In recent years, as lawmakers worked to drastically overhaul the financial protections afforded to consumers when they deal with banks, some have been vocal in their opposition to these reforms, saying they are damaging to business and therefore bad for the economy.

However, U.S. Secretary of the Treasury Timothy Geithner recently issued a statement in which he said that those who oppose financial reform would likely do more damage to the economy than good. In recent weeks, this has become one of the focuses in the hotly-contested race to become the Republican nominee for president, with several candidates saying they would repeal the Dodd-Frank Wall Street Reform and Consumer Protection Act.

[Article: Some Lesser-Known Parts of Dodd-Frank Reform Could Affect You]

But Geithner notes that because many lawmakers are now writing rules and regulations for the financial industry within the framework of the existing bill, repealing it entirely, or even reversing some aspects of it, might cause significant economic problems for both consumers and businesses alike because of the amount of uncertainty it would create across the board.

“The direction of reform is clear, and as we finalize the remaining elements, we will be able to provide businesses, investors, and consumers with more clarity and certainty,” Geithner said. “Those who are still working to delay and weaken reforms will only increase uncertainty and damage our efforts to get the rest of the world to adopt a level playing field.”

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Geithner also praised the work of the new federal Consumer Financial Protection Bureau, which itself has come under significant fire from Republicans, but which he says is making strides in improving disclosures between lenders and consumers. In addition, many consumers are already working with the agency to settle disputes with financial institutions as they relate to mortgages or credit cards. Geithner believes the new authorities granted to the government as a result of the CFPB’s existence will benefit consumers going forward.

He also pointed to signs that at least some aspects of the reform are actually helping to promote business. For example, he noted that banks participating in the Small Business Lending Fund have increased lending to smaller, private companies by $3.5 billion in the last several months, up 10 percent from baseline levels.

The CFPB has been operating with full regulatory power since July, and has worked to develop disclosure forms for mortgage and credit card lending agreements that are easier for consumers to understand.

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You’re at the big game and you whip out your official Giants or Patriots credit card to pay for a hotdog. Pretty cool, huh? Okay, more likely you’re in your family room watching the game. But if you love your football team, you’ll even enjoy using the NFL ExtraPoints Rewards credit card from Barclays Bank long after the Super Bowl is over.

With the NFL Extra Points credit card, you can get the logo of your favorite team on your credit card.  This is a good option for the fan who wants to earn 1 percent cash back on all purchases and save 20% when shopping at NFL.com.

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After you use your card for the first time, you get 10,000 NFL Extra Points. Cardholders even get access to season ticket financing. Note that your points expire 48 months from the day you earned them.

The Patriot’s card is Visa Signature and offers a variable APR of 13.74, 17.74, or 22.74 percent. There’s a 15-month 0 percent APR balance transfer offer. The balance transfer fee is 4 percent. The Giants card is a World Mastercard with the same APRs and balance transfer offer.

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January challenged my patience. Several days were bitter and bone chilling cold, though things unrelated to the cold weather were breaking. I broke a tooth in half while eating rice. Yes, it was cooked rice. Thank goodness for flexible spending—a crown will probably eat my balance for the year, but it will be covered.

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The handle to my kitchen sink fell off in my hand one evening. Then the bathroom sink decided to spring a leak. A couple of days later, water decided not to come out of the shower head. Fortunately, I had purchased extra fixtures last year with gift cards and close-outs at a home improvement store. I have faucets for the bathroom and kitchen; I have the whole shower kit. Hoping a simple plumber visit will cure it all. Meanwhile, I am enjoying relaxing baths. A candle, a glass of wine, my e-reader and I am in heaven.

I am still waiting for my auto insurance company to finish its investigation on the December accident my daughter was in and refund my $500 deductible. It has been about a month and a half, and no communications unless I initiate them. They keep telling me these things take time. The highway patrol had no issue finding the other driver responsible—but my insurance company is not so sure. They had not even pulled the accident report, interviewed the other driver, or filed a claim with the other driver’s insurance company. My premiums, however, were due this month. I wish I could have told the company that these things take time and I will pay my premiums with the same speed they have used to address the claim!

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I am doing well on my resolution to eat in at least 4 days a week. I ate lunch in my office 18 out of 20 work days. I saved at least $90 on lunches this month. I am so proud and I paid myself the savings.

I received my W-2 a week and a half ago. I e-filed my state and federal returns that same day and I have received my state return. It was tiny, but it was a return. I am waiting for my federal return. If my plumbing bill is reasonable, I can pay off my remaining credit card debt three or four months early. If my plumbing bill is a bit higher than I hope, I can still eliminate my credit card debt in May. Here’s hoping for a conservative plumbing bill and a reasonable dental bill. I need to turn January challenges into February fortunes!

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Over the past week we’ve been flooded with panicked questions from taxpayers who are freaking out after have receiving 1099-C or 1099-A forms for debts that were forgiven, never paid back or wiped out in bankruptcy. The main theme of these questions is “Do I have to pay taxes on the amount on the 1099-C (or 1099-A)?”—usually followed by “HELP!!?”

My first piece of advice: Take a deep breath! You may not have to pay taxes on the amount of the income listed on the 1099-C or 1099-A.

At the same time, doing nothing is not an option. If you got a 1099-C or 1099-A, so did the IRS. That means you must explain to the IRS why that amount should not be included in your income. If you don’t, the IRS will assume that money counts toward your income and you may either get a smaller tax refund than you expected or, worse: A bill from the IRS.

How can you avoid including that amount in your taxable income? By showing that you qualify for an exclusion or exception. I described these in my previous article, How to Avoid Taxes on Cancelled Debt, and more details are also available on the IRS website.  You may be able to simply fill out Form 982, claim an exclusion or exception, and be done with it. Sometimes it’s more complicated than that, though, and you need to work with a tax professional.

[Infographic: What to Do If You Get a 1099-C]

Here are a couple of examples of questions we received recently about 1099-Cs:

1099-C for Debt Wiped Out in Bankruptcy

I included my automobile with my bankruptcy in 2010, it was a Chapter 7. However I received a 1099 for the car that I included in the bankruptcy. What do I do now? Must I pay the taxes on this large amount even though it was included in my bankruptcy? Please help.

Debt that was discharged in bankruptcy can be excluded from your taxable income. Take a look at Form 982. At the top of the form you’ll see box 1 a. Discharge of indebtedness in a title 11 case. (Don’t be confused by the reference to “Title 11″—that’s just the part of U.S. Code that covers bankruptcy).  You can check that box. Then on Line 2, you’ll put the amount that was discharged in your bankruptcy for that debt and any others that were reported on a 1099-C. That amount will be excluded from your income. It should be simple enough.

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Student Loans Cancellation

My student loans were discharged. I am on Social Security. Do I have to file the 1099-C I received for $62,000? My student loans were discharged due to total disability and I don’t file taxes because Social Security is non-taxable….HELP!!!!

First, keep in mind you don’t file the 1099-C; the lender does. A copy has already been sent to the IRS. So you must now demonstrate to them that part or all of that “income” is not taxable. How do you do that? By figuring out whether you qualify for an exclusion or an exception, and if you do, filing form 982.

You mention that your student loans were “discharged.” Do you mean discharged in bankruptcy? Or do you mean they were cancelled due to your total disability? If they were discharged in bankruptcy, then read the previous question and answer for more information on how to claim the exclusion for bankruptcy debts.

[Related Article: How to Avoid Taxes on Cancelled Debt]

If they were cancelled, however, then it’s not quite as simple. According to the IRS, “Generally, if you are responsible for making loan payments, and the loan is cancelled (forgiven), you must include the amount that was forgiven in your gross income for tax purposes.” There is an exception for student loans that were used to attend a qualified educational institution and were cancelled because you worked for a certain period of time in certain professions. (An example would be a doctor who works in a qualified low-income area.) I didn’t find any reference to an exception or exclusion for student loan debt that was cancelled due to disability, though.

However, you may qualify to have part or all of the $62,000 excluded from your income if you are considered by the IRS to be insolvent. You’ll see a simplified example of how that works on our Infographic: What to Do If You Get a 1099-C. Review Form 982 and the instructions to see if you feel comfortable filling it out yourself. If not, your disability may qualify you for free or low-cost tax help through the Volunteer Income Tax Assistance Program.

Please keep in mind that I am a credit expert, not a tax expert, and the information in this post is strictly for educational purposes. See a tax professional or contact the IRS for help with your individual situation!

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The Consumer Financial Protection Bureau (CFPB) launched their nonbank supervision program recently.  So what exactly is a nonbank? It’s an entity that offers or provides financial products or services but does not have a bank, thrift or credit union charter.  Nonbank providers include payday lenders, many mortgage lenders, mortgage servicers, money services companies (check cashing stores), debt collectors and the credit reporting agencies.

Many consumers may be surprised to learn that these nonbank entities have traditionally operated under a different set of federal-level rules than banks and credit unions.

[Related Article: More Banks Offering Clearer Credit Card Agreements]

While chartered banks, thrifts and credit unions have historically been regulated and supervised by a variety of different agencies on both a state and federal level (and will continue to be with the CFPB), many consumer protection entities have concerns that these so-called nonbank entities have not always been held accountable to the same rules and standards at the federal level, which subjects consumers who use nonbank services to potentially unfair and deceptive practices.

And there are a lot of consumers who use the services provided by these nonbanks. According to the CFPB, an estimated 20 million consumers use payday loan services, 14 percent of consumers have one or more loans in debt collection and approximately 2 million new mortgages were opened in 2010 with nonbank mortgage companies. Also, most U.S. consumers have a credit bureau report housed and managed by Equifax, Experian and TransUnion.

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The CFPB reports that their nonbank supervision program will be very similar to the bank supervision program.  The CFPB will conduct examinations to ensure the nonbanks are complying with the federal consumer financial laws, as well as to evaluate and understand potential risks to consumers surfacing from the nonbank entities. This will also allow the CFPB to remedy violations that may harm consumers.

Consumers will likely see little in the way of immediate change, as this process is just getting started, but it will be interesting to track and monitor progress as the new supervision program is enacted.

The CFPB is interested in hearing from consumers regarding their experiences (with the chartered banks and nonbank entities) or if you have questions—just visit www.consumerfinance.gov.

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Last week was a pretty good one for the notion of privacy in America, which  has increasingly become forlorn and tattered as a result of the advancement of digital technology. First, the Supreme Court ruled in United States v. Jones that warrantless GPS tracking of a criminal suspect by the FBI was unconstitutional, and then later in the week Google announced its new privacy policy, a model of simplicity and fairness with one sizeable flaw. Oddly, this particular decision by the court sheds some important light on the particular problem within Google’s otherwise admirable new privacy policy.

The decision of the Court in United States v. Jones was accompanied by two concurring opinions, one written by Justice Alito, and the other by Justice Sotomayor. The unanimous decision and ruling found that the government violated the Fourth Amendment’s prohibition of unreasonable searches and seizures because a tracking device had been attached to the defendant’s car without first obtaining a warrant. The placing of the device constituted a trespass, akin to breaking into someone’s home or filing cabinet.

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Justice Alito’s well-reasoned concurrence went further, arguing that the notion of physical trespass as a predicate to finding a warrant necessary was outdated, and that beginning with the wiretapping cases of the 1960s, courts began to recognize that a more appropriate standard was whether or not a person had “a reasonable expectation of privacy” in a given situation. This approach, argued Alito, was far more effective in dealing with privacy issues in the digital era—as opposed to limiting the Fourth Amendment to the law of trespass, which essentially dates back to 1215.

Justice Sotomayor’s opinion spoke to the world as we know it, and she couldn’t have been more spot on. She wrote: “… it may be necessary to reconsider the premise that an individual has no reasonable expectation of privacy in information voluntarily disclosed to third parties… This approach is ill-suited to the digital age, in which people reveal a great deal of information about themselves to third parties in the course of carrying out mundane tasks. People disclose the phone numbers that they dial or text to their cellular providers; the URLs that they visit and the e-mail addresses with which they correspond to their Internet service providers; and the books, groceries, and medications they purchase to online retailers… I for one doubt that people would accept without complaint the warrantless disclosure to the Government of a list of every Web site they had visited in the last week, or month, or year.”

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Justice Sotomayor separates the notion of intrusion from that of physical trespass while simultaneously untangling the often-confused ideas of privacy and secrecy. Why should anyone expect that the information that a customer has to provide to their bank will be made available to the Government without a Court-issued warrant? Absent that warrant, anything you intend to keep private should be kept private. Justice Sotomayor cited the decision in the 1967 case of Katz v. United States “[W]hat [a person] seeks to preserve as private, even in an area accessible to the public, may be constitutionally protected.”

Justice Sotomayor’s logic preserves the sanctity of the Fourth Amendment in the context of the massive flow of digital information available on the Internet today, and as such, it is a very important opinion.

However, the Fourth Amendment restricts only what the government can do; it bears no relation to the activities or policies of individuals or organizations. There are plenty of other laws that in one way or another seek to protect the privacy of personal information from misuse by the private sector, but the best protection an individual can have is the attitude and policy of the entity to whom one’s information is voluntarily entrusted. Happily, but slowly, major players on the web are taking steps to protect your privacy, or at least to let you know just how and why it can be forfeit. So last week’s announcement by Google (probably the largest collector of information on the planet, outside of Beijing) regarding privacy is not only important, but very timely in light of the Court’s decision in the Jones case.

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A Close Shot from Google (cont.) »

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Google’s new policy is exemplary in its brevity, comprehensibility, and candor. If you disagree, try reading one from a bank or a wireless carrier (emphasis on the word “try.”) In simple language, it sets forth—among other items—the kinds of information being collected, how Google and its associates may use that information, and what you can do to limit that usage. It really does tell you everything you need to know, for better or for worse, and as compared to the policies and procedures of other information collectors, it seems reasonable and fair-minded. It does, however, embody one glaring mistake, best illuminated by the light of Justice Sotomayor’s concurring opinion.

[Article: If You're Worried About Medical Privacy, Better Take Some Xanax]

Contained in the “Information Sharing” section there are assurances that information provided to Google will be shared with third parties only in limited circumstances. Google lists four circumstances, the first one being when, “We have a good faith belief that access, use, preservation or disclosure of such information is reasonably necessary to (a) satisfy any applicable law, regulation, legal process or enforceable governmental request…”

Hold on, Bucky.

What exactly constitutes an “enforceable governmental request?” This sentence should read: “We will share information with a Governmental entity only when presented with a valid search warrant issued by a court of competent jurisdiction.” Such a provision would make it obvious that by giving information to Google, you do not intend to waive your constitutional rights, and it would make it clear that despite the fact that your information was shared willingly with a private sector entity, you reasonably retained an expectation of privacy against Government intrusion. If everyone’s privacy policy had language of this type, sooner or later every court—and every legislature—would remember all that stuff about the Fourth Amendment.

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Of course, you may still be dismayed by the fact that Google is able to share your information with anyone at all, whether private or public. Arguably, that is the price we pay for all of the service and convenience that companies like Google provide to us, free of charge. But, that is a conversation we must reserve for another day.

The old saw is that the requirement of search warrants makes crime easier for the bad guys. In the Jones case, the defendant was given a life sentence for, among other things, harboring a linebacker-sized cache of cocaine—and that conviction was overturned by the Court’s unanimous decision.

And that is the price of freedom.

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The world of debit and credit cards is changing rapidly, and it’s beginning to look as though Americans will have to start adapting to new types of payment technology when making a purchase in the near future.

MasterCard recently unveiled what it calls its “roadmap” toward issuing EMV—or chip and pin—credit and debit cards en masse here in the U.S. Cards using the EMV (which stands for Europay MasterCard Visa, after the companies that pioneered the technology) system are used ubiquitously in most countries around the world, and the U.S. is currently the only major nation in the world that still uses the type of cards that store users’ payment information with a magnetic strip on the back.

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The plan, which comes quickly on the heels of a similar announcement from Visa, the world’s largest payment processor and MasterCard’s primary competitor, will help to swap out the cards currently filling American wallets for new ones that store data not on magnetic strips, but rather on small microchips embedded in the cards themselves. While some banks currently offer these types of cards to consumers, most do not, and consumers who use them may encounter some difficulties in finding a merchant who accepts them in the U.S. For the most part, EMV cards issued by American lenders bear both magnetic strips and are granted to consumers who travel abroad regularly.

MasterCard says it is working with companies to ensure that the infrastructure for an EMV acceptance system is in place by April 2013, saying it wants to have these systems ready to be installed for ATMs, point-of-sale acceptance and both online and mobile commerce. Already, the payment processor has helped to roll out and develop EMV systems in more than 130 countries, and more than half of the 1.2 billion EMV cards in circulation worldwide at the end of the second quarter of 2011 bear either the MasterCard brand or its affiliated brand, Maestro.

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EMV cards work by having a consumer wave the plastic over a point-of-sale terminal that reads the microchip embedded in it, and then enter a PIN code to confirm the purchase—hence “chip and pin.” For this reason, they are considered far more secure than the current magnetic strip technology.

The first year I lived in Florida, I was amused by the temperatures that Floridians considered “cold” in winter. But I wasn’t laughing when I got my first January electric bill and discovered just how much it costs to heat a Florida home in the winter. More recently, a leak in the pump of our in-ground pool left me with a water bill three times the normal amount. While that bill put a dent in our budget, I was fortunate that I was able to handle it. But I know that’s not always easy if you’re on limited income, or on a fixed income due to retirement or disability.

What happens if you run into problems with a utility bill? What are your rights?

[Infographic: What To Do If A Debt Collector Calls]

To get answers to some of the most common problems facing customers, I spent time talking with Charlie Harak, managing attorney for the National Consumer Law Center.  He’s also the coauthor of The National Consumer Law Center Guide to The Right of Utility Consumers.

Harak says the first thing to understand is that most consumer protections apply only to gas and electric services. “Water is usually provided by a government provider (municipal and rural electric co-op) which is far less regulated,” he said. Similarly, propane or heating oil that is delivered is typically not regulated.  Furthermore, he says there are no federal laws that specifically address the rights of utility customers. Those rights fall under state laws.

As the NCLC guide explains, gas and electric service is typically regulated by state Public Utility Commissions (PUCs). Services may be provided by Investor Owned Utilities (IOUs), government-owned entities (munis), or rural electric cooperatives (co-ops). Among the three, IOUs are often the most highly regulated.

With that background in mind, here are five common utility bill problems, and what you can do about them.

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I just heard from a debt collector about a very old utility bill. Isn’t there a statute of limitations for these debts?

Yes, the statute of limitations may prevent a utility company, or debt collector who purchased one of these old debts, from successfully suing you to collect. That time period is based on state law, and will typically be “the same as the statute of limitations for contract actions,” says Harak.  However, it’s not a good idea to ignore calls or letters about an old debt. If the company or collector takes you to court and you don’t show up to raise the statute of limitations as a defense, they may get a default judgment against you.

Third-party debt collectors who collect consumer debts (including utility bills) are regulated under the federal Fair Debt Collection Practices Act. Anytime a debt collector contacts you about a debt you have the right to receive a debt collection notice by mail (if they called you first), and then to request written validation of that debt. That gives you time to research the debt to figure out whether you owe it and what you can do about it.

If you confirm the debt is outside the statute of limitations, you can write the debt collector explaining that you know the debt is too old, and ask them not to contact you again. (The FDCPA applies only to outside collection agencies, not to companies collecting their own debts.)

At the same time, you may not be able to get service again if you have an outstanding unpaid bill. If you continue to live in that utility company’s service area, you may need to find a way to pay the bill to avoid future problems.

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 Old utility bills, Co-signing, Skyrocketing charges »

Image: williac, via Flickr.com

I am trying to get utility service at my new home/apartment but they tell me I have to pay an old bill from that address first. Is that true? 

“That would almost always be illegal,” says Harak. “The only exceptions would be if that person was related to you by blood or was a roommate.” But if the bill belonged to someone you didn’t know, you likely would not be required to pay it in order to get service.

What if the bill was from your parents or a former roommate who skipped out on the bill? Ask the utility company for a payment plan. In most states, they would be required to provide you with a way to catch up on the old bill. You may also have to put up a deposit in order to get service again.

[Related Article: Will Utility Payments Help Rebuild Credit Scores?]

My mother/boyfriend/someone else used my name to get utility service and they didn’t pay the bill. Help!

If you gave someone your permission to use your name to get service, the bill is yours and you’ll have to find a way to catch up. If they used your information without your knowledge or consent, however, that’s identity theft. The question is whether you are willing to report it. If you aren’t, the utility or collection agency may continue to try to collect from you.

The steps you’ll have to take to claim identity fraud vary by state.  In Massachusetts, for example, where Harak practices, “the utility companies will let you off the hook if you will name the person, if you will file a police report, or if you’ll go to court and sue that person.”  In other states, he says, you may have to take other steps to try to clear up the false debt—and that is not always an easy process.

Using someone else’s information to get service can also backfire on the person who received service under someone else’s name. “You tend to lose your rights as a customer because you’re not getting service under your name,” he says. If you qualify for some type of assistance, for example, you can’t ask for that help in the other person’s name.

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My gas/electric went through the roof last month and I don’t have the money to pay it. Is there anything I can do to stop them from disconnecting it? 

Request a payment plan. These are available in almost every state, and it’s usually very easy to get a payment plan if you have one unusually high bill. “It’s one of the easier problems to solve,” Harak says. If your gas or electric company won’t work with you, he recommends appealing to your PUC.

He does caution that payment plans are better in some states than others. In some, they can’t be fewer than a specific number of months, while in others they can’t be longer than a specific period of time.

Make sure you only agree to a payment plan you can afford. As the NCLC guide points out, in some states you may not get the same advance notice of termination if you fall behind on a payment plan.

Ask about budget billing or “levelized” payments. Those plans allow you to pay a similar amount each month, adjusted periodically depending on your use. I switched to a budget plan with my electric plan after our first winter in our home, and since then my bills have been roughly the same each month, even in the coldest and hottest months.

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Disabled or unemployed and can’t pay »

I am disabled or unemployed and can’t pay what I owe on my gas or electric. They are going to terminate my service. What can I do? 

Some twenty states offer protections against service termination if you are ill or have a very low income.  Many states offer protections to certain groups of customers during winter months. In those states, service can’t be shut off or you may be allowed to pay a smaller amount to avoid cut-off during certain months of the year or when the temperature falls below a certain number. (Only a few states offer protections during hot weather.) For example, Illinois residents are protected as follows:

Termination of gas and electric utility service is prohibited: on any day when the National Weather Service forecast for the following 24 hours covering the area of utility in which the residence is located included a forecast that the temperature will be 32° Fahrenheit or below and no electric or gas public utility shall disconnect service during the period of time from December 1 through and including March 31 of the immediately succeeding calendar year unless the utility has offered a deferred payment plan and informed the customer of specific agencies and funds available to them for payment assistance. Source: The Rights of Utility Consumers, page 63.

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Lose your job, though, and you may have trouble keeping the electric or gas on. “Protections never hinge on the fact that you are unemployed, other than the fact that you may meet low-income qualifications,” warns Harak. If you do qualify, however, low income discount rates may be available. Contact your utility company and your state utility commission for more information.

There may also be specific protections available if someone living in your home has a serious illness that could be threatened by a shut off; if a young child or elderly; or is disabled.

In Arizona, for example, service can’t be terminated for nonpayment if doing so would threaten the well-being of an occupant of the residence due to medical condition, illness, each, disability or weather. Those customers must be provided with information about assistance and/or required to enter into a payment plan to avoid termination.

In some states, you’ll need to provide documentation from your physician stating that service termination would put your health at serious risk in order to qualify for protection.

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If you’re in the market for a new credit card, you’re probably thinking about the various perks different cards offer and seeing what the best value is.

In some cases, you might want to consider a rewards credit card, and in others, perhaps you want a card with a zero percent introductory rate so that you can pay off more of your debt. But these days, lots of companies are charging sizeable annual fees just for maintaining your account, and therefore, you might also want to find a card that comes with no annual fee at all.

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However, a no annual fee credit card isn’t necessarily for everyone. If you’re the kind of person who uses your credit card a lot to make smaller, everyday purchases, the benefit you’ll find from this type of card is probably outweighed by those provided with a rewards card. That’s because you’ll probably end up earning more than you save with a no annual fee card.

But if you have a credit card habit that’s more conservative—for example, if you only use it in the event of an emergency or to make larger purchases—a no annual fee card may be perfect for you. Instead of paying $40 or $50 annually for a card you might only use a few times a year, you’ll be able to keep the card tucked away and not worry about being hit with any added charges.

Of course, there are different types of no annual fee cards. Some will provide this benefit for life, while others may only waive the fee for the first year the account is open. Obviously, based on your needs, it will be important to differentiate between these two types of accounts.

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However, some cards will also waive your annual fee only because they charge interest rates that are considerably higher than average, and therefore, you might want to consider the actual cost of the card if you’re the type of borrower who regularly carries a debt from one month to the next.

Whenever you open a new credit card account, you should find out what the card will end up costing you in total based on previous borrowing habits and your current financial standing.

Would you take financial advice from a cocktail napkin sketch? Well, it depends on who is sketching. If it’s your brother-in-law, who likes to boast about how he “almost” made a killing investing in Google stock, then the advice is probably not worth the paper it’s on. But if it happens to be sketched by Carl Richards, a financial planner and blogger on the New York Times‘ Bucks blog, then it’s a good idea to save the napkin and wipe your barbecue wing sauce covered fingers on your pants instead.

Richards’ sketches (you can find them all here) offer practical financial advice in the form of humorous (at times darkly humorous) graphs that get to the essence of peoples’ oftentimes troubled relationship with money and credit. For instance, Richards has a graph that charts the increase in the price of gold in relationship to the chance you will get hurt. That line climbs at a steady 45-degree angle.

[Article: Health Care Bills Without the Agony?]

Richards’ new book, The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money combines napkin sketch graphs with financial advice that focuses on reducing fear, making realistic choices, and learning to accept the fact that life rarely goes as planned.

Unlike most personal finance books I’ve read, Richards’ is upfront about the role luck plays in a person’s life. For instance, he tells the story of applying for a job at a securities firm. The employer had winnowed down the number of candidates to two: Richards and another man. They were sitting together in the waiting room when a woman came out and said that the other man had been picked. The chosen applicant turned to Richards and said, “I don’t want it. You can have it.” Years later at the same job, Richards’ boss told him he’d have to start coming in on Sundays. So he quit. That led to another job, which eventually led to running his own business and landing a gig at the New York Times.

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But Richards doesn’t think all luck is good. He recently had to short-sell his house, an experience that he said “has been permanently seared into my psyche.” It caused Richards to think less of the “possibility of a certain event occurring,” and instead “consider the consequences of the event happening,” advice he now shares with his clients.

At 178-pages, The Behavior Gap is a short book, but that’s because Richards respects the reader enough to not pad it with fluff. With its focus on studying your own patterns of behavior instead of the market’s, it’s the antithesis of Jim Cramer’s frantic, panicked hot tips that are only valuable as punch lines in Richards’ napkin sketches.

Below, four sketches that give you an idea of the kind of advice Richards gives to readers of his book and blog.

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Confusing Urgent with Important

The New American Money Math

One Best Financial Life

Whining About Credit Card Companies

If you have a new credit card, one reason you might have gotten it is so that you can use it to finance purchases you might otherwise have had a hard time making. You may also have secured the card to help you rebuild your credit standing.

If that’s the case, there are a few things you should know about how to manage that account to boost your score as quickly as possible. Perhaps the most important thing is to only use your card for payments that you don’t make every day. Putting lunch or a cup of coffee on your credit card might get you into bad spending habits and cause you to put more debt onto the card than you can reasonably afford. In fact, you might want to consider only spending as much on the card as you can pay back every month to keep yourself headed in the right direction.

[Article: 7 Reasons to Hate & Love Your Credit Card]

Along those same lines, if you do end up racking up more debt than you can pay back in a single month, it’s important that you at least pay back more than the minimum. Again, this is to ensure that you don’t get into bad habits, because only paying the minimum every month will keep you in debt much longer than you’d probably like.

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As a general rule of thumb, you should try to keep your debt to 10 percent or less of your card’s total credit limit. That’s because 30 percent of your credit rating is based on just the amount of credit you use at any given time, and the less you utilize, the better. There is a myth that lenders want you to have at least some debt outstanding all the time, but it’s not true; the closer your balance is to zero, the better off you’ll be both financially and in terms of a maintaining a strong credit rating.

Of course, when you’re opening a new credit card account, you should take a look at all the ways in which it might affect your finances. Consider things like whether you’re able to make all the payments you need to—on time and in full—as well as if it might affect your ability to pay other bills.

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Last week, some consumers began receiving IRS forms sent by their credit card lender, prompting a lot of concern about what benefits received as part of owning a rewards card were considered taxable. Now, the IRS has clarified its position.

Citibank’s decision to mail tax forms to some of its rewards cards customers certainly caused a stir last week, but now the IRS has come forward to make clear just what is and is not considered taxable under current codes. Essentially, consumers who received rewards points, miles or cash back just for opening a rewards account will have to pay taxes on the value of those benefits because it is considered “miscellaneous income.” However, rewards points accrued in the course of normal credit card spending are not considered taxable because the IRS views them as rebates that help defray the cost of a purchase, rather than additional income.

[Article: Paying Taxes With a Credit Card: Yea or Nay?]

“A common analogy is buying a $500 television at a retail store and receiving a $50 manufacturer’s rebate,” IRS spokeswoman Michelle Eldridge told the Los Angeles Times. “It’s not income, just a deemed reduction of the cost of the television.”

U.S. Sen. Sherrod Brown, an Ohio Democrat, who chairs the Senate Banking Subcommittee on Financial Institutions and Consumer Protection, was unhappy about Citi’s decision to send the tax materials and contacted the bank asking it to stop treating these rewards as taxable income. However, Citi says it was just following tax law, because while smaller items with lesser values often go unreported, those that are more valuable are often reported by banks as a business expense, necessitating that consumers report them as well.

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As for what the miles or points are valued at, Citi says that each one is worth about 2.5 cents apiece. So if a consumer received 10,000 for signing up, the value of that offer was $250. Meanwhile, Citi also claims that the tax implications of these offers was made clear in the materials given to borrowers when they were offered the accounts, though it was in fine print.

Many banks are now sending out offers for new rewards cards that grant consumers hundreds of dollars worth of miles just for signing up, then double that amount if they meet certain spending thresholds within the first few months the account is open.

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How do inquiries affect your credit scores? That’s a question I recently posed to Tom Quinn on my radio show Talk Credit Radio. Tom’s a credit scoring expert with many years of experience, including helping to develop, launch and grow MyFICO.com. He also contributes to Credit.com’s blog. Here is an excerpt from that interview.

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Gerri:   Fact or fiction? Every time a person applies for credit it costs them 5 points off their credit scores. Is that true or false?

Tom:    That is false.

Gerri:   So what’s the truth about it?

Tom:    Basically, whenever a lender touches your credit report, or if you’re seeking credit, then they usually will pull your credit report to understand your credit risk, and an inquiry is posted. So there are all these different kinds of inquiries out there.

For example, if you come home today and have a pre-approved credit offer in the mailbox, a lender probably pulled your credit report to do that and then there’s a certain code associated with it that can be identified as a” promotional inquiry”. Or, if you get a message on your credit card statement saying, “because of your great credit behavior we’re raising your credit line,” they probably pulled a credit report to do that as well and then an inquiry will be posted. If you go and try to pull your own credit report at myFICO.com for example, an inquiry is posted.

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So the good news is, all those inquiries are tagged or identified separately so that the model can really isolate those credit inquiries that are related to you seeking credit, when you’ve actually applied for credit. When you apply for credit, what research shows is that people who applied for credit are riskier than people who haven’t.

But the good news is, inquiries don’t cost a whole lot of points in the big scheme of things. How you pay your bills and how you manage your debt is really what’s counted in the score. Inquiries will add a little bit of predictive value on top and may result in a couple points lost here or there. But the way the inquiry logic works, a couple of things: your inquiry is shown on your credit report for the last two years but that model’s only looking at inquiries in the last 11 months. So those a little older than 12 months, for example, aren’t counted.

And there’s a capping logic. Basically, the way the model works, is once you’ve reached a maximum number of inquiries for that particular score card, whether you have one more on top of that or 15 more on top of that, they don’t count extra against the score. So, in the big scheme of things Gerri, inquiries get a lot of attention by consumers but they really don’t cost them a million points. Really focusing in on paying bills on time as well as managing your debt levels is really what’s going to drive the score.

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To listen to my complete interview with Tom, right click on the download link below to open it and play it on your computer or to download it to your mp3 player. It is also posted on iTunes.

Listen to the interview with credit scoring expert Tom Quinn here.

Image: Valerie Everett, via Flickr.com

There are always plenty of small business credit cards available for those with excellent credit. Hey, even if you have only “good” credit, you’ve got options. But fair, or average, credit is like the Bermuda Triangle of credit scores. There are few decent options and it’s almost like you don’t exist in the eyes of credit card issuers.

I just reviewed the Capital One Spark Classic for Business, which is targeted especially for owners who want a cash back credit card but who don’t qualify for the elite group of business cards. There are some things to really like about the card.

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• You earn 1 percent cash back for every $1 spent. There’s no limit to the amount of cash you can earn and your cash rewards don’t expire. Like other Capital One rewards programs, redeeming your rewards is easy. You can redeem your cash anytime you wish either by phone or online. Or you can let the cash accumulate and Capital One will automatically send you a check each year.
• You get management tools that make business life so much easier, such as year-end itemized reports.
• You can get cards for your employees at no additional cost.
• There are no foreign transaction fees. If you travel overseas on business, this can save you a bundle.
• There’s no annual fee.

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You can read my full review of this card here.

At publishing time, Capital One Spark Classic for Business is offered on Credit.com product pages, and Credit.com may be compensated if our users apply for and ultimately sign up for this card. However, this relationship does not result in any preferential editorial treatment.

The recent recession drastically changed the way consumers felt about and handled their outstanding debts, and the renewed attention to paying down their balances was reflected in the drops in loan delinquency over the course of 2011.

Consumers not only continued to cut their outstanding debt, but also made more conscientious efforts to make on-time payments last year, according to the latest National Credit Trends Report from the credit monitoring bureau Equifax. In all, the amount owed across all types of consumer debt slipped to $11.1 trillion, a drop of nearly 11 percent from the all-time high of $12.4 trillion in October 2008.

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The most appreciable drops in consumer loan delinquency were, perhaps not surprisingly, observed in credit cards issued by banks, the report said. In all, the number of these accounts 60 days or more behind on their payments dropped by 29 percent during 2011. Meanwhile, 60-day delinquencies for credit cards issued by retailers fell by 15 percent.

This shift in consumer payment habits, as well as in consumers’ attitudes toward opening new accounts now that the economy is improving, has prompted both banks and retailers to begin issuing new accounts to consumers who might not have had access to them during and right after the recession. Origination of new credit cards issued by banks to subprime borrowers—who would not have been able to get a new account as recently as a few months prior to the start of 2011—climbed 48 percent overall, and were 22 percent higher in October than the same month a year prior, the report said. In addition, retailers saw four years of declines in new account origination reverse itself, as consumers opened 26.8 million cards between January and October, up 7 percent from 2010′s total.

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“More than 63 percent of all past due balances are from loans originated between 2005 and 2007, and as the industry continues to isolate and manage those vintages, I would expect to see continued improvement in delinquency rates as a result,” said Michael Koukounas, senior vice president of analytics for Equifax.

The end of the year saw consumers’ outstanding credit card debt start to tick up for the first time in a while.

If you’re in the market for a new credit card and your credit is generally in good shape, you might be thinking about whether to seek out a credit card with cash back rewards.

But not all cash back credit cards are created equal, therefore you should carefully consider a number of factors before settling on any one new account.

[Credit Card Review: Best Cash Back Credit Card Right Now]

One of the first things you need to think about when looking at new cash back credit cards that might interest you is your own spending habits. Do you tend to put a lot of small purchases on your credit card, or do you only use it for larger transactions that you might not have the cash on hand for? It’s important to think of this because you might not use your card enough to justify the monthly or annual fee that might come with it. Along the same lines, you should also determine whether the amount you generally spend on your credit card accounts is going to be enough to cover the cost of the annual fee. If not, you might want to find one with a lower annual cost.

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Similarly, you’ll also want to look at your repayment habits. Even the best cash back cards only grant users 3 percent or so back for every dollar they spend, while simultaneously charging higher interest rates. That means if you’re the type of borrower that regularly carries a balance from one month to the next, you might be paying more in interest than your spending generates in rewards, essentially making the card less valuable. However, if you’re diligent about paying off your balance at the end of each month, a cash back reward could be viewed as a kind of “free money.”

Of course, when looking for a new credit card of any kind, whether it provides cash back or not, you should take the time to examine a number of offers available to you. This will help you to assess what is available, what your expectations for the account should be, and which one offers the best rates and terms given your unique financial situation and spending habits. You should also consider the impact that the new account will have on all aspects of your finances.

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If you have ever puzzled over a hospital or doctor bill and whether you are supposed to pay it, then join the ranks of millions of Americans equally confused by medical bills. One national study found that 40% of American adults do not understand these bills well enough to know why they owe the outstanding balance or if it is correct.

Other studies, including those by the American Medical Association, have revealed that one of every five claims is inaccurately processed by health insurers. To add to the confusion, many bills from hospitals and doctors arrive months after treatment, further clouding the reason for the bill and the amount due.

Many people are tempted to wait for clarity. They set the bills aside with the hope that their insurer will pay the claim. This is a big mistake, since delaying payment can result in the medical bill being turned over to a collection agency. Once there, it will likely lead to future headaches.

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300 Billion Reasons to Pay Attention to Your Medical Bills

Total healthcare spending in America amounted to $2.6 trillion in 2010. Of this total, $300 billion was paid out of pocket, for example, through deductibles and co-payment fees. The growth in out of pocket spending accelerated between 2009 and 2010 as more people switched to higher deductible plans or increased co-payments in exchange for lower premium costs.

Paying more up front for healthcare is becoming commonplace for insured patients. But keep in mind; providers want to be paid for their services. When they do not receive prompt payments, they initiate action similar to other businesses and send the bills to collection.

[Related Articles: Can Medical Debts Prevent You From Getting a Job?]

Once in Collection, Doing the Right Thing is Not Enough

Contrary to what many believe, medical debt can hurt your credit score. Thirty million Americans are contacted annually by collection agencies for unpaid medical bills. Patients frequently claim confusion led them to allow bills to go past the due date or be sent to a collection agency. According to studies published in the Federal Reserve Bulletin, more than half of all collection accounts on credit reports are medical in nature.

Collection agencies routinely report medical bills to the credit bureaus. They view all collection accounts as “delinquent” with no regard for why the bills were sent to collection. Many people, upon hearing from a collection agency, promptly pay the medical bill in full. After doing so, they are often surprised to find that these accounts stay on their credit report.

Medical collection accounts can linger for up to seven years, even with a balance due of ZERO. Collection accounts are reported in the credit history section of a credit report which accounts for 35% of a credit score. Because of this, these fully paid “delinquent” medical bills can sting. One or two recent medical collections can lower a credit score by 50 to 100 points. Such a significant reduction in a score will dramatically increase the cost of a mortgage or the interest rate on a credit card.

[Infographic: How Much is Your FICO Score Costing You on Your Mortgage?]

Avoiding Medical Bill Problems

So, if you have an outstanding medical bill, what can be done? First, if you are confused by a medical bill, do not ignore it. Contact the provider immediately to discuss the bill. If you are not certain whether you or your insurer should pay the bill, inform your provider that you are working with your insurance company to get the bill paid. Assure them that you will pay your share. Ask that they refrain from sending the bill to a collection agency while you resolve the issue.

If the bill is large and you need to pay it off over time, again, discuss this with your provider. Doctors and hospitals often allow patients to pay their bills off over many months, even interest free. Some provide financial discounts to income eligible patients. If your hospital or doctor provides a discount or allows you to pay over time, ask them to put the agreement in writing. If they do, be sure to maintain timely payments so that the bills do not end up being sent to collection.

Addressing Medical Bills that were Sent to Collection

If you have a medical bill that has already been sent to collection, first make sure that you are obligated to pay it. Contact the provider and/or the insurer to make sure the insurance company has paid all claims and that the provider has applied all available discounts. Then make arrangements to pay your share and ask the agency to remove it from your report after it is fully paid.

If your medical bill had been inappropriately sent to collection due to confusion on whether you or the insurer was responsible for payment, this is not truly a credit issue. Work with the provider or their third party collection agency and ask that the account be deleted from your credit report once it is paid in full.

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Systemic Change May Require an Act of Congress

Many healthcare providers recognize that bills can be sent to collection in error and may agree to delete them from a credit report. However, they are not necessarily required to so do.

The problem of medical bills ruining people’s credit has come to the attention of the U.S. House of Representatives. Congressmen Heath Shuler (D-NC) and Don Manzullo (R-IL) have put together a sensible bi-partisan proposal to address this problem. They feel that medical debt is unique and that it deserves to be treated differently than other types of debt. So they decided to take action by introducing HR 2086, the Medical Debt Responsibility Act. The legislation requires that medical bills (of less than $2,500) that are fully paid off or settled be removed from a consumer’s credit records within 45 days.

This straightforward proposal does not fix the medical billing system but it provides relief for those who’ve paid off their medical debts. It enjoys support across the political spectrum spanning from Rep. Ron Paul to Rep. Barney Frank and has dozens of co-sponsors. Congress should immediately enact this proposal and protect families from any further financial harm due to medical collections.

Be a Savvy Consumer

Illness or injury can result in hardship and medical bills. Ignoring these bills can create problems. Exercise your consumer protections. Keep tabs on the content of your credit report. Pay your bills. And do not allow confusion around your medical bills to ruin your credit and threaten your financial future.

Image: bolistan, via Flickr.com

If you have a lot of credit card debt spread across a number of different accounts, you might be thinking about whether you should consolidate those balances onto one card.

The benefits of doing so are obvious. First, you’ll essentially be taking the number of payments you have to worry about making every month and condensing it to just one, reducing the risk that one gets lost in the shuffle and reducing the risk that you’d get hit with penalty interest rates and fees, as well as the accompanying hit to your credit rating.

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But second, and perhaps more importantly, you’ll also be putting yourself in a better position to pay off your debt more quickly. That’s because many offers for new credit cards now carry generous introductory offers that grant users 0 percent interest for some time after the account is open. Most fall somewhere between six and 18 months.

Therefore, if your financial goal is to pay down your debt more quickly, getting a 0 percent APR credit card will be a huge advantage, because it can give you as much as a year and a half to cut your balance without paying a cent in interest.

[Related Article: Spiraling Credit Card Debt: What's Your First Step?]

Of course, when moving debt to this card from other ones, you will almost certainly have to pay what is known as a balance transfer fee. Usually, this charge amounts to about 3 percent of the total value of the balance—for example, if you put $5,000 onto the new card from old ones, you’ll have to pay $150—but that is usually preferable to the ongoing interest charges you would face if you kept your balances on all your old cards instead.

And when opening such an account, you might also want to consider your plans for using it in the future. If you’re just using it as a means of reducing your outstanding debt, you might not be very concerned about the associated ongoing interest rate after your introductory offer expires. But if you plan to use it as you would any other card after that point, you should keep an eye on the ongoing APR. That’s because cards with 0 percent APRs to start typically carry higher ongoing interest rates than those that do not.

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