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Proper Methods for Destroying Old Credit Cards

November 19th, 2009 · Credit Cards

With the theft of credit card and other personal information rapidly becoming one of the most sought after items to steal, consumers need to be extremely careful when it becomes time to say goodbye to their trusty (or abused, as the case may be) old credit card.

In years past, credit cards required expiration dates because the magnetic strips had limited useful lives. If you have ever worked in retail, you are familiar with the customer excuse, “Oh, try this credit card instead, that one sometimes doesn’t swipe” (yeah, right). Until the card companies got a little smarter, old expired cards with still functioning strips could continue to be used without issue because the expiration date was not a part of the verification process. Nowadays, fortunately, that has changed, and an expired card may not be “swipeable”, but the information is definitely not something you want to get into an identity thief’s hands.

So when it is time to say goodbye to Mr. or Mrs. Card, you need to ensure that you disable and/or destroy the crucial parts of their “body”. This consists of the information embossed on the card front, the information encoded in the magnetic strip on the back of the card, and the RFID or smart chip potentially contained within the card. Also, you will want to ensure your signature and the CVV number (3 digit number on the back) cannot be identified. Here are some safe and effective ways to do this:

Cremation. Sure, incinerating the card will certainly render all information useless, but also may release toxic fumes from the polyvinyl chloride acetate (or plastic) into the environment. Of course, sending it (in multiple pieces) to the landfill may not be any better for future generations.

Hammertime. Unless you’ve chosen the cremation route, take the time to deactivate the RFID chip and magnetic strip prior to your shredding or cutting step. The chip can be destroyed with good swing of the hammer (more about RFID chips and where they are typically located on the card in this blog post) and the magnetic strip can be deactivated using a strong magnet run along its length.

The Chopping Block. Next, either use good old fashioned scissors or a cross-cutting shredder (be sure it has the ability to accomodate the more rigid credit card material – instruction manual should suffice to tell you) and cut or shred the card in such a fashion that you slice each set of numbers into six pieces or more. Use the same strategy in each of the key areas mentioned previously, and your personal information will be close to impossible to retrieve, especially if you supplement these steps with the last step.

Segregated Disposal. Take the plastic strips and pieces and disperse them into multiple trash receptacles or bags; this final step pretty much solidifies your safety, as even the most dedicated identity thief would be hard-pressed to collect and reconstruct your card using these measures.

Nearly 10 million Americans were victims of identity theft last year, and the numbers are on the increase. Use these methods when it is time to dispose of credit cards that are expired or no longer needed for various reasons, and you will reduce your chances of being a victim of identity theft or fraud. These measures really are quite simple and take a minimum of time, and even if they sound a bit redundant, worth the extra moment of your time for piece of mind.

Readers, do you have any other interesting methods for credit card destruction to share? If so, let us know by leaving a comment!

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Federal Bank Adds New Regulations on Overdraft Fees

November 18th, 2009 · Banking

In recent years, most banks started approving, rather than declining, debit and check transactions that exceeded what customers had in their accounts. The banks’ rationale: consumers would rather pay $39-a-pop bounce fees, banks contend, than risk embarrassment at the checkout counter. I don’t know about you, but I would rather have my card declined.

We’ve written about overdraft fees before, the latest article being “Overdraft Fee Legislation Gaining Momentum“.

Recently, the Fed issued new policy guidelines regarding overdraft fees. The policy requires customers to opt in to “overdraft protection” programs. The overdraft protection program means customers agree to pay a fee any time they overdraw their accounts at automated-teller machines or using a debit card. In a pro-active move, the Fed prohibited banks from charging higher fees to customers who don’t want overdraft protection.

Members of Congress have not halted their efforts to introduce legislation to take overdraft consumer protections one step further. Why? The Fed move is good, but isn’t enough, because:

  • It doesn’t cover check or recurring-debit transactions
  • It doesn’t cap the amount or number of fees that can be charged
  • It doesn’t prevent banks from manipulating how they process transactions to increase fee income

As we’ve mentioned in our other posts, the banks are highly resistant to losing the “option” of charging overdraft fees, as they are such a huge profit center. Michael Moebs, an economist and chief executive of Lake Bluff, Ill.-based Moebs $ervices, said the new Fed policy will cost banks on average a minimum of $5 per checking account. For the U.S. banking system, he predicts a cost of about $600 million, or 2% of the estimated $38.5 billion in consumer overdraft revenue.

The new rules go into effect July 1.

Sources:
Wall Street Journal Online
Ask Liz Weston

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I’m Not Sure What to Say In My Letter to a Collection Agency

November 17th, 2009 · Consumer Debt, Debt Collection

Many people know they need to respond to a letter or phone call from a collection agency, but they might not know exactly what to say. In general, it’s not usually a good idea to speak to a collection agent when they call, let alone respond to a letter over the phone. This leaves the written response as the recommended avenue. There are two types of letters to send to a collection agency in response to first contact – debt validation and investigation request.

In any letter to a collection agency, the language you use is very important. One term you should NEVER use in a letter to a collection agency: “debt verification”. Asking for this is covered neither under the Fair Debt Collection Practices Act (FDCPA) or the Fair Credit Reporting Act (FCRA). If you send a letter with these words, the collection agency is legally bound to do NOTHING.

Let’s cover the specific language you should use for each type of letter:

Debt Validation Request
You need to use the magic words “debt validation” to invoke the protections under the FDCPA. In addition, you need to have sent this letter within the first 30 days after first communication from the collection agency (phone or letter). For a review on debt validation, read our debt validation. Here is a sample debt validation letter.

Investigation Request
You need to use the magic words “request investigation” to invoke the protections under the FCRA. Requesting an investigation is technically the same as disputing a negative listing with the credit bureaus. It’s a very effective technique. To learn more about this method, read our Dispute with Original Creditor article. Here is a sample investigation request letter.

Other Types of Letters
If the collection agency can correctly respond to your requests, you can always tell them to go away with a cease and desist letter as is your right under the FDCPA. You can also try making them a settlement offer.

Cease Communication – You can send a “cease and desist” letter asking a collection agency to stop contacting you, but you can’t tell them to only contact you in writing or only by phone etc. It’s an all or nothing letter – stop all communication. Here is a sample letter.

Debt Settlement Offier – If you want to make the collection agency or junk debt buyer an offer to settle, you should read up up on this article.

We hope this article helps clear up some of the confusion, but if you have any more questions, tell us by leaving a comment!!

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