? Credit cards companies are the legal, modern day loan shark. Don’t think so? Forget to make a payment and tell me that you don’t think that late fee isn’t a bit excessive. It’s definitely not Guido showing up at your door to break your knees, but is will certain break your wallet.

Interest charged on an average DAILY balance is unscrupulous. The only time credit cards are good is when you do not carry over a balance to the next month. This is known by credit card companies as “free loading.” Interesting that they use that term, don’t you think? I call charging unscrupulous interest “loan sharking.” I’ve known very few people who pay off their balance every month. I’ve known people I thought were financially savvy, only to find out they carry over a balance on 10 or more credit cards. Not very savvy money management in my book.

2. Create a Budget. Yes, I know! I don’t know too many people who like creating and following a budget, but if you really want to be responsible with your money and know where you stand money wise every month, then you need a budget.

3. Checking Accounts. The customer service environment of banking has changed in the last 20 years. In the 80s, during the time of the Savings and Loan scandal and the worst economy recession (1987) since the Great Depression, bankers realized that they needed to establish fees to curb customers from writing NSF checks just to survive.

This has progressed over the years to charging fees for anything from calling for assistance with a forged check to complaining about long lines and slow cashiers. Well, maybe not the last one, but it’s getting that bad. It’s a disturbing trend of hidden fees, double meanings and open-end agreements with disclaimers that state, “We reserve the right to increase our fees without notice.”

Watch those signature loans for overdraft protection. Many people think the signature loan pays the NSF check, which it does, but some banks will still charge an NSF fee. That’s right! You have a signature loan to cover a check in case you have a overdraft, due to some unforeseen error on your part or the banks, and the bank will still charge an NSF fee. Some charge a handling fee for the automatic draft that covers the NSF check. Let’s face it. Banks have gone gaga with fees.

4. Savings account. Savings accounts are for emergencies. Keep at least $1000 in the account and there must be a true emergency before the money can be withdrawn.

5. No Automatic Drafts from checking account. I closed my checking account when my mortgage company was double debiting my monthly payment after I set up a written automatic payment draft from my checking account. I didn’t even realize it had happened at first until I received NSF notices from the bank.

The NSF fees were shocking and it took me weeks to get the mess straightened out. My only option was to close the account because my mortgage company would not stop processing payments even after the bank and I both contacted them, told them they were double debiting and asked them to stop the Automatic Payment Drafts. Since the Automatic Payment Draft was an agreement in writing, my mortgage company had to refund the payments that were doubled. The bank refunded all the NSF charges.

6. Be careful of “Check by Phone.” Do not pay with a “check by phone” from a verbal payment arrangement. All payment arrangements need to be in writing and paid with a check or money order by mail. The only exception is when making a payment for a bill from a statement. In this case, you have a payment agreement in writing – your statement.

It is so easy these days for unethical creditors to take more out of your checking account than what was verbally agreed. Yes, it is illegal, but without anything in writing, you have no legal recourse.

Debit card fraud and ACH fraud are common simply because people give creditors permission (verbally) to draft money from their accounts. Creditors can draft any amount they want without a written payment agreement and the unethical ones usually do.

Some creditors view verbal payment arrangements, check by phone, pay by phone and debit card payments as a license to take as much as they want because you gave them permission to take money out of your account. The only recourse you have is to dispute it with your bank and then it becomes your word against theirs. It’s next to impossible to stop a check or payment by phone from drafting out of your checking account and creditors know this. That’s why it is their preferred method of payment. A check or debit card payment by phone is nothing more than an ACH debit. The creditor or collection agent may ask for a check number, but it means nothing to the bank except an ACH debit.

7. Mortgage and Auto Loans. The only loans anyone needs. Save and pay cash for everything else. Make double payments and pay loans off quickly, if you can. Watch your mortgage company closely. Several mortgage companies were sued via class action lawsuits for fraudulent and predatory practices practices.

8. Focus on becoming Debt Free. Real money management is exactly that, MONEY management. It’s not credit card management or loan management.

9. Invest your money. Learn about the stock market. Invest in Mutual Funds or Index Funds. Buy a CD. No, not a compact disk, a certificate of deposit. Put your money in a Money Market account. The idea is to invest a portion of your income, not all of it, in an investment vehicle that is steadily growing (going up) or will earn you more interest that a savings account. CDs and money market accounts are not the best investment vehicle, but if you know very little or your not willing to learn how to invest in the stock market, then CDs and money market accounts are a good start.

10. Don’t nickel and dime yourself into debt. Everyone does it! Cable TV, ISP, cell phones, memberships, magazine subscriptions, etc. Go over all your expenses and cut the fat. I got rid of our cable TV. I was tired of watching the same old shows over and over. I also dropped two memberships that I really wasn’t using. The idea is: if it isn’t being used or doesn’t serve its intended purpose, it needs to go. You’re just throwing away your money.

Some Closing Thoughts

It took me years to realize that I knew nothing about managing my finances. My parents really didn’t teach me anything and everything I had learned about credit was from the very people who supported the credit card companies – consumer credit counselors.

We’ve become a society built on credit worthiness and immediate gratification. Parents teach their children their credit habits or teach them nothing at all. They learn nothing about being responsible with credit and being aware of the consequences of having too much debt and becoming overwhelmed and unhappy.

Children learn from their parents about credit cards and they learn that Mom and Dad charge everything on these wonderful cards and then proceed to live paycheck to paycheck. The kids think this is normal and that everyone lives this way. This is not only crazy, it creates a repetitive debt cycle generation after generation.

Your born, go to school, go to college, go to work, get in debt, live paycheck to paycheck, retire broke and die miserable and unhappy. While this is not true for everyone, it is certainly true for a majority of individuals. It’s time to break the cycle. Be smart with your money. Treat your money with respect and be responsible with credit.

Links to important info concerning your credit, paying debt, and the laws that protect you!

Dave Ramsey – Beat Debt, Build Wealth!

Bud Hibbs – America’s Consumer Credit Expert!

State Statute of Limitations for Delinquent Debt

Free sample letters to resolve issues with creditors, collectors, reporting agencies and credit bureaus!

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