Keep your balance when using debit card

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DEAR BRUCE: Is using a debit card with no funds in an account the same as writing a bad check? — Reader, via e-mail

DEAR READER: There is a great deal of confusion about debit cards. If you go into a gas station and use a debit card at the pump, they are going to immediately debit your account for more than the amount of gasoline that would fill your tank, because they don't know how much you're going to put in. This can cause problems, especially if you have other debits coming into your account.

If you do come up short, you may be charged some fees. A credit card can overcome this problem — as long as you have a decent credit line and don't overdraw. People just need to remember that a "debit" card is not a "credit" card to be paid back later; those funds need to be available at the time of purchase.

If you don't keep track of this, you can rack up a lot of insufficient-fund charges.

DEAR BRUCE: When I was younger, fresh out of high school, I was convinced that store credit cards were a good idea. Now I'm older, wiser and in debt. I'm having a hard time paying them off, owing to the interest on these charges — some as much as 22 percent. I am not even close to paying off the principal amounts. Since my credit is shot, I can't get a bank loan.

My question is, what are your thoughts on debt consolidation? I have unsuccessfully tried to lower the interest rates myself. If not a debt consolidator, then what? — Reader, via e-mail

DEAR READER: Debt consolidation is just another name for borrowing money from one source to pay another. If you are ineligible for a loan because of poor credit, there is no point consolidating because that is, by definition, a loan.

I think you are talking about companies that negotiate with creditors to lower interest rates. While that has some merit, given the fact that your credit is already destroyed, you should realize that some of these "nonprofit" organizations not only charge an up-front fee but also a percentage of what you are paying.

While the overall number you pay per month is less — owing to the company's ability to negotiate with your creditors — I would be reluctant to pay a continuing fee. I have always recommended Consumer Credit Counseling Service. They have been around for a long time — with an excellent reputation. Good luck.

DEAR BRUCE: My husband and I have been married less than two years. He has two credit-card accounts that were obtained several years ago in his name. He has life insurance on these card balances whereby upon his death, accidental or otherwise, the balance is paid in full.

Each month, he continues to pay a percentage of the balance for the life insurance, and he continues using these cards for purchases. Will I be liable for any of his credit-card debt should he die? — Reader via e-mail

DEAR READER: Brought down to its essence: If he dies, the account balances are paid — end of story. Whether or not this is an effective way to carry life insurance is another matter.

The overwhelming likelihood is that if your husband is in good health, and a nonsmoker, he could buy a life-insurance policy on his own that would cover upon his death whatever face amount you select. The net cost would be a lot less than buying it through the credit-card company. The direct answer to your question: When he dies under the current arrangement, the debts go away.

DEAR BRUCE: I have read all your articles about time-shares — how they are a bad investment, sold to consumers under pressure, are not worth it with the tax and maintenance fees, etc. Unfortunately, I didn't believe you and bought into one anyway. We have never been able to use it, and now we're trying to sell it. Even that's not working.

Is it stupid to stop paying the maintenance fees and taxes and let the ownership revert back to the original owners? Are we opening ourselves up to a bad credit rating for the rest of our lives? — Should Have Listened, via e-mail

DEAR SHOULD HAVE: Unhappily, it's not all that simple. If you don't pay the fees and taxes, it may not revert back to the original owners. Oftentimes, the owners don't want the time-share, and they will bring an action against you for the deficiency. The credit rating is the least of your problems. You may approach the original owners; they may or may not be willing to strike a deal. Their point of view, more often than not, is that you have to pay us, we don't want it back and we will go to court to get garnishments or whatever it takes to make it happen.

Unfortunately, there are many of you in this predicament. You would be amazed at the number of letters like this I receive every month.

Bruce Williams is a columnist for the Newspaper Enterprise Association. Send questions to Smart Money, P.O. Box 503, Elfers, FL 34680. E-mail to bruce@brucewilliams.com. Questions of general interest will be answered in future columns. Personal replies cannot be provided.

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