Can a credit card company put you behind bars for not paying the bills?

Credit card helps to buy things regardless of the fact that you do not have enough cash at the moment to pay off. Generally in the US, people have number of credit cards and many consumers default on their payments. Many of these consumers are under notion that they can go to jail for not making payments to the credit card company. In reality if you fail to make payment then the company shall put you behind bars. But there are other adverse consequences if you are unable to make payment on time.

What the credit card company can do?

If you have failed to make payments on time then the credit card company can file a law suit against you and the court can order for wage garnishment. This matter is usually tackled by the civil court and not in the criminal court.

Know about the legal matter?

Card issuer’s agreement is considered to be a legal contract if this contract is violated then you are required to undergo other consequences. The credit card company can sell the account to the collection agency or levy penalty charges on the owed amount if you fail to make your payments on time. Few credit card companies can also sue you for defaulting on your payment.

What are things that you need to consider?

Your credit report might be adversely affected if you frequently default on your payment. If you blemish your credit report then your credit score might drop. Remember that your credit report will help the lenders determine whether you are eligible to apply for new loan or not. If your credit score is low then it might be difficult to get loan in future. Your potential lenders might disapprove your loan application if your credit score is not high.

You should be aware that the credit card company can file a lawsuit against you and the court’s judgment might not be on your favor. Therefore, you should try to repay your credit card company on time otherwise you might complicate your financial situation. The court can order for wage garnishment or seize your asset as a result of the law suit.

How to Protect Yourself from Credit Repair Scams

Consumers that find themselves overwhelmed by credit card debt can be easy targets for credit repair scams. Before you get involved in any bill consolidation or credit repair programs, take the time to understand the warning signs of credit repair scams.

Upfront Payment

Some credit repair companies will lay out a tempting solution to your credit issues and then ask for an upfront payment to get started. The federal government passed the Credit Repair Organizations Act which states that credit repair companies cannot ask for payment until they have completed their service. If a company asks for payment up front, it is not reputable and it is breaking the law.

Creditors

Be wary of a credit repair company that tells you to stop paying your credit card bills and to not contact your credit card companies. They do this because they claim that you do not need to pay your credit card bills while a settlement is being negotiated. This is dangerous because not only does it have a negative affect on your credit rating, but your credit accounts can go into default and create a whole new set of problems.

Protect Yourself

Get credit repair referrals from the Better Business Bureau or financial professionals that you trust. Before giving any personal information to a credit repair company, ask for a personal interview where you can ask questions and find out how the company does business.

Repair Your Own Credit

Rather than risking your financial future with a potential credit repair scam, you should consider repairing your own credit. You can start by paying your monthly credit card payments on time and paying no less than the monthly minimum. If you cannot afford to pay your credit card bills, then look into your own bill consolidation solution. You can consolidate your bills using a personal loan, a home equity loan or a low-interest credit account that allows balance transfers.

The federal government mandates that every American consumer is entitled to one complete credit report from each of the three major credit reporting agencies every 12 months. Order your free credit report and make sure that all of the personal and account information is correct. If you have mistakes on your credit reports, then they could be dragging your credit score down.

Do not cancel credit cards once you pay them down or off. Maintaining a large amount of available credit on old credit accounts will help to build up your credit score. Avoid opening new credit accounts unless you absolutely need to. Learn to manage your credit and you can repair your credit score on your own.

What Are The Drawbacks Of Closing A Credit Card?

If you are approaching toward paying down your debt, or just do not want to use them anymore, closing the account might seem a great option. However, if you leave unused accounts open, it may cost you heavy as these days many card issuers are charging inactivity fees for dormant accounts. Keeping in mind your financial condition, closing a credit card debt may make sense, but before that consider the cons.

Credit Utilization

About 30% of your FICO credit score calculation is done keeping in mind your credit utilization. Your credit utilization, or debt-to- available-credit ratio, is based on the total balances versus your total credit limit. Ideally, you should always use 30% of your available credit. If you close an account of high limit and carry high balances on other cards, this will increase your credit utilization and damage your credit score.

Loss of Payment History

Another 15% of your credit score is based on the length of your credit history. If an account is in good shape for a significant period of time, this can help improve the credit report. However, closing an old account significantly erases the positive effect from your credit history and causes your credit score to fall.

Loss of Rewards

These days many credit card companies offer reward programs, where cardholders can earn cash back or points that may be redeemed for travel, gas, merchandise, hotel stays, and gift cards. If you use such cards wisely, these can essentially pay you back for using them. If you close such a reward-earning card, you will be losing the points that you have earned, and the opportunity to earn future rewards.

Emergency Use

In few circumstances, a credit card may help and even rescue you. Occasions like renting a car, a room in a hotel, a medical bill, or a major car repair. If you do not have an emergency savings, a credit card can help you handle the situation.

Five Tips to Avoid Credit Card Fraud

Credit card frauds are the smartest way of stealing money these days. Innumerable people around the world are getting victimized by credit card scams on a regular basis. Your credit card information is always at stake. A trickster can very easily draw all the information from your credit card when you purchase things and make payments with it. And you could still be unaware when they do so. Read more »

Bad credit? Raise Your Score With A Secure Credit Card

More and more consumers are finding themselves with below average or poor credit due to the recession. Unemployment, foreclosed homes, and late payments can all damage credit. Because of this, many are trying to repair their credit; for example they may want to improve their credit so they can get pre approved and  buy a home. One way to get back on track and prove that you are worthy of credit is by way of prepaid credit/debit cards, or bank secured credit cards.

How do secured credit cards work? Among credit cards, the secured card differs in that it allows people with bad credit to obtain a credit card and gives them a chance to improve their credit over time. A secured or prepaid credit/debit card allows you to give the card issuer a deposit so that they can offer you a line of credit.

This protects the issuer in case you fall behind on your payments or even default. It protects you because if you do fall behind, your deposit can make up the balance and keep your credit on track.

How do you get started with a secured credit card? First check with your bank or credit union and see if they offer a secured card. If not, there are secured credit card offers online. When you sign up for an account you will make an initial deposit which normally equals your line of credit. Then you will get your card mailed to you and you can begin to use it like a normal credit card.

Prepaid credit/debit cards come with a lot of benefits that an unsecured card comes with, including:

A major credit card logo. Your card will have the logo of one of the major credit cards, meaning you can use it anywhere major credit cards are accepted.

Credit bureau reporting. The issuer will report your payments to the three major credit bureaus just as they would with an unsecured card.

Other benefits may include low or no annual fees, identity theft protection, fraud protection and emergency card replacement.

There are disadvantages of secured bank cards, however. Be sure you read the terms of any secured bank card before signing up.

You may have additional obligations, such as a monthly insurance premium that you are obligated for in exchange for the 0% APR on the card.

The APR may start out very low, but in six months you may find it has skyrocketed.

Because there are advantages and disadvantages to a secured credit card, you should look at all offers carefully. If you decide a prepaid credit/debit card is for you, it can be a great option for repairing your credit.