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9.3 Being Credit Savvy

posing as the card-issuing bank and asked the cardholder to verify his or her credit card num-
ber, expiration date, and security code. Remember that your bank or credit card issuer would
never ask for private financial information.

Unfortunately, there are other ways thieves can obtain your credit card information. New
credit cards and even your smartphone use technologies that make you vulnerable to virtual
pickpockets. Watch this video to learn more about these threats and protect yourself from
them: https://www.youtube.com/watch?v=7fVuX7Pl4-Q.

What do you do if your credit card information is stolen? Contact one of the credit bureaus—
Experian, Equifax, TransUnion, or Innovis—and place a fraud alert on your credit file. To exe-
cute a fraud alert, you only need to notify one of the credit bureaus, and it will automatically
notify the others, which saves you time and energy. The fraud alert is free, lasts for 90 days, and
can be renewed if necessary. A fraud alert tells potential creditors to be particularly careful
about granting any credit. You can add a phone number along with the alert so creditors can
contact you directly to verify that you are the person who applied for a credit account.

Strategies for Success:
Be Careful With That Debit Card!

If you rent a car or make a hotel reservation, these vendors block the amount owed on your card,
making it unavailable to you for future purchases. This may only be a problem if you have a low
credit limit on your card. Suppose you have made a reservation for your hotel with a credit card
over the phone or online. When you arrive at the hotel, a staff member will ask you for a card
(debit or credit) to cover “incidentals” such as the mini fridge or room service. When you hand
over your debit card, the hotel will put a hold on your card for, say, $300 per night. If you plan to
stay 2 nights, that’s $600, and then any subsequent use of your debit card could result in your
card being declined or incurring fees and penalties for overdrafts. If you used one card to make
your reservation, it’s best to stay with that card. The hotel has already blocked the cost of your
2-night stay on that particular card, and if you use another card to pay your bill, the hotel may
forget to lift the hold on your first card. The best defense is not to use a debit card; use a credit
card for the majority of your transactions because you are not liable for fraudulent activity.

Paying Down Debt

It is very easy to financially overextend yourself and get in over your head with too much
debt. There is a way out, but it is not easy. (See Strategies for Success: Developing a Healthy

Relationship With Money for tips.) Let’s look at Elena Maria’s case. When Elena Maria needed
to borrow money to pay for a hospital bill, she borrowed $5,600 from a finance company at
an interest rate of 26% with a beginning minimum payment of $177.33. Elena Maria did not
know to shop around for the best loan rate; she simply trusted a friend’s recommendation.
She is desperate to pay it off, but she can barely make the minimum payments and can see no
end in sight.

Now that she feels more confident about her ability to reach her goals, she is going to attack
this high-interest loan and pay it off. We will assume that her minimum payment is calcu-
lated as interest plus 1% of balance. Elena Maria used Bankrate’s credit card calculator
(http://www.bankrate.com/calculators/managing-debt/minimum-payment-calculator.aspx)

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