Credit freezes still worth the hassle

In previous columns I have explained the benefits of freezing one’s credit. A credit freeze essentially allows consumers to protect their credit from possible scammers who attempt to open up new credit in their name.

It's best to freeze your credit after you've made major purchases that require lenders to run a credit check on you, such as purchasing a home or vehicle.

However, a reader who followed my advice and put a freeze on his account recently informed me of an unexpected situation where the credit freeze may have caused him problems.

He was in the Tri Cities area purchasing a new car and trading in his old car. The difference between the vehicles was about $20,000, so he wrote a check to the dealership.

Even though the reader wasn’t borrowing the funds to purchase the car, the dealer wanted to run a credit check on him because he had written a sizable check. The finance rep asked the reader to lift the credit freeze but the reader wasn’t able to comply because his passwords to do so were back at home.

Luckily the finance rep relented and the deal went through, but it was a lesson to anticipate situations when you may need to unlock your credit. The other thing the reader could have done was to ask the dealer to verify funds with his bank but it didn’t come down to that.

The lesson here is that if you're purchasing an item that requires you to either borrow money or write a big check, make sure you unfreeze your credit prior to negotiating the deal. This might be a bit of a hassle but I still think putting a freeze on your account is worth keeping scammers from being able to open up a line of credit in your name.

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Rating debt payoff methods

There are two main methods for paying off debt: avalanche and snowball.

With the avalanche method, you start paying off the debt with the highest interest rate and work your way down.

With the snowball method, you focus on the debt with the lowest balance and work your way up to the next highest balance.

There are two important things to focus on when getting out of debt: 1. Have a plan and 2. pay more than your monthly minimum on at least one loan or bill (excluding your mortgage).

If you pay only the minimums, you'll never get out of debt because minimum payments are designed to earn the lenders the most interest. Make a list of who you owe, the amount you owe, the balance, the interest rate and the minimum payment on each debt you have.

If using the avalanche method, focus on the loan with the highest interest rate and then once you’ve paid that off, move to the loan with the next highest interest rate until you work your way through your list. Remember to pay at least the minimum payments on your other outstanding loans.

On the other hand, if using the snowball method, you start paying off the loan with the lowest balance first, while making at least minimum payments on your other debts. The idea with the snowball method is to attack the smallest debt first so you feel like you're making progress by cutting down on the number of loans you have outstanding. Doing this will help you gain momentum, like a snowball, to pay off your debt.

Mathematically, it would be better to pay off your debt using the avalanche method since you attack the highest interest rate loan first, but for some people, reducing the number of parties they owe money to can give them the momentum to keep going.

If you want to see which method works better for you, there's a tool to calculate your unique situation. Go to www.Unbury.us. You can type in all your parameters including balances, minimum payments and interest rates to calculate how long it will take to pay off your debt.

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Stimulus checks, round 2

The second round of stimulus checks has started to hit our bank accounts. Check amounts are $600 for each qualifying adult and child. The payments are part of the stimulus bill passed by Congress in December and signed by President Trump on Dec. 27.

There are some income limit differences from the CARES Act that will preclude some from receiving a stimulus check the second time around.

Payments for single filers with no qualifying dependents phase out entirely at $87,000 vs $99,000 under the CARES Act. For married filing jointly with no qualifying dependents, the amount of phase out is $174,000 vs $198,000 in the CARES Act.

Children will be eligible for the same amount as eligible adults as long as the dependent child had not reached their 17th birthday in 2020. In other words, if you have a dependent child who is 17 years old, they are not eligible to receive the benefit.

Also, adults (typically college students) who are claimed on another person’s tax return are precluded from receiving the benefit as well.

If you'd like more detailed information about the latest stimulus bill go to the Tax Foundation website at https://taxfoundation.org/coronavirus-relief-bill-stimulus-check.

Also, you can check on the status of your payment under “Get My Payment” or update your bank account information at the IRS website at https://www.irs.gov/coronavirus/get-my-payment.

If you aren't set up for automatic payments with the IRS, it could take weeks for your check to arrive in the mail.

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Remember: I’m on your side.

If you have encountered a consumer issue that you have questions about or think our readers should know about, please send me an email at [email protected] or call me at 208-274-4458. As The CDA Press Consumer Gal, I’m here to help. I’m a copywriter working with businesses on marketing strategy, a columnist, a veterans advocate and a consumer advocate living in Coeur d’Alene.