I Can’t Afford the Wage Garnishments on My Credit Card Debt — Help!

Wage garnishments for unpaid credit card debts have a way of kicking you when you’re down. If you struggled to make your payments before, you’re probably going through some tough financial times, and losing some of your paycheck to creditors can make life even more difficult. But if your wages are being garnished but you simply can’t afford them, there’s still help. Here are a few steps for appealing the garnishment.

Step 1: Know your rights

Wage garnishment laws vary by state, but by federal law, credit card companies can garnish at most 25% of your disposable income (your take-home pay after taxes, Social Security and insurance) or your disposable income above 30 times the federal minimum wage. These limits apply even if multiple creditors are taking a piece of your paycheck, but they don’t always apply for unpaid child support, back taxes and other debts.

Check your state’s laws as well, since many states protect your wages beyond federal guidelines.

Step 2: Talk to a financial counselor

When you’re trying to change a wage garnishment arrangement, it’s best to bring in backup. A financial counselor can help decide if and how you should appeal your garnishment, as well as make a plan for getting debt-free. He or she can probably provide some advice on how to make your money go further. If you can’t afford the financial counselor’s fees, ask if they use a sliding scale or provide free services to people earning below a certain income. Be sure to check any credit counseling agency against the U.S. Trustee Program as well as your state’s Attorney General to make sure that it’s legitimate.

Step 3: Formally object to the garnishment

You can also file a claim of exemption, which is a statement that you believe your garnishment should be changed or removed. One reason you can provide is that you can’t afford to live on your reduced wages. You might also be able to argue that your garnishment would be lower if it followed either state or federal guidelines.

If you’re in the military, you might have additional protection: Credit card garnishment is called an “involuntary allotment,” and you might be able to appeal those allotments. For example, you might be able to argue that you were serving overseas and therefore couldn’t make your court date.

Step 4: Consider bankruptcy

Bankruptcy is the nuclear option for debts that you can’t pay. Declaring Chapter 7 bankruptcy will get rid of most of your wage garnishments, but there are serious consequences for doing so. Bankruptcies can stay on your credit report for up to 10 years, making it difficult to qualify for and get good rates on car loans, new credit cards and mortgages. Declaring bankruptcy also involves going through debtor education courses, meeting with a judge and combing over your finances, so it’s hardly a quick fix.

If you’re struggling because your garnished wages aren’t enough to live on, you can and should try to work with your creditors and the legal system. Remember: If you declare bankruptcy, your creditors might never get repaid, so they might be willing to work out a more manageable plan. Wage garnishments can be changed, and you can get help.

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The post I Can’t Afford the Wage Garnishments on My Credit Card Debt — Help! appeared first on NerdWallet Credit Card Blog.

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I Can’t Afford the Wage Garnishments on My Credit Card Debt — Help!

Wage garnishments for unpaid credit card debts have a way of kicking you when you’re down. If you struggled to make your payments before, you’re probably going through some tough financial times, and losing some of your paycheck to creditors can make life even more difficult. But if your wages are being garnished but you simply can’t afford them, there’s still help. Here are a few steps for appealing the garnishment.

Step 1: Know your rights

Wage garnishment laws vary by state, but by federal law, credit card companies can garnish at most 25% of your disposable income (your take-home pay after taxes, Social Security and insurance) or your disposable income above 30 times the federal minimum wage. These limits apply even if multiple creditors are taking a piece of your paycheck, but they don’t always apply for unpaid child support, back taxes and other debts.

Check your state’s laws as well, since many states protect your wages beyond federal guidelines.

Step 2: Talk to a financial counselor

When you’re trying to change a wage garnishment arrangement, it’s best to bring in backup. A financial counselor can help decide if and how you should appeal your garnishment, as well as make a plan for getting debt-free. He or she can probably provide some advice on how to make your money go further. If you can’t afford the financial counselor’s fees, ask if they use a sliding scale or provide free services to people earning below a certain income. Be sure to check any credit counseling agency against the U.S. Trustee Program as well as your state’s Attorney General to make sure that it’s legitimate.

Step 3: Formally object to the garnishment

You can also file a claim of exemption, which is a statement that you believe your garnishment should be changed or removed. One reason you can provide is that you can’t afford to live on your reduced wages. You might also be able to argue that your garnishment would be lower if it followed either state or federal guidelines.

If you’re in the military, you might have additional protection: Credit card garnishment is called an “involuntary allotment,” and you might be able to appeal those allotments. For example, you might be able to argue that you were serving overseas and therefore couldn’t make your court date.

Step 4: Consider bankruptcy

Bankruptcy is the nuclear option for debts that you can’t pay. Declaring Chapter 7 bankruptcy will get rid of most of your wage garnishments, but there are serious consequences for doing so. Bankruptcies can stay on your credit report for up to 10 years, making it difficult to qualify for and get good rates on car loans, new credit cards and mortgages. Declaring bankruptcy also involves going through debtor education courses, meeting with a judge and combing over your finances, so it’s hardly a quick fix.

If you’re struggling because your garnished wages aren’t enough to live on, you can and should try to work with your creditors and the legal system. Remember: If you declare bankruptcy, your creditors might never get repaid, so they might be willing to work out a more manageable plan. Wage garnishments can be changed, and you can get help.

No money image via Shutterstock

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Mobile Banking Apps Ratchet Up Pressure on Bricks-and-Mortar Institutions

These days, you can do just about anything on your phone, including your banking. As online-only financial services providers such as Simple, Ally Bank and GoBank expand their products, more people are managing their money on the go or from the comfort of their homes.

More than half of American smartphone owners—51%—have used mobile banking services in the past year, up from 48% in the previous year, according to the Federal Reserve. In a survey this year by consulting firm Accenture, about a quarter of consumers who bank in the U.S. or Canada said they would consider signing up with a branchless online bank, while 94% of those 18 to 29 years old regularly do their banking online, and 72% have gone mobile.

Online encroachment

So where does this leave traditional banks and their bricks-and-mortar branches?

Because digital-only service providers don’t have to maintain and staff multiple locations, they cost less to run. This means that they can offer lower fees and interest rates. Simple customers, for instance, don’t pay any monthly or overdraft fees and aren’t required to maintain a minimum balance. Simple focuses on its mobile platform, so customers can do most transactions through their smartphones, including setting savings goals or writing and mailing a check.

Computer glitches affect online providers much as they do bricks-and-mortar banks. When Simple updated its system in August, about 10% of its 120,000 users lost access to their money, according to news reports at the time. Technology issues have blocked customers from even some of the biggest U.S. banks: In 2010, JPMorgan Chase’s online portal went out for three days. Although occasional technical issues can present a hurdle for online-only providers and their customers, the convenience they can offer, coupled with low costs, can still win over consumers.

In terms of basic services, digital-only providers aren’t all that different from bricks-and-mortar banks, especially as many of the larger institutions roll out their own online portals and mobile apps. In some cases, big banks have acquired or set up partnerships with the branchless upstarts. This year, for instance, Spain’s BBVA which also works with the Bancorp Bank to hold customers’ funds in Federal Deposit Insurance Corp.-backed accounts.

Making money

Like traditional banks, online-only providers make money through interchange fees paid by merchants for debit card swipes. Many, including Moven, offer customers fee-free access to tens of thousands of independently run cash machines, to counter big banks’ well-established ATM networks. If you need to send a paper check, though, doing it through digital-only banks may involve more time and effort than a traditional account would typically require.

As mobile banking becomes more popular, especially with younger adults, big banks as well as credit unions and community banks are beefing up their smartphone and online offerings and integrating more technology into their branches and ATMs. Some, including Wells Fargo and PNC Bank, are experimenting with smaller branches, while others have taken to putting teller windows in supermarkets, all to make in-person banking more streamlined and convenient.

If you don’t have a smartphone or tablet, or find it difficult to navigate pages and make transactions on a small screen, mobile banking might not be the right choice for you. But for those who love their smartphones, these mobile banking services are good news: As long as you can connect to the Internet, you’re good to go.

---

Tug-of-war image via Shutterstock.

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Mobile Banking Apps Ratchet Up Pressure on Bricks-and-Mortar Institutions

These days, you can do just about anything on your phone, including your banking. As online-only financial services providers such as Simple, Ally Bank and GoBank expand their products, more people are managing their money on the go or from the comfort of their homes.

More than half of American smartphone owners—51%—have used mobile banking services in the past year, up from 48% in the previous year, according to the Federal Reserve. In a survey this year by consulting firm Accenture, about a quarter of consumers who bank in the U.S. or Canada said they would consider signing up with a branchless online bank, while 94% of those 18 to 29 years old regularly do their banking online, and 72% have gone mobile.

Online encroachment

So where does this leave traditional banks and their bricks-and-mortar branches?

Because digital-only service providers don’t have to maintain and staff multiple locations, they cost less to run. This means that they can offer lower fees and interest rates. Simple customers, for instance, don’t pay any monthly or overdraft fees and aren’t required to maintain a minimum balance. Simple focuses on its mobile platform, so customers can do most transactions through their smartphones, including setting savings goals or writing and mailing a check.

Computer glitches affect online providers much as they do bricks-and-mortar banks. When Simple updated its system in August, about 10% of its 120,000 users lost access to their money, according to news reports at the time. Technology issues have blocked customers from even some of the biggest U.S. banks: In 2010, JPMorgan Chase’s online portal went out for three days. Although occasional technical issues can present a hurdle for online-only providers and their customers, the convenience they can offer, coupled with low costs, can still win over consumers.

In terms of basic services, digital-only providers aren’t all that different from bricks-and-mortar banks, especially as many of the larger institutions roll out their own online portals and mobile apps. In some cases, big banks have acquired or set up partnerships with the branchless upstarts. This year, for instance, Spain’s BBVA which also works with the Bancorp Bank to hold customers’ funds in Federal Deposit Insurance Corp.-backed accounts.

Making money

Like traditional banks, online-only providers make money through interchange fees paid by merchants for debit card swipes. Many, including Moven, offer customers fee-free access to tens of thousands of independently run cash machines, to counter big banks’ well-established ATM networks. If you need to send a paper check, though, doing it through digital-only banks may involve more time and effort than a traditional account would typically require.

As mobile banking becomes more popular, especially with younger adults, big banks as well as credit unions and community banks are beefing up their smartphone and online offerings and integrating more technology into their branches and ATMs. Some, including Wells Fargo and PNC Bank, are experimenting with smaller branches, while others have taken to putting teller windows in supermarkets, all to make in-person banking more streamlined and convenient.

If you don’t have a smartphone or tablet, or find it difficult to navigate pages and make transactions on a small screen, mobile banking might not be the right choice for you. But for those who love their smartphones, these mobile banking services are good news: As long as you can connect to the Internet, you’re good to go.

---

Tug-of-war image via Shutterstock.

The post Mobile Banking Apps Ratchet Up Pressure on Bricks-and-Mortar Institutions appeared first on NerdWallet Credit Card Blog.

Source Article http://ift.tt/1y39EC7

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5 Ways Credit Card Debt Could Wreck Your Finances

There’s no doubt about it: Avoiding credit card debt is a smart financial move. But have you ever stopped to consider exactly why credit card debt is so bad? As it turns out, it can lead to consequences a lot more serious than just big interest payments.

Here are 5 ways credit card debt could wreck your finances — consider yourself warned!

1. Above all, there’s a huge opportunity cost to paying all that interest

Yes, credit cards generally charge double-digit APRs and carrying a balance from month to month will result in big bucks washed down the drain on interest payments. But it’s not just this wasted money that’s bad news for your financial picture – it’s also the opportunity cost of shelling out all that cash.

For instance, if you’re paying hundreds in interest on your credit card debt every year, then you’re not using that cash to pay for a class that will increase your earning potential. You’re not using those hundreds as seed money to start a business. Heck, you’re not using the money to taking a needed vacation that will prevent burnout at work. So it’s more than just the money that you’re paying in interest, per se – credit card debt interferes with your ability to put your money to better use.

Looking for more specific examples of this? Read on.

2. Huge payments could make it hard to save for emergencies

Building up a reserve fund of 3-6 months of living expenses is a good way to protect yourself from the financial fallout of life’s inevitable emergencies. But for most people, 3-6 months of expenses represents several thousand in cash, and saving it up takes time even under the best circumstances.

If you’re making huge payments on a pile of credit card debt, you’re not going to be able to devote much of your monthly pay to emergency savings. This could leave you vulnerable to serious financial strain if a large, unexpected expense arises. Looked at through this lens, it’s easy to see how credit card debt really jeopardizes your future financial stability.

3. You’ll be discouraged from investing

When there’s a choice to be made between paying down credit card debt and investing, most people choose paying down debt. This is undoubtedly a reasonable choice. After all, market returns aren’t guaranteed. But the double-digit savings on interest you’ll see if you eliminate your credit card debt is.

However, the longer you delay investing as you toss your excess cash at your credit card balance, the harder it’s going to be to build a big enough nest egg to retire. Since most people don’t have employer-sponsored pension plans these days, our own funds are all we’ve got. You could be facing a serious financial crisis in your golden years if you let credit card debt slow down your wealth-building today.

4. It could hurt your credit, which makes all other loans more expensive

A factor that heavily influences the 30% of your FICO score that’s determined by “amounts owed” is a number known as your credit utilization ratio. This is the total amount you owe on your credit cards compared with your credit limit. If your credit card debt is pushing your credit utilization ratio above 30%, you should expect your score to suffer.

The problem here is that a low FICO score will cause any new loans that you take out to carry a higher interest rate. Consequently, your monthly payments will be higher, and this further cuts into your ability to use your income for saving and investing.

In short, credit card debt is a double-whammy: It’s expensive on its own, but it causes other products to become costlier, too. Shelling out so much cash every month makes getting to a financially comfortable place hard for most folks.

5. If you end up in bankruptcy, your earning potential might be limited

It’s not uncommon for employers to check potential employees’ credit reports before extending a job offer. If you end up filing for bankruptcy because of credit card debt and your boss sees this during a routine background check, there’s the possibility the promotion you’re after could go to someone else.

Although indirect, by interfering with your employability, a past credit card debt disaster could hurt your earning potential. So hopefully it’s clear – from this example and the others above – that getting in over your head with credit cards is bad news for reasons way beyond just big interest payments. If you don’t make an effort to pay off your debt now, your financial future could be at stake.

Wrecking ball image via Shutterstock

The post 5 Ways Credit Card Debt Could Wreck Your Finances appeared first on NerdWallet Credit Card Blog.

Source Article :http://bit.ly/1rMcsyD

Read More

5 Ways Credit Card Debt Could Wreck Your Finances

There’s no doubt about it: Avoiding credit card debt is a smart financial move. But have you ever stopped to consider exactly why credit card debt is so bad? As it turns out, it can lead to consequences a lot more serious than just big interest payments.

Here are 5 ways credit card debt could wreck your finances — consider yourself warned!

1. Above all, there’s a huge opportunity cost to paying all that interest

Yes, credit cards generally charge double-digit APRs and carrying a balance from month to month will result in big bucks washed down the drain on interest payments. But it’s not just this wasted money that’s bad news for your financial picture – it’s also the opportunity cost of shelling out all that cash.

For instance, if you’re paying hundreds in interest on your credit card debt every year, then you’re not using that cash to pay for a class that will increase your earning potential. You’re not using those hundreds as seed money to start a business. Heck, you’re not using the money to taking a needed vacation that will prevent burnout at work. So it’s more than just the money that you’re paying in interest, per se – credit card debt interferes with your ability to put your money to better use.

Looking for more specific examples of this? Read on.

2. Huge payments could make it hard to save for emergencies

Building up a reserve fund of 3-6 months of living expenses is a good way to protect yourself from the financial fallout of life’s inevitable emergencies. But for most people, 3-6 months of expenses represents several thousand in cash, and saving it up takes time even under the best circumstances.

If you’re making huge payments on a pile of credit card debt, you’re not going to be able to devote much of your monthly pay to emergency savings. This could leave you vulnerable to serious financial strain if a large, unexpected expense arises. Looked at through this lens, it’s easy to see how credit card debt really jeopardizes your future financial stability.

3. You’ll be discouraged from investing

When there’s a choice to be made between paying down credit card debt and investing, most people choose paying down debt. This is undoubtedly a reasonable choice. After all, market returns aren’t guaranteed. But the double-digit savings on interest you’ll see if you eliminate your credit card debt is.

However, the longer you delay investing as you toss your excess cash at your credit card balance, the harder it’s going to be to build a big enough nest egg to retire. Since most people don’t have employer-sponsored pension plans these days, our own funds are all we’ve got. You could be facing a serious financial crisis in your golden years if you let credit card debt slow down your wealth-building today.

4. It could hurt your credit, which makes all other loans more expensive

A factor that heavily influences the 30% of your FICO score that’s determined by “amounts owed” is a number known as your credit utilization ratio. This is the total amount you owe on your credit cards compared with your credit limit. If your credit card debt is pushing your credit utilization ratio above 30%, you should expect your score to suffer.

The problem here is that a low FICO score will cause any new loans that you take out to carry a higher interest rate. Consequently, your monthly payments will be higher, and this further cuts into your ability to use your income for saving and investing.

In short, credit card debt is a double-whammy: It’s expensive on its own, but it causes other products to become costlier, too. Shelling out so much cash every month makes getting to a financially comfortable place hard for most folks.

5. If you end up in bankruptcy, your earning potential might be limited

It’s not uncommon for employers to check potential employees’ credit reports before extending a job offer. If you end up filing for bankruptcy because of credit card debt and your boss sees this during a routine background check, there’s the possibility the promotion you’re after could go to someone else.

Although indirect, by interfering with your employability, a past credit card debt disaster could hurt your earning potential. So hopefully it’s clear – from this example and the others above – that getting in over your head with credit cards is bad news for reasons way beyond just big interest payments. If you don’t make an effort to pay off your debt now, your financial future could be at stake.

Wrecking ball image via Shutterstock

The post 5 Ways Credit Card Debt Could Wreck Your Finances appeared first on NerdWallet Credit Card Blog.

Source Article http://ift.tt/1y39EC7

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5 Reasons Your Credit Score Is More Important Than Your GPA

If you’re a college student, you’re probably working hard to keep your grade point average looking sharp. After all, your GPA could be your ticket to graduate school, a competitive internship or maybe even your dream job.

But if you’re hitting the books so hard that you’re ignoring another important number – your credit score – you could be making a huge mistake. It might be hard to believe, your three-digit credit score is more important than your GPA. Not sure why? Check out the five reasons below.

1. It determines the cost of future purchases

It’s true that your GPA could determine certain aspects of your future, but your credit score is guaranteed to influence one thing – the cost of most of the big purchases you’re going to make after graduation.

Here’s why: Lenders and insurance agents (among others) look at your credit score when they’re figuring out how to price the products they’re selling you. For instance, when you apply for your first car loan, the bank you’re working with will run a credit check to decide how much to charge you in interest on the auto note. A low credit score will mean paying a much higher interest rate. This, of course, will make the cost of the loan higher overall.

A high GPA might open the door to academic opportunities, but a high credit score will keep more cash in your wallet. This is much more important once you’ve left school behind.

2. Once your score goes south, it takes much longer to improve

A bad semester could have a negative impact on your GPA, which is certainly stressful. But it’s relatively easy to revive your average the following term if you buckle down and study hard. In other words, a few bad moves can be corrected pretty quickly.

Not so with your credit score. Messing up just once could result in a serious loss of points that will take a long time to correct. For instance, if you don’t pay a bill and it goes into collections, you’ll lose a lot of points from your credit score – perhaps as many as 100. But there’s no extra credit or big exam to ace that will help it you get these points back quickly. You’ll have to demonstrate years of positive payment history to get your score back to good form.

We’re certainly not suggesting you should take your GPA lightly, but it’s important to remember that your credit score is less forgiving – this is why prioritizing it is a smart long-term move.

3. It’s almost impossible to put a bad score behind you

When you’re an undergraduate, it’s hard to think about much else beyond your four years in school. But there is a wide world out there beyond your bachelor’s degree, and within a few years of graduation, your GPA loses a lot of its importance. Pretty soon, potential employers will be much more interested in your past job performance than how you did in your freshman composition course.

But your credit score will follow you everywhere you go, for the rest of your adult life. Since it’s checked under so many circumstances, there’s not point in time when it will stop mattering, the way your GPA probably will. You’ll need it, and need it to be good, for as long as you’re participating in our financial system.

Again, this goes to show that the importance of working toward good credit might be slightly greater than the importance of working toward good grades.

4. It will influence your ability to find a place to live

When it comes to basic human needs, shelter is at the top of the list. Your GPA isn’t going to be very helpful when it comes to find a decent place to live, but a good credit score certainly will be.

This is because most landlords will check your credit score as part of the rental application process, and many simply won’t accept tenants with bad scores. Of course, the same is true if you’re thinking of buying a home. If you don’t have good credit, qualifying for a mortgage will be nearly impossible.

So no matter what, building and maintaining good credit will affect your ability to find housing. This reality alone should convince you that it’s at least a little more important than your grades.

5. It could put a crimp in your romantic relationships

It might seem strange, but your credit score (unlike your GPA) could have an impact on your dating life. According to a 2014 NerdWallet analysis, 53% of single adults over age 25 are “somewhat less likely” or “much less likely” to date someone with bad credit.

Unless you’re habitually dating very pretentious people, it’s highly unlikely that your GPA will be a considered a deal breaker by potential mates. But most young adults quickly realize that bad credit limits their options and don’t want to get serious with someone who might hold them back. So once again, credit score trumps GPA in terms of long-term importance.

Final words of advice: Since having good credit is a bigger deal than you thought, you’re probably wondering how you can improve yours. Here are a few tips:

• Pay your bills on time.


• Avoid credit card debt, and definitely avoid maxing out a credit card.


• Start establishing a credit history as soon as you can. The easiest way to do this is by getting a credit card early and using it responsibly.


• Don’t apply for too much credit at once.


• Check your credit reports at least once per year; if you spot a mistake, have it corrected as soon as you can.

If you follow these tips, you’ll be on your way to a bright future – academically and financially, of course!

Study image via Shutterstock

The post 5 Reasons Your Credit Score Is More Important Than Your GPA appeared first on NerdWallet Credit Card Blog.

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