How will the new bank fees affect your money? (Image: Thinkstock)

Consumers scored a victory recently when Bank of America and a host of other banks decided to forgo charging bank fees on debit cards. But that doesn’t mean Americans won’t face other new fees and unexpected charges by the banking industry.

Here are several ways that U.S. banks are likely to sneak in new fees—and start squeezing money out of their customers in order to pad banks’ own coffers.

Lowering Interest Rates on Savings and Deposits

Think the interest you’re earning on your savings or money market account is pitifully low right now? It could get worse in the future if banks further decrease their deposit rates as a way to save money and, in effect, boost revenue.

According to Dan Geller, founder of Market Rates Insights, banks could lower their deposit rates by a scant 0.01% per month and still produce nearly twice as much in interest-expense savings as the new fees on debit cards would have generated.

By Geller’s calculations, a monthly decrease of 0.01% in the national average deposit interest rate reduces interest expense for banks by about $1.5 billion a month, which impacts a bank’s bottom line in the same way as earning this amount through fees.  And that $1.5 billion in monthly savings is far more than the potential $875 million banks stood to gain in monthly debit card fees.

In 2010, banks already lowered their interest rates by an average of 0.01% a month. So financial institutions that choose to progressively drop rates again in late 2011 or 2012 can simply say that they’re continuing a “normal” business practice as part of operating in a low-interest environment.

But make no mistake: by lowering the interest rates they pay on your savings, “banks can maintain a healthy net interest margin and protect their bottom line in the next two to three years until the economy recovers,” says Geller. “Better yet, this objective can be achieved with minimal effort and, most importantly, without alienating customers.”

(Image: Thinkstock)

Hiking Various Fees Tied to Credit Cards

In recent years, late payments on credit cards have averaged about $35. One possible way for banks to increase their income would be to slap delinquent customers with even bigger late-payment penalties.

That’s a potential scenario, but not as likely as fees that are under the radar of the average consumer.

For instance, credit card issuers might impose foreign currency or transaction fees when you use a credit card out of the country, or they may charge a fee on a rewards credit card when you redeem a “free” airline ticket, says Curtis Arnold, founder of CardRatings.com, a credit card comparison site that helps consumers find the best deals on credit cards.

“They may even start charging for the printed statements that you get in the mail under the guise that they’re trying to be environmentally friendly,” says Arnold, noting that “banks are very creative.”

“The public outcry over rising fees has become such a toxic issue and it generated such buzz in the media that I expect banks to regroup and figure out what to do next. They’re not going to just lay down and take this,” Arnold adds. “They’re going to fight back.”

Arnold’s advice: Be on guard and constantly read the fine print of your credit card and banking agreements. Also, even though the new Consumer Financial Protection Bureau will be a watchdog for consumers Arnold says “we shouldn’t trust regulators to be our life preservers.”

(Image: Thinkstock)

Escalating Checking Account Fees

Despite many claims about “free checking,” the truth is that most checking accounts cost consumers dearly. And those checking-related fees may rise as banks look to make up lost revenues.

Already, the average banking account customer who doesn’t meet minimum balance requirements pays an average of $5 to $12 per month for a checking account, according to a September 2010 research report from JP Morgan Chase.

Moreover, all the top 10 U.S. banks charge non-sufficient funds fees that range from $19 to $37 per occurrence. “To replace lost maintenance fees, banks have increasingly turned to punitive fees (e.g., NSF, extended overdraft, stop fees, etc.),” Chase researchers wrote.

So it’s not far-fetched to think that this trend could be magnified in the future.

In the meantime, however, the fact that BofA, Wells Fargo, Chase and other banks have abandoned their plans for debit fees “should give us hope as consumers for what we can accomplish if we work together,” says Arnold. “This is a great victory and it demonstrates that we can fight back against big banks.”

“Ask The Money Coach” is a syndicated column written by personal finance expert Lynnette Khalfani-Cox, co-founder of the free financial advice blog, AskTheMoneyCoach.com. Follow Lynnette on Twitter at @themoneycoach.

Fair Isaac, creator of the FICO score, has rolled out to all three credit bureaus its newest general-purpose FICO score, dubbed FICO 08. With this new version of the credit score, FICO says its will disregard collection accounts and other dings on your credit file when the original balance owed was under $100.

The logic there,” says FICO’s Tom Quinn, “is that for small dollar amounts, like a collection notice from a public library system, the (credit scoring) model will now bypass those and not consider those to be negative. Any kind of derogatory public information that’s less than $100” will be excluded, Quinn adds.

This certainly has the potential to help boost your FICO score if it was impacted by such a blemish. But beware: amid the credit crunch, every single account you have, and every single financial transaction you engage in is being analyzed to determine your credit worthiness.

All Transactions – Large and Small – Matter Greatly Amid the Credit Crunch

Also, even with FICO saying it won’t use those small accounts in its scoring methodology, the debts nonetheless remain on your credit file, and some lenders may require that you resolve those issues or pay off those debts before approving you for a loan.  More importantly, you should know that every transaction – large and small – matters greatly amid the current credit crunch. And when I say “every” transaction, I mean it.

Your Financial Habits Are Under Intense Scrutiny, Even if You Don’t Know It

Increasingly, retailers, credit reporting agencies, credit scoring companies, and of course banks and other lenders are watching every financial transaction you make. Made an online purchase to buy some shoes lately? Somebody tracked it.

That’s why the next time you’re working at your computer – or simply surfing the web – you’ll see a pop-up or some advertisement featuring shoes. Ditto for school supplies, furniture, electronic gadgets, or anything else you purchase. But the scrutiny goes way beyond just watching what you buy, and then trying to sell you more of it.

Retailers, lenders and credit-scoring firms are all capturing a wealth of data about your financial habits, both on and offline, in an effort to tell them who among us is the most credit-worthy – and who is the least.

(Image: Thinkstock)

You May Be Deemed “Risky” Based on What You Buy and Where You Shop

So what exactly are they watching? In a word: everything. They’re looking to see whether you accept credit card offers, online, in the mail or via telephone. They’re gauging whether or not you’re likely to take a balance transfer offer for the initial low interest rate – only to toss the card when the offer expires, or when a better deal comes along. They’re looking at the types of stores you frequent, and whether you spend money (that is, use your credit cards) at “risky” establishments, like bars, clubs and casinos.

They’re also poring over all manner of data regarding your housing, and that includes both renters and homeowners. For those of you who rent, they’re looking at whether you’ve consistently paid your rent or time, whether you’ve been delinquent, and whether you’ve ever been evicted.

For homeowners, they’re looking at how much overall debt you have, whether or not your mortgage is a fixed-rate or adjustable loan, whether or not you have a home equity loan or line of credit, and if so, how much you typically tap and how often. If it seems as if the credit industry has got a spotlight on you, it’s because they do. But you don’t have to be blinded by it – or blind-sided – if you manage your financial affairs properly.

Your Credit Report is Constantly Being Updated

Again, when I say that every transaction counts, let me make something clear: I’m not just referring to business transactions that involve loans. Every transaction means just that – every economic exchange you make, every credit, loan or contract agreement you enter into, and every financial move of yours that can be documented – all of it matters greatly. Every single transaction counts.

Do you think that your dealings with cell phone companies, water end electric services, and public utilities aren’t being monitored? Think again. About 100,000 organizations supply information to the credit reporting agencies. These organizations include banks, lenders, collection agencies, credit card companies, leasing firms, utility companies and any other entity that extends credit or reports information about you. Even libraries have been known to rat on delinquent patrons to the credit bureaus for having an overdue library book!

The same pattern holds true for various municipalities around the country; places like Chicago and New York City will report you to collection agencies in a hot minute to for failing to pay parking tickets or moving violations. And as cash-strapped cities try to cope with budget shortfalls and a tough economy, you don’t have to be Nostradamus to predict that many more cities will soon start using collection agents to pursue “small” debts due from local citizens.

The Convergence of the Credit Crunch, Technology and Big Brother Means You Must Be Careful Even With Small, Overdue Bills

Thus, transactions large and small take on greater importance amid the credit crunch because, in many ways, Big Brother isn’t merely looking over your shoulder these days. Big Brother now seems to be peeking into your laptop, using a skycam to watch where you go, accessing your Blackberry or iPhone, and placing wiretaps on your home and business phones too. OK, so maybe it’s not that bad. But you get my point.

An incredible amount of information about your finances and money patterns is being captured, analyzed, and dissected in ways you probably never imagined. I predict that in the future, this trend will greatly increase—even for small bills.

Simple, little transactions that you may regard as minor or even big bills that you are disputing can all wind up having serious ramifications for your credit rating.

That magazine subscription you ordered (even if it was just part of a sales promotion) can come back to haunt you if the $14.95 bill isn’t paid. Those music videos you’ve neglected to return (since forever) could land you on someone’s collection list. And even that hospital co-payment or medical debt that you’ve been sent a bill for yet again – for the umpteenth time after your insurer refused to pay – that too could ultimately damage your credit rating if left unattended.

So do yourself a favor—handle all your bills wisely and pay everything on time, and that includes small bills of less than $100.

“Ask The Money Coach” is a syndicated column written by personal finance expert Lynnette Khalfani-Cox, co-founder of the free financial advice blog, AskTheMoneyCoach.com. Follow Lynnette on Twitter at @themoneycoach.

(Image: Thinkstock)

Charge or credit? Cash or travel awards? Those are just a few of the many questions that come up when shopping for a credit card, and for business owners this can be the difference between a financial sink or swim situation.

Don’t get caught up in the countless small business offerings provided by banks and card-issuers.  With an array of credit card choices, you want to ensure you’re making the right decision for your business. Small business owners should consider their spending habits and how they plan to pay charges, among other things. When it comes to sorting through the bevy of offerings, be sure to utilize an online credit-card comparison site such as Bankrate.com, CreditCards.com and CardRatings.com.

Click here to read more at The Wall Street Journal…

Should you opt for a card with no annual fee, or one that will allow you to rack up gobs
of rewards points? If your credit is less than perfect, how can you find a card that won’t
charge you an exorbitant interest rate? And what’s a good interest rate these days anyway?

Clearly, answering all these questions—let alone sifting through the array of potential cards—isn’t always easy or clear-cut.

Fortunately, there are some ways to narrow down your search and help you find the best
credit card deal, based on your credit rating and other factors.

After all, if you’re going to apply for a credit card, do a balance transfer, or take a bank up
on its offer for a new card with a “low introductory rate,” you want to make sure you have
a reasonable good chance of getting approved, and that you’re not just wasting your time,
right?

With this in mind, here are five important tips to follow when searching for the best credit
card deal:

1. Use a Credit Card Comparison Site

The single best way to see what credit card options exist, given your financial standing, is to do some comparison-shopping online. Start by checking out CardRatings.com, a consumer education and credit card comparison site.

CardRatings.com offers editor and consumer reviews of every type of credit card
imaginable – from student and business cards to cash back and travel cards and more.
The site helps you decide what card best fits your spending habits and financial profile,
get the best rates available, and ultimately lower your credit card debt. Best of all,
CardRatings.com is free to use.

2. Read the Fine Print

Most of us don’t take the time to read the fine print in credit card offers. But as I’ve
previously explained, reading the fine print on any credit or financial transaction can help
you avoid being suckered, or even ruining your credit score.

At the very least, it’s smart to know the fine print before you fill out a credit card
application because you don’t want to get disappointed if the deal doesn’t work out to be
as sweet as you thought it might be. For example, just because a bank or credit card issuer
touts a rate “as low as 8.9%,” that doesn’t mean you’re necessarily going to qualify for
that rate. They may specify, in the fine print, what credit rating or other conditions and
requirements you need to meet in order to nab that ultra low rate.

3. Be Aware of Annual Fees and Other Charges

Because of recent regulatory changes, banks and credit card issuers are stepping up their
efforts to collect fee income from consumers. Some credit cards impose an annual fee just
to maintain the card, but there are still plenty of card options that don’t have any annual
fees—throughout your cardholder agreement.

For those that do have fees, you may be able to get the annual fee waived during your first
year as a cardholder, or in subsequent years. You’ll never know unless you ask for that
fee to be waived. Whatever the case, just be sure you’re aware of whether a card you’re
considering imposes annual fees or other charges. If so, the benefits of the card should far
outweigh those fees in order to make the card worthwhile.

4. Find Out If Special Deals Or Zero-Interest Offers Available

Many credit card issuers attract new customers by extending low “teaser rates” or even
zero-interest offers where the cardholder pays no interest on either purchases or balance
transfers for the first six to 12 months.

If you are planning to coordinate a balance transfer or want to make a larger purchase that
won’t collect interest, look for a card with this type of promotional offer. Just make sure
you are able to pay off the entire balance before the promotional period is over. Otherwise,
you’re on the hook for those interest charges.

5. Watch Those Balance Transfer Fees

If you want a new credit card for the purposes of initiating a balance transfer, switching
credit cards is usually a fairly easy process. A balance transfer can even boost your credit
score.

But each credit card issuer will impose a fee for each transfer. This is usually a percentage
of the amount transferred, and can vary by issuer. A 3% transfer fee, or a maximum charge of $75 or so is common. So if you plan to transfer large balances, make sure you’re aware of how much you will be paying in fees, and seek out the lowest rate possible when selecting a credit card.

By some estimates, there were 171 million MasterCard brand credit cards and 269 million
Visa credit cards in circulation in the United States in 2010 alone. That’s a huge number of
credit cards—not to mention other credit and charge cards like American Express, Discover and so on.

Since this industry is so competitive, it pays to seek out the best credit card deal available
and ensure you are paying the lowest possible rates on any balances you may carry.

Weathers’ saving grace was the debt management plan she’d developed through Novadebt, a nonprofit consumer credit counseling organization. But in recent years, more cardholders have turned to a little-known alternative called a credit card hardship program, which is offered by most creditors such as American Express and JPMorgan Chase.

Unlike debt management plans offered through credit counseling agencies, which assist with consolidating payments, a hardship program allows you to make arrangements directly with your creditors. An internal program of credit card issuers that may vary by name from one creditor to another, it helps cardholders who are struggling to make minimum payments but who wish to avoid defaulting on their debt.

A phone call to your card issuer is the first step to getting enrolled in a credit card hardship program that will, depending on your circumstances, lower your monthly payment, reduce your interest rate, or suspend fees and penalties. While enrolled, you will be denied charging privileges. Upon completing the program, some issuers allow use of the card, sometimes with a lowered credit limit.

American Express offers its cardholders several options: a short-term customer assistance program (up to 12 months), a long-term consumer debt management program (more than 12 and up to 60 months), or collections, says Marina Hoffmann Norville, the company’s director of public affairs and communications, risk and information management. With a short-term agreement, a customer’s monthly payment is reduced by  “as much as 57%  for up to a year, depending on particular circumstances,” says Hoffmann Norville.

“Cardmembers who are current, in addition to delinquent members, may be eligible.”
Before you enroll, “Find out how this will appear on your credit report,” says Barry Paperno, consumer operations manager for myFICO.com. The way a hardship program is labeled could affect your credit score. Two credit report labels that could lead to a lower credit score are “partial payment plan” and “settlement,” says John Ulzheimer, president of consumer education at SmartCredit.com.

With American Express, members on a short-term plan aren’t reported negatively, says Hoffmann Norville. But those enrolled in a long-term program will find the same canceled/collections notations on their credit reports as they would if they were in collections. For long-term programs, customers might be referred to the National Foundation for Credit Counseling, which may, in turn, connect them with not-for-profit agencies that manage long-term arrangements on behalf of the creditor. “Since a long-term program is more than one year, during that time the customer would be canceled and not able to use their card, and also in collections,” Hoffmann Norville explains. “So they would be reported as ‘canceled/collections.’ If possible, try to get the more favorable notation ‘account payments managed by financial counseling program.’ ”

Griffin, 33, paid off all her consumer debts last year. She also surrounds herself with people whose values are similar to hers, such as her friend Jade Brawley, a Washington, D.C.-based schoolteacher who is working to improve her credit score, which is in the mid-700s. “Before I make a purchase, I plan for how I’m going to pay it off,” says Brawley, 32. For Griffin, having someone mirror her own money-management philosophy motivates her to reach her financial goals.

Achieving A+ credit can pay off in the form of lower interest rates, faster loan decisions, and easier access to capital. The most widely used credit score is Fair Isaac Corp.’s FICO score, which ranges from 300 to 850. “Excellent credit is whatever credit score is necessary to get the best deal that a lender has to offer,” says John Ulzheimer, president of consumer education at credit monitoring website SmartCredit.com. That number can vary not only by lender, but according to the type of loan a consumer is applying for. For example, lenders awarding 30-year fixed-rate mortgages might consider a 760 FICO score to be A+, while those offering 36-month auto loans might consider a consumer with a 720 score or above to have excellent credit, says Barry Paperno, consumer operations manager for myFICO.com. Currently, you’ll likely qualify for the best rates for any type of big-ticket purchase if you have a score of about 760 or above, experts say.

(Continued on next page)

According to Fair Isaac Corp., the number of people with excellent credit has decreased since the recession. In April 2008, 18.7% of the population had FICO scores of 800 and above, while in April 2010, only 17.9% had that distinction. Another 19.5% of Americans had FICO scores between 750 and 799 in April 2010. The median FICO score has been about 711 since April 2010, says Paperno. During that same period, those with low credit scores increased, with 35% of Americans having FICO scores below 650, up from 33.7% of Americans in 2008.

It’s easier to achieve excellent credit if you diligently manage your credit and don’t fall into any debt traps along the way. For those with a spotty track record, it typically takes between three and seven years to rebuild your score unless it’s a personal bankruptcy, which will take 10 years to fall off your credit report, Ulzheimer says.

For example, if a consumer’s credit score dropped to the 500s, it might take a couple of years to get the score to the 600s or lower 700s. However, it might take seven to 10 years for that same person to get up to 780 because enough time would have to pass for any negative information to fall off the credit report. “A 780 is an elite credit score, and if you want an elite credit score, you’ve got to have an elite credit report—which means you can’t have anything negative on it,” Ulzheimer adds.

The first step you should take is to scrutinize your credit report. “When you get a copy of your report and score, the report will tell you the main reasons your score’s not higher,” says Tom Quinn, credit score expert for Credit.com. You can request a free copy at Annualcreditreport.com. If the biggest factor is high credit card balances, start paying those down aggressively.

Likewise, if late payment is the culprit, your score will gradually rise as the late payment ages, provided you don’t continue to make more late payments and you keep low levels of credit indebtedness.

(Continued on next page)

Some credit improvement steps will have a greater effect than others:

Always pay on time. Paying on time is the single most important factor in having a good credit score. Even a single recently reported late payment can have a substantial effect on your credit score.

Know which loans count the most. Credit obligations aren’t all weighted the same. Revolving debt, such as credit cards, is considered riskier because of the likelihood of getting behind in payments than installment debt, such as mortgages and auto loans. As a result, a person with one installment loan and a lot of credit card debt might have a lower credit score than someone with multiple installment loans and little credit card debt. “I personally have over $800,000 of installment debt with a mortgage, a second mortgage, and a rental house,” says Ulzheimer. “But I have zero credit card debt, and my lowest credit score is 809. If I had that much credit card debt, my score would be in the 400s.” If you pay off a credit card, you may see a bigger jump in your credit score than if you finish paying off an installment loan.

Keep revolving debt to a minimum. Since the FICO score looks at the amount of revolving debt you have in proportion to the amount of revolving credit available, you can have an excellent credit score while maintaining loan balances, as long as you’re nowhere near maxing out your available credit. Although it’s best to pay credit card balances in full each month, the ideal amount to owe is less than 10% of the amount of revolving credit that you have available. If you’ve done the work to get out of debt, don’t make new balances just to try to move up the FICO ladder. But it’s a good idea to keep credit cards active by charging small amounts regularly and paying them off by the next billing date.

Keep new accounts to a minimum. While you may be able to save a few dollars with a 10% discount by opening that retail credit card, you can reduce your chances of having A+ credit since the presence of recently opened accounts can lower your score. “You should really think long term,” says Quinn. “Do I really need that 10% discount today when I’m going to be applying for a car loan in the near future and I want to make sure my credit is as good as it can be for that bigger purchase?”

Getting an A+ score requires habitual sound financial practices. “If you want a 780 or 800 FICO score, you better have perfect credit, which means no delinquencies, nothing negative, credit card debt that is at a very low balance, and a well-aged credit report,” says Ulzheimer. “If you can combine all those things, you’re in good shape.”

If your business is structured in such a way that you’re personally liable for your business debt (such as a sole proprietorship or partnership), you are personally responsible for the card. Therefore, your business credit card usage is reported on your individual credit report, which means your personal credit could be negatively affected.

Here are some things you should watch out for:
Account terms can be changed at any time. The Pew study found that 80% of business credit cards allow issuers to change terms of an account at any time with little or no notice or ability to opt out.

Penalty fees are unrestricted. The study also found that 73% of business cards had a late fee attached to them and 67% of business cards had an over-limit fee.

Payments can be applied to lower-rate balances. Credit card companies can apply your payments to low-rate balances first while interest accrues on your higher-rate balances.

(Image: ThinkStock)

Recently, I was invited to give a speech on the economic empowerment of women. I’m usually pretty relaxed about public speaking, but this was a heavy duty group of mostly female politicians, philanthropists, entrepreneurs, executives, and internationally renowned women’s rights activists, including Kerry Kennedy Cuomo and Naomi Tutu.

The assigned topic was fodder for tons of statistics, some encouraging and others deeply disturbing. The speech had the potential to be very heavy, which I wanted to avoid. So, along with all the sober economic news and calls for ongoing vigilance in the fight for gender equality, I talked a lot about my mom.

Vera Clarke has always been a walking testimony to women’s financial independence. Most of her lessons in economic empowerment were stated explicitly and often. Others were self-evident but never lost on me, her only child.

First and foremost, she urged me to always have my own job and my own money, including a secret account—as in secret from my husband. A Depression-era child whose father worked several jobs while her mom raised five kids, she loved her own mother deeply but didn’t want her life. So, she became the first in her family to graduate from college, she got a master’s degree and began a career in education, a field that she knew would allow her to balance the work-mother scales well.

My mom insisted that any woman who works outside the home should pay someone else to clean the inside of her home. I know cleaning is therapeutic for some people but my mother is not one of them, and I’m here to testify that the apple doesn’t fall far from the tree! She made it clear that hiring other women to help with the house or my after-school care wasn’t just helpful to her, it was helpful to them, enabling them to do for their families and pursue their dreams as well.

“Money is freedom,” she always said. “If you have it, you can go where you want, buy what you want, and do what you want. If you don’t, you will always be trying to get someone’s permission.”

The amount of money one made was never her preoccupation. “Don’t measure yourself by what you have,” she’d say. “Measure yourself by what you have accomplished.”

The handling of whatever amount you had was what counted. As a New York City public school teacher, she never made a killing and, in 50 years of marriage, she never earned as much as my father did. But she had an equal say in the family’s financial decisions and she made the most of what she had on her own terms, treating herself to cultural events my dad had no interest in, trips he couldn’t get away for, and generally buying whatever she damn well pleased (which often meant surprise gifts for him or me).

Continue reading on next page…

(Image: ThinkStock)

Don’t get me wrong: She lived well within her means. In fact, she lived below her means (another great lesson I wish I’d learned better). But my parents often disagreed about what those means were. My dad was more financially conservative (some might say cheap) than my mom was. She wasn’t a big spender, but she was a big giver and a big believer in indulging a fantasy from time to time. She often took the life’s-too-short approach to financial decisions (as in life’s too short not to get those shoes, go on that vacation or spring for those really good concert tickets)—something my dad never did.

Whenever my parents reached an especially tense impasse over financial issues, she’d end the argument by channeling her best Billie Holiday and belting out, “God Bless the Child That’s Got It’s Own.” This drove my father crazy, but he never figured out how to override her message, which was clear: “I’ve got mine, and I’ll decide what to do with it.” That, even to my child’s eye, was clearly a form of power and she wielded it well.

My mom’s other lessons in economic empowerment were gleaned less directly. She and my dad had a joint bank account, joint ownership of their home, they paid joint taxes and made all significant purchases jointly. But, in addition to their shared holdings, she made sure she had her own credit card accounts, her own investments, and her own credit rating. She was mindful of finding bargains but she understood quality and she never sacrificed one for the other.

“It’s not a steal if it’s garbage,” she’d say, whenever I spotted something she deemed unworthy of any price tag. “Unless they’re paying you to take it home, you’re getting taken.”

In a pinch, my mom could always “find” money in the house—and not just pocket change, but significant amounts tucked away in unused coffee cups, between the pages of books, or inside old boxes kept on high shelves. She never said a word about this, but I knew that if the world fell apart, she could buy enough food or gas or water to keep us afloat until somebody figured out how to put it back together.

When New York offered its most experienced teachers an early buyout package, she took it, maxing out her pension and benefits without putting in the extra time. Now widowed, she’s still stubbornly independent on every front and still as generous as the day is long.

She takes pleasure in giving to the causes she deems worthy and to her grandchildren often for no reason at all. Every once in a while, she asks them to lift an old coffee or juice jar for her, claiming to be testing their strength. Filled to the brim with coins, the jars weigh a ton, but if the kids can lift one, she says, they get to keep it. The record, so far, is held by my daughter, who emptied her jar into the CoinStar once and got back more than $100. That’s not a bad haul for picking up an old jar of loose change. And it’s not a bad lesson to learn young: Every little bit counts. It’s a lesson, like the ones my mother taught me, that will last a lifetime.

(Thinkstock)

In part one of this article, we explained what the statute of limitations is and how it affects you during a debt collection. Here, in part two, we’ll tell you what to do if you’re contacted about a debt that is past the statute of limitations.

As mentioned before, the statute of limitations refers to the amount of time a debt collector has to sue you for an unpaid debt. After this time, a collector cannot sue you and win. Even though a debt collector is not allowed to sue you or threaten to sue you for a time-barred debt under the Fair Debt Collection Practices Act, some will still try to collect the debt by convincing you to pay it back willfully. What should you do if you’re contacted by a debt collector about a time-barred debt? BlackEnterprise.com has a few tips for you.

Don’t acknowledge the debt. Once the debt has become uncollectible, you cannot be forced by a court to pay. However, if you tell a debt collector that you are responsible for an old debt, this statement will re-start the statute of limitations. In this case, you can be sued for the debt and the debt collector is likely to win.

Don’t agree to a payment plan. Agreeing to pay a debt that is past the statute of limitations is called debt reaffirmation if the debt was part of a bankruptcy. In other cases, it’s known as re-aging or re-establishing. This action also restarts the statute of limitations, leaving you open to a lawsuit if you can’t pay up. Making any payment, even if it’s not part of a payment plan, will also restart the clock on your debt.

Don’t sign any paperwork. Sometimes a collection agency will send a letter about your debt. They might ask you to check a box indicating if you want to make a payment now, if you plan to make a payment at a later date, or if you can afford to pay at all. This is actually a sneaky trick to get you to acknowledge an uncollectible debt and restart the clock so they can sue. In this case, send a certified letter telling the collector that your debt is past the statute of limitations and you want them to put an end to all efforts to collect the debt.

Keep a recent credit report handy. Your credit report will show the date of last activity on your debts. You can use this as proof that the statute of limitations on your debt has passed if you’re ever taken to court by a debt collector who claims the debt is still active and collectible.

Sheiresa Ngo is the multimedia content producer for consumer affairs at Black Enterprise.

Be sure to also read these related articles on debt…

• The Statute of Limitations on Debt
• Eliminate Student Loan Debt Now
• 4 Things You Might Not Know About Credit

1.  You can get a temporary credit card number. If you don’t feel comfortable using your credit card number when shopping online, you can use a short-term number instead. All you have to do is contact your credit card issuer or bank and make a request. A new, temporary number will be provided that is linked to your credit card account. Bank of America offers this option through its ShopSafe program. Citibank also offers this service via what it calls a virtual account number. Temporary credit card numbers are free of charge.

2. A potential employer can’t see everything about your credit. When a future employer orders your credit report, they can’t see your credit score. Employers don’t have access to your credit score, only your report. Employers receive a modified version of your credit report (known as an employment report) from the three major credit reporting agencies, which doesn’t include your score.

3. Depending on the card, you can refuse to show ID when making a purchase at a store. Under the merchant agreements with MasterCard and Visa, a merchant is allowed to ask for your ID, but you’re not required to show it and the merchant cannot refuse the transaction. These rules are listed in MasterCard’s Merchant Rules Manual and Visa’s Rules for Visa Merchants. However, if you’re purchasing alcohol, tobacco, or certain medications, ID is required by law regardless of the credit card you’re using.

4. Having a debt forgiven doesn’t mean you’re in the clear. According to the IRS, (depending on the type of debt forgiven) forgiven debt is taxable because it’s counted as income and the forgiven amount must be reported as such. However, in some cases, you might be eligible for an exclusion. One example is mortgage debt. Under the Mortgage Forgiveness Debt Relief Act, if your mortgage is partially forgiven from 2007 through the 2012 tax years, you might be eligible to apply for tax relief and exclude the forgiven debt from your income. Debts discharged during bankruptcy are also eligible for exclusion.

Sheiresa Ngo is the multimedia content producer for consumer affairs at Black Enterprise.

Also read:

• Your Get-out-of-Debt Checklist
• 5 Money Management Tips With Mellody Hobson
• 5 Podcasts to Boost Your Financial Brainpower