Credit and Credit Cards
When you turn 18, it will seem as if you
suddenly become very popular with credit card companies. You will
probably receive two or three forms in the mail asking you to apply for a
credit card. These credit cards may be from local department stores,
general credit companies (such as Visa and MasterCard), or from oil
Although it is very exciting to receive
these cards, you need to remember that they can easily get out of
control. When you purchase something with a credit card, you must repay
the credit card company. Unless you pay the credit card company within
the grace period, you will usually have to pay interest. It is
unfortunate, but many young adults owe thousands of dollars to credit
card companies. If you receive a credit card and decide to use it, read
the terms of the agreement very carefully. Different credit cards have
different interest rates, which can make a considerable difference on
your bill. Most companies will allow you to pay a minimum balance each
month. These minimum balance payments are usually quite low. A
combination of both low minimum balance payments and large interest
payments could mean that a $100.00 item ends up costing you $150.00.
If you lose your credit card, you should
immediately notify the credit card company. Additionally, you should
never release your credit card number over the telephone unless you are
sure that you are working with a reputable company.
A credit rating is a tool used to determine
whether or not you have a history of promptly paying your bills. Credit
bureaus are located throughout the state that accumulate credit
information about you from people such as landlords, banks, credit
unions, etc. If you make an arrangement with a credit card company to
make payments on or before the 15th of each month and you skip a
payment, chances are high that this missed payment will be reported to
the credit bureau. The credit bureau will then apply this information to
your credit rating for future reference.
If you are denied credit based upon your
credit rating, it is required by law that you be sent a letter
explaining why your credit was denied. The letter will also contain
information advising you how to get a copy of your credit rating. You
have the right to obtain your credit rating and challenge information
that is on it.
A good credit rating is very important and
should be taken very seriously. The best way to protect your credit
rating is to make sure that you do not acquire excessive debt and that
your payments are always on time.
Many people make the mistake of living a
"buy now - pay later" way of life. When they reach the maximum amount
allowed on their credit cards and can no longer obtain loans from their
bank, they are often on the brink of financial disaster. Careful money
management will help you avoid this type of situation. However, if you
do accrue multiple bad debts, there is help available.
Throughout the state of Iowa, there are
organizations which offer professional money management advice and help
you consolidate your debts to avoid bankruptcy. These services are
usually offered for a very small fee or they may be entirely free.
Agencies that provide this type of service are usually listed in the
yellow pages under "Credit and Debt Counseling."
Bankruptcy is a proceeding under federal law
by which a person may be released from paying his or her debts or can
arrange for regular payments so that creditors are repaid. Any person
can file for bankruptcy. It is not necessary for your debts to be
greater than your assets to file bankruptcy.
Bankruptcy petitions are filed with the
Clerk of the United States Bankruptcy Court. The clerk of court charges a
filing fee to file a bankruptcy petition. If you file a petition in
bankruptcy, most lawsuits and garnishments are automatically stopped.
Your creditors have the right to ask you questions about your assets
when you file a bankruptcy. A trustee will be appointed to evaluate your
situation and pay your creditors.
Bankruptcy is a very serious matter that
will affect your credit rating for the rest of your life. Your attorney
should be consulted prior to the initiation of a bankruptcy.
It is a good idea to develop a
relationship with a bank as soon as possible. This may be accomplished
by opening a checking and/or savings account. Prior to opening an
account, you should examine what each bank has to offer. Some banks
offer free checking accounts while others require a minimum balance.
Some banks may also offer you an ATM (Automatic Teller Machine) card
along with your checking account.
Checking accounts are helpful when you are
unable to pay for purchases in cash. When you sign a check, you are
stating that you have that amount of money in your bank account. If you
write a check for more money than you have in your bank account, you are
committing a crime. Therefore, it is very important to keep track of
the amount of each check and the amount in your account to avoid