Consumer Tips

Wise consumer decisions are difficult to make without the right information. Although it seems that free consumer advice is available everywhere, we know that objective, impartial advice is hard to come by.  

In this section, we offer consumer tips directly from experienced Certified Consumer Credit Counselors. Because personal finance includes an array of subjects, we've included universally helpful advice like tips on budgeting and how to read your credit report. Click on the links below to find the tips you need to make wise consumer choices.  If there is an interesting topic we've overlooked, please, let us know.  

Light at End of Tunnel for Defaulted Student Loan Borrowers

Reverse Mortgages: What You Need to Know
Your Guide to Credit Reports

When Late Fees Happen to Good People

How to Read Your Credit Reports
Your card has been DECLINED

"No Interest" Sales
Pay Day Loans Simply Don't Pay
Identity Safety in the Workplace

Common Cost Cutters

Common Cost Cutters

For Home

For Vehicles

For Food Expenses

For Clothing Expenses

Home

• For a cooler house in summer, use your microwave, range top or outside grill instead of your oven

• Use the "no heat" drying cycle on your dish washer

• Keep your water heater thermostat under 120°

• Take quick showers or fill your tub ¼ full for baths

• Maintain and change your AC & furnace filters often

• Adjust the thermostat when no one is home & close the drapes when possible

• When possible, use florescent rather than incandescent lighting

• Close the damper on your fireplace when not in use

Auto

• Check and maintain fluids, tire pressure and oil often because it saves on repairs

• Avoid fast starts & stops to save on gas & tire wear

• Drive the speed limit to avoid tickets & save gas

• Consolidate trips, share rides or ride the bus when possible

• Take basic auto mechanics & maintenance class

• Take defensive driving class to lower insurance rates

• Compare insurance company rates – be neither over nor under insured

Food

• Study ads & plan weekly menus around specials

• Shop once with a complete list made from menus & household inventory

• Shop once a week & limit your time for shopping

• Shop alone, if possible & NEVER when you are hungry

• Take advantage of the lower cost of generic or store brand goods

• Shop in a familiar store to cut down on impulse purchases & save time

• Use coupons but only for items you would normally buy

• Compare prices of different size products by noting the unit prices

• When buying large quantities, divide & freeze remainder

• Buy fruit & vegetables that are in season

• Shop at day-old bakeries for bread products

• Let one or two all-purpose cleaners take the place of many

• Eat out less often & have cocktails or desserts at home

• When eating out, order water with your meal

• Take "brown bag" to work & use facilities like microwave & refrigerator

Clothing

• Shop at discount stores or resale shops

• Shop sales but don’t buy just because it’s cheap

• Sew and mend garments

• Buy conservative clothes that will stay in style

• Avoid garments that require dry cleaning or special care

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Your money going

down the drain?  

Look out for these Costly Credit Practices:

Multiple interest rates: Creditors charge different interest rates for different services like purchases, cash advances, and money transfers.    For consumers that don’t keep a close eye on which balances are being paid first, the interest can quickly become the bulk of the debt.

$34 Late Fees: Late fees now average $34 per month.  Consumers should look out for "cut off" times set by creditors. These terms set a specific hour during the day the payment must be received making it easier to pay late.

$31 Over-the-limit Fees: Over-the-limit fees now average $31.

3% Cash Advances & Balance Transfers:  Creditors generally charge 3% of the cash advance or balance transferred.                              - USAToday.com

Up 31% Penalty Rates: Your interest can soar up to 31% if you're as much as one day late making a payment.

Up 32% Universal Default: Even when you pay your bill on time, some creditors reserve the right to hike your rate up to 32% for paying late on some other creditor's bill.

Percentages from the Government Accountability Office: www.gao.gov

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When Late Fees Happen to Good People

If you use credit, you’re aware that there are consequences for paying late.  Creditors include small-print cautionary clauses in their terms and conditions about late payment fees and reserve the right to raise your interest rate for even one missed payment.

Just last month Jeanne Sahadi, a senior writer for CNNMoney.com pointed out that an estimated 70% of the credit card industry’s revenue comes from interest and penalties.  Sometimes, consumers with impeccable credit have to battle erroneous late charges due to creditor mistakes. These discrepancies are difficult to resolve because there are limited ways the consumer can prove when he or she sent their payment. Even worse, if a late payment is reported on your credit report it will have a detrimental effect on your score.

If you believe you have been charged an unfair fee, follow these steps to disputing unfair charges. 

1. Call

Call your creditor and explain the situation to a manager stressing the fact that you believe you paid on time. Base the explanation on your previous payment history.  

2. Write

You can also pursue the matter in writing. Send a letter explaining the situation and describe the action you would like the creditor to take. Request a response in 10 days and keep a copy of that letter for your records.

3. Seek Help

You can file a complaint with the Consumer Protection department of the Texas Attorney General's Office.  

Address:

Office of the Attorney General

Consumer Protection Division

PO Box 12548

Austin, Texas 78711-2548

Telephone: 1-800-538-1579

Online: www.oag.state.tx.us

Recent complaints from the Federal Trade Commission and other consumer advocates about deceptive or abusive credit industry practices have resulted in Congressional hearings. Creditors have begun to do away with clauses such as “universal default” and “any time, for any reason” charges (The Financial Solution, April 2007 Issue).

A push for clearer disclosure of terms and conditions is also being felt in Washington.  The Financial Solution will keep you posted on the changes in consumer credit practices and ways you can combat unfair fees.

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Tips on Budgeting

Keeping it Balanced

1. Set your financial goals.  Be specific and realistic when doing so.

2. Determine your monthly take home pay.  This includes all wages, pensions, subsidies and dependable child support.

3. Track your expenses so you'll know where your money is going.  Trim any expenses that seem too high.

4. Make a written spending plan.  Or click here for one you can print and make your own.

5. Live within your spending plan.  It shouldn't just look good, it should feel good.  Make adjustments as needed to make it comfortable for you.

6. Enroll in a free Money Management workshop and learn how to make the most of your money.  

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Your Guide to Credit Reports

According to a recent study by the Consumer Federation of America, a consumer with an average credit score of 700 would reduce finance charges by $76 each year by increasing his score 30 points.  Your credit report reflects the history of your borrowing and payment practices for a seven-to-ten-year period.  A credit report contains information about your credit and loan history and is used extensively by potential lenders to evaluate your creditworthiness.  When applying for a loan, lenders examine your credit history to assess the likelihood that you will repay the loan.

How you handle credit today will affect your access to credit later.  Whether you’re opening a credit card, applying for a loan, purchasing a home or car, renting an apartment or signing up for utilities, providers will pull your credit report.

Know your rights.

Through the federal Fair Credit Reporting Act (FCRA) every consumer is entitled to a free copy of his or her credit report once every 12 months from each of the three major credit bureaus.   Read each report carefully as there may be discrepancies between the three credit bureaus.  This is because creditors do not necessarily report the information to all three and they don’t always share information.

Order your free credit report at www.annualcreditreport.com or call 877-322-8228.  You can also send a request by mail to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, Georgia 30348-5281.

If errors are found, contact the bureaus immediately so that they can begin to investigate and correct the mistake.

You may dispute the error in writing or online.  Print out the dispute form here.

Take Action to Improve Your Score

Building A Better Credit Portfolio is offered every 4th Saturday of the month for free! Call 1-800-410-2227to make your reservation or register online.  For a personalized session regarding your credit report and information on how to improve your credit score, make an appointment with a Certified Consumer Credit Counselor in your community by calling 1-800-410-2227.

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These 7 signs indicate it's time to stop buying on credit:

1. Your borrowing to meet regular expenses, such as food and utility bills.

2. Your borrowing to buy items with a short time span, such as clothes or children's toys (the merchandise should outlast the payment period).

3. You are being dunned for late payment.

4. You have no cash reserves.

5. Your revolving charge accounts are never paid up.

6. You continually send creditors less than is actually due.

7. You feel the need to take out a debt consolidation loan.

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Your Card has been Declined...

"I have spent thousands of dollars with your company, and paid in full each month; however, three days ago, while checking my account online, I noticed that you have decreased my credit limit from $8,100 to a mere $400…”

Imagine this happening to you.  Perhaps it already has.  Before you can finish mentally linking the events that will take place after your credit company drastically reduces your credit limit, (this will push me over the limit and I will incur fees; my other creditors will hike my interest rate; this will affect my credit report!) your credit score has plummeted. 

“…this is unacceptable” continued the writer of the above letter as she goes on to list the main reasons for her complaint: “It was automatic, they failed to contact me in any way before or even after” and “they failed to look at my credit history with them and consider the possible circumstances”.  This consumer, who up until a few minutes before that letter held a bank dividend account, posted her experience on a popular online credit forum CardRatings.com.  More postings regarding other creditors appeared over the next few days echoing her experience: “This also happened to me.” 

While it’s typical of creditors to review card member accounts on a regular basis and make changes in interest rates and credit lines due to factors like payment history, out-of-pattern spending or credit report changes, Curtis Arnold, CEO of CardRatings.com says major creditors are “taking steps to protect themselves” in the midst of the subprime lending fallout by lowering credit limits of existing cardholders, “including some prime customers” (CNNMoney, Aug. 23, 2007).

John Ulzheimer, a recognized credit expert agrees with Arnold, explaining the recent credit line decreases as “a reaction to what creditors perceive as increased risk of defaults.” He compares it to the aftermath of Hurricane Katrina, when thousands of people were relying on credit cards for food and necessities; credit-limit decreases were also used to mitigate risks (SmartMoney, July 26, 2007). This practice, called “chasing the balance”, in which creditors not only lower a person’s credit limit to match their current balance, but lower the limit yet again every time the consumer makes a payment, leaves debtors at a high utilization percent. This affects their FICO score drastically, as it has been estimated that consumers lose 1 point for every percent of their credit limit in use (Rex Johnson, 6 Ways to Kill Your Credit Score).  So, if someone’s total credit limit is $10,000 and their outstanding balance is $3,000 (30%), their score would be 30 points lower than if they carried a $0 balance.  Furthermore, if an unexpected decrease puts the consumer above their credit limit, they’ll have to pay over-the-limit fees too. Take for example, an anonymous credit card company customer, who claims that the company decreased his credit line to $150 over his balance, citing ‘Serious Delinquency and Public Record or Collection Files”.  He argues that there are no late payments on his account and that all derogatory information occurred before the account was opened. Nevertheless, this consumer is now faced with his bill for the charged amount, an over-the-limit fee, and a weak credit score for reaching 100% credit utilization.

Until now, the ousting of credit line decreases has been quieted by screaming headlines on sub-prime lending and housing market crashes. However, consumers should remain on the lookout for unexpected credit line decreases that can potentially hurt their credit.  Here’s how to keep up on these threats:

1. Read Your Mail

Although creditors can make changes to your credit limits faster than they can notify you about them, they are still required to send you some type of notification. Make sure you’re reading any literature coming from your creditors. Also, monitoring your accounts online can make you aware of credit line decreases or other changes faster, empowering you to do something about it before it’s too late.

2. Know the Rules

Familiarize yourself with the guidelines creditors use in determining “risk”.  Ulzheimer says, “that could be anything from high credit utilization to late payments, to increased credit inquiries.”  Remember, anything that could result in a credit-score decrease puts you at risk for facing a credit-limit decrease as well.  So, attend a workshop such as Building a Better Credit Portfolio that teaches you the basics in credit reporting and includes a breakdown of how your credit score is determined.

3. Keep Low Balances

Always try to keep low balances on your credit cards.  This helps with credit utilization percent and decreases the chances of incurring over-the-limit fees in the event that you get hit with an unexpected credit line decrease.

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Pay Day Loans Simply Don’t Pay

A year-end study by the Center for Responsible Lending and other consumer advocacy groups showed that U.S consumers pay as much as $4.2 billion annually in steep fees charged by payday loans.

An article by Market Watch’s Andrea Coombes put it quite simply: “You don’t have to know much math to understand that taking out a loan for $325 and then having to repay $793 to clear the books is a losing proposition.”

But despite the clear math, some financially distressed consumers continually turn to payday loans. Two-thirds of them are taking 12 or more payday loans out a year (Personal Finance Daily Dec.1, 2006). Coombes says that since payday loans are designed to be paid back in two weeks, the lump sum required at the next payday is impossible for some borrowers. In most cases, consumers end up renewing the loan in order to have more time to pay but end up paying hundreds of dollars more on interest than what they originally borrowed.

Although the Personal Finance article advises against payday loans, the fact remains that even for those consumers that get caught up in the payday loan cycle, the terms of the agreement are crystal clear. The issue isn’t hidden fees or poor mathematical skills on the part of the consumer. It’s that often, consumers with less than perfect credit believe that they simply won’t qualify for other lenders. However, the director of consumer protection for the Consumer Federation of America, Jean Ann Fox, says that “only 6% of payday loan customers say they have no other alternative for getting credit”.

Consumers who are turning to payday loans and paying 400% interest may find that other less costly alternatives exist. Fox points to mainstream financial institutions like credit unions and banks to provide better financial alternatives. In addition, pay advances from employers or loans from family members are also avenues that financially distressed consumers may try.  While taking these alternatives may be more complicated than taking a “quick and easy” payday loan by writing a check and walking out the door with cash, it may help save you from the cycle of debt.

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Identity Safety in the Workplace

At work, every morning has its pace. Before distributing “good mornings” left and right, you arrive at your desk and put your purse and keys down, in the same place where you put them every other morning. There’s not much thought that goes into these small activities, because you feel safe in your work environment. However, an office is a melting pot of all kinds of people. Placing wallets or bags in the same place everyday makes them easy pickings for a not-so honest co-worker. Despite numerous consumer alerts about identity theft while shopping on line, or even in person, people are not careful enough in the workplace.

Late in 2006, the CEO of a well known computer services company was accused of using employees’ personal information to apply for loans and credit cards. If convicted, he’ll face up to 125 years in jail. Another case ousted a man stealing co-workers’ information to create fraudulent accounts. Then there’s the misconception that what you do on your computer at work is private.

Paying bills on-line during lunch or checking your bank account on company time can leave you open for untrustworthy co-workers to gain financial information you wouldn’t otherwise share. Although it seems trivial, forcing yourself to press the keys Ctrl + Alt + Delete on your keyboard each time you step away from the computer (even if it is for a few minutes) can save you from being an ID theft victim because it will not allow anyone to access your computer. When you’re back, simply enter your password, and you can pick up where you left off. In addition, clear your browsing history and never save any passwords for financial accounts on your work PC. Faxing or copying personal information using work equipment is out of the question. It’s too easy to get distracted and leave a paper with identifying information lying around.

It’s important to trust your neighbor, but it’s more important to protect your good name and your credit.

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Pay No Interest 'til.....2012......2015...

Look familiar? Enticing images of plasma TV's, leather couches or whole living room sets and shiny new vehicles with bright "NO INTEREST" signs can lure consumers into paying more in the long run.  Here's what our professionals have to say about "No Interest" sales:

“No interest doesn’t mean no payments”

Albert Guadiano, C.C.C.C.

“These types of promotions only work for the consumer IF he or she pays off the total purchase amount within the promotional period.  The consumer should divide the total purchase amount by the number of months the promotion runs and make payments that will pay the debt off in full before the promotional period expires.  That is 'no interest'."

“Factor in the transaction fee"

Valeria Wilson, Education Specialist, C.C.C.C.

“Most of these type offers have a transaction fee of 3+% of the amount charged or not less than $75.00. For example, when a person charges in February and the 0% interest is through August.  The charge IS accruing interest during this time.  IF the customer doesn’t pay the balance off by August 31^st, he now owes all the interest that accrued from February through August along with the amount he charged and the transaction fee."

“Stay Current”

Lucy Vasquez, C.C.C.C.

“ If the consumer misses a monthly payment, that may violate the sale terms and will end the promotion, then interest will begin to incur for the consumer.  All in all it could be a money saver if they stay current and pay it all before the deadline.”

George Merkle, President & CEO, CCCSSA

“If you are late on even one payment on some of these offers, often the interest rate goes to 18+% and immediately that whole balance becomes due.”

“Posting Problems"

Norma Kunze, C.C.C.C.

“If the final payment posts after the “cut-off time” (eg. Cutoff is 2 P.M. and payment posts at 3:00 P.M.) the accrued interest, from DAY ONE is usually added to the balance, this could be hundreds of dollars!”

“Ask Questions"

Rita Meza, C.C.C.C.

"If the consumer will be making payments, they need to ask what the terms will be if they miss a payment and if they don’t miss, will the interest be added at any specific time?"

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Light at End of Tunnel for
 Defaulted Student Loan Borrowers

Consumer Credit Counseling Service of Greater San Antonio now provides Student Loan Repayment Counseling.  This service provides a free initial counseling session in which a Certified Consumer Credit Counselor will provide an overview of the situation and point you in the right direction. For a one-time $70.00 fee, a Certified Consumer Credit Counselor will assist the client in sifting through information and resourcesthat will help get the borrower back on track with repaying your student loan while learning to avoid predatory offers and dishonest marketing ploys. 

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How to Read Your Credit Report

In April, our newsletter featured the importance of financial literacy.  We talked about the benefits of knowing your rights when it comes to credit reporting and how to access a truly free credit report.  This issue informs you of what is included in your report:

• Identity Information – Including Social Security Number, address and date of birth. This information is used to ensure the credit report information is accurate and matched with the right person.  It also can help detect and prevent identity fraud

• Employment history – Where you’ve worked and for how long.

• Credit history – account records with creditors.

• Inquiries- a list of potential lenders that have requested your credit report and when.

• Public financial records- including collections accounts, bankruptcies and late child support payments.

Your Credit Score

Most lenders use a mathematical formula to generate a “score” to help them determine if you are a good credit risk.  This is called a “credit score” and the most frequently used version is the FICO score created by Fair Isaac and Company.  A FICO score is a snapshot of your credit risk at a particular point in time.  FICO scores range between 300 and 850 with higher values being preferred because it indicates to lenders you are a lower risk. 

Your credit score is determined by five factors: payment history, outstanding debt, length of credit history, recent inquiries and types of credit in use. Each of these factors is weighted differently to determine your score:

• Payment history (35%) – Build up a consistent payment history.  Late payments, judgments, bankruptcy and tax liens can lower your score.

• Outstanding debt or Amounts Owed (30%) – Maxing out your credit cards can lower your score, so keep balances well under your credit limit.

• Length of credit history (15%) –Long relationships with banks or credit unions based on loans have a positive influence on your score.

• Recent inquiries or new credit (10%) – Too many inquiries for credit within a short period of time can lower your score because it suggests you are frantic for credit and/or may soon be overexposed.

• Types of credit in use- (10%)- Too many open lines of credit (i.e. credit cards, retail accounts, installment loans, mortgage accounts) can lower your score. Loans from finance companies generally lower your score, especially when there are no other types of credit reported.
   

The interest rates you are charged on loans may be determined by your FICO score. Most often, the higher your score the better chance you have of getting a lower rate. FICO scores also can be used to determine your homeowner and auto insurance premiums and whether or not you qualify for a loan.

More information on How to Build a Better Credit Portfolio.  

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Your Credit Capacity

• The 20 % figure is based on an "average" family with "average" expenses.  It does not take into account any major emergencies.

Consumer Credit Laws

Click here for "Secrets of Bill Collectors"' in PDF format

Click here for "Fair Debt Collection Practices Act in PDF format

Truth In Lending Act - requires creditor to provide the consumer with accurate and complete credit costs and terms.

Equal Credit Opportunity Act (ECOA) - Prohibits a creditor from discriminating against a consumer on the basis of age, sex, or marital status, reliance on income from a public assistance program, and race, color, religion, or national origin.

Fair Credit Reporting Act (FCRA) - The purpose of this act is to insure that information contained in a credit report is accurate and that it will be used in a confidential manner. Consumers have a right to dispute information that may be derogatory or erroneous. Inaccurate information must be corrected or deleted, and a consumer explanation statement of 100 words or less can also be included in the report. A credit bureau must also delete adverse information which is more than seven years old and information on bankruptcy which is more than ten years old.  

The Fair and Accurate Credit Transactions Act (FACTA) - The FACT Act was signed into law at the end of 2003.  This Act amends the Fair Credit Reporting Act and gives every consumer the right to a free credit report every year from each of the three major credit bureaus: Equifax, Experian and TransUnion.  To get your free credit report, go to www.annualcreditreport.com or call 877-322-8228.

The Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act (EFTA) - These Acts can help consumers resolve mistakes on credit billing and electronic transfer account statements.  The Acts outline procedures for correcting several types of errors including unauthorized charges and the failure to properly reflect payments.

Fair Debt Collection Pratices Act (FDCPA) - A third party collector is prohibited from:

• Using abusive language to coerce a consumer into making payment,
• Calling at unreasonable hours (before 8:00 AM and after 9:00 PM) or making excessive calls
• Threatening to notify the employer or friends that the consumer has not paid his/her bills
• Using false pretenses to gain entry to the home with the intent to identify or take something of value
• Attempting to collect more than what is owed
• Sending the consumer misleading letters that may appear to be from a government agency or a court of law

Click here for more details of the Fair Debt Collection Practices Act in PDF format.

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Reverse Mortgages: What You Need to Know

"I realized that I had way overspent my children's inheritance," the 74-year-old said. "I counted some chickens before they hatched. And they did not hatch."

Read the entire story of Macleta Clark's experience and what our Certified Consumer Credit Counselor, Diana Hamby knows about Reverse Mortgages, on The San Antonio Express News.

Reverse Mortgage Counseling Session: $125

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How Much House Can You Afford?

A lender or real estate broker is primarily concerned just with your ability to make that mortgage payment, but YOU must look at the "bigger picture" and carefully consider all  your other expenses.  Be sure to include your periodic expenses such as clothing, car repairs, medical expenses, school supplies and gifts.  Money needs to be set aside monthly for these expenses too.  

Also, try to anticipate any changed in your future expenses.  Do you foresee purchasing a new car?  Will your insurance payments increase? Are more children in your future? Are your children planning to attend college? These circumstances may have a bearing on whether or not you can afford the mortgage payment in the future.  Do not commit to payments so large that your home becomes a financial burden instead of a joy.

Compare your current expenses and proposed future expenses to these national averages:

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