Can You Buy Bitcoin with a Credit Card?

August 20, 2020CreditBy toptierfinancial

If you’re going to join the roller coaster ride of investing in Bitcoin or other cryptocurrencies, buying virtual currency can take more effort than it does to make typical investments online.

You’ll likely have to buy it through an exchange — a website to trade one currency for another such as U.S. dollars for Bitcoin— and for that you might need a credit card. But buying cryptocurrencies with a credit card is risky and can come with high fees.

Here are some things to check with the exchange and credit card you’re going to use before buying cryptocurrencies:

Are credit card purchases allowed?

bitcoinWhile finding an exchange that accepts credit cards is easy enough, but six large financial institutions have blocked consumers from buying cryptocurrency with a credit card: JP Morgan Chase, Bank of America, Wells Fargo, Citigroup, Capital One, and Discover. Policies can change, however, so check with your credit card provider to see if it allows such purchases.

The biggest reason for the denials was the wild swings in Bitcoin and other cryptocurrency prices. Buying an investment with borrowed money, and then seeing that investment drop steeply, could drop your incentive to pay that credit card bill.

Other reasons include lack of mainstream acceptance, high risks of fraud and volatility in the cryptocurrency market.

High risk of credit card debt

Investing in other currencies, also called speculating, can be risky for credit card users who then carry the balance over each month and don’t pay it off completely immediately. They could have credit card debt that could cost them a lot of money.

A December 2017 study by LendEDU of active investors found that 22 percent didn’t pay off their credit card balance after buying Bitcoin. Their plan was to use Bitcoin profits to pay off the balance, which is a risky strategy.

Worse than that, 70 percent of those who didn’t pay off their credit card balance after buying Bitcoin said they believed owning Bitcoin is worth the interest expense.

Credit cards have an average APR of 17%, which is interest debtors will have to pay monthly. That’s a high amount of interest to pay on something that can drop in value by half or more overnight.

Convenience fee

Using a credit card, or even a debit card, at a cryptocurrency exchange can require paying a convenience fee to the exchange. This fee can make purchases quicker, but more costly.

A payment method that’s usually free is using your checking account and routing number — called ACH for short — that pulls money directly from your checking account. This can take a few days to post to your account.

It’s a popular method of transferring money. The same amount of people in the LendEDU study who said they use a credit card to fund a Bitcoin purchase — 18 percent — also use the ACH bank transfer process to buy Bitcoin. Most buyers — 33 percent — used a debit card, which is about the same as using cash.

Foreign transaction fee

If the exchange is outside the United States, your credit card may charge a foreign transaction fee. This often isn’t charged when you buy something outside of the U.S., but a cryptocurrency exchange may result in one.

The fee is usually 3 percent of the transaction amount — $30 for every $1,000 of cryptocurrency you buy.

Cash advance fee

Your credit card issuer may consider it a cash equivalent transaction or cash advance when buying virtual currency, resulting in more fees.

A typical credit card cash advance fee is $5 or 10 percent of the transaction amount, whichever is greater. Every $1,000 of cryptocurrency could cost you a $100 fee.

Cash advances also have a higher APR on credit cards, and don’t include grace periods to pay off, meaning you’re paying interest immediately. Cash advances also won’t earn you any credit card rewards and the purchase won’t count toward any spending requirements to earn a sign-up bonus on a new credit card.

Limit of cryptocurrency purchases

The exchange you’re using may place a daily or weekly limit on how much cryptocurrency you can buy with a credit card. This is a good safety measure for your protection, giving you some time before your limit resets and you can buy again.

Impact on your credit score

The more of your credit limit you use, the more it affects your credit score. Credit utilization is a major factor in credit scores, so having a big balance because you’ve just bought a lot of cryptocurrency can hurt your credit score. If you miss payments or carry the debt for awhile, your score could drop more.

Most people invest with cash they already have on hand. Investments should be money you’re willing to lose.

If your investment strategy includes cryptocurrencies and you want to use a credit card, start by checking with your credit card company about possible fees and if it even allows such purchases. Financial markets are changing constantly, and credit card issuers may turn back to allowing cryptocurrency purchases if they become safer and more widely accepted.

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Ask an Expert: Should I cancel a credit card if I get a new one? How will this affect my credit score?

July 3, 2020CreditBy toptierfinancial

Question: I have 3 credit cards that I have paid off. If I was to accept an offer from another credit card company that offers me better services would it affect my credit in a positive or a negative way? Should I cancel any of the cards that I have paid off or leave them opened?

Dear Reader,

Congrats on paying off your cards. That’s certainly something to celebrate! Because you have been paying off your cards on time and in full, your credit score has increased. When you have a higher score, you have access to better offers from lenders and creditors, which includes lower interest rates and reward programs. However, that doesn’t mean that you should apply for the first good offer that you see or close one of your paid-off credit cards.

Anytime you ask for new credit, even if it’s a pre-approved offer sent to you, the creditor will run your credit and generate a hard inquiry on your credit report. This hard inquiry stays on your report for 24 months and affects your score negatively for some time. According to FICO, each inquiry can lower your score 5-10 points. But the real impact will depend on your overall credit health. If you have multiple inquiries in a short period, it can be even more detrimental to your credit. Lenders can interpret this as a sign that you are overspending or can’t pay your bills. But, if you are shopping around for rates for a mortgage or auto loan, multiple inquiries count as just one if done in a certain period of time.

So, you have to be selective and compare offers from different lenders online when applying for a new card. A few new perks may not be worth the temporary decrease in your score. An alternative to getting a new credit card with more benefits is to ask your current lenders to upgrade your cards. Creditors are often willing to work with you, especially if your accounts have been in good standing. Sometimes, they can do it without pulling your credit.

Now, even if you get a new card, I don’t recommend closing any of your cards. You should consider closing your cards if you have trouble controlling your spending or are paying an annual fee on the card. But other than that, closing a credit card can do more harm than good to your credit report. Whenever you close an account, you can affect your utilization ratio, which compares your total available credit to your total credit card debts. Your credit utilization ratio is one of the factors that influence your score the most, almost as much as always paying on time. The lower your credit ratio, the better your score. If you close a credit card and have balances in your other credit cards, your utilization ratio will increase, and consequently, your score may drop. Keeping the card open with a zero balance can help you maintain a lower utilization ratio when you start using your other credit cards.

Another thing to keep in mind before you decide to close an account is that it can reduce your credit report age. To calculate your score, FICO also takes into consideration the average age of all your accounts and for how long you’ve had each account. When you close an account in good standing, it will stay on your report for seven years. After that, it will be removed from your report. And with it, all the positive history you had, including its age, which could lead to a drop in your score. The longer you’ve had credit for, the better.

Understanding how your credit card use affects your score is a wise step to effectively manage your credit and boost your score. Each credit report is unique, and each action we take affects us uniquely. Consider keeping your paid-off credit cards open and try upgrading them before getting a new one. The key to building your credit is to use your credit card responsibly. This means using less than 30% of your available credit, paying in full and on time every month, and limiting how often you get new credit. Good luck!

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Ask an Expert: I’m being sued by a debt collector. What should I do?

June 30, 2020CreditBy toptierfinancial

Q. I received papers that I am being sued by a third party company I know not to ignore it, but I dont know what to say or do.

Dear Reader,

You are right not to ignore the lawsuit notification. Ignoring a suit could lead to a default judgment by the court. This usually means that a judge can grant your debt collector the right to garnish your wages or levy your bank account by default. You also lose the ability to dispute the debt.

The first thing you have to do is prepare to respond to the lawsuit within the specified time frame. It’s not always easy to do this on your own, so you may want to consult an attorney for assistance. Attorneys usually offer free consultations, and if you are low-income, you can get low cost or free help through your local Legal Aid. An attorney could help you write a formal defense, file it with the court clerk, help you identify if you have a valid defense, and, most importantly, represent you in court if it were necessary.

You must gather all information related to this particular debt. This can include collection letters, the dates when you missed your payments, and details about the original debt. You need to determine who the creditor is and if the collection information is accurate. Often, debts are repeatedly sold from one collector to another, which leads to mistakes. You must determine if the debt has passed the statute of limitations. The statute of limitations is the time established by your state in which a creditor can sue you for an unpaid debt. The collector cannot sue you once that time passes, but they can still try to collect from you.

If you owe the debt, contact the collector before your hearing and attempt to negotiate a repayment plan. If you don’t have enough income to commit to a monthly payment, you can ask for a debt settlement in which you’ll pay your collector less than what you owe. Whatever agreement you negotiate, make sure you get it in writing before you send any payments. If you cannot pay your debt at all, bankruptcy may be an option to consider. However, this is typically a last resort for consumers who have high credit card debt and won’t benefit from other debt repayment options.

If you owe the debt, but believe you shouldn’t be required to repay it, work with an attorney so you get the right guidance to defend yourself. If you don’t owe the debt, you still have to take action. The collector has the burden of proof and needs to show in court that you owe it. If they can’t produce the information, there’s a good chance that your case could be dismissed. Also, being sued for a debt that you don’t owe could be a sign of identity theft. Check your credit reports to make sure it’s error-free and that you recognize all listed accounts. You can get free copies of your credit report every week until April 2021 at www.annualcreditreport.com. After that, free reports will be available on an annual basis.

Time is not on your side. If you still need guidance to submit your response right away, talk to an NFCC certified credit counselor. You can work with a counselor online or over the phone. Your counselor can help you put your thoughts in order and guide you step by step in crafting your answer. You are taking the right steps to handle the situation and the extra help will help you deal with your collectors and the court process with more confidence. You are not alone. Good luck!

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Ask an Expert: Should I cancel my credit card partial payment plans? Will it help my credit score?

June 19, 2020CreditBy toptierfinancial

Q. I have started the process of paying off credit card debt. It was suggested to me that I contact the credit card companies (more than 3) to work out a payment arrangement with a lower interest rate, in some cases zero percent interest. I have been on the plans for a few months now and all seems to be going great. However, I see the term “paying partial payment plan” on my credit report now for those cards. I have been reading the negative affect this has on credit. My question is what should I do about this? Will this go away once the balance is paid off? Should I try to reverse the payment plans in an effort to save my credit score?

Dear Reader,

Whenever you agree with your creditors to pay your credit cards for a lesser amount, they usually report it on your credit with a notification along the lines of paying with a “partial payment plan.” Having that notification on your credit report can affect your score negatively until you pay off your credit cards or exit the plans.

There several things that you can do to influence how your score is affected while you pay your debts. Keep in mind whatever strategy you choose will affect your credit. How much each specific action will affect your score negatively or positively depends on your current credit report and your history. So, before you decide, consider your current financial situation and determine how much you can pay on these cards.

If your creditors have not closed your accounts and you can make your original payments, contact your creditors and exit your plans. This could improve your score, but it will take you longer and cost you more to pay your debts off since you will no longer benefit from a 0% interest rate. If you have enough income, another alternative is to pay off your debts quickly and focus on rebuilding your credit and boosting your score afterward. When you pay your credit cards, make sure the creditors remove the “partial payment plan” notation from your credit reports. They should do it automatically, but it’s in your best interest to ensure they do so promptly.

If you can’t afford the original payments, consider enrolling in Debt Management Plan (DMP) through a nonprofit credit counseling agency. These programs are administered by the nonprofit and help you repay your debt in full, typically with lower monthly payments and interest rates. Whenever you pay your debts through a DMP, it’s reported as being paid through a debt counseling program. While this notification on your credit report does not negatively affect your credit score, enrolling on a DMP does because creditors close your accounts. Therefore, your utilization ratio increases and your score goes down.

DMPs may not be the best option for everyone and will not offer the instant credit relief you hope. It’s possible that your credit score may experience a temporary drop while you begin to repay your debt through one of these plans. In most cases, what negatively influences your score the most is not that you are enrolled in the plan or how it’s reported, but what led to this point. Being enrolled in a payment plan is preferable to facing out of control debt, which can lead to late or missed payments that can affect your score for 24 months.

Whatever path you take, there’s light at the end of the tunnel. Weigh your options and remember that this is only a temporary setback while you get out of debt. Building your credit and improving your score is a marathon, not a sprint. If you need additional help, talk to an NFCC-certified credit counselor from a nonprofit to find what repayment strategy can work best for you. Good luck!

Sincerely,

Bruce McClary, Vice President of Communications

Bruce McClary is the Vice President of Communications for the National Foundation for Credit Counseling® (NFCC®). Based in Washington, D.C., he provides marketing and media relations support for the NFCC and its member agencies serving all 50 states and Puerto Rico. Bruce is considered a subject matter expert and interfaces with the national media, serving as a primary representative for the organization. He has been a featured financial expert for the nation’s top news outlets, including USA Today, MSNBC, NBC News, The New York Times, the Wall Street Journal, CNN, MarketWatch, Fox Business, and hundreds of local media outlets from coast to coast.

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How Credit Counseling Can Help When You are in a Financial Crisis

June 4, 2020CreditBy toptierfinancial

A personal financial crisis can take different forms. Losing a job, having your work hours or income reduced, facing a huge medical expense, and having your identity stolen are just a few examples. Many times, these situations can lead to larger problems, especially mounting credit card debt. If you find yourself in a financial crisis, you should know that credit counseling is an available resource, and it could be the perfect solution to help you recover. Let’s take a closer look at exactly how credit counseling can help.

Talking to Someone

We know that financial stress can impact your mental health, and many people find comfort and relief by talking about their concerns with someone else. Credit counseling pairs you with someone who is willing to listen and ready to help you move toward your goals. No, a credit counselor isn’t a therapist, but credit counselors are known for providing comfort in difficult times. Your credit counselor will approach your situation with understanding and empathy, and give you space to voice your financial regrets, concerns, and goals.

Trusting an Expert

A credit counselor isn’t just confidant; he or she is an expert trained in helping consumers overcome financial difficulty and make a plan for their future. There is great peace of mind that comes with working alongside such an expert. When you are in “crisis mode,” you may not have the time or mental energy to get bogged down in the details or pull yourself by the bootstraps to achieve financial recovery. The great thing about credit counseling is that you don’t have to. You get to put your financial situation in the hands of an expert and educator who can guide you toward your desired outcome, help you create a structured plan, and teach you new financial strategies and behaviors along the way.

Reviewing Your Credit Report

Your credit report is an extremely important financial indicator, because the information it contains affects your credit score. Unfortunately, mistakes are far too common in credit reports and many go unnoticed. If you are going through a financial crisis, you will want to keep a close eye on your credit report to make sure it does not have errors holding back your score. You will also want to watch the data on the report over time as a sign of your progress paying down debt.

Walking through each line item of your credit report with a credit counselor can reveal errors, highlight areas to work on, and give you the opportunity to ask questions and learn more about how credit reports and scores work.

Exploring Numerous Solutions

Sometimes you have a general problem and aren’t sure what the best solution is. Money inherently works this way. For example, if you are having a hard time paying rent, credit card debt might actually be the bigger underlying problem. If you could free up some cash away from your credit card bills, rent would be easier to make. That’s just one example. The good news is that credit counseling helps identify the major issues and identify your best solutions.

For some, housing really is the main issue. In that case, a credit counselor can point you to a housing counselor to explore options for how to keep your home. Alternatively, maybe your credit card debt makes you a good candidate to consider a Debt Management Plan. Or, maybe your financial strain is best addressed by some minor tweaks to your monthly budget. Your counselor can explore all of these solutions with you and even connect you to local resources in your community in cases where doing so would be helpful.

Simplify Your Month-to-Month Routine

If you opt for a Debt Management Plan, you will receive numerous benefits. One benefit that is particularly helpful is that your month-to-month routine will become much simpler. By making one monthly payment to cover all of your credit card debt, you don’t have to worry about the hassle of keeping track of multiple bills. Simply make one payment to the credit counseling agency, and you’re covered for the month. Not only that, but the DMP will put an end to those pesky creditor and collection calls, which are the last thing you need when you are in an already stressful situation.

Getting Started is Easy

If you are in a crisis, you may not have much time and energy left in the tank. Thankfully, it is very easy to get started with credit counseling. Sessions can be held online or via telephone (or in-person if you prefer). All you need to do to prepare is gather your basic financial information, including a list of your expenses, recent paystubs, and your credit card statements. You can read more about what to expect, or get started here.

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#AskanExpert: What are options for boosting my credit score without getting retail credit cards after a DMP?

May 1, 2020CreditBy toptierfinancial

Question: My credit took a massive hit when I graduated from college. I signed for a debt management program at the age of 26! Now I need options to boost my credit without getting retail credit cards. What are my options? I have one final account to settle through my DMP which I am hoping will happen within the first quarter of 2020.

Dear Reader,

Congratulations on almost reaching your goal of becoming debt-free! That’s a fantastic accomplishment. Going through a DMP probably has affected your credit in some ways. How much and in which light, depends on your credit history before and during your DMP. For instance, closing your credit card accounts when you enrolled on the DMP probably hurt your score, but consistently paying on time during your program should have had a positive impact.

You have several options to rebuild your credit. You can start by correcting mistakes in your credit reports. Get a free copy of your credit reports from each of the major credit bureaus (Experian, Equifax, and TransUnion) through www.annualcreditreport.com and carefully review them to make sure they are error-free. If you find mistakes, start a dispute online through each of the credit bureaus’ websites to correct them.

Next, you need to get new credit and learn to use it strategically. There are several ways that you can do so. One way is to become an authorized user in someone’s credit card. When you become an authorized user, the credit card activity is included in your credit history, and depending on how the account is managed, it can build or hurt your credit. Another option, and arguably your best option, is to get a secured credit card and use it strategically. This type of card is backed by a deposit you make that also serves as your credit limit. It’s best to put a small, recurring charge on it and always pay on time. Just keeping your balance low and paying on time are the two most important things you can do to boost your score. These cards are also your gateway to regular credit cards in the future, so be wise.

Similar to secured credit cards, many credit unions and banks offer starter loans to help you establish credit. Yet another option is to have a friend or family member co-sign a small loan with you. In this case, you and your co-signer are both equally and legally responsible for repaying that loan. Other options can include rent/utility reporting services. There are a few of them out there, but most charge a setup fee and monthly payments to report your payment history. So, make sure you carefully review them and see if they are worth it and if they report to the three credit bureaus. Similarly, Experian Boost is a free service that can include the payment history of some of your utilities and telecom bills in your credit report to give your score an extra boost. However, Experian Boost only reports to your Experian credit history, so your TransUnion and Equifax scores won’t see the same benefit.

You have several options to rebuild your credit. Which strategy is best for you depends on where you stand right now. You can always talk to a nonprofit credit counselor to get a personalized plan. Counselors can review your credit online and over the phone and help meet your financial goals. Finishing paying off your debt is just your first step. Good luck.

Sincerely, 

Bruce McClary, Vice President of Communications

Bruce McClary is the Vice President of Communications for the National Foundation for Credit Counseling® (NFCC®). Based in Washington, D.C., he provides marketing and media relations support for the NFCC and its member agencies serving all 50 states and Puerto Rico. Bruce is considered a subject matter expert and interfaces with the national media, serving as a primary representative for the organization. He has been a featured financial expert for the nation’s top news outlets, including USA Today, MSNBC, NBC News, The New York Times, the Wall Street Journal, CNN, MarketWatch, Fox Business, and hundreds of local media outlets from coast to coast.

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Should You Access Your Retirement Funds Early Due to COVID-19?

April 30, 2020CreditBy toptierfinancial

One of the long-standing rules of personal finance has been that you should not take funds out of your retirement account early except as a last resort. The question now is whether the COVID-19 crisis has created a “last resort.” In other words, does it make sense to dip into retirement savings now? The CARES Act has temporarily changed the rules about accessing these funds, making it more favorable to do so before you are of retirement age. Let’s take a closer look at the changes and the considerations that should go into any decision about accessing retirement funds early.

Normal Rules for Distributions and Loans

There are generally two ways to access retirements funds early. You can take the money out of the account (a distribution) or you can borrow money from your account (a loan). Normally, if you take a distribution from a retirement account before you are 59 ½, then you will pay income tax on the distribution and be subject to a 10 percent penalty (or a 25 percent penalty in the case of distributions from a SIMPLE IRA within the first two years of participation). However, note that there are exceptions to this rule.

Distributions are available from any retirement account. However, loans are more limited. Loans are not available on any IRAs or IRA-based accounts. The IRS explains that loans are only available on “profit-sharing, money purchase, 401(k), 403(b) and 457(b) plans,” though not all plan administrators offer loans. Borrowing from a 401(k) or similar account is normally limited to $10,000 or 50% of the vested account balance, whichever is greater, with a cap of $50,000. You pay interest on a 401(k) loan, but the interest returns to your account. The biggest cons to using a 401(k) loan are that you may miss out on investment growth due to taking your money out of the market, and you may default on the loan, which could lead to the loan being treated as a distribution. For a good primer on these loans, read this article from Credit Karma.

Loans and distributions can both be disastrous to your retirement savings by triggering severe consequences in the form missed portfolio growth, increased tax liability, and penalties. That is why most financial experts warn against tapping into these funds early if you can help it.

Important Changes Under the CARES Act

These are not normal times. Anticipating that many Americans will be strapped for cash, the government changed the rules for early retirement distributions and 401(k) loans under the CARES Act. Here are some additional important details and further explanations about the law to keep in mind.

Early Distributions

Which retirement accounts are covered?

The option to take a distribution without paying a penalty applies to all retirement accounts.

Who can take a penalty-free distribution?

To avoid penalty, the distribution must be taken by a qualified individual. This covers someone who has tested positive for COVID-19 or who has a spouse or dependent who tested positive. It also covers someone “who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury (or the Secretary’s delegate).”

How big can the distribution be?

The limit for penalty-free distributions is $100,000 per individual across accounts.

What time period is covered?

To avoid penalty, the distribution must be taken between March 27, 2020 and December 31, 2020.

How much will you pay in tax? How can you limit your tax liability?

This will depend on your tax bracket. However, the act allows you to spread the tax payment over three years. It also allows you to repay the money to an eligible retirement plan to avoid the tax liability.

 

401(k) Loans*

How much can you borrow?

The CARES Act increases the cap from $50,000 to $100,000.

What time period is covered?

The increase in how much you can borrow is in effect until September 23, 2020.

How much tax or penalty will you pay on the loan?

There are no taxes or penalties on the loan, but you will pay interest, which is returned to your account.

Does the law change payment obligations?

The law allows affected individuals to delay repayments for up to one year.

*Be sure to consult with your plan administrator to understand fully the terms of a potential loan and the impact of the CARES Act on such a loan.

Should you take a distribution or loan?

The CARES Act provides a unique opportunity to access your retirement funds with less financial penalty than usual. However, these new rules do not address the other main disadvantage of early withdrawals: limiting your investment growth over time. Timing the market, or predicting when investments will hit their peaks or bottoms, is practically impossible. The initial market response to the COVID-19 crisis has been negative, and markets may still be in the midst of a downturn. This means that your portfolio may be quite a bit lower today than it was even just a month ago. Cashing out of your retirement now may mean you take a loss or miss out on upcoming market rebounds. It would strip your funds of their growth potential

Withdrawing or borrowing from your accounts is still a last resort. Do not borrow from your retirement just because you think it is a rare opportunity to do so. You should only take money out of your accounts if you need the money for a financial emergency. Even then, consider the following funding sources instead, and then only return to the idea of taking your retirement money if the other options are not feasible.

Alternatives

Stimulus Money and Tax Refund

Make sure you have taken the necessary action to get your stimulus check. That money may help you meet your goals and eliminate the need to borrow from your retirement. The same is true for a tax refund if you have not yet received yours.

Emergency Fund

You have this fund for a reason. Consider using it now if you are in a bind. Consider growing it too. Now is the time to cut extra expenses and put more toward your savings for future uncertainties.

Personal Loans

Personal loans often provide better terms and interest rates than credit cards, especially to people with good credit. If a small personal loan can hold you over in a pinch, it may be a better alternative.

Of course if you are struggling and are unsure where to start, a certified nonprofit credit counselor can help you sort through your options and provide financial guidance that can set you up for success, now and in the long-term.

 

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#AskanExpert: Should I File for Bankruptcy?

April 27, 2020CreditBy toptierfinancial

Q. Should I file for bankruptcy? I lost my job in 2007. I became unable to pay my credit card debts about two years later. My debts were charged off except for one that is suing me. I started working again in November 2016. An old debtor filed a judgment in 2016 and has now levied my bank account. I was unaware I was being sued until 2019 when my bank account was levied. I have very little left over each month after paying rent and bills. My debt is about $20,000 not including the one suing me, which is a little over $10,000.  My main concern is this judgment. I don’t know what to do. Please help!

Dear Reader,

I’m sorry to hear you are going through such a difficult situation. Taking care of your expenses and your parents’ can be overwhelming, especially if you can’t keep up. Filing for bankruptcy could be an option that can help you get rid of your credit card debt, including your judgment. Yet, it may not be your only one. In addition to your debts, you should also think about your long-term plans to make sure you can still pay for all your financial obligations and stay out of debt.

Unfortunately, many people learn that a creditor has sued them when their wages are garnished or, like you in your case, their bank account is levied. At this point, you have limited options to deal with the judgment entered against you. One of your options is to contest the judgment and ask a judge to set it aside. This is usually very difficult to do because you would have to prove in court that the creditor violated federal or state laws while collecting the debt or during the lawsuit process. And if you are just hearing about it, chances are that you don’t have documentation in order to move forward.

Another option is to negotiate a deal with the creditor to settle the debt for less than what you owe. Since the creditor is already collecting money from you, you don’t have a lot of leverage. You could offer them a lump sum and ask for reduced monthly payments. If you were to get a deal with them, make sure you get it in writing. Your third option circles back to bankruptcy.

Bankruptcy is the right choice in some circumstances. It’s a big step and it can be costly, but for some people, it is a chance to start again. I’ll suggest that before you make a decision on your own, be sure to talk to a nonprofit credit counselor. Your counselor will review your financial situation in depth, including your income, expenses, and debts, and give you the information you need to help you make the right decision. They can help you explore what additional options beside bankruptcy you may have. Most importantly, they can help you create a budget to help you plan for the future to pay your debts and stay out of debt. You can talk to nonprofit credit counselor online or over the phone today. Stay strong. Good luck.

Sincerely,

Bruce McClary, Vice President of Communications

Bruce McClary is the Vice President of Communications for the National Foundation for Credit Counseling® (NFCC®). Based in Washington, D.C., he provides marketing and media relations support for the NFCC and its member agencies serving all 50 states and Puerto Rico. Bruce is considered a subject matter expert and interfaces with the national media, serving as a primary representative for the organization. He has been a featured financial expert for the nation’s top news outlets, including USA Today, MSNBC, NBC News, The New York Times, the Wall Street Journal, CNN, MarketWatch, Fox Business, and hundreds of local media outlets from coast to coast.

If you have a question about your own specific financial situation, don’t hesitate to submit your question to our experts today! If you would like a thorough review of your personal financial situation, contact one of our nonprofit credit counseling agencies today!
*Some questions have been shortened and/or altered for publication purposes while others have been published as is.

The post #AskanExpert: Should I File for Bankruptcy? appeared first on NFCC.

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Creditors Response to COVID-19, Coronavirus Pandemic

March 18, 2020CreditBy toptierfinancial

Here is a list of the top creditors and their offerings during the Coronavirus pandemic: 

Bank of America

https://about.bankofamerica.com/promo/assistance/latest-updates-from-bank-of-america-coronavirus

As the economic situation evolves and you continue to monitor your personal finances, Better Money Habits has information and know-how that can help you make more informed decisions.

For questions or advice, we’re here for you. Visit a financial center to meet with a specialist, call your Financial Advisor or Contact us.

Chase

https://www.chase.com/digital/resources/coronavirus

If you need help…

… with your accounts or payments, please call us at the number on the back of your credit or debit card, or on your monthly statement.

Capital One

https://www.capitalone.com/coronavirus/

We also understand that there may be instances where customers find themselves facing financial difficulties. Capital One is here to help, and we encourage customers who may be impacted or need assistance to reach out to discuss and find a solution for you.

Should you find yourself in need of assistance, please contact us.

Wells Fargo

https://www.wellsfargo.com/jump/enterprise/coronavirus-response

Wells Fargo is committed to helping customers experiencing hardships, including from the COVID-19. If you’re in need of assistance, call us at 1-800-TO-WELLS (1-800-869-3557) to discuss options available for your consumer lending, small business, and deposit products.

Citi

https://online.citi.com/US/JRS/pands/detail.do?ID=covid19

Should you be impacted by COVID-19 and need our support, we’re here to help. Effective Monday, March 9, 2020 for an initial thirty days, contact us for assistance with:

For Retail Bank Customers: Fee waivers on monthly service fees; waived penalties for early CD withdrawal.
For Retail Bank Small Business Customers: Fee waivers on monthly service fees and remote deposit capture; waived penalties for early CD withdrawal; Bankers available after hours and on weekends for support.

In addition, we have always on assistance programs, including:

For eligible Credit Card Customers: Credit line increases and collection forbearance programs.
For eligible Mortgage Customers: A range of hardship programs through our service provider, Cenlar FSB. Please contact them at 855-839-6253 (M-F 8:30am – 8pm ET, Sat 8:30am – 5pm ET Monday to Friday 8:30am to 8pm ET, Saturday 8:30am to 5pm ET).

Discover

https://www.discover.com/

If you have been impacted by COVID-19, our team is here to help.

Contact us any time online, by mobile app or phone.

 

*List will be updated as we have more information.

 

The post Creditors Response to COVID-19, Coronavirus Pandemic appeared first on NFCC.

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How to Get Cash From A Credit Card

January 1, 2020CreditBy toptierfinancial

If you don’t have any cash on you, walking by an ATM without enough money in your bank account to cover a withdrawal can be frustrating

Many credit cards, however, can be used to withdraw cash from an ATM, whether it’s your bank or not. Just like that, you can have some money in your pocket.

But don’t jump up to the first ATM you see and take out some cash with your credit card just yet. Called cash advances, these withdrawals are actually you borrowing cash on your credit card and must be repaid — usually with high fees and interest rates.

Table of Contents:

How To Get A Cash Advance From a Credit Card
Is a Cash Advance Bad for Your Credit?
How To Avoid Some Cash Advance Fees

How To Get A Cash Advance From A Credit Card

You first need to check that your credit card will work in an ATM.

Either call your credit card company or check the cardholder agreement that came with your card.

Look for the sections on “Cash Advance APR” and “Cash Advance Fee,” which is listed with dollar figures or percentages charged are a sign that your card can be used at an ATM.

Your credit card statement may list a cash advance credit line or cash advance credit limit, which is the maximum amount of cash you can take out. The credit limit for cash advances is usually smaller than your credit limit for regular purchases.

To use your credit card at an ATM, you’ll need to find or set the PIN that’s tied to your credit card. You may have gotten it when the card came in the mail. You may have to request it from the credit card issuer by logging into your account online or calling the phone number on the back of the card. It might take seven to 10 days to set up the PIN.

You may get charged a fee for using an ATM that is outside the network linked to the credit card. Check with your credit card provider or your bank to find out how much it is and if you can avoid it.

Is a Cash Advance From a Credit Card Bad?
Short-Term Problems of Cash Advances

Fees are the first thing you’ll pay on a cash advance. They’re usually based on the amount of cash you borrow, such as $10 or 5 percent of the amount, whichever is greater. That equates to a $10 fee for borrowing up to $200, or 5 percent of the amount borrowed if it’s more than $200.

Immediate interest charges are another reason to avoid cash advances. They don’t have grace periods — as your normal credit card purchases do for about a month— and the credit card company will start charging you interest on a cash advance as soon as you borrow the cash.

Cash advances have high APRs that are much higher than normal purchases. Expect to pay 25 percent interest on a cash advance, again, without a grace period.

Long-Term Problems of Cash Advances

High interest rates can turn into long-term problems if you don’t pay the cash advance off soon, but there are also other problems with cash advances that can follow you for years.

The first is that your credit card company may flag you as a risky borrower. Creditors consider people who use cash advances as being desperate for money, especially if they do a few of them.

Such risky behavior with your money can lead to you being unable to get higher lines of credit or good terms with the bank that gave you the cash advance. Your credit card’s interest rate could rise or your account closed.

A second long-term problem is that cash advances add to your credit card debt and is shown on your credit reports. If you already have high balances on your credit cards when compared to your total available credit, a cash advance can lower it more.

The more credit card debt you have compared to your total available credit — called credit utilization — the more it can hurt your credit scores. If you already have high balances on your credit cards, a cash advance can make raise your credit utilization rate and make you a bigger risk to creditors.

The higher the credit utilization rate, the greater the risk that you’ll default on a credit account within the next two years, according to FICO, a credit scoring company.

“Amounts owed” make up 30 percent of a credit score, and using more than 20 percent of the credit available to you is considered risky.

How to Avoid Some Cash Advance Fees

Interest charges on cash advances are unavoidable, but some fees can be eliminated through a few options.

If you have a credit card from Discover, it allows up to $120 to be borrowed in cash at checkout when you’re buying something. The money is categorized as a purchase instead of a cash advance, so you’ll avoid bank and transaction fees.

Your regular APR applies to the cash you get and there are no hidden fees, according to Discover. Called “Cash Over,” the transactions are limited to $120 every 24 hours with no monthly limit, though your local store may have allow less money to be cashed out over the purchase amount and may limit the number of times you can withdraw cash.

If you’re having difficulty finding an ATM linked to your bank so you can avoid ATM fees for withdrawing cash from your checking account through a machine that isn’t part of your bank’s network, find a bank that covers ATM fees at other banks. Some brokerage accounts offer free ATM use for customers, so setting up a brokerage account may be worthwhile.

If you’re really strapped for money, consider a balance transfer credit card. It can allow you to transfer a credit card balance and then pay it off without any interest charges for a year or more.

However, there are drawbacks to the cards, and fewer credit card companies are offering them. Be aware of the terms before switching to one.

If you decide to get a cash advance through your credit card, try to pay it back as soon as you can. Interest will start accruing immediately, and having debt get out of control will only add to your cash-flow problems.

The post How to Get Cash From A Credit Card appeared first on Better Credit Blog | Credit Help For Bad Credit.

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