The Credit Handbook
Electronic banking, also known as electronic funds transfer (“EFT”), is the use of electronic means to transfer funds directly from one account to another, rather than by check or cash. EFT is commonly used to deposit paychecks directly into workers’ accounts, withdraw money from an ATM, pay certain bills on a regular schedule, and to buy items with a check card.
Debit and ATM cards are not credit cards, because you are not borrowing money when you use them. These cards allow you easy access to your own money. Because they are not credit cards, debit and ATM cards do not help build your credit rating. What they do offer is convenience.
ATM cards, or Automatic Teller Machine cards, are used at ATMs to withdraw cash from your bank account. You type a password (a Personal Identification Number or PIN) into the ATM to verify your identity and activate the card.
Debit Cards or Check Cards
“Check card” is another name for debit cards. A debit card can be used at the point of purchase to transfer money from your account to the store’s account. In 2014, debit card users spent an average of $9,291. These cards are used instead of cash, personal checks, or credit cards. Sometimes your ATM card and your check card are the same. They are convenient, but keep these drawbacks in mind:
- You have less bargaining power with a check card than with a credit card. With a credit card you have the right to refuse to pay for a purchase if you are not satisfied with it. With a check card you have already paid for the item, so you have less bargaining power.
- A thief with your check card and PIN can take all the money in your account. The thief can even make point-of-sale purchases with your card.
- Your liability is limited to $50 if you report the check card lost or stolen within two days. If you do not report the card lost or stolen within two days, your liability can jump to $500. After 60 days, you can be responsible for the entire amount (Visa and MasterCard have voluntarily implemented zero liability policies, but this protection is not written into law, and some requirements or exceptions may apply).
- You may wish to enter check card transactions into your checkbook ledger, like you would record checks you write. If you sign up for online access to your bank account you can review your check card transactions before—or even instead of—receiving monthly statements.
Fighting Credit Card Fraud
If you are the victim of credit card fraud you will spend a lot of time undoing the damage. To help prevent it from happening to you, the Federal Trade Commission recommends these tips:
- Sign your cards as soon as they arrive.
- Keep (in a secure place) a record of your account numbers, their expiration dates, and the phone number and address of each company.
- Keep an eye on your card during the transaction, and get it back as quickly as possible. Make sure you get your own card back.
- Void incorrect receipts, destroy carbons, and save receipts to compare with billing statements.
- Open bills promptly and reconcile accounts monthly, just as you would do with your checking account.
- Report any questionable charges promptly, and in writing, to the card issuer.
- Notify card companies in advance of a change in address.
- Lend your card(s) to anyone.
- Leave cards or receipts lying around.
- Sign a blank receipt. When you sign a receipt, draw a line through any blank spaces above the total.
- Write your account number on a postcard or the outside of an envelope.
- Give out your account number over the phone unless you’re calling a company you know is reputable. If you have questions about a company, check it out with your local consumer protection office or Better Business Bureau.
Stop Identity Thieves in Their Tracks
There were approximately 13.1 million identity theft victims in 2015. The amount of fraud related to identity theft is estimated to cost Americans tens of billions of dollars every year.
Identity theft is a growing concern for citizens across Minnesota and the rest of the country. A few vital bits of personal data are a gold mine for information crooks looking to steal your identity. An impostor using personal information like your address, birth date, and Social Security number can acquire phony credit cards, siphon money from your checking or savings accounts, get a mortgage, and even give you a criminal record.
Maybe the identity theft is first noticed when you don’t receive your monthly credit card statement. Or, you receive your bill and it contains charges from places you have never been. Either way, you may be the latest victim of a crime that can wreak havoc on your personal finances.
Worse, you may not even be aware your identity has been stolen until something goes wrong. Over the last decade, the explosion of information available to businesses and companies about individuals is staggering. In addition, creditors are often willing to give consumers access to thousands of dollars of credit quickly and with little information.
Minnesota Security Freeze Law
A Minnesota law helps citizens protect themselves from new account fraud. If you believe that your financial information has been stolen, you may wish to “freeze” your credit report so that the thieves cannot obtain a credit card or loan in your name. The law empowers any consumer to freeze his or her credit report by simply contacting a consumer reporting agency and requesting a credit report freeze. A credit report freeze will deny identity thieves access to the consumer’s credit history and prevent them from obtaining new credit cards or loans under the consumer’s name.
Any Minnesotan can impose such a freeze on his or her personal credit report for any reason. Victims of identity theft can have their credit reports frozen without charge. Non-victims can proactively freeze their credit report for a $5 fee. When a credit reporting agency receives a freeze request, it must place the freeze within three days of the request, and provide a unique PIN to the consumer within 10 days of the request.
When your credit file is frozen, you cannot be approved for new credit. In order for you to obtain new credit, you must use your PIN and contact the credit reporting agencies to thaw your file. While credit reporting agencies are to thaw credit reports in an expedited manner, thawing your file may take up to three business days. Be sure to plan ahead and temporarily thaw your credit file before applying for credit.
The consumer may then use the PIN to temporarily lift or “thaw” his or her report for a specific period of time or for a specific creditor. For example, suppose that you are looking to purchase a new car. If you know that you want to buy the car from Dealership XYZ, you may contact the credit reporting agencies and allow that specific dealership to access your credit report. Or you may request that your credit report be accessible to any creditor for a specific period of time, such as 30 days, to give you time to shop at several dealerships. After the specified time, your credit report will automatically refreeze.
Be sure to keep the PIN in a safe place. If you forget your PIN, you can get a second one for free, but will have to pay $5 for a third one. Like placing the freeze, victims of identity theft can thaw their credit reports without charge, while non-victims may be charged a $5 fee.
Because different credit issuers may use different credit reporting agencies, you will need to freeze your credit report with each of the three major credit reporting agencies. Each of the three credit reporting agencies has its own process for taking credit freeze requests. If you are a victim of identity theft, you will need to provide the credit reporting agencies with a copy of either the police report or case number documenting the theft to avoid the $5 fee.
For instructions on how to request a credit freeze, consumers may contact
the credit reporting agencies as follows:
Experian Security Freeze
Equifax Security Freeze
TransUnion Security Freeze
Credit reporting freezes are one defense in the fight against identity theft. As this crime continues its climb to the top of law enforcement charts, you can be proactive in protecting yourself from its expensive, time-consuming consequences by freezing your credit report.
Make Yourself Less Vulnerable to Identity Theft
While there is no guaranteed way to stop a thief, there are ways to become a less attractive target:
Keep and carry as few credit cards as possible.
After completing a credit card transaction, make sure that the card you get back is your own. Cancel all credit accounts you don’t use and when you open a new credit account, ask that a password is used before any changes or inquiries can be made.
Carefully review all bank and credit card statements, canceled checks, and phone and utility bills. Report any discrepancies. If statements don’t arrive on time, contact the post office and the creditor to ensure your mail is not being diverted.
With respect to accounts that have been opened fraudulently or tampered with, contact the creditor and ask to speak with someone in their fraud department. Be sure to follow up in writing, file a police report, and keep copies of all documents for your records.
Guard your information.
Your checks should not have your driver’s license number or phone number preprinted on them. Never put your Social Security number on a check. Don’t let a merchant write a credit card number on your check. Shred all personal documents before you discard them so a thief who picks through your garbage will come up empty. If you have reason to think someone else is using your Social Security number, call the Social Security Administration to verify the accuracy of your account.
Use your telephone with caution.
Avoid giving out your credit card number or other personal information over the telephone unless you have a trusted business relationship with the company. Do not provide personal information over unencrypted wireless communications such as cordless or cellular telephones.
Check your credit report.
You are entitled to a free copy of your credit report once each year from each of the three credit bureaus. Free annual reports may be requested in the following ways:
- Logging on to: www.AnnualCreditReport.com
- Calling: (877) 322-8228
- Writing: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA, 30348
Make sure the report is accurate and includes only those
activities you have authorized.
If there has been fraud on your account, tell each credit bureau to flag your file with a fraud alert including a statement that creditors should contact you for permission before they open new accounts in your name.
Stop pre-approved credit card offers.
In addition to maintaining your credit report, the three major credit bureaus sell to companies lists of individuals who meet a certain credit criteria. To remove your name from the generated lists, you should call the “Opt Out” hotline for the three major credit bureaus Equifax, Experian, and Trans Union at: 1-888-5OPT-OUT (888-567-8688) or “Opt Out” online at www.optoutprescreen.com.
These steps to protect your personal information will make it more difficult for someone to steal your good name, but be vigilant because, as technology makes the transfer of information easier, crooks will try to find ways around today’s safeguards.
For more information about privacy and identity theft, request a free copy of the publication Guarding Your Privacy: Tips to Prevent Identity Theft published by the Minnesota Attorney General’s Office.
The Rent-to-Own Trap
Rent-to-own stores often target low-income consumers who do not have credit cards. These stores charge the equivalent of 100 percent to 125 percent average annual interest rates. Rent-to-own businesses offer items such as televisions, washers and dryers, refrigerators, couches, and more. They set up short-term rental-purchase agreements. No down payment or credit check is usually required. The renter pays over time to “rent” an item. If the renter makes all the required payments, the renter then owns the item. The catch is, the renter usually makes payments that add up to much more than the cost of the item, or the cost of the item bought through a traditional credit card. Rent-to-own deals should be avoided when other options are available. Minnesota law caps most consumer rent-to-own interest rates at eight percent, but some businesses take advantage of consumers who aren’t aware of the law.
Look Out for These Scams
Avoid these common scams that prey on people in financial difficulty.
Advance fee loan scams may sound appealing, because ads promise that companies can deliver loans no matter what your credit situation. Often you are asked to make some type of up-front payment. This is illegal. Usually you’ll lose your money and never see a loan.
Businesses and some nonprofit organizations that offer debt counseling and reorganization plans may charge high fees and fail to follow through on the services they sell. Others may misrepresent the terms of a debt consolidation loan, failing either to explain high costs or to mention that you’re signing over your home as collateral. Other businesses advertising debt reorganization may not explain that they are really pushing Chapter 13 bankruptcy, an option that may not be right for you.
Companies offering “credit repair” promise to clean up your credit history. These con artists can’t deliver or may charge you to do what you could do for yourself for free. They may also advise you to do something illegal. No matter which approach they take, they are likely to disappear with your money, leaving you worse off than when you started.
You may be the target of another credit repair scheme, often called “file segregation.” You are promised a chance to hide unfavorable credit information and establish a new credit identity. The scheme is illegal.
Usually when you pay money to the crooks running these offers you will be directed to apply for an Employer Identification Number (“EIN”) from the Internal Revenue Service (“IRS”). These numbers are typically used by businesses to report financial information to the IRS and Social Security.
After you receive your EIN, you are told to use it in place of your Social Security number when you apply for credit. If you defraud the government this way, you could face fines or even prison.