Handling problems with your card

This was originally published on Monday, October 3 ,2016 in the Pacific Daily News.  Click here to subscribe to the PDN.

Q: I was at the store the other day and used my debit card to make a purchase. To my surprise my transaction was denied. I checked my account right away and noticed that there were several suspicious charges from a company I use frequently. I was embarrassed and because of these charges my account was overdrawn. I have several scheduled automatic payments that are not going to be paid. I’m scared my account has been compromised, what should I do?

A: It is a scary feeling to think you have enough money to cover your day-to-day expenses and then discover that your account has been compromised. So many questions form in your mind and you start to think of the worst.

In this day and age, we use our debit or credit cards to pay for almost anything, making us susceptible to fraudulent charges. Unauthorized debit card charges can happen for many reasons. Some of the more common reasons are accidentally being charged twice, being overcharged, a credit return failed or nondelivery of goods through the mail.

No matter the reason, the sooner the mistake is found, the better chance you have on disputing the charge.

  • Gather all information. Take time and look through all your receipts. If you share a joint account, ask the joint holder if they recently made the purchase. Be aware that some online stores use a third party to handle their purchases and the statement will list that third party’s name, not the online shop’s. If you are certain that the charge is fraudulent, contact your bank right away. Inform your bank that you have unauthorized charges on your statement and that you will be contacting the merchant. Your bank will then discuss several options with you including freezing your account until more information is provided.
  • Contact the merchant. If you have a phone number, call the merchant and discuss the charges. Ask if there is anything they can do to reverse the charges. Most merchants value your patronage and are usually willing to work with you, especially if the error is a mathematical mistake or a non-receipt of a product or service. If the merchant is not willing to correct the error, then contact your financial institution. By contacting the merchant first, you are showing a “good faith” effort to work out the situation.
  • Work with your bank. If the merchant refuses to rectify the mistake, you have 60 days from the time of the unauthorized purchase before being held accountable. Let your bank know that you contacted the merchant and they are unwilling to reverse the charges. The bank has 10 days to investigate an unauthorized charge. After the 10 days, your bank must contact you with their findings within three days. If the investigation is incomplete after the 10 days, your financial institution must credit your account for the full disputed amount, less $50, while continuing the investigation.

If the transaction was conducted within the United States, the financial institution has an additional 45 days to resolve the issue. If the transaction is made outside the United States, then your financial institution has 90 days to resolve the issue. If the bank finds that there is an error that has occurred, they must pay you within one business day of finding that error.

On the other hand, if the charges are legitimate, the financial institution must give you written notice before taking the money that was credited to you earlier. If you used your debit card as a credit card, you may fall under different guidelines which can be found at http://www.consumerfinance.gov.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at http://www.moneymattersguam.wordpress.com.

Tips for a first-time credit card owner

This was originally published on Monday, October 27, 2014, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: I was just approved for my first credit card. I’m excited that I’m now creditworthy, but numerous people have expressed to me that owning a credit card has put them in some financial troubles. Do you have any tips for a first-time credit card owner?

Answer: Congratulations on your first credit card! Yes, owning a credit card is opening a whole new world of financial responsibilities. It’s true that credit cards can lead some to financial hardship if spending goes out of control. But if used properly, it also can be a beneficial financial tool. Using a credit card wisely can improve your credit rating, which can qualify you for low interest rates when purchasing a car or a home, or it may help get a job. Here are some tips to keep you on the right financial path.

•  Know your monthly limit. Take some time to review your budget to see how much you can afford to spend monthly. Remember that the credit card company will charge you interest on the balance of your card.

• Never skip a payment. It’s best to pay the balance of your card off every month. Credit card companies make money not on what you owe but the interest it accrues. If you cannot pay the full amount, at least make the minimum payment. But do not get in the habit of paying just the minimum balance. Paying the minimum balance can take years to pay the balance off and in the end, you would have paid more in interest than the amount you originally owed. Read your contract carefully. There usually is a different interest rate for cash advances on your card. Missing a payment could result in a late payment fee and a negative hit on your credit score.

• Use it responsibly. A credit card should be used with caution. If you have cash on hand, it’s best to use the money first. Use the card for needs and not extravagant wants. Credit cards can be used in emergency situations. Try not to go over the monthly limit you set for yourself.

• Use your rewards. If your card has a reward system, take full advantage of it. Some may offer cash back that you can use toward your payments. Others may offer gifts and some may earn airline mileage. Most of the time, these rewards have a time limit of when you can claim them. Read your contract. You earned those rewards, so you should cash in on them.

• Remember 30 percent. Keep this number in the back of your mind. It’s the optimum percentage of your credit utilization ratio. This ratio is your total credit available to how much credit you are using. This ratio weighs heavily on your credit score. If the ratio is low, it positively affects your score. If it’s higher than 30 percent, it will bring your credit score down. For example, if your credit limit is $1,000, you should not carry a balance over 30 percent or $300. If later on in years you decide to get another credit card, the combined total of your cards and the balance you have should stay at 30 percent or lower. In other words, if you have a two cards that have a combined total of a $5,000 credit limit, your combined balance should not exceed $1,500.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

Help! My high balance is hurting my credit score

This was originally published on Monday, October 20, 2014, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: My credit score is just above average. The reason for this is because of my high balance on my only credit card. I know I need to pay down the balance, but I have also heard there are other ways to improve my score such as closing my account or asking for a lower limit. Are there other ways to improve my score?

Answer: First, let me commend you on understanding what’s hurting your credit score. Many people don’t look at their credit score until they’re in dire straits. It seems that there’s a lot of advice floating around out there on the best ways to improve your credit score when it comes to credit cards. Some may help and others can be very detrimental. My best advice is good old-fashioned personal restraint from using it and paying off the balance. Here are some tips that I’ve heard and why they’re not feasible.

•  Closing a credit card. On your credit score, one of the most heavily weighed factors is your balance to credit limit ratio, or how much you owe. This category accounts for 30 percent of your score. Once you pay off a credit card and close it, the credit card issuer can decide if the history of the card remains on your credit score. If they decide to take the credit card off your report, you will lose the history that goes along with it. That would not help your score because credit history accounts for 15 percent of your credit score.

Since this is the only card you have, it might hurt you more than someone who has numerous credit cards. If the credit card issuer leaves the closed account on your report, the history will only stay for 10 years. An account that is open, even with little activity, can stay on your report as long as it stays open.

•  Requesting a lower credit limit. As I mentioned previously, one of the heaviest-weighed factors on your credit score is based on how much you owe. If you cannot pay down your debt but you lower your credit limit, you will increase your balance-to-credit-limit ratio. This would severely hurt your score.

• Opening new credit cards. Because your ratio of the amount you owe to the amount of available credit is so heavily weighed, you’d think that opening more cards to increase your limit would work. Yes, opening more cards will raise your credit limit, but opening more accounts all at once will hurt your score. Each time a credit card issuer opens an account for you, they will look at your credit score. These inquiries will actually lower your score. If you want to increase your credit limit by opening new cards, do so by spacing them out over a few years.

• Not using your card once you pay it off. Once again the ratio of indebtedness to credit limit plays a factor in this decision as well. You should use your card regularly, but in amounts that you can pay off the balance in full on the month it’s due. If there’s no activity within a certain period of time, your card issuer may close it.

• Checking your credit score regularly. When you check your credit score regularly, it won’t hurt your credit score. Inquiries from banks, loaning agencies and credit card issuers will. Credit lenders report to the credit bureaus every 30 days. It’s very smart to stay on top of your credit score.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

How to dispute charges on your credit card

This was originally published on Monday, July 28, 2014, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: While looking at my monthly credit card statement, I noticed an unfamiliar charge. How do I dispute the charge?

Answer: Great job on being alert and attentive. Many people don’t take time to look at their monthly statements. Mistakes do happen and more times than not, the charge is disputed in the favor of the card holder. The sooner the mistake is found, the better chance you have on disputing the charge.

Mistakes on credit card charges can happen for many reasons. The most common are being billed twice, being overcharged, a credit return failed, non-delivery of goods through the mail or an unauthorized purchase. When a dispute is made, the credit card companies will investigate.

The first step is to gather all information on that purchase; a receipt will definitely be an asset. If the charge is fraudulent, be sure to look through all your receipts. Sometimes online stores use a third party to handle their purchases and the statement will list that third party’s name, not the online shop.

Before contacting your bank, call the merchant to see if the charge can be disputed with them. If the error is a mathematical mistake or a non-receipt of a product or service, the merchant will usually correct the error. If the merchant is not willing to correct the error then contact your bank. By contacting the merchant first, you are showing a “good faith” effort to work out the situation.

Next, write a letter to the credit card company. The law gives you 60 days after the billing error appears to dispute it. Address the letter to the billing inquiries department and not the collections department that you send your payments to. The letter should include the name that appears on your card, your mailing address, account number and a brief description of the error (include the date of the charge). A copy of the receipt should be attached if you have it. Send the letter certified mail with a return receipt and keep a copy of the letter.

The law provides consumer protection rights when disputing a charge. By law the credit card company must acknowledge the complaint in writing within 30 days of receiving your letter. The credit card company then has 90 days to investigate the error and make a decision. You are not responsible to pay the amount being disputed, but the undisputed portion still has to be paid. The law also protects you by restricting the credit card company from reporting the disputed amount as a late payment to the credit bureaus.

During the investigative process the credit card company can keep the limit that you are disputing as a balance on your card. For example, if you are disputing a $500 charge and your credit limit or balance is $2,000, that would leave you with $1,500 of available credit.

If the investigation determines that the billing is correct, you will be responsible for paying all or a portion of the amount. The credit card company must explain to you in writing why they made that decision. If you disagree with the outcome, you have 10 days after being notified of the decision to write the credit card company and inform them that you are not paying the amount. Do note that the credit card company can then start the collection process, including contacting the credit report bureaus of your late payment. If they do report it to the credit bureaus, the report must state that you do not agree with the outstanding amount. The amount you are responsible for may also include any fees or late charges.

On the other hand, if the bank makes judgment in your favor and you are not responsible for the amount owed, they will credit your account the amount disputed and remove any fees or late charges associated with the amount in error.

If the credit card company does not follow any of the procedures or deadlines, they cannot collect the amount in question even if the amount is determined not to be an error.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

Small changes go long way with credit cards

During your annual review of your credit cards, you can make small changes or request adjustments that will add up incrementally over the course of the next year. These changes can help you pursue your larger debt goals, or simply help keep your debt balances low and your finances in shape.

Add a specific amount or percentage to your minimum payments. If you’re on a tight budget, but resolved to pay down your debts, try adding 10% to your minimum payments. Or, you can add a specific amount, such as $10 or $20, to each payment.

Paying more than the minimum will help you shrink your debt, and those amounts will add up over the year. The small change will also help you acclimate your budget to your debt payment goals. You can increase this amount periodically to pay down debts.

Set a fixed automatic payment for the year. A minimum payment on a credit card adjusts every month, because it’s calculated as a percentage of your current balance. As long as you don’t add purchases to the card, and your APR doesn’t change, your balance and your minimum should shrink with every payment.

A fixed payment will help you pay down your balance more quickly. Resolve to stop using the card for the next year or six months, and choose an amount above the minimum payment. Automatic transfers will eliminate a bill payment chore, and the temptation to fall back to minimum payments.

Ask your credit card issuer for a lower interest rate. If you have a solid credit history, you can try negotiating with your issuer on your interest rate. The reduction of a percentage point, or even half a percentage point, can make a large difference if an emergency requires you to take on debt in the future.

Review your credit reports and credit card file thoroughly, and take note of any pre-approved offers that you have recently received. You can talk to your credit card issuer about your positive credit patterns, your long customer history with the company, and other comparable offers you have received.

Because a financial institution’s willingness to extend credit is determined in part by larger economic circumstances, keep this negotiation on your annual checklist. You may be unlucky one year, and lucky the next. Your credit history could also steadily improve, putting you in a stronger negotiating position for the following year.

Ask your credit card issuer to waive your annual fee. Not all credit cards charge an annual fee. If you have a card that charges this fee, compare it to other offers you receive or cards that you have that do not include the fee. How do interest rates and reward programs compare?

If you have a responsible credit record, a good history with the company, and you receive offers for similar credit cards that do not include annual fees, you can try asking your credit card issuer to waive the annual fee on your card. It doesn’t hurt to ask, and you can end up with substantial savings in fees for the year.

Use your rewards. Using your points can be a great way to reward yourself for completing your annual debt review or meeting your debt goals. Some reward programs have points that expire, which is all the more reason to use them now.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years experience in retail banking and with financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com

Teach teens to use credit cards responsibly

If your teenager is about to graduate from high school, he or she may soon be applying for a credit card. As a parent, you can provide advice on the smart use and management of credit cards from the very start of your teen’s credit history. With your guidance, your teen can develop a healthy attitude toward credit, and build a sound credit history that can be beneficial in the future.

Here is some basic advice you can discuss with your teen:

Try to use credit cards only to build a credit history and for emergencies.

Credit cards can provide an easy way to create a pattern of positive credit behavior, which will help when applying for future loans and credit cards.

To build that pattern, you can purchase a few things on your credit card during the month, and then pay off the balance in full, on time, when the statement comes in. It’s easy to let things slip when you have that purchasing power in your hands for the first time, so try to commit to a few small purchases each month that you know you can pay off quickly.

In emergencies, a credit card can help at the moment, but you’ll want to create a plan soon afterward to manage the new balance and pay it down as quickly as possible. The longer the balance remains on your card, the more you’ll pay in interest, and the less money you’ll have available for spending on items that you need.

Set your own credit limit. Spending within your means will help you avoid interest payments and larger financial problems down the road. Your credit card may come with a credit limit, but you can set your own credit limit, tailored to what your budget can afford each month. This way, you won’t have a problem paying off your balance in full each month.

It also can help if your personal limit is less than 25 percent of your credit card’s total limit. The percentage of available credit that you use, or your “credit utilization,” can have a major effect on your credit score, and consequently on your applications for new loans and credit cards in the future. If you consistently stick to a low credit-use percentage, you’ll increase your chances of maintaining excellent credit for the long term.

Understand the cost of paying late. If you’re late paying your credit card bill, you incur more than a bad mark on your credit history. A late payment will add late fees to your balance and may even trigger a penalty APR, in which your future expenses are charged at a higher interest rate.

As soon as you know that you’re going to have trouble paying a bill, ask for help, so that you can resolve the problem before the due date.

Set your own minimum payment. The minimum payment on a credit card bill is often a very small percentage of the total balance. It leaves you with a high remaining balance, and consequently a high interest payment for next month. You can set your own minimum payments by choosing to pay an amount that is more than the minimum due, and sticking to that amount in upcoming months, until your balance falls to zero.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 19 years experience in retail banking and with financial institutions in Guam and Hawaii.  You can email him at  moneymattersguam@yahoo.com

With credit cards, shop around

As  you shop  for  a reasonable credit card, here  are a  few  tips  that can help you along the  way:

Think about your credit quality.

If you have excellent credit, you’ll have your pick of credit card offers and terms. If you have fair or bad credit, however, you may only qualify for higher Annual Percentage Rate (APR) interest rates — and in the long run, those high APR rates can do even more damage to your financial well-being.

If your credit isn’t first-rate, consider rehabilitating your credit before you apply for a new card. Make your payments for existing debt on time, pay down your balances, and do it consistently. As you demonstrate good behavior, your credit score will climb, and better offers will become available to you.

Compare several different credit card offers.

The best way to get a sense of the current credit market is to gather several different offers and compare them. You can find credit card offers (and their disclosures) at financial institutions, on their websites, or through credit card comparison websites like creditcards.com or creditcardtuneup.com.

Don’t apply yet: Just search for the disclosures that come with the application. These disclosures should list APRs for different categories, grace periods, and fees, in that order. By comparing different cards, you can quickly see which terms are more favorable for you, and you’ll stand a better chance of getting a good deal.

Look for low APRs.

The first thing you should see on a credit card disclosure is the APR. If you think you’re going to be carrying balances longer than a month, your best option is a credit card with a low APR. If you pay smaller amounts of interest charges, more of your money can be used for principal debt, allowing you to pay off your balances quicker.

Sometimes, APRs are split into different categories: purchases, balance transfers and cash advances. If you’re planning to use your card for any of these categories more often, then you should pay special attention to that APR.

If you’re offered an introductory APR teaser rate, note the expiration date of the teaser rate. Make sure you understand the terms: Figure out what happens if you carry a balance past the expiration date, and use the standard purchase APR when comparing this credit offer to others.

You should also compare Penalty APRs, which can be charged if you’re late on a payment. Some credit card issuers are more severe than others on penalty rate increases; some issuers are willing to reassess the penalty rate after six months, while others state that the change will remain indefinitely.

Look for reasonable fees.

Some cards have an annual fee, while others do not. Try to avoid the annual fee if you can, unless a stellar rewards program outweighs that cost.

You can also compare late fees, international use fees, transaction fees, and others. If you plan to use balance transfers or cash advances, note if the issuer charges an initial fee (such as 3 percent of the amount) on top of the interest you will pay.

If it sounds too good to be true, it probably is.

A credit card offer may sound good to begin with, but you should always check the credit card disclosure, just to be sure. A low APR may be coupled with exorbitant fees, or include conditions you don’t feel serve your best interests. Read the fine print, and you can make an informed decision you feel happy with.

Michael Camacho is the president and chief executive officer of Personal Finance Center. He has more than 18 years experience in retail banking and with financial institutions in Guam and Hawaii.