Credit Card Debt Management

There’s some really scary stuff being discussed over at Creditor Web. Apparently, identity theft schemes have stepped up a notch and the latest trend is “skimming.” The latest episodes are not unlike the old ATM scams that were superficial faceplates placed by hopeful thieves in order to record personal banking information.

First of all, handheld copying devices no bigger than a lighter make it imperative that you watch the cashier carefully the entire time they possess your credit card.

“Think about it- if you’re impatiently waiting to get out of the store, are you watching the cashier closely? Some cashiers may engage you in conversation to distract you as they slide the card through their miniature theft device.”

One wonders if this is not how the young lady at the center of a recent Glamour magazine article became a victim of identity theft. After all, this unfortunate victim eventually had a face-to-face confrontation with her thief, who was a barista in a busy San Francisco coffee shop.

CreditorWeb also states that skimming devices have been planted in gas stations in California.

“The thieves were able to steal credit and debit card numbers, as well as PINs, from about sixty customers. They have used the stolen card numbers to finance $15,000 of fraudulent charges.”

So the latest recommended defense is to pay inside at gas stations, not at the pump. Experts also recommend paying with cash whenever possible, although this can be a real bummer for rewards gurus. Of course, through all the various stages of identity theft, a common defense has been to watch your bank account very closely. Shred personal financial documents. ID thieves are smart, but you can be smarter and stay a step ahead.

Settling debts can be a messy affair, particularly for the uninitiated. It can be done, sometimes much better than a debt negotiation service (which typically costs money and mars your credit report). The following tips will provide some insight as to the best way to proceed in your quest.

• Check the status of the debt. If the debt has already been written off or “charged off,” it is a dead debt that cannot be negotiated. Some ways to find out if this has occurred are to check the credit report for the words “charge off,” or try to remember if you received a letter of notification from the creditor that this was about to occur. Also, check your tax records and see if you paid taxes previously on that “income,” because all debt that has been written off is considered income by the IRS. You will receive a 1099C “Cancellation of Debt” form from the creditor and you will have to pay taxes.

• Negotiate a payment plan. Most companies consider a three-month repayment plan equal to a lump sum payment. Hardship or long-term repayment plans can stretch out past six months, even over a period of several years.

• Negotiate interest. You do not have to accumulate interest over the duration of the long-term repayment plan. Although some payment plans come with interest as high as 20%, you can negotiate your way down to zero interest. Don’t forget to negotiate how the settlement will appear on your credit report, an area of negotiation that many people forget about. Remember no debt that has been left unpaid for more than seven years should still appear on your credit report, period.

• Check status of debt and statute of limitations. This is good information to know before going into debt negotiations. If your debt has already been written off, or charged off, it is dead and non-negotiable. Also check your state’s statute of limitations to see if the creditor is still even legally able to try collecting this debt. If you find out they are in the wrong, feel free to correct them next time they call.

Settling your debts provide a nice alternative to bankruptcy, and are considerably easier on your credit record. A bankruptcy usually stays on the credit report about 10 years and can make it extremely difficult to find credit with anyone thereafter. This is particularly true with unsecured debt, which includes most credit cards. The credit industry does, however, offer some options to those with bad credit.

Most bankruptcy filings are going to be Chapter 13, thanks to the 2005 bankruptcy law restructuring. That means you will be put on a payment plan anyway to repay most of your debts, so you might as well look at doing this on your own. Should you decide bankruptcy is not the best option for you, consider looking at debt consolidation or negotiation/settlement instead. You can hire a debt negotiation service, but this too will have a negative effect on your credit record.

The kicker is, you can handle debt negotiation and settlement on your own (and keep credit report damage to a minimum). Stay tuned for more details on how to successfully settle your own debt. In the meantime, Buzzle.com has an interesting article on how debt settlement relates to taxes, just in time for those tax filings.