Credit Card Debt Management

This is the post that credit card companies do not want you to read. Follow this advice and you’ll be marked as a “non-profit” account, meaning your account is not a moneymaker. And really, why would you want it any other way? So if you take out a credit card, try to use it wisely. Here are some pointers to get you started.

Pay off your balance each month. This will ensure that you are minimizing the money you throw away on interest. However, carrying a balance on your cards does help your credit score to a point. If you must carry a balance, keep it under 50 percent of the credit limit on the account.

Pay on time. This may seem like a no-brainer, but it cannot be stressed enough. Fees are typically $29 at a minimum for late payments.

Know your limits. This isn’t referring to your credit limit. Of course you should keep tabs on that and avoid going over. This tip refers to your spending limit, which is based on your household budget. That’s right - the day of reckoning is coming and that bill must be paid. Short of life or death emergencies, don’t buy anything with your credit card that you could not afford at the time with cash. Budget that purchase, plus a little extra for interest, into your monthly cashflow plan.

So why use credit? Don’t buy anything that you can’t cover with cash? That’s right, because if it’s that expensive, you probably don’t really need the item if you take a good, long, honest look at the situation. If you can cover it with cash, you’re good to go. You may just want to use the credit card to rack up a few airline miles or cashback rewards. One good example of smart credit card spending is on gas purchases, with cash being allotted on the side to pay off the monthly gas bill. That way, you can get your gas and your rewards.

One-third of consumer debt is credit cards. It’s really out of hand and 2008 is the year to make the credit card companies work for you.

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.

We have talked about what to do after you’ve been an identity theft victim. But do you know where to be most cautious? The following is a list of the top ways ID thieves are preying on their victims.

Searching your home and purse/wallet: It is true that the vast majority of identity thieves know or are related to their victims. They have access to your home and personal belongings, and they are the people you might least suspect.

Dumpster diving: Your trash is a hot spot of ID theft opportunity. Credit card offers, bank statements, discarded checkbook carbon copies, old paycheck stubs, anything with your social security number on it, etc.

Shoulder surfing: Using a public terminal to surf the net? You might want to think twice, particularly when typing in sensitive information like banking passwords. Also watch for shoulder surfers checking out your pin or card number in line at stores.

Stealing mail: Most of the stuff that can be found in your trash can be found in your mail as well. Mail that has fallen out of the mailbox and onto the ground is one obvious sign to watch for.

“Phishing”: This is the ultimate competition and it can net a prize much bigger than any fishing contest you’ve ever heard of. Some ID thieves send out fake e-mails posing as banks, merchants, service providers or magazine publishers that direct consumers to a web site appearing completely normal and legitimate. Information may then be entered in by the consumer, either to “verify an account” with a bank or lender, or to “renew” an account or subscription. But the site is a mirror of the truly legitimate original web site and someone is on the other end taking down all your information.

Phone scams: This is the same type of thing as “phishing,” but over the phone. A person will ask you to verify your social security number, account number, etc. over the phone. They will pose as a representative of a completely legitimate organization with which you might even conduct regular business. They can even rig the phone number from which they are calling to appear on Caller ID machines with the appropriate organization’s name and number.

Yes, it’s scary stuff, but don’t despair! Some common sense steps can at least decrease your chances of becoming a victim of identity theft. Ultimately, the best protection is to think like a criminal and identify any theft opportunities just as they would. But alas, another topic for another day. Stay tuned!