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Collection Fees on Student Loans You Never Knew Could Happen

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Debt collections_lg

If you’ve ever been through federal student loan entrance counseling, then you know that failing to make payments on federal student loans can have serious consequences. If you fall behind on your required monthly payments after you graduate, the Department of Education may take steps like garnishing your wages before they ever reach your bank account, withholding your tax refund, or even suing you.

But did you know that failing to pay back your federal student loans could also make you liable for collection fees?

If you have federally-financed student loans that are in default—which in most cases means that you haven’t made payments for 270 days—the federal government may refer your account to a collection agency. What may come as a surprise is that these collection agencies typically charge fees or commissions, and these fees can be added to the balance that you owe.

Though the fees vary depending on the agency and the type of loan you have, they can exceed 15% of your total balance, and can even reach up to 40% of your total balance in the case of Perkins loans. This means that if your current loan balance is $20,000, you could suddenly have between $3,000 and $8,000 in fees added to your account.

Ouch.

So how can I avoid having to deal with a collection agency?

Avoid default: The best way to avoid collection fees is to ensure that your student loan does not go into default. If you are struggling to make your monthly payments, contact the Department of Education right away to explain your situation and figure out a plan. For example, you may be able to reduce your required monthly payment amount through an income-driven repayment plan. You can find more information about how to apply for income-driven repayment here.

Check into deferment or forbearance: Depending on your situation, you may also be eligible for loan deferment or forbearance. You should look into applying for deferment or forbearance if you have returned to school, if you have an illness or financial hardship that affects your ability to make payments, or if you have recently served in the military. More information about loan deferment and forbearance is available here.

Heed warnings: If you do fail to make your required monthly payments, your loans will become delinquent and you will receive warnings from the Department of Education. Do not ignore these warnings. If you ignore them, your loans will go into default after 270 days and may be referred to a collection agency.

Monitor your credit: Additionally, if you have missed any payments on your student loans, be sure to check your credit score and get a credit report. If your credit score has been brought down by one or more missed payments, you can try writing a letter of goodwill to your loan servicer explaining your situation and politely requesting that they remove the missed payment from your credit report. You can find more information on how to write a letter of goodwill here.

But what if my loans have already been sent to a collection agency?

Take action immediately: If you receive a notice from a collection agency, this means your loans have gone into default. It is critical that you respond to the agency immediately to work out a plan for repayment. If you enter into a repayment agreement within 60 days, you will not be charged collection fees.

Try to pay back in full: If you are able to pay the full amount back, pay it immediately. This may not be an option for many people, but it is the fastest way to get your loans out of default.

Set up a rehabilitation plan: If you cannot pay the full amount, work with the collection agency to create a repayment plan—known in this case as a rehabilitation plan—that is manageable based on your current income. If the agency suggests a monthly payment amount that you feel is unmanageable, let them know that you need a lower amount, and send them documentation of your current income as proof.

Don’t miss a payment: Follow through on the rehabilitation plan! If you fail to make the payments you have agreed to, collection fees will be added to your account.

Ensure default status gets removed: After you have made nine on-time monthly payments according to the terms of your rehabilitation plan, your loan will be removed from default status. A loan can only be rehabilitated once.

Resources to help you

  • How to make a payment to a collection agency here.
  • 7 things to know if you have debt in collections here.
  • The Department of Education has a page about student loan default here.
  • The Department of Education’s page about getting out of student loan default is here.
  • The Department of Education provides contact information for the collection agencies it works with here.
Sarah Noelle
Sarah Noelle |

Sarah Noelle is a writer at MagnifyMoney. You can email Sarah at sarah@magnifymoney.com

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Consumer Watchdog

Don’t Make Payments via iTunes Gift Cards. It’s a Scam.

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

iTunes Gift Cards

Thanks to the Federal Trade Commission, we’re more aware of money wiring schemes. We know to send emails from long lost relatives requesting a wire transfer directly to spam. And to ignore mail from companies promising us a huge cash prize after we pay a “small fee” through money wire. What they really plan to do is get their hands on that small fee and then disappear.

Unfortunately, whenever we catch on to a scam, career criminals become more resourceful. The newest way to scam people out of cash is through iTunes gift card.

How iTunes Gift Card Scams Work

The reason con artists like to request money wires is it allows you to send money far away. It’s also difficult to recover money once it’s wired. A credit card payment, on the other hand, may be trackable or even reversible.

Sending money through iTunes gift card presents the same opportunity as a wire transfer. It’s difficult to track where the cash goes after the gift card is drained. If you find out later you’ve been scammed for money, the chances that you’ll get the money back that was on the card are slim.

Here’s how the scam works: Someone will ask you to buy an iTunes gift card, then tell you to give them the serial number on the card. Once they have the serial number, they either drain the cash on the card or sell the card online.

A scammer may ask you to use an iTunes gift card to give them money for various reasons, including some of the same reasons that are common with wire transfers, like:

  • Assisting a relative or friend in need
  • Repaying an old debt
  • Pay for an item being sold online
  • Paying a fee to accept a prize
  • Paying back taxes

The Scam to Look Out for Growing in Popularity

At the beginning of this year, the Treasury Inspector General for Tax Administration (TIGTA) reported that since October 2013 over 5,000 people have fallen victim to IRS phone scams and paid out over $26.5 million as a result.

One popular IRS phone scam is when someone impersonating an IRS or Treasury agent threatens arrest, deportation, and other consequences if you don’t pay up.

What’s one way they ask you to pay a phony tax bill? You guessed. iTunes gift card.

Since ignoring a valid tax bill can result in wage garnishment and even jail time, we’re all hyper-vigilant of any correspondence from the IRS. But, if someone calls to demand a tax payment with an iTunes gift card, something is wrong.

When the IRS wants to get your money for real, they will not resort to threatening you over the phone for payment right away. You get an opportunity to appeal. They will never ask you to pay through iTunes gift card. If you’re uncertain of a request for payment, go to the IRS contact website and reach out to the agency directly.

What to Do If You Get a Request for iTunes Gift Card

Crooks are good at what they do. They know the buttons to press to get a victim to fall for the con. If someone’s living paycheck to paycheck, a prize scam is going to look mighty enticing. If someone’s petrified of going to prison, they may be more inclined to pay these “taxes” to avoid the slammer.

Don’t act off impulse when any gift card is in the equation. iTunes gift cards should only be used to make iTunes and App Store purchases. Apple has even addressed this problem on the website.

According to the Apple gift card page:

“iTunes Gift Cards are solely for the purchase of goods and services on the iTunes Store and App Store. Should you receive a request for payment using iTunes Gift Cards outside of iTunes and the App Store, please report it at ftc.gov/complaint.”

4 Safer Ways to Pay or Get Paid

One way to avoid the iTunes gift card scam and any other scam that involves a money transfer is never sending cash to someone you don’t know. When circumstances come up where you need to exchange money for personal or business use, there are better avenues to do so than iTunes gift cards, here are a few:

1.PayPal

Signing up for a PayPal account is free, but there are some fees for certain transactions. Here’s the fee schedule for sending money:

Sending Money Domestically

  • From your PayPal balance or bank account – Free
  • From your debit or credit card – Flat fee of $0.30 plus 2.9%

Sending Money Internationally

  • From your PayPal balance or bank account – 0% to 2%
  • From your debit or credit card – 2.9% to 5.99% plus a fixed fee based on the payment currency

If you sell a product or service through PayPal, there’s a 2.9% + $0.30 fee per transaction for the seller (and an even higher fee for international transactions). Buying from a merchant with PayPal is always free.

2.Venmo

Do you casually exchange money with family and friends? Venmo is part of PayPal and a solution for small, quick transactions between people who know each other. It’s particularly useful on the go, when dividing a restaurant bill for instance. No more getting stuck with the bill!

Download and sign up for the account for free. Then add money to your Venmo account balance or link your Venmo account to your bank account, debit or credit card. Data security is always a concern when adding your financial information to any online account. Venmo uses data encryption and secure servers.

Sending money with a debit card is free for major banks. Debit card transactions from some smaller banks may have a 3% fee. All payments through credit card cost 3% as well. Credit cards may also incur a fee.

3.Square Cash

You can use Square Cash for personal and business use. If you’re using the app to send and receive money from family and friends with your bank account, you can do so for free. You will pay a fee if you have to send money through credit card and that fee is 3%.

Using Square Cash for business isn’t free, and you’ll have to note that you plan to accept payment in exchange for products and services when you set up an account. The processing fee for businesses is 2.75% per payment received.

4.Google Wallet

Google Wallet works similar to each other system we discussed above. You can download the app for free on your iPhone or Android. To send money, you just need either the email or phone number of whoever the money is going to. Google Wallet also comes with 24/7 fraud monitoring which is unique. Sending and receiving money with Google Wallet is free.

Always Report a Scam

If you encounter anyone requesting iTunes gift cards for payment, run for the hills. And make sure to report it. You reporting a scammer may prevent someone less suspecting from falling for the same person’s con.

Taylor Gordon
Taylor Gordon |

Taylor Gordon is a writer at MagnifyMoney. You can email Taylor at taylor@magnifymoney.com

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When Late Payments Hurt Your Credit and How Long it Lasts

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Very Upset Woman Holding Her Many Credit Cards.

When you borrow money—whether it is to buy a car, refinance other debt, continue your education, purchase plane tickets, pay medical bills, or go shopping—you sign a contract that outlines the rules of how and when you’ll repay the money. But what happens when you miss a payment or can’t repay the loan?

1. What Happens When You’re Late on a Payment? 

If you miss a payment on your loan, the lender will likely contact you to ask you to make a payment, and it may charge you a late payment fee. Unless the lender gives you a grace period, the credit reporting agencies will also be notified that you were late with a payment, and this information will be added to your credit report. Usually, late payments are not reported to a credit reporting agency until you are at least 30 days past due. If you continue to not make payments, the lender may send your account to either an internal or third-party collections agency.

The collections agency will try to get you to make a payment, and it may take more severe measures. Missing payments on an auto loan can lead to the car being repossessed, along with additional fees and expenses. Defaulting on a mortgage can result in the lender foreclosing on the house, although this process can’t begin until the borrower is 120 days delinquent.

Unsecured debts don’t involve a physical object lenders can take away, but they do have the option of suing you. If they win a court judgment against you, they can collect the debt by garnishing—taking money out of—your paycheck or taking money directly from your bank accounts.

2. When Is the Date of First Default?

The day you miss a payment is the date of first delinquency, but the point at which your unpaid loan goes from delinquent to default depends on the contract and where you live. “Generally, after a missed payment there is a grace period, during which there may be fees,” says Lisa Stifler, a senior policy counsel at the Center for Responsible Lending. “Then it goes into default after some time.” For example, for credit cards the date of first default is usually 180 days after a missed payment.

[7 Things You Need to Know if You Have Debt in Collections]

3. How Does Missing Payments Affect Your Credit?

Missing loan payments can affect your credit multiple times over. Late payments are reported to the credit reporting agencies when you’re 30, 60, 90, 120, 150, and 180 days late. Some lenders may charge-off the loan at that point; writing it off their books because they assume you won’t repay it.

The charge-off is a new negative mark on your credit. When the debt is sent or sold to a collections agency, that’s another mark and a new collections account appears on your report. If you continue not to pay and the collections agency wins a judgment against you, yet another negative mark is created. All these negative marks can remain on your credit report and negatively affect your credit for years to come.

  • Late payments remain on your credit report for seven years from the date of first delinquency. If you bring the account current, the series of missed payments will be deleted seven years from the date of the first missed payment.
  • Collections remain for seven years from the date of first default with the original lender, which in total may be seven-and-a-half years after your first missed payments.
  • Judgments remain on your credit report for seven years from the ruling, which could be years after the late payment.
  • Repossessions and foreclosures, charge-offs, and settlements remain for seven years from the date of first default.
  • Chapter 7, 11 and 12 bankruptcies remain for ten years from the filing date. Chapter 13 bankruptcies remain for seven years from the filing date.

These negative marks remain on your credit regardless of whether or not you settle the account. The date of first default cannot be changed by you, a lender or a collections agency.

4. What Is the Statute of Limitations for Debt?

Those who are worried about getting sued for their unpaid debt may look to the statute of limitations (SOL) for relief. States impose a SOL that dictates how long a lender or collections agency has to sue the borrower for the debt. The SOL usually ranges from three to ten years and varies by state and the type of debt. Which state’s laws apply to your loan can depend on where you lived when you took out the loan, where you live now, or what’s in the contract.

It’s important to note that even after the statute of limitations has passed and the debt becomes time-barred, you still owe the money. The lender, or a collections agency, can try to collect the money from you directly, even if they can’t get a judgment against you. In some cases, you might still be sued for time-barred debt, and you could lose if you don’t show up in court to present the SOL as a defense.

[How to Make a Payment to a Collections Agency Without Getting Ripped Off]

5. Can You Reset the Statute of Limitations?

Those with an old debt are sometimes hesitant to make a payment or speak with a collections agency for fear of resetting the statute of limitations. In many states, the statute of limitations for some debts may reset if the borrower acknowledges the debt or makes a payment of any amount. This could be a reason not to engage with a debt collector.

On the other hand, it is a myth that speaking with a debt collector or making a payment resets the timer for the negative marks falling off your credit report. Those timelines have a particular start point and cannot be reset.

6. What Should You Do If You Can’t Make a Payment?

If you’re going to miss a payment, call the lender before you do so. Explain the situation and tell them when you can make a payment or how much you can afford to pay now. You can try to get late payment fees waived, although it’s a good idea not to make a habit of this.

When you can’t afford or choose not to make payments, the debt goes into default, followed by collections. Your options may change, but an open line of communication can still be critical. The collections agency may be willing to work out an alternative payment plan or settle the debt if you can pay a portion of the amount owed.

 

Louis DeNicola
Louis DeNicola |

Louis DeNicola is a writer at MagnifyMoney. You can email Louis at louis@magnifymoney.com

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Consumer Watchdog: The IRS Reveals Dirty Dozen Tax Scams

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

The IRS Reveals Dirty Dozen Tax Scams

Updated for 2016

Tax time is high season for scams and identity theft. In fact, tax-refund fraud is expected to hit $21 billion this year. We’ve alerted you to some of the tactics crooks use during tax season like pretending to call as an IRS agent demanding payment, email scams saying your tax payment got rejected or that you owe back taxes, or simply stealing your W2 then filing your tax return and routing your refund to another bank account. The IRS also has its own list of 12 scams used to part you with your hard-earned money (or that they think you might be tempted to do).

We want you to be aware of every way a thief might try to take advantage of you during the often frustrating and trying time of filing taxes.

Here are the Dirty Dozen tax scams from the IRS:

1. Phone Scams

This scam is the most prevalent way a crook will try to use tax time to get your money. A fraudster will call you impersonating an IRS officer claiming you owe more money (or back taxes) and need to pay it now or risk being arrested, deported, getting your driver’s license revoked or whatever clever scare tactic he can come up with. Stay calm, never give out personal information and immediately hang up and report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484 and file a complaint using the FTC Complaint Assistant (choose “Other” and then “Impostor Scams”).

[Learn how to protect yourself from tax scams here.]

2. Phishing

If it smells fishy, it probably is! The IRS won’t send you an email out of the blue about a refund or back taxes. In fact, first contact from the IRS almost always still comes via snail mail and not email or phone. If you get an email claiming to be from the IRS, don’t click any links until you contact the IRS directly to confirm it’s valid. The crooks are looking to steal your personal information.

[Read more about how to protect against Phishing Scams here.]

3. Identity Theft

Getting your identity stolen at any point during the year is a major hassle and could be costly. But getting your identity stolen at tax time is probably because a crook is filing for a tax return using your name and getting your refund first (or a fake version of your refund). One of the best ways to defend against this is to file your taxes as early as possible. Also be sure to track all your W2 or 1099 forms and reach out to an employer immediately if you haven’t received your forms by early February. Crooks are not above stealing your tax forms and using them to file.

[Learn how to prevent and deal with identity theft here.]

4. Return Preparer Fraud

Looking for a good deal is great, but don’t go to cheap tax preparer (accountant) if he or she isn’t credible. Do your due diligence before giving over all your personal information to an accountant. Unfortunately, some of them use tax season as a chance to steal people’s identities.

5. Offshore Tax Avoidance

This one is on you. Don’t hide your money offshore, because you’ll be paying big time when Uncle Sam tracks it down. You can voluntarily admit to having an offshore account (even if you had one by accident – perhaps while working internationally) through the Offshore Voluntary Disclosure Program.

6. Inflated Refund Claims

It’s fine if a tax prep software company promises the biggest return compared to competitors, but don’t trust anyone claiming to get you an inflated refund. Never sign a blank return and be wary of anyone promising a big return without even looking at your information. Also, don’t agree to pay fees based on a percentage of a refund. This scam is typically perpetuated via word of mouth, flyers in storefronts and targets community and church groups.

7. Fake Charities

Check out any charity before donating. This is good practice year-round, but fake charities become especially popular during tax season to prey on people receiving refunds. Use tools like GuideStar.org to see if a charity is legit.

8. Hiding Income with Fake Documents

Much like hiding money offshore – this tax scam is on you to avoid. Don’t attempt to fake taxable income by filing false Form 1099s or other documents to inflate your tax refund. You are legally responsible for what is on your returns, regardless of who prepares them.

9. Abusive Tax Shelters

The IRS is committed to cracking down on abusive tax structures/ tax avoidance schemes and persecuting people who create and sell them. Be wary of anyone pushing tax shelters that sound like a great deal.

10. Falsifying Income to Claim Credits

Just report what you’ve earned. It’s really basic. Falsifying your income in anyway will not end well for you, no matter what a con artist tells you.

11. Excessive Claims for Fuel Tax Credits

Some prepares may try to talk you into making a fuel tax credit claim on your return. Be wary! The fuel tax credit is generally limited to off-highway business use, typically for farming. If you aren’t a farmer, it’s doubtful this tax credit is for you.

12. Frivolous Tax Arguments

Yes, you have the right to contest your tax liabilities in court. But don’t let a scam artist sell you snake oil. Often times frivolous tax arguments not only fail to hold up in court but filing a frivolous tax return results in a penalty of $5,000.

Be sure to check out the Dirty Dozen tax scams directly on IRS.gov and contact the IRS and FTC directly if you believe you’ve been a victim of a tax scam.

Think You’re a Victim of a Tax Scam?

Scams need to be reported immediately to the Federal Trade Commission (FTC). You can also hear an example of a scam IRS call here.

Erin Lowry
Erin Lowry |

Erin Lowry is a writer at MagnifyMoney. You can email Erin at erin@magnifymoney.com

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Should You Shop with Fingerhut? (Probably Not)

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Should You Shop with Fingerhut

Plenty of consumers today either make a proactive choice to ditch credit cards or are unable to gain access to one due to a low credit score or non-existent credit history. In response, payment processors like PayPal offer a credit service where shoppers can finance purchases with online retailers – but more and more independent businesses are following the trend and offering their own lines of credit for online shopping portals.

Fingerhut is one such website. Fingerhut acts as a catalog that focuses on being able to finance your purchases. The site allows you to purchase and receive items now, and then make monthly payments on what you ordered to pay for them in full over time.

But is it really shopping on credit now and paying later?

How Fingerhut Works

Fingerhut is an online shopping portal that sells “everything from furniture and bedding to jewelry to the latest electronics.” All purchases are made on a line of credit extended by the company and customers must repay their balances with monthly payments.

You’ll receive an answer immediately when you apply for credit, and some customers are able to start shopping instantly. Purchases that aren’t paid off in full after buying accrue interest, with an APR of 25.15%. There are no annual fees.

Fingerhut offers two programs for customers to receive credit: the Fingerhut Advantage Revolving Credit Account and the Fingerhut FreshStart Credit Account.

The Revolving Credit Account “may or may not require a one-time down payment when you place your first order.” The company states that this isn’t a fee, but a charge that will be applied to your order.

In comparison, the Fingerhut FreshStart® Credit Account is backed by WebBank and acts as an installment credit program. You’re required to make a $30 down payment on what you want to order. If you make payments on time and in full, Fingerhut promises to change your account to the Revolving Credit Account (and up your credit limit).

You cannot transfer balances or take cash advances from either credit option, and your credit can only be used with Fingerhut.

Screen Shot 2016-02-11 at 11.42.48 AM

Who is Being Targeted?

Fingerhut doesn’t require membership, but you do have to apply for their lines of credit before you can shop with them.

The site targets people with no or poor credit who may be declined for lines of credit with other retailers. If you’ve been declined for a store card at your local department store, for example, Fingerhut’s offer may look particularly attractive: you get to finance your purchases even with poor credit.

The main reason people shop with Fingerhut is because the company offers popular, name-brand products and allows you to finance them instead of having to purchase what you’re looking for outright. The site is legitimate from that standpoint – you can charge items to your credit account, they’ll ship after you make a down payment, and then you can repay the balance monthly.

But consumers need to beware before signing up, applying for credit, and heading to the checkout page.

Buyers Need to Beware

Prices of items listed on Fingerhut are considerably higher than other retailers, and there’s little benefit to buying items on the line of credit they offer. Those with bad credit scores won’t see much improvement to that score by using the site, and there’s no reason to attempt to boost your credit score by purchasing material goods from an online retailer.

If consumers need to purchase on credit, they’re often better off charging something to a credit card (or saving up cash to buy what they want). Fingerhut’s prices for the items themselves are higher than in other stores, and their interest rates are often even higher than the rates on credit cards.

And customers aren’t building credit with any company beyond Fingerhut. The site claims that they “can help shoppers build buying power with us,” which is not the same as building credit history. Instead, try building credit history with a secured card.

Choose More Sensible Shopping Alternatives

Fingerhut’s online catalog features a huge variety of items that you can order now and pay for later. But by the time you’ve paid off your purchase, there will be much more cash out of your pocket than necessary. Through Fingerhut, you’ll pay more for your item itself than you would if you purchased at another store – and you’ll pay interest on top of that, too.

If you don’t have the cash in hand today, take a step back and look at your budget to understand why. Are you overspending? Do you really need the item you’re trying to buy, or is an impulse purchase? Is there something else you’d rather do with your hard-earned money than spend on material goods, like saving up for a goal or investing for your future?

If you decide you do want to buy items like the ones you can find on Fingerhut, it still makes sense to choose other alternatives for your shopping needs. In the long run, it’s much cheaper to buy what you’re looking for through other retailers. You can still shop online and get better deals on overall price.

Use coupon sites to look for codes and discounts, and check out online shopping portals like Amazon and eBay to hunt for the best deals. Set up price alerts to be notified when things go on sale and plan purchases carefully to make the most of the money you want to spend.

Kali Hawlk
Kali Hawlk |

Kali Hawlk is a writer at MagnifyMoney. You can email Kali at Kali@magnifymoney.com

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Protect Yourself from Tax Scams

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

 

Tax return check

Updated for 2016

Tax time is coming which means crooks are looking to part you and your money. There are a myriad of tax scams, but two of the most common right now are early filing and fraudulent calls.

File Early to Protect Yourself

Consider this scenario: you put off filing your taxes until April. You go through filling out all the information with your preferred tax filing software and as you click the final submit button a screen tells you that you’ve already filed and received your refund.

There is a rise of scammers using personal information to file early and steal refunds. In fact, it’s predicted tax-refund scams will net $21 billion by this year.

The best way to prevent your return from being stolen is to file as soon as your tax documents arrive.

Decoding a Fake Call Scam

Another common scam comes in the form of fake calls or threatening text messages claiming to be the IRS. Often, the caller/texter will demand the taxpayer makes a payment to the IRS or face being arrested, deported, or suspension of a driver’s license.

Crooks ask for money to be sent via wire transfer or a pre-paid card. This money is nearly impossible to recover once it’s sent, so victims who do give into the demands are likely to never see the money again.

The IRS issued a statement in 2013 stating the agency never asks for credit card numbers over the phone nor requests pre-paid debit card or wire transfers. In fact, the first communication about a tax-related issue is through the mail.

These scammers sure aren’t rookies though. In 2013 the IRS reported some of the characteristics of these scams include sophisticated tactics to convince potential victims the IRS was indeed calling.

Here are some characteristics of the call scam:

  • Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
  • Scammers may be able to recite the last four digits of a victim’s Social Security Number.
  • Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
  • Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
  • Victims hear background noise of other calls being conducted to mimic a call site.
  • After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim

Information found in a 2013 IRS press release

What to do if you receive an phone call from the IRS you suspect is a phony:

  • First, stay polite but firm on the phone (just in case it really is the IRS). Say you have heard IRS scams are prevalent and you’ll need to ensure this isn’t a scam by reaching out yourself to the IRS and then hang up.
  • Second, if you’re sure you don’t owe any additional taxes to the IRS, report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.
  • If you think you may actually owe back taxes to the IRS, call the IRS directly at 1.800.829.1040 and work with an employee to pay back what you owe.
  • Be sure to report the scam by filing a complaint using the FTC Complaint Assistant; choose “Other” and then “Impostor Scams.” Be sure to note if it included an IRS impostor by writing “IRS Telephone Scam” in the notes.

Tips taken from IRS.gov.

Don’t Download Email Attachments

Stay vigilant about email scams as well. Any email that’s sent to you claiming your tax payment was rejected or you owe back taxes need to be verified before clicking on links or downloading attachments that likely contain malware. Call the IRS directly to see if the email is legitimate.

Protect Your W2

Thieves can also use mail theft to wreak havoc on your financial life. A W2 or 1099 features nearly all the information an identity thief would need to impersonate you. Social Security number, check. Address, check. Full name, check. Employer and salary, check, check.

Because of this, it’s not uncommon for thieves to pull tax forms right out of the mail.

Your employer was required by law to send you tax forms by February 1, 2016

Keep a list throughout the year of companies that should be sending you a W2 or 1099. If you don’t receive your documents by February 8, 2016 — then be sure to reach out and inquiry when you should expect your tax forms and ensure they were sent to the correct address.

If you’re concerned your identity may have been compromised, you can put a credit alert or credit freeze on your credit report with all three bureaus (Experian, TransUnion and Equifax). You can also download your credit reports for free to look for any suspicious activity at annualcreditreport.com.

Don’t wait to report scams 

Scams need to be reported immediately to the Federal Trade Commission (FTC). You can also hear an example of a scam IRS call here.

Erin Lowry
Erin Lowry |

Erin Lowry is a writer at MagnifyMoney. You can email Erin at erin@magnifymoney.com

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How to Spot 5 Popular Work-From-Home Scams

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

How to Spot 5 Popular Work-From-Home Scams

We’ve all seen deceptive work-from-home job ads before. They promise work that pays thousands of dollars each week with no experience necessary.

Of course, it sounds too good to be true. But more money and the freedom to work from home is something we all want, so you may be inclined to give one of them a shot. Before you do, know that there are a few dead giveaways that a work-from-home opportunity is really just a scam.

How to Spot and Avoid Work-From-Home Scams

The phrase, “You have to spend money to make money,” is one that scam artists use to get over on you. If you have to dish out a few hundred dollars for membership, certifications, training or equipment to work for a company, you need to make sure you’re spending money on something valuable.

Don’t invest until you’ve taken a look at company reviews from reputable sources like the Better Business Bureau. You can’t trust any old website for an honest review. Sometimes website owners are affiliates who get a cut of the profit if their review gets you to buy into a scam. Unbiased forums are a better source of reliable feedback.

There’s also no such thing as easy work. Be wary of jobs that sell a lifestyle where you earn a good deal of money from hardly any effort. When a company sells an image and nothing tangible, you have to wonder where the revenue comes from to run the business. If it looks shady, trust your gut.

Finally, any recruiter that contacts you asking for information to get you started in a program, like your Social Security number or address, should sound fishy to you. There’s nothing stopping them from taking your information and then stealing your identity.

Top 5 Work-From-Home Scams

Now, let’s talk about some of the top work-from-home scams you should avoid.

1. Pyramid Schemes

Often pyramid schemes look like real opportunities for entrepreneurs. A pyramid scheme recruits sellers of a product that has no value. It charges some sort of entrance fee for membership, training or inventory. The fee is then redistributed as income for participants at the top of the pyramid.

A minuscule group of people actually makes money. The top earners use groupthink and sketchy sales tactics to convince lower level sellers they can make tons of money recruiting other people. In reality, pyramid schemes are illegal and very few people make money.

A close cousin to the pyramid scheme is multi-level marketing or MLM, which is legal. The difference between the two is with MLM distributors earn commission from selling a real product (example, diet supplements or make-up).

Distributors also earn commission on the sales of those people they recruit. MLM gigs aren’t an outright scam, but you shouldn’t expect one to replace your full-time income. There’s also a chance you won’t make your money back if you have to buy the inventory you are going to sell.

2. Mystery Shopping or Survey-Taking

Now, there are mystery shopping and survey-taking opportunities that are legit. But like with all good things, a few people find an angle to scam people out of money. You shouldn’t have to pay for access to mystery shopping or survey gigs. You can find them online for free. If a membership site guarantees you a full-time income from either hustle, you should probably question its validity.

3. Online Business

Online business is the hot industry right now. Successful online business owners can earn over 4 or 5 figures per month with affiliate marketing and other various products. Who doesn’t want a piece of that action?

Some products sold to help you launch an online business are worth your time, others not so much. Systems that promise quick results are unrealistic, especially if you don’t know how you’ll be making money until you buy into the scheme.

There’s no way to make fast money online – or anywhere for that matter. Even if someone’s method of earning online is viable, they’ve probably been working at it for a while. Before you pay for something, seek unbiased reviews.

4. Data Entry or Medical Billing

Work-from-home data entry scam sites guarantee to get you hired and paid well by legitimate companies. You have to pay to become a member of the site. In return, you’ll get access to training, support and exclusive job listings. All you need is a computer and wireless connection – no experience.

Think about this from the perspective of a company that’s hiring a remote worker. Would you partner with a website that has a pool of workers with no experience? And if so, how much would you intend to pay these employees? Probably peanuts.

Instead of creating partnerships with companies, some sites just post gigs and other resources you could find online yourself if you did a bit of digging.

Another popular work-from-home scam is medical billing. A company asks you to investment in equipment, training and industry connections to launch your own billing business. But again, it’s difficult to earn your money back.

5. Envelope Stuffing and Craft Assembly

The envelope scam is one that’s been around for a while. Ads claim to pay you hundreds of dollars per day to stuff envelopes from home. To sign up for the gig, you have to put in your personal information. If this were actually real, the envelope-stuffing budget of a company would be astronomical. These scammers have an ulterior motive for signing you up.

A similar scam is where a company sends craft parts to you and pays for assembly. Again, there are more efficient ways for a company to assemble products than shipping parts off to remote workers. Don’t fall for it.

Are There Legitimate Work-From-Home Jobs?

After discussing all the scams, you’re probably wondering if there’s any real way to make money from home. It’s possible. It’s just not easy. Companies that pay remote workers good money look for people with experience and skills. You have to apply and qualify for full-time remote work just like any other job. That’s unless you launch a business selling your own skills or products.

If you’re just looking to earn side income, try sites like SwagBucks, Mechanical Turk, and UserTesting. These sites ask you to do small online tasks like reviews and surveys with no fees to sign up. You won’t be able to quit your day job with this income, but you’ll actually get paid for your time.

We all like a good shortcut to money and scammers know this. If you see an opportunity to cut corners and earn big money while wearing your pajamas (minimal effort required), it’s probably a scam.

Taylor Gordon
Taylor Gordon |

Taylor Gordon is a writer at MagnifyMoney. You can email Taylor at taylor@magnifymoney.com

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Tax Refund Advance: Why You Should Avoid It

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Tax return checkA tax refund advance is just what it sounds like – an advance on your tax refund. Sometimes it is called a Refund Anticipation Loan (RAL) or Refund Anticipation Checks (RAC).

With a tax refund advance, a lender loans you money (“advances”) that you will repay in exchange for a fee. The amount of the loan is based on what you believe your tax refund to be.

Tax refund advances provide people who are short on cash with money until they receive their refund. A tax refund advance is a short-term loan. However, you should think of tax refund advances as payday loans for tax returns. Not great.

Why You Should Avoid Tax Refund Advances

If someone wants a tax refund advance it is because he needs cash fast – faster than the IRS can get it to him.

The problem with tax advance refunds is that usually the fees are outrageously high and the interest charged on the loan is triple what it would normally be for a loan. And just like any other loan, the full amount must be repaid – even if the refund is lower than expected.

While the actual fees and interest rates vary widely from lender to lender, you can expect to pay too much (e.g.: 10% interest rate and $100 fee for a $1,000 refund, at best).

Ultimately the cost of getting a tax refund advance is too high. Not only that, but lenders prey on people with low incomes who are likely to really need the money and may not be aware as to why these loans are not in their best interest.

The people who need the money the most, end up paying steep rates for it (in fees and interest). One company, listed below, even has their service offered at IRS.com (notice the .com and the real IRS is not a company and the website is actually at .gov). It’s sleazy.

Examples of Companies That Offer Tax Refund Advances

There are a growing number of companies that offer tax refund advances or similar options such as a line of credit based on your return. Examples of companies that offer this service include:

  1. US Tax Center at IRS.com
  2. Income Tax Advances
  3. H&R Block
  4. TaxAdvance.com

You can see from the list above that some companies exist exclusively for the purpose of issuing tax advances (like TaxAndvance.com), while other companies include it is a feature with other services (H&R Block’s line of credit with Emerald Advance).

Regardless of where you get the tax refund advance from, you are getting the same product – a high fee loan in exchange for your tax refund early.

Other Options to Meet Your Financial Needs

Instead of signing up for a tax refund anticipation advance, tax payers should consider taking steps that make it less likely they would need this service.

For example, e-filing is one way to ensure you get your tax refund as fast as possible. With e-filing, you can request a direct deposit of your refund into a checking or savings accounts, which typically takes between 10 and 21 days (for state and federal refunds, respectively). E-filing is a much faster way to file than when tax payers had to file their taxes using standard mail, which use to take weeks or months to get your return. E-filing helps eliminate the long waiting period that once was.

Another way to avoid needing a tax advance refund is to start a $1,000 emergency fund. Starting a small emergency fund (of about $1,000) will give you extra buffer and financial margin. This small emergency fund can help you avoid needing an advance during tax season.

If you need money in a pinch before your tax refund arrives, then consider using a personal loan or possibly even a credit card if you could afford the minimum payment until your refund is delivered and then pay off the entire bill. Carrying debt on a credit card gets extremely expensive, so you should always aim to pay it off on time and in full.

If you are having a tax professional prepare your taxes, you may be able to pay him by having his fees taken out of your refund. Not all preparers do this, but it is a common way to pay for tax preparation services. Check with your tax preparer to see if this is an option for you if you are having trouble coming up with the cash to pay for the service.

Finally, consider adjusting your withholdings with your employer. If you are getting a tax refund it means that you over-withheld (i.e. your employer withheld too much from your paycheck). If you increase your exemptions, your employer won’t withhold as much. This may get you closer to not receiving a refund at all. This would be ideal because then you aren’t paying more than you owe. You would have more money each paycheck, too. Of course, it is best to consult a tax professional before making any changes, but this may be a good option for you.

The bottom line is that you should find a way to avoid taking out a tax refund advance because you are likely to pay too much for such a short-term loan and the risk is avoidable through saving ahead of time, filing electronically, paying for tax preparation fees out of your refund, and adjusting your withholdings. Don’t let these lenders get the best of you – avoid the tax refund advance loan just like you would avoid a payday lender.

Natalie Bacon
Natalie Bacon |

Natalie Bacon is a writer at MagnifyMoney. You can email Natalie at natalie@magnifymoney.com

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How to Get Removed as an Authorized User on a Credit Card

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Authorized User on a Credit Card

Becoming an authorized, or secondary user, on another person’s credit card can be a good way to build or rebuild credit. The account’s information is often added to your credit file, which can help establish a credit history. The increased credit available to you may decrease your overall utilization rate, which can also boost your credit score.

However, being an authorized user can have a negative effect as well. If the primary cardholder doesn’t pay a bill on time, or owes a lot on an account, your credit could be hurt as a result. Even when that’s not the situation, authorized users may want to get taken off an account if their relationship with the primary cardholder changes.

Requesting The Removal

To request your removal as an authorized user on a credit card account, you’ll usually need to call the card issuers. Only Bank of America and BarclayCard allows authorized cardholders to request a removal online.

You’ll need to verify the account’s information, which often involves answering a security question or knowing personal information about the primary cardholder. Once you do so, almost all the card issuers allow authorized cardholders to remove themselves from an account. Only at Citi might a secondary cardholder not have the clearance to request the removal.

In general, you can’t make other changes to an account or request the removal of other authorized cardholders.

Card Issuers’ Contact Information

If you’re a secondary cardholder at one of the following financial intuitions, you can call the number listed below to request your removal from an account. Expect to answer several identification and verification questions, although the specific questions vary by issuer.

American Express: Authorized users can remove themselves from an account by calling the customer service line at 1-800-528-2122. You need to provide your name, card number, and answer a security question or have the account’s security pin. 

Bank of America: Authorized users can remove themselves from an account online or by calling the customer service line at 1-800-732-9194. You will need to answer security questions that were created by the primary account holder, such as the city they were born in, their first car, or their mother’s maiden name.

BarclayCard: Authorized users can remove themselves from an account online or by calling the customer service line at 1-888-232-0780. You will need to provide the account number and two of the following: the primary cardholder’s date of birth, Social Security number, mother’s maiden name, or home phone number.

Capital One: Authorized users can remove themselves from an account by calling the customer service line at 1-800-227-4825. You need to provide the card’s number and the primary cardholder’s name and date of birth. 

Chase: Authorized users can remove themselves from an account by calling the customer service line at 1-800-432-3117. You need the card number and primary account holder’s mother’s maiden name, or the account’s password. 

Citi: Authorized users can remove themselves from an account by calling the customer service line at 1-800-347-4934. You need to provide your name, the primary cardholder’s name, and the security word of the account. With Citi accounts, you may not have the clearance to make changes to the account even if you’re an authorized card user. If this is the case, the primary cardholder will need to request your removal. 

Discover: Authorized users can remove themselves from an account by calling the customer service line at 1-800-347-2683. You need the account number and zip code of where the bill is mailed, or the primary cardholder’s Social Security number.

Kohl’s: Authorized users can remove themselves from an account by calling the customer service line at 1-855-564-5748. You will need to verify the account by providing your card number, name, and date of birth.

Follow-Up with the Credit Bureaus and Card Issuers

Getting yourself taken off an account may only be the first step depending on your end goal. If you’re requesting a removal because the primary cardholder’s activity has hurt your credit, or you want the line of credit off your credit file for another reason, you may need to call the credit bureaus or follow-up with the card issuer.

After getting removed from the account, new activity shouldn’t be added to your credit file. Depending on the issuer and bureau, the entire credit line might automatically be taken off your credit report or the credit line remains with a marker that your relationship with the account was terminated. If the account remains, previous positive and negative marks will remain on your credit file and may affect your score.

Even when the process is automatic, it may take 30 to 60 days for your authorized user account to get taken off your credit report. Wait a month or two and then request a free copy of each of your three credit reports from AnnualCreditReport.com. If the credit line is still there, you can then follow-up with the credit bureau and file a dispute asking them to take the account off your file.

Louis DeNicola
Louis DeNicola |

Louis DeNicola is a writer at MagnifyMoney. You can email Louis at louis@magnifymoney.com

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Can a Debt Collector Get Into My Bank Account?

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Mixed Race Young Female Agonizing Over Financial Calculations in Her Kitchen.

Can a creditor get into your bank account if you don’t pay your debts? The short answer is: maybe.

Whether and to what extent a creditor can get into your bank account depends on your specific circumstances.

It’s important to note that the exact answer for you will depend on the state law in which you live. For that reason, it may be valuable to seek an attorney’s advice in your state.

But for a lot of people, in many states, the following rules typically apply.

How A Creditor Gets Access to Your Bank Account

To get into your bank account, the creditor must get a court order. Specifically, this means that the creditor must sue you (take you to court) and win. Only after the judge enters a judgment against you (meaning the creditor won the lawsuit against you) can the creditor have access to your bank account.

This is an important point to remember. You don’t have to live in fear that a creditor could be in your bank account at any given time until the creditor gets a judgment in its favor. Part of this process requires that you would be given notice of the lawsuit and hearing dates and times. So, you should know when you’re being sued, and you shouldn’t have to worry about a creditor having access to your bank account until that time comes.

One caveat to this general rule is that there could be a situation where a creditor does not need to get a judgment against you in order to access your bank account. One example of this is the federal government. If you have federal loans, the federal government does not need to get a judgment against you to access your bank account as a creditor. The government could also use wage garnishment, tax refund interception and Social Security garnishment to get repaid. There may be other rare exceptions for you, which is why it’s important to seek an attorney’s advice.

Another exception to this rule is if the place where you owe money to is the same financial institution where you hold your money. For example, if you bank at Chase Bank and also have a loan from Chase Bank, the bank may be able to access your funds to repay this loan (this would be included in the paperwork you signed allowing this to take place).

[7 Things to Know if You Have Debt in Collections]

Giving a Creditor Your Bank Account Information

If a creditor has access to your bank account, you can be pretty confident that the creditor is going to collect what it’s owed. This means that you should never give a creditor your bank account information. Most debt collectors will ask you to pay this way, and you should not do it. Allowing the creditor to debit your account is essentially permission to continue to do it. Even if the creditor is only supposed to take less than the full amount you owe from the account, it could take more. And if the creditor takes more money from the account than you give it permission to, you are going to have to prove that. Getting your funds back and taking a creditor to court can be avoided if you do not give the creditor your account information.

[How to Make a Payment to a Collections Agency Without Getting Ripped Off]

For example, if the creditor says that you can pay half of what you owe, and to do so, you need to give the creditor your bank account information, I urge you not to do this. In every situation that I have encountered, it is never a good idea to give the creditor your bank account information.

The general consensus is that you should not give your bank account information to a creditor. If the creditor insists that this is the only way for it to take payment from you, then you should open a second account specifically to pay this debt. Only fund the account with money that you want the creditor to have. This way, the creditor cannot access your full bank account.

How Much Money Can a Creditor Take From Your Account?

There are consumer protection laws in place to prevent a creditor from taking too much money out of your account. But again, these are state laws that vary depending on where you live.

Typically, the laws that limit a creditor’s ability to garnish your bank account require you as the debtor to do something. You are responsible for figuring out what the law is in your state and taking action to limit the amount that a creditor garnishes from your account.

A creditor can also garnish your wages, up to 25% of your paycheck. This is garnishment from your paycheck. If the funds are actually deposited into your bank account, the 25% doesn’t hold true.

If you are in this situation, you should consult an attorney to see what state laws are in place where you live.

How to Get Help

If you are concerned about a creditor seizing money from your bank account, a good place to start is to contact a local attorney to find out what state laws specifically apply to you.

Avoid giving a creditor your bank account information. In general, it’s not a good idea. And remember that typically, a creditor needs to get a judgment against you before it can access your bank account.

An excellent resource to help you with your creditor problems is the Consumer Financial Protection Bureau. This is a federal agency that aims to protect consumers, specifically with financial protection.

Natalie Bacon
Natalie Bacon |

Natalie Bacon is a writer at MagnifyMoney. You can email Natalie at natalie@magnifymoney.com

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