Using Credit for Those Affected by Cancer
Using credit to pay for cancer treatment requires forethought and close management. Credit lets you pay over a period of time for purchases or services. Many credit users may need to change how they spend with credit. If you charge too much, it could take a long time to pay off or you might face credit problems.
If you can’t repay your credit debts as agreed, talk to an attorney, a trusted family member or friend or to a financial services professional to see what you can do. Free credit counseling may also be available in your area.
While you are in treatment for cancer, or at a high risk for recurrence, you need to know how much cash and credit you have available. Negotiating discounts and deferments on credit cards is much more difficult than addressing individual medical account balances. If you use credit wisely and avoid making unnecessary charges, you will have:
- A money source if you’re unable to work or if you have large medical or other bills.
- Additional life insurance, called credit life insurance, that pays off the account balance if the card holder passes away.
How to Get Credit for Those With Cancer
1. Open a credit card account. Carefully consider:
- The interest rate (and when/if it will change to a higher rate).
- The amount of late fees and when they go into effect.
- The effect of a late payment including an increase in interest rate.
- Cash advance charges and increased interest rate.
- Whether the card offers credit life and/or credit disability insurance or other protections.
Save all of the paperwork and watch for notifications from the credit-card company about changes of terms in your account. Double check everything when you get your credit card. Cancel the credit card without penalty if you discover that the card does not meet your expectations. Do not use the card if you decide you are going to cancel it.
Read the fine print before you choose to open any account. Watch out for clauses that allow credit card companies to raise the rate if they decide, in their interest, that your account carries risk. Read about government protections for credit card holders.
2. Request a secured (or prepaid) credit card. With a secured credit card, you deposit money with the creditor equal to the maximum amount you can charge on the card. You build a positive record permitting you to get unsecured credit in greater and greater amounts. Some companies charge excessive fees for secured cards so be sure you understand the charges before you apply for credit or use the card. Secured credit cards should:
- Pay interest on the money you deposit with the credit card company.
- Not charge an annual fee.
- Report the account to the credit bureaus, but preferably not as a secured account.
- Has a reasonable interest fee on outstanding debt.
- Offer credit life insurance, credit disability insurance and additional protections.
3. Ask someone to co-sign on an account or a loan with you. Keep in mind, if you don’t pay the debt, your co-signer will be required to pay the full amount.
4. Get a credit card from a local retailer. Department stores charge higher interest rates, so be sure to pay off the amount quickly.
How to Correct Errors on Your Credit Report
- Check the reports from all three credit bureaus and alert them to any mistakes as soon as possible. It may take some time to correct errors, so you need to continue to follow up on your report. Getting information corrected can be a lengthy process because it involves the creditor and the credit bureau (possibly all three bureaus). Be persistent.
- Contact each of the three credit bureaus as soon as you can by calling, writing a letter or sending a request through its Web site. Describe what is wrong, why it is wrong, and ask the bureau to correct the information. Keep a copy of what you send, or write down the name and direct telephone number of the person with whom you speak with over the telephone.
- The credit company will investigate the claim with the creditor and get back to you within 30 days.
- If the creditor agrees the report was inaccurate, it must inform all three national credit bureaus so they can correct the information in your file.
- If the creditor does not respond, then the result is the same as if the creditor agrees, and the bureaus will make the changes you requested.
- If the creditor disputes your explanation, you have the right to insist that the bureau include a 100 word statement with your report explaining your side of the story.
5. Ask for an increase your credit limit. For those who have credit and been making your credit card payments on time for at least 12 months, call each credit card company to ask to increase your credit limit. Explain your situation, preferably to a supervisor, and ask for a credit line increase. Also ask for a decrease in interest rate.
Credit Scores
Too many lines of credit, such as multiple credit cards, loans and other debt, will lower your credit score. A low credit score can affect:
- The amount of money you can borrow.
- The interest rate you will be charged on a loan.
- How much you will pay in auto, homeowner's and other insurance premiums.
- In some cases, whether or not you will get a job, as some employers are now checking credit scores.
- Your spouse’s credit score.
Pay down your credit card balances as soon as possible. Use credit cards as a backup source of cash in case of emergency.
How to Protect Your Credit Score
1. Pay your bills on time to avoid being penalized with a higher interest rate and late fees.
2. Reduce your credit card debt. High credit card balances will hurt your credit score. Communicate with your credit card company immediately if you can’t make your monthly payment. Request a payment deferment and provide medical documentation that shows your decline in income and why you can’t pay.
3. Use each of your cards equally without increasing your spending.
4. Don’t apply for several credit cards at the same time. This could hurt your credit score and your ability to get new cards.
5. Protect yourself against credit fraud. Give out your Social Security or credit card numbers cautiously. When necessary, only provide this information to trustworthy companies you’re familiar with.
6. Keep your personal information stored in a secure place at home. Carrying personal information with you increases the possibility of it falling into the wrong hands.
7. Destroy or safely store credit card receipts. Avoid leaving copies of receipts at restaurants or other places of business where someone can pick up information about your account.
8. Don’t apply for insurance too many times. Even if you submit just one application for insurance, your credit can be checked by multiple times in trying to find good rate quotes. Each credit check can lower your credit score. An independent broker who works with multiple insurance companies can give recommendations based on previous experiences with customer claims. Also, see online ratings of insurance companies to find those rated "excellent" or "superior." And ask knowledgeable family and friends.
How to Check Your Credit for Mistakes or Fraud
First:
- Gather your credit card statements together and do a quick check of your credit status.
- How much credit do you have available for emergencies?
- Are you behind on any of your credit cards?
- Are you carrying balances on higher interest cards that could be transferred to a lower interest card?
Next, order copies of your credit history from all three major credit bureaus if you have not done so in the past year. Check these reports and alert the credit bureaus to any mistakes you find. It may take some time to correct errors, so you must be persistent in following up on your report.
Go to www.annualcreditreport.com or call (877) 322-8228 for your free annual credit report from all three national credit bureaus. This is the only site where you can order copies of all three credit bureau reports at no cost. The national credit bureaus are:
- Equifax, www.equifax.com, (800) 685-1111.
- Experian, www.experian.com, (888) 397-3742.
- TransUnion, www.transunion.com, (800) 888-4213.
Check Information on Your Credit Report
- The spelling of your name.
- Your past and present addresses.
- Your Social Security number.
- Information about other money you owe such as lawsuits or judgments that were awarded against you by a court.
- Information for each listed credit card and other credit accounts:
- Did you open this account? (Check for credit fraud.)
- Is the number correct?
- Is the account listed as open or closed?
- Is someone else correctly or incorrectly listed on the account with you?
- Is the payment history correct?
- Is the credit limit correct?
The Fair Credit Reporting Act (FCRA) requires each of the three nationwide consumer reporting companies (Equifax, Experian and TransUnion) to provide you with a free copy of your credit report, at your request, once a year. Be sure to take advantage of this law to ensure that the credit information about you is accurate.
Errors can easily become part of your credit record so you may want to check your credit report more often than annually to help prevent identity theft and report any inaccuracies to the credit bureau immediately. However, there is usually a charge for additional credit checks unless they are due to a denial of credit.
Credit Card Protections
Those affected by cancer may be interested in these credit card protections available for a fee:
- Credit life insurance pays off the balance of a specific debt if the borrower passes away. The monthly premium for credit life insurance depends on the amount of the outstanding balance. There is usually an amount charged for each $100 owed.
- Credit disability insurance makes the minimum monthly payment manageable if you become disabled. Some policies pay the minimum amount due for a certain number of months. Some newer policies suspend the card's minimum payment requirement and stop the accumulation of any interest and fees.
- "Bundled" protections are offered by larger credit companies. The bundle (or group) of protections temporarily stops minimum monthly payments, interest charges, and fees, except the annual fee. Ask about less expensive plans that include less coverage. Bundles usually include protection for: job loss, hospitalization, short-term disability, leave under the Family Medical Leave Act (FMLA), disability or death.
With vehicles and large consumer purchases, such as furniture or appliances, you can sign up for credit card protections at the time of purchase. With credit cards, you can get insurance or bundled plans when you accept the card or possibly later by calling the company. Most often you are not asked any health questions and there are no exclusions for pre-existing conditions for credit protection plans. Understand the specific terms of each policy you purchase with the insurance provider. Keep the policy information in a safe place you can easily access if you need to use the benefit.
Benefits of Credit Card Balance Transfers
You may be able to lower your credit card costs by transferring your higher rate balances to cards with lower interest rates. New credit card accounts often come with an introductory low interest rate or even one that is permanently low if you make payments on time. If you find a lower-rate credit card that you qualify for, ask your current credit card company to match that lower rate. They may lower your interest rate to keep you as a customer.
To transfer a balance from one credit card to another credit card, call the new credit card company and they’ll let you know what you need to do. Afterward, you don’t have to close the old account, unless it’s preventing you from getting new accounts with higher limits and lower fees. You can keep the old credit card open in case of an emergency.
When transferring balances:
- Find out how long the lower interest rate will last and what the interest rate will be afterward.
- Pay your credit card bills on time and to keep your account balance under the credit limit. If not, your interest rate can go up on your entire balance transfer, starting from the initial transfer date! Check your credit card account regularly by setting up and monitoring it online.
- Ask the company to waive any balance transfer fee, which is often three percent of amount transferred.
- When transferring a balance by writing a "convenience check" provided by the new credit card company, find out if it will be considered a cash advance with amuch higher interest rate.
- Some credit cards require you to make a purchase every month to keep the interest rate low. You will also likely have to pay your monthly bills on time. It is not unusual for a credit card company to raise the interest rate if you make a late payment more than twice in six months, but some will do so sooner.
- Consider not using that new card for other purchases, and concentrate on paying off the balance.
How to Reduce Credit Card Debt
1. Try to reduce the amount of interest you pay on the balance. If you can find a credit card with a lower rate of interest, consider transferring the balance to that account. Again, read the fine print and watch out for hidden fees.
2. Consider talking with a financial planner to see what you can do to increase your net income or decrease your expenses.
3. Reduce spending on items you really do not need.
4. Increase the number of tax exemptions you claim by changing your W-2 form through your employer, if you receive an income tax refund every year. As a result, less money will be withheld from your pay for taxes, giving you more money to pay down credit cards each month.
5. Consider any benefits of getting a line of credit or a second mortgage based on the equity of real property you own, such as a house. The equity is the difference between what you owe on the property and its fair market value. The interest rate is likely to be lower than what you are paying on your credit cards, but consider this option with caution:
- Check the loan fees and interest rate to make sure that having a second mortgage or a home equity loan would be better than your current financial situation. Talking with a financial expert about the consequences of this option is recommended.
- In addition to your current bank, contact smaller banking institutions and credit unions to find the best interest rate. You may get better terms if you agree to have payments automatically deducted from your checking account.
- There may be able to find private resources that provide financial assistance for expenses, such as medication costs and treatment-related travel costs. If you can get this type of assistance, put the amount of money you were able to save towards credit debt payments.
Credit Card Companies Can Cancel Your Account
A credit card company can cancel a credit card account for a variety of reasons including:
- Because you don't use a credit card for an extended period of time.
- Because you have a history of late or missed payments on a different account.
- Because you file for bankruptcy.
Keep in mind that, although a particular credit card may not be affected by a bankruptcy, (for example, a credit card on which you do not owe anything), the credit card company may cancel the card if it finds out about the bankruptcy.
Debt Consolidation Loans
Be certain that you understand the terms and interest rates on a loan to consolidate all of your debt into a single loan payment. You may find that lowering your interest rate will not make your present debts more manageable. Ask yourself if you can really afford to repay the amount of the consolidation loan. Find out whether the loan will pay off over the life of the loan or whether there will later be a large, lump-sum payment or "balloon payment" due that you may not be able to afford.
Use caution if you are considering debt consolidation loans. For example, one type of consolidation loan, a home equity loan, requires that you pledge your home equity to a creditor. Although most states provide consumers protection from creditors for a specified amount of equity in their home, that protection may be lost if you do not maintain your home equity loan payments.
Credit Counseling Programs for Those With Cancer
Questions to Ask Yourself About Your Credit Use
- Are you using credit temporarily to buy things that you need, or are you buying things that you want but don't really need?
- Are you thinking about the long-term effects of your credit use, or are you avoiding thinking about the future?
- Is your credit situation likely to improve in the near future, or is it likely to become an unwelcome source of stress?
- What is your anticipated earnings/income potential?
Credit counseling or debt management programs are supposed to provide debt counseling services that involve negotiating with creditors to set up a debt management plan. The purpose of a debt management plan is to help the debtor repay his or her debt by working out repayment plans with creditors that may include reduced payments, fees and interest rates to the debtor.
Some credit counseling programs are ethical while others charge excessive fees and provide poor service to consumers. If you decide to participate in a credit counseling program, be certain that you know about any fees you will be charged.
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Works Cited
Landay, David S. Be Prepared: The Complete Financial, Legal and Practical Guide to Living with Cancer, HIV and Other Life-Challenging Conditions. New York: St. Martin's Press, 1998.
Caplin, Joan. "Check This Credit Card Ripoff." Money, February 2005: 32, 48B.
McFadden, Leslie. "8 Major Benefits of New Credit Card Law." Bankrate.com. October 2009. www.bankrate.com
Quinn, Jane Bryant. Making the Most of Your Money. New York: Simon & Shuster, 1991.
Petersen, David. Seminar: Financial Planning for People With HIV/AIDS. New York, 1994.
