Money talk: Don’t put too much trust in paper checksQ: I pay my bills and credit card balances monthly by check rather than by online banking.
By: Liz Pulliam Weston, INFORUM
Q: I pay my bills and credit card balances monthly by check rather than by online banking. This is because I don’t want to provide a clear path for a possible unscrupulous company or person with access to my account to simply take extra money from my account. Are my worries about this possibility reasonable? Or is there simply no possibility of theft from my account in this way?
A: It’s not that your fears aren’t reasonable. It’s that you’re putting too much trust in paper checks.
Pull out one of your checks and take a close look at it. Along the bottom is a series of numbers that include the bank’s routing number and your account number. That information, along with your name and address printed on the check, is everything an “unscrupulous company or person” needs to raid your checking account.
Once the bad guys have your check, they can alter the amount, counterfeit a new batch of checks or take over the account by adding themselves as joint account holders and changing the address, among many other possibilities.
Or they can set up an electronic transfer out of your account. This is one of the reasons people in debt are told not to give their bank routing and account numbers to debt collectors, since unscrupulous collectors can clean out the account.
Furthermore, paper checks don’t have the federal protections that cover electronic transactions. Banks are required to investigate reports of fraudulent electronic payment within 10 days (or within 45 days if the bank provisionally credits the disputed amount, up to $2,500, to the consumer). But users of paper checks are covered by a patchwork of state laws and subject to the agreement they signed with their banks, which may not provide them with as much protection.
So paper checks aren’t safer than electronic transactions. It’s just your familiarity with this form of payment that makes you think you’re protected.
Q: My husband and I have made every mistake when it comes to finances. We filed for bankruptcy protection last year. We were able to keep our car, but it’s worth much less than what we owe. We want to buy a better car and return this one to the lender, but when I called the lender, the representative said they would garnish our wages. Can they really do this, or is it a scare tactic? Do you know a better way to get rid of this debt?
A: You reaIly need to talk to your bankruptcy attorney to see what your risk might be. If you “reaffirmed” the loan and promised to keep paying it, then the lender may be able to sue you for the difference between what you owe and what the car is worth.
In many cases, the best way to deal with an “underwater” vehicle – one that’s worth less than you owe – is to “drive out of the loan” by continuing to make the payments until the obligation is paid off.
Then you should continue to drive the car for a few more years while you save up enough cash to buy your next car, or at least to make a big down payment so that you’re not underwater.
The fact that you want a better car is really no excuse for reneging on your commitment. By the way, you wouldn’t be “returning the car to the lender.” You would be agreeing to a voluntary repossession, but that doesn’t get you off the hook. In most states, lenders can indeed come after you for the difference between what a repossessed car is worth and what you owe.
Sometimes, bankruptcy is inevitable when people are facing insurmountable debt. But you took the wrong lesson from yours: Instead of realizing you needed to change your financial habits, you seem to think there’s a “get out of jail free” card when it comes to debt.
Q: I spent the past five years rebuilding my credit to where I am able to qualify for any credit I need. Recently, however, I have been getting denied for credit even though my balances are low and I have never missed a payment. I checked my credit reports and saw that an old cell phone bill from 2004 has resurfaced with a collection agency that just reported me this July. Should I negotiate or just wait for it to fall off?
A: If the collection agency is pretending the debt is new, it’s breaking the law. It should be reporting the date when the account first went delinquent, and the black mark should fall off your reports seven years and 180 days after that first delinquency.
If you want to speed things up, you could try negotiating to have the collection agency delete the account in return for payment, but make sure you get its promise to do so in writing before you send any money.
Liz Pulliam Weston is the author of the book “Your Credit Score: Your Money and What’s at Stake.” Questions for possible inclusion in her column may be sent to 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or via the “Contact Liz” form at www.asklizweston.com.