From the Financial Hotline
By: Financial Hotline
Winter 2025 (Vol. 42, No. 4)
Q: Are zero percent cards a gimmick or will that really help me?
A: There are cards that offer 0% interest for balance transfers for a set amount of time which is typically 15 to 18 months. The strategy is to pay off high interest credit card debt by transferring those balances to the new 0% card. Since those high interest cards now have zero balances, you can focus all your payments on the new card until the debt is settled. It sounds simple but you usually need a credit score of 670 or above to be eligible for most of these deals. There is also an upfront “transfer fee” of around 3 to 5 percent of the amount transferred and once the intro period is over, the interest rate converts to a higher rate – usually between 18% to 28%. There is usually no room for forgiveness with a 0% card – if you miss a payment you could be immediately converted to a high interest rate. In summary, if you qualify for a 0% interest card and are disciplined enough to not run up new debt, the interest free break can help your payments go further towards paying down your debts.
The Wells Fargo Reflect Card has a 0% intro APR for 21 months from account opening on purchases and qualifying balance transfers with a 17.24%, 23.74% or 28.99% variable APR thereafter depending on your credit score. The amount transferred incurs a 5% balance transfer fee but there is no annual fee for the card. (Minimum credit score is 670) Apply at www.WellsFargo.com
The Citi Double Cash Card from Citibank will accept a credit score as low as 600 and offers 0% for 18 months on Balance Transfers (18.24% - 28.24% (Variable) APR thereafter) plus it allows you to earn cash back twice with no annual fee. The transfer rate is 3% if you move balances within the first four months of opening your account. Apply at www.citi.com
Q: How much does it help to increase the monthly payment on my credit card bill?
A: It does make a big difference. For example, let’s say you have a credit card with a balance of $2,000 and an annual percentage rate of 20%. If you pay the minimum payment of $40 per month it will take you over nine years to pay off that debt and cost you an additional $2,335 in interest. But if you increase the monthly payment to $120, you will pay off that card in one year and nine months. With interest payment of only $362.
Q: Is there a new law that will remove medical debts and collections from my credit report?
A: Yes. The Consumer Financial Protection Bureau (CFPB) reports on January 7, 2025, they finalized a rule that will remove an estimated $49 billion in medical bills from the credit reports of about 15 million Americans. The CFPB’s action will ban the inclusion of medical bills on credit reports used by lenders and prohibit lenders from using medical information in their lending decisions. The rule will increase privacy protections and prevent debt collectors from using the credit reporting system to coerce people to pay bills they don’t owe.
The CFPB’s research reveals that a medical bill on a person’s credit report is a poor predictor of whether they will repay a loan, and contributes to thousands of denied applications on mortgages that consumers would be able to repay. The CFPB expects the rule will lead to the approval of approximately 22,000 additional, affordable mortgages every year and that Americans with medical debt on their credit reports could see their credit scores rise by an average of 20 points.
The CFPB’s final rule brings regulations in line with Congress’s decision to safeguard consumers’ privacy by restricting lenders from obtaining or using medical information, including information about medical debts. Federal financial regulators later created an exception to this restriction, allowing creditors to consider medical debts. This carveout has enabled debt collectors to use the credit reporting system to coerce payments from patients for inaccurate or false medical bills.
Q: Will transferring my assets to a Revocable Living Trust protect me from lawsuits and creditors?
A: While a Revocable Living Trust is a great estate planning tool, in general, most revocable trusts allow you to retain legal ownership of the assets which means creditors could go after them. On the other hand, with an Irrevocable trust , your assets are transferred to the trust and you give up control over them. This makes it difficult for creditors to access them.