Should you apply for a joint credit card account with your fiancé, spouse, parent,

teenager, college kid or roommate? It’s a tough question – especially of one of you has a rocky credit history. But

there are advantages to joint credit cards or adding an authorized

user to your existing credit account under certain conditions.

Joint account holders and authorized users: What’s the difference?

The difference between a joint account holder and an authorized user is that the

joint account holder is legally liable for paying the credit card balance, and the authorized user can use the card

but isn’t liable for making payments.

Benefits of joint credit accounts and authorized users

As long as you trust the other person on your joint credit card account or the

person you add as an authorized user, it can be a good way to share expenses. But the main benefit of a joint

credit account is that if one person has very good credit and the other does not, the

href="http://www.creditcardcolumn.com/bad-credit-credit-cards/">person with bad credit can improve his or her

credit rating and get access to lower interest rates by sharing an account with

href="http://www.creditcardcolumn.com/good-credit-credit-cards/">someone with a good credit score.

However, sharing your account purely for the sake of letting someone with bad

credit fool the credit bureaus is controversial and may not work.

Credit card “piggybacking”

The practice of adding someone who needs credit repair to an existing credit card

account is an old technique, and one that isn’t as effective as it used to be before the credit bureaus caught on

to it.

The way credit card piggybacking works to improve a bad credit rating is that

someone who has an excellent credit score adds you to a well-managed credit card account – preferably one that’s

been open for years – as an authorized user. The card holder’s prompt payment history then shows up on your credit

report and your credit improves as a result.

However, not all credit card companies will report authorized user accounts to the

credit bureaus – in part because the practice has been abused by so many people with bad credit. The FICO credit

scoring algorithm was tweaked in 2008 to help predict authorized user accounts that had been created for the

purpose of “faking” a good credit history.

Drawbacks of joint credit accounts and authorized users

The biggest drawback of sharing a credit card account is that one party might abuse

it and damage the credit scores of both. And if the relationship goes south, it’s even harder to manage the credit

account in the event of a breakup or divorce. With a joint credit account or one in which you’re the main

cardholder and the other person is an authorized user, you could end up paying for expensive items you don’t even

own.

The safer way to have a joint credit card account or add an authorized

user

If one person on the account has bad credit and was added for the sake of credit

repair, the best thing that cardholder can do is to cut up the card. That way there’s no temptation, no splurges –

and as long as the more responsible cardholder charges little and makes timely payments, that credit score will

improve.

If you’re a parent adding a teenager or college student as an authorized user, you

can set a low limit with the credit card company for your child’s charges.

It’s wisest for each person to have his or her own credit card account. But if you

do open a joint account, be sure to talk about the risks first.

Credit card fraudsters and scammers are everywhere, it seems. Sometimes they skim your card number at a place where you frequently shop or dine. Other times, you’re not sure how they got your number and were able to use it – you just know that someone, somehow, got your credit card number and expiration date (or your debit card number and PIN) and used your account to buy airline tickets, electronics or other purchases. That’s credit card fraud.

Sometimes the crooks try to get your credit card number a little more directly – through a brazen scam. Some examples:

• Someone pretending to collect money for a legitimate charity calls and requests a donation via your credit card.
• Scammers pretending to be roofers, yard workers or other contractors show up at your door, give you a temptingly low quote for work you need done anyway, and ask for a deposit before they begin the work. Then you never see them again.
• A con man (or woman) calls, claiming to be with the utility company, and says that your account is past due and your service will be disconnected unless you pay promptly…with your credit card. They helpfully offer to take your card information so you can pay right away and avoid interruption of service.

Some of these scammers can be pretty convincing, and if someone skims your credit or debit card number, you might not know until they’ve done a lot of damage. So how do you protect yourself against credit card fraud and credit card scams?

Consumer protection against credit card fraud

The good news is that credit cards offer their customers a pretty good measure of protection. Federal law doesn’t hold consumers liable for anything over $50 when your credit card is used without your authorization.

When there’s unusual activity on your credit card, most credit card companies will call you to authorize the last several transactions. Even if the credit card company doesn’t call to confirm whether suspicious transactions are authorized by you, as long as you report the activity and file a claim as soon as you find out about it, the credit card provider won’t hold you liable.

How to avoid credit card scams and fraud

Still, who wants to be the victim of any kind of credit card scam or fraud? Use these tips to protect yourself and your credit cards, debit cards and bank accounts from the bad guys:

• If someone calls claiming to be from the utility company, whether your account is current or not, tell the caller that you’ll call back shortly to make the payment. Then call the company’s main phone number to check your account status and pay if need be. Don’t use any number the caller tells you to use.
• Consider using one credit card or debit card for in-person charges and another one for online purchases. That helps you narrow down the source of any credit card fraud that may occur.
• For the credit and debit cards that you use most often, check your account balances and transaction history frequently to make sure no unauthorized activity has occurred.
• And if you do use a debit card often, use it as a credit card (without having to enter the PIN) whenever possible.

Credit card fraud and scams are a nuisance and an outrage. Luckily, they’re also pretty easy to avoid and fix if your card number is stolen and used without your permission. And if you are diligent about monitoring your accounts, the most a scammer will cost you is a little time and aggravation.

If you’re reading this, you probably have more credit card debt than you’d like to

have. Don’t get us wrong – credit cards are a great tool for building your credit score so you can get better

interest rates on big things like mortgages and car loans, and many

potential employers will even check your credit score before they consider hiring you.

But if you’re maxed out on one or more credit cards or too close to your credit

limit, or if the minimum payments aren’t so minimal anymore, you need to take action to pay down your credit card debt.

Follow these five tips to pay down your credit card balances faster and improve your credit score:

1. Put the cards away and stop using them. It’s all too easy to use

a credit card for an impulse buy when it’s right there in your wallet. So put it in a safe place at home while you

are working to pay down your credit card debt. No self-control needed!

2. Find creative ways to pay more than the minimum. Maybe you found

something on sale at the mall that would have been an impulse buy for sure, but you had the self-control not to buy

it. Or maybe you’ve started packing your own lunch instead of buying fast food. Put the money you saved toward

paying down your credit card balance.

3. Sell your stuff. Are you unable to make more than the minimum

credit card payment? No problem. Declutter your house and have a garage sale or eBay-selling blitz to make some

cash off the things you no longer love, use or need. Then use the profits to pay down your credit card balance.

4. Find a source of side money. Tutor, babysit, take a part-time

job – whatever you can do to make extra cash will help you reduce your credit card balances as long as you use the side money to pay down your

credit accounts.

5. Make sure you know what’s due when. Many times, people make the

minimum payment because they forgot their credit card payment’s due date, spent the money elsewhere, and didn’t

save enough cash for a bigger payment. Put all your credit card bill due dates on the calendar you use the most at

the beginning of the month so you can plan your spending accordingly.

If you have more than one credit card with a high balance, which do you choose to

pay off first? You could use the “debt snowball” method and pay off the smallest balance first (while making

minimum payments on your other credit accounts on time each month), then apply that payment amount to the next

smallest credit card balance and so on. This is a good psychological trick to play on yourself, because having at

least one credit card paid off makes you feel better about your ability to pay down the other balances.

Or you could choose to pay down the credit card with the highest interest rate, or

perhaps the one with the highest utilization rate – the balance compared to the credit limit for that credit card

account. Increasing your available balance will increase your credit score.

Once you do pay down credit cards to a zero balance, you can cut up the card if you

don’t intend to use it – but do keep the account open, because credit accounts that have been open for a long time

are good for your credit score.

However you choose to go about paying down your credit cards, you’ll need plenty of

self-discipline and determination. But the rewards of having less credit card debt and a higher credit score are

well worth the work.

Sometimes it seems as though some of the things you can do to help your credit

rating are counterintuitive. For example, you might want to close a credit account that you know you’ll never use

again, but it’s better to keep it open with a zero balance because that’s good for your credit history as well as

your credit ratio (how much available credit you have vs. how much debt).

But what about a credit account that was charged off years ago – say a decade or

more – by the credit provider because of serious delinquency? Should you dispute ancient charged-off accounts to

remove them from your credit report, or leave them there to show how long you’ve been in the credit game?

A charged-off account is a bad thing no matter when it occurred in the course of

your credit history. That’s because it is a debt that the creditor decided was uncollectible – usually because it

was delinquent for 120 to 180 days.

Maybe you have turned over a new leaf since that account was closed by the

creditor, and the rest of your credit

history is stellar (or mostly stellar). In that case, even if removing that old charged-off debt means your

credit history will only go back 5 or 6 years, you should take steps to remove it. If your current credit habits

are still not the most responsible, then removing the old debt may not have much of an effect on your credit

score.

The Fair Credit Reporting Act (FCRA) allows negative items to remain on your credit

report for seven years from the first date of delinquency that resulted in the charge-off. But the FCRA also gives

you, the consumer, the right to dispute outdated information and ask that it be removed from your credit report if

it wasn’t taken off automatically after those seven years were up. And a charged-off credit card from 10 or 15

years ago certainly qualifies for initiating such a dispute with the credit bureau.

So for best results (and your best possible credit score), pay down your debts,

keep zero balance accounts open, and by all means dispute old charged-off credit accounts that should have been

removed years ago. If that’s the worst thing on your credit report, you might even see some noticeable improvement

in your credit score.

Finally, you might be wondering if you still owe that debt even if it has been

charged off by the creditor. The answer is yes – the charge-off didn’t erase the debt, it is just an accounting

procedure the creditor uses for tax purposes. In fact, the original creditor might either attempt to collect the

debt after the charge-off or assign it to a collection agency that will hound you day and night.

Not only that, but a fairly recent charge-off may also affect your credit score and

cause you to be denied when you apply for other credit cards. So

it’s certainly worth the effort to get in touch with the original creditor and make an attempt to pay that

charged-off account in full.

Debt management services ads you hear on the radio can be very tempting if you’re

behind on several bills. But not all debt management companies are created equal – and if you choose the wrong

company to handle your debt management program, you’ll end up worse off than if you handled your own debt

management.

Here’s what to look for (and what to run away from) in any credit counselor or debt

management plan you’re considering using.

Questions for Credit Counselors

The U.S. Federal Trade Commission (FTC) and some state Attorneys General have sued

several credit counseling companies in the last few years for defrauding or deceiving their customers. And other

such companies have gone out of business, leaving their customers in the lurch.

To avoid these problems and protect yourself, the FTC recommends that you ask these

questions when choosing a credit counselor or debt management plan:

• Do they offer any free information? Beware of companies that charge for information about the services they

  offer.

• Are they licensed to offer credit counseling in your state? Many states do require such a license, and this

  information offers an extra measure of how reputable the organization is.

• What kind of training or certification do the company’s credit counselors have and from which organization?
• What do they charge for their debt management services? (Beware of high hidden fees!)
• Can they give you a formal written agreement? Don’t enter into a debt management plan over the phone – get

  those agreements in writing and keep meticulous records of your correspondence with the credit counseling company

  after you’ve decided to work with them.

Even if the credit counseling or debt management organization answers your

questions to your satisfaction, you should still check them out with the Better

Business Bureau and your state’s Attorney General.

Using a Debt Management Plan

After your initial consultation with a credit counselor, you may be advised to

enter into a debt management plan. The way this works is that the credit counselor or their organization works out

a lighter payment schedule for you with your creditors. In lieu of making your usual payments directly to your

creditors, you deposit a certain amount of money each month to the credit counseling organization and they

href="http://www.creditcardcolumn.com/automatic-payments-for-credit-card-bills-a-good-idea/">pay your creditors

according to the schedule.

The FTC recommends that you stay vigilant when enrolled in a debt management plan.

Review your monthly statements to make sure your creditors are getting paid what they should.

Ultimately, because of the risk and cost of using a debt management plan, it’s

usually best to handle debt management on your own if possible. Contact your lenders directly and try to negotiate

lower interest rates or lower monthly minimum payments until your financial crisis passes. Do everything you can to

reduce your debt and protect your credit score – because after all, it’s your financial reputation and has a huge

impact on the major purchases you want or need to make.

And if you need advice with any part of the process, seek it from a government-

based or government-affiliated nonprofit organization. That’s the best way to play it safe and still get help with

debt management.

One of the biggest threats to your credit rating – not to mention your family’s

financial security – is the big, unexpected expense that you have to charge on your credit card and can’t pay back

quickly. Medical bills and emergency car repairs are just two examples of sudden expenses that can wreak havoc on

your finances. As the balance rises on your credit cards, so does the minimum payment. And if you’re unemployed or

unable to work because of a disability or medical condition, the situation will only get worse.

That’s why it’s so important to have an emergency fund in place. But if money is

tight and/or you’re not really all that disciplined when it comes to dealing with money, how can you talk (or

trick) yourself into saving money for your emergency fund?

Start small – as in “small change” and small bills

When you spend cash, bring the change home and put it in a jar instead of spending

it. Those quarters and dimes can add up and help a little when things get tight.

It’s also a good idea to have a little stash of smaller bills, such as ones and

fives, for those times when your child needs money for a school trip or class party (both of which tend to happen

when you’re out of cash) or you need to take a taxi.

Pay yourself before you pay bills (or shop)

If you’re a freelancer or don’t have a steady income, you should treat your savings

account deposit like a bill. Pay yourself first – any amount is better than nothing at all. And if you think you

can’t afford to save, you may be mistaken: Think about something you could do without, such as meals at fast food

restaurants or that weekly trip to the mall. And if you have a steady income that’s direct-deposited into your bank

account, consider having some portion of it automatically deposited into your savings account so you’re not even

tempted by it.

Use windfalls to pad your emergency fund

As I’m writing this blog post, it’s the very beginning of tax season. If you know

you’re getting a tax refund, allocate at least part of it to your emergency fund. Bonuses from work, cash gifts

from family or friends, or other financial windfalls are also good candidates for depositing into your emergency

fund.

How much of an emergency fund is enough?

Most financial experts agree that $1000 is the bare minimum for an emergency fund,

and three to six months of expenses is ideal. Some financial gurus recommend socking back an extra month’s worth of

expenses for each dependent.

That’s good advice, even if it is a little daunting. But don’t let the size of your

goal keep you from starting an emergency fund right now, with whatever money you have on hand. The point of an

emergency fund is to have a plan in place for dealing with as much of the emergency expense as possible with

cash.

And in the meantime, if your credit cards are your current “backup plan,” be sure

the balances are paid down as much as possible to free up your credit until your emergency fund is a decent

size.

Got a minute to check your credit? A recent

href="http://www.ftc.gov/os/2013/02/130211factareport.pdf">study by the Federal Trade Commission found that one

out of every 5 Americans has a mistake on his or her credit report. Worse, about 5 percent had errors so serious

that they cause the consumer to be overcharged for everything from credit cards to car insurance and car loans.

The good news: When the 5.2 percent who had really serious mistakes on their credit

reports actually challenged those errors with the credit bureaus, they were able to improve their credit score

within months.

What causes credit report errors?

Mistakes can show up on your credit report in several ways. Maybe the creditors

sent incorrect information to the bureaus about your bill-paying habits as a result of a faulty automated process.

Maybe a social security number was keyed in wrong and you’ve been mixed up with someone else. Or perhaps you were

the victim of identity theft.

5 Steps to Fixing Credit Report Mistakes

Whatever the reason, no one will fix those errors if you don’t find and dispute

them! Follow these five steps to resolve credit report errors:

Step 1: Order a copy of your credit report to review. Visit

AnnualCreditReport.com, where you can order your credit report free once a year from all three major credit bureaus

(Experian, Equifax and TransUnion).

Step 2: Review your credit reports closely. Look for things like

addresses you’ve never used, odd versions of your name, the wrong date of birth or incorrect social security

number. And in the section about who has accessed your credit information, look for

href="http://www.creditcardcolumn.com/cards-by-bank/">credit companies you don’t recognize or don’t remember

applying for credit with.

Step 3: The paper trail starts here: Make a copy of the front page

of the credit report and the page(s) with errors and highlight them. Make multiple copies of whatever evidence you

send the credit bureau. And if there is more than one error, number them so you can refer to them by number in your

cover letter.

Step 4: Write the letter to the credit bureau to dispute the

error. Don’t use an online form: They often don’t allow you to attach evidence or fully explain the situation, and

may require you to agree to arbitration clauses that aren’t to your advantage. And if one of your creditors is

responsible for the mistake, send them a similar letter. Be very clear about what you’re disputing, such as “I

never applied for an account with that company” or “My payment was never late, and I’ve attached proof.”

Step 5: Document everything from paper copies of your

correspondence to a phone log with the names of anyone and everyone you spoke to, the date, and what was resolved

in the phone call.

If your dispute goes on for months and doesn’t seem to be getting anywhere, use the

National Association of Consumer Advocates website to find a lawyer with

experience in Fair Credit Reporting Act cases. But most of the time, that won’t be necessary. Credit bureaus

usually correct errors fairly quickly, and within months, your credit rating should show improvement – and that

helps save you money in all sorts of ways! So be sure to check your credit report once a year to find and fix

costly errors.

If you just filed your taxes and discovered that you’re getting a large tax refund,

that’s great news! It’s a chance to do something smart with a fairly large chunk of money. But what should your

priorities be? Should you use that tax refund to pay down or pay off credit card debt, or is it wiser to park that

money in your savings as an emergency fund?

A look at your debts and priorities will help you decide how to use your tax refund

as wisely as possible. Paying down your credit card balances is great for your credit to debt ratio and your credit

score, but there are other factors to consider, too.

Using your tax refund for credit card debt

It’s a smart idea to use at least a large chunk of your tax refund for paying high

interest credit card debt. If your credit cards carry an interest rate of 18 percent and your car loan has an

interest rate of 5 percent, you can see why it would make sense to pay down the card and instead of paying off the

car. And when you free up more of your credit, you improve your credit to debt ratio – and thus improve your credit

score, too.

Using your tax refund for an emergency fund or savings

If you’re the kind of person whose credit cards are all at a zero balance, you

should probably add most or all of the tax refund to your savings account or emergency fund. But if you do have

credit card balances, even if you can pay off your entire credit card debt with your tax refund, if it’s going to

leave you with no cash to put in savings (and you don’t have any existing savings to speak of), you should probably

keep at least $1000 at a minimum for a basic emergency fund.

Sure, with your credit cards paid off or paid down, you have more of a balance to

work with – but you know that if you have to use a credit card for emergency expenses, unless you’re very

disciplined, it’s all too easy to let that balance grow larger and larger without paying it down. And that can

negatively affect your credit score.

Making the most of your tax refund

If you have zero balances on your credit cards and a well-padded emergency fund in

place, you can still use the refund wisely. Some ideas:

• Contribute to your IRA so you’ll have more of a deduction next year
• Set up and contribute to a 529 savings account to help fund your child’s future. These accounts help you save

  for college tuition and expenses, and you can use the money for college bills tax-free.

• Fix up your car to make it last longer (and head off future repairs or emergencies)
• Make home repairs or improvements that help you save on utility bills

There are many smart ways to use tax refund money and other financial windfalls,

but only you know what is best for you and your specific credit situation. It’s your money – make it work as hard

as possible for you!

When I pay my car insurance premium, the website wants to know if I would like to set up automatic payments. Same with credit cards, utilities and just about any other kind of payment you can make online. But although automatic payments can help keep your bills paid on time and avoid late fees, they should be used with caution – and how much they can help you depends on your situation.

So when is it a good idea to “set it and forget it,” and when is a more hands-on approach to bill payment in order?

When to Choose Auto-Pay – and for Which Bills

There are many reasons to set up at least some kinds of payments on an automatic payment system. Predictable payments such as insurance premiums, subscriptions and storage space rental all qualify for the auto-pay treatment. Also, phone or Internet bills are prime candidates for automatic payments, as are utility payments if you know about what your usage has been and can predict the amount of your bill.

It also makes a lot more sense to go with auto-pay if your income is direct-deposited at set, predictable times and can schedule your payments to come out soon after those deposits.

Auto-Pay for Credit Cards?

Some recommend that you should also set up your monthly credit card payment on auto-pay, because it helps you make your payments on time effortlessly, helps you avoid late fees, and keeps your credit score nice and high – the way you (and lenders) like it.

However, a credit card statement is different from a car insurance bill. Your credit statements should be reviewed each month both to make sure the balance isn’t getting too high and also to make sure there isn’t unwanted or unauthorized activity there.

If someone made unauthorized purchases using your credit card, you need to know that so you can alert the credit card company immediately. And you need to know what the balance is so you can work harder to bring it down, thus improving your credit score so it will be nice and high when you need to finance something else.

But if you know that you’re the type of person who can have automatic credit card payments set up and remember to also review the statement each month, that’s the best of both worlds.

Avoiding Potential Pitfalls of Automatic Payments

For some people, setting up any kind of automatic payments might prove hazardous to their checking account and credit rating. That includes those who have more unpredictable income because they are self-employed or freelance, and thus don’t get paid the same amounts on the same dates each month.

Also, anyone who is prone to making big purchases with the debit card and forgetting to subtract them from the check register – or forgetting to subtract automatic payments when they are due – is at risk of going into overdraft and incurring the dreaded NSF fees.

But you could still use auto-pay and avoid those risks if you:

• Subtract the amount of all automatic payments from your check register at the beginning of each month so they’re already accounted for
• Transfer enough money into a separate “bill pay” checking account and have each month’s automatic payments deducted from that account
• Keep a significant pad of money in your checking account in case you forget to subtract a purchase or a payment

The solution you use depends on your financial situation and the way you handle money. But if you find a way to use automatic payments for your credit card bills and still remember to review the statements, it’s a time-saver, a stress reducer, and a great way to keep your credit accounts current.

It’s no secret that health care costs are higher than they have ever been – and if you need a medical or dental procedure that your insurance doesn’t cover, you can really have an expensive (and painful) dilemma on your hands. You might have to come up with several hundred or even several thousand dollars to pay out of pocket. And that might make many people think twice about whether they need the procedure – a sometimes dangerous decision to have to make.

Fortunately, there are various payment options for expensive health care expenses that insurance won’t pay for. You could choose to:

Put the expense on an existing credit card. However, if that bumps your credit card balance too close to your credit limit, that will hurt your credit score. If you do pay your medical, dental or hospital bill with a credit card you already have, make sure to pay that card’s balance back down as soon as possible. The good news is that if you send in more than the monthly minimum to get that balance back down, this kind of activity can actually end up improving your credit score because it shows you to be responsible with your debt management.

Ask for an extended payment plan. Some doctors and dentists will allow you to use an extended payment plan without involving any credit companies, so you can ask if that is an option in your case. After all, it’s in the health care provider’s best interest to keep you as a patient – especially if you’ve been using their practice for some time already.

Apply for a health care credit card. This is a fairly new option, but one that’s catching on in popularity – and these cards are offered by major credit issuers such as Citi, GE Money, Chase and more.

Health care credit card accounts have similar terms to the kind of credit accounts home repair contractors offer: zero interest as long as you pay off the balance within a set amount of time, and as long as you make the monthly payments on time. So even if your health care provider doesn’t allow an extended payment plan, these credit cards give you a way to spread your payments over time without maxing out your other credit cards.

However, if you don’t pay off that balance in the allotted time – or if you miss a payment or fall behind on your payments – a high interest rate will apply. But for responsible borrowers that are able to make the required payments on time, a health care credit card can be a great way to get the medical or dental procedures you need without having to pay any interest.

Whichever option you choose, don’t let the high cost of health care keep you from getting the dental or medical care you require. Ask your physician or dentist about health care credit cards and other payment options so you can get back on the road to good health.