You may open a checking or savings account at a bank, savings and loan association, credit union, or other financial institution that offers such services. You should bring personal identification with you to the bank, including your social security number, when you apply for the account. Be prepared to make an initial deposit of $100 to $300 to open the account, depending on the bank or institution you choose. Many times, the opening of an account requires a credit check.
Automatic deposits allow you to have your paycheck or benefits check deposited directly into your bank account by your employer or the government. Automatic withdrawals are a way to pay bills directly from your account, without having to write a check. Automatic transactions are useful to help you receive your wages as soon as possible and pay your bills on time. However, you should always check your bank account to make sure your deposits are going through and to make sure you have enough money to cover automatic withdrawals. If your income changes or you cancel a service you are currently paying for, make sure you update or cancel your authorization for deposits and withdrawals as soon as possible.
You should check your bank statement carefully every month to make certain there are no errors or differences between your records and the bank’s statement. If there are, call this to the attention of the bank immediately so that the problem can be corrected without any further complications. Failure to act in a timely fashion may prevent you from forcing the bank to correct any errors it may have made. If you lose your checkbook or check card, or if they are stolen, you should contact the bank immediately.
If you write a check for more than you have in your account, the check will be returned to the person to whom the check was written with a statement of insufficient funds. This is often called “bouncing a check.” This will have a negative effect on your credit record and your relationship with that person or business. Your bank will most likely charge you a fee for a returned check, and frequently the business
where you used such a check will be charged a fee and may also charge you a fee. On your bank statement, these fees may be listed as “NSF” If you write a check knowing that you do not have sufficient funds in your account or on an account that you previously closed, you may also be subject to civil and criminal penalties.
If you have a checking account, you may have the option of setting up an “overdraft protection” service. There are various types of overdraft protection, which authorize the bank to loan you the money needed to cover the checks your write. Your bank can explain the options to you. Keep in mind that these protections can include high bank fees: the bank may charge fees for the service or related transactions, and some transactions may accrue interest. It is much less expensive and safer to always ensure you have enough money in your checking account to cover your purchases and bills.
Service charges are fees charged by financial institutions for certain transactions. For example, a bank may charge you a small fee for each check you write, or for each time you withdraw funds from an automatic teller machine (ATM). When you open up any kind of an account with a financial institution, be sure to ask what service charges will apply and how you will know if they change. The bank should provide you with information that explains all the terms and conditions of your account. If they change, you should receive notice from the bank.
A credit card account allows you to charge expenses to an account that you must pay back later. Usually you will receive a statement of your account once a month and be expected to pay some or all of the balance. You will pay interest on the money you borrow by using a credit card account if you don’t pay the balance in full every month.
There are different types of credit cards and you need to be aware of the process and rules that relate to your card. Retail credit cards are usually issued by department stores and specialty stores and may only be good only at that store, though some retail cards are only “branded” to that store but usable elsewhere. Generally speaking, retail cards have a higher interest rate than bank cards. Bank cards, such as Visa or MasterCard, are issued by banks and other financial institutions. These are accepted at a wide variety of businesses. Some cards such as American Express and Diner’s Club, can be “pay-as-you-go” cards because they require payment in full each month, rather than simply a minimum of the total bill.
A debit card allows you to charge expenses to your checking account without writing a check, and the money is paid out of your account immediately. You must have enough funds in your checking account to cover any charges you make using your debit card, or some sort of overdraft protection or line of credit to cover any charges that would put your account in the negative. As above, any overdraft protection will likely have fees associated with it.
You can get a credit card by responding to advertisements you receive in the mail or by applying at a bank or store that issues the card. When you apply for credit, you need to establish that you or a co-signer will be able to pay the bills. This can be done by having someone with an established credit history (such as a parent) co-sign for your card. If you have a job or some other source of income, documentation of that may enable you to get the card without a co-signer. Under federal law, if you are under the age of 21, you will not be issued a credit card unless you have a co-signer who is over the age of 21 or you have proof that you have an independent means of paying your credit card bills.
Your account may include interest and fees.
Interest: When you buy something with a credit card, you are actually borrowing money from the credit card company to pay for the purchase. Interest is what the credit card company charges you to borrow its money, just as a bank would charge you interest if it granted you a loan.
Fees: Fees are the charges applied to your account by the bank or store for their services as you use their bank card. Be sure to understand how fees and interest are calculated before you open a credit card account.
Be sure to understand how interest is calculated on your particular account, or you may have an unhappy surprise when your bill arrives. Not all credit card issuers calculate interest charges the same way. One method calculates interest based on the average daily balance. Another method, the adjusted balance method, subtracts payments from the balance before calculating interest charges. A third method, called the previous balance method, calculates the interest charge based on what the balance was on the last billing. Read the credit card contract and talk to the credit card company about how interest on your account will be calculated before you open an account to make sure you understand what terms and conditions will govern your use of the credit card account. When you receive a credit card, make sure to keep a copy of your contract and any new materials you may receive in the mail about the company’s interest rate or policies. These contracts must also be made available on the company’s website.
What should I do if I lose my credit card? What do I do if my statement includes charges I did not make?
You should call the credit card company immediately to report the loss, or any incident where charges appear for purchases you did not make. If someone uses your credit card before you report the theft, you may be assessed fees for each card that is used without your authorization, so do not delay reporting the loss. If you believe that your credit card was stolen, report it to the police and credit card company immediately. Be sure to keep a copy of the police report and a record of any charges to your account that you did not make or authorize. If you believe that you are the victim of identity theft after your credit card is lost or stolen, you can find more helpful information on websites of the Federal Trade Commission, www.ftc.gov, and the Minnesota Attorney General’s Office, www.ag.state.mn.us.
Credit bureaus are independent agencies (not associated with any bank or credit card), that maintain files on consumers’ credit history. This information is provided to credit card companies, landlords, banks, and other institutions that subscribe to the services. The information is used in determining whether a person is a good credit risk. There are hundreds of credit bureaus, with the three largest being Equifax, Experian, and TransUnion. Much of the information in your file is supplied by you in the applications you fill out when you apply for credit, such as your address, your spouse, and your employers. Other information is supplied by those who have extended credit to you. This information includes if you pay your bills on time, your outstanding balances on credit cards and loans, and the amount of credit extended to you. Other information such as bankruptcy filings, judgments filed against you, and tax liens may be obtained from public records.
Institutions that are considering extending credit to you review this information when you apply for credit. You have the right to review these credit reports and you have the right to know the basis for any denial of credit. If there are any inaccurate items listed on your credit report, you can dispute those. That will trigger a review by the supposed creditor to confirm that the listing is accurate.
Under federal law, you are entitled to receive one free credit report every year from each of the nationwide consumer reporting companies, Equifax, Experian, and TransUnion. To do so, visit www.annualcreditreport.com. Be careful! Some websites that claim to provide free credit reports often sign you up for services you have to pay for without your knowledge.
A credit rating profiles your history of handling credit. Creditors use different kinds of rating systems. Some rely strictly on their own judgment and experience. Others use a credit scoring or statistical system to predict whether you are a good credit risk. Different creditors may reach different conclusions based on the same set of facts.
Before making a big purchase like a car or a computer, make sure you research the product. Think about what you need the purchase for and what make and model will serve you best. Compare prices at various stores and websites and read other people’s reviews of the product’s quality at a consumer reporting services, like ConsumerReports.org. When you make the purchase, always save your receipts. This may allow you to return the product if it breaks or does not serve your purposes.
Ask if the product you are purchasing is covered by a warranty in the event that it doesn’t work properly or needs repairs. If a product is sold without a warranty the product is sold “as is.” The buyer should be sure to inspect the product to make sure that it is free from any defects and/ or not in need of any repairs before purchasing any product “as is.”
Warranties are the manufacturer’s or seller’s promise to provide a remedy should the product fail. Warranties vary in the amount of coverage they provide. Just as you compare style, price, and other characteristics of competing products before you buy, you should also compare warranties.
Keep these questions in mind when comparing warranties:
- What parts and repair problems are covered by the warranty, and what is specifically excluded?
- Are there any conditions or limitations on the warranty?
- How long does the warranty last?
- What will you have to do to get repairs?
- What will the company do if the product fails?
- Does the warranty cover “consequential damages” (damages the product causes)?
- What are the costs and/or benefits of an extended warranty?
If you have a question about a particular product or service, try contacting the company or individual that makes the product or provides the service. Many consumer magazines and websites, such as Consumer Reports, try to give an objective opinion about various products and services. To inquire about the record of a specific company in providing products and services and honoring warranties, you can contact your local Better Business Bureau. It is a good idea to consult these resources before making a major purchase.
For information on how to file a complaint, you should contact the Minnesota Attorney General’s Office at www.ag.state.mn.us or call 651- 296-3353 or 1-800-657-3787.
False advertising is the practice of making claims or statements about a product that are untrue. The Minnesota Attorney General’s Office is interested in learning about companies that use false advertising. If you have been a victim of false advertising or know of a company that uses deceptive advertising, visit the Minnesota Attorney General’s website.
Most individuals will probably need loans at some point, particularly for very expensive purchases, such as a car, a condominium, or for one’s education. Loans are available through many institutions for different kinds of purchases. Remember, a credit card account is also a loan agreement. Loans vary significantly in the fees and interest that are charged, and theses can make a major difference in the true cost of purchasing an item or service.
The best place to get advice and information about financing your education is at your school’s financial aid office, the U.S. Department of Education, or the Minnesota Office of Higher Education. Advisors there should have information and applications for several aid programs, including various types of loans, grants, and work/study programs. Your credit history may affect your ability to obtain such loans, and having a loan may also affect your future credit record.
Even if you need money quickly, try to avoid commercial loans like payday loans or liens on the title to your car. Although these types of loans are processed quickly and look reasonable, they can often be difficult to pay back in time. The interest rates can be very high, and, as a result, they ultimately cost a great amount of money.
If you need an emergency loan, contact your county social services for information about any emergency assistance programs available. You may also be able to secure a personal loan from your bank or credit union.
First, you should contact your creditors to inform them of your situation and try to work out arrangements for repayment and extensions. If you cannot reach an agreement with your creditors, or if you need assistance in planning your budget, you may wish to consult with a credit and debt counseling service. Some nonprofit organizations offer low cost or free assistance with debt management plans and/or credit counseling. Be sure that you understand what fees they charge for their services. Beware of for-profit debt settlement services as many charge significant fees for their services, especially those located out of state and offering to deal with all your creditor. Debt settlement companies should be licensed by the Minnesota Department of Commerce, which has a website you can search at http://www.commerce.state.mn.us/ LicenseLookupMain.html. If your financial situation becomes critical (i.e., you owe multiple creditors substantial debts that you are not able to pay off), you may wish to consult with an attorney regarding filing bankruptcy.
Sometimes debt collectors will use aggressive and threatening tactics to try to collect debts from you. You may receive multiple phone calls a day, at home or at work. If you are being harassed by collectors, you have the right to write them a letter informing them to stop contacting you. Collection methods are controlled by law. The Fair Debt Collection
Practices Act (FDCPA) is a federal law that prohibits debt collectors from using harassing, abusive, or deceptive practices when collecting a debt. Even if a consumer owes the debt, he or she can still sue a collector that violates the FDCPA. You should consult a consumer rights attorney if you are receiving harassing, abusive, or deceptive phone calls or other communications from debt collectors.
You should consult a lawyer immediately. Do not just ignore the notice you receive because you do not have the money to pay your debt. The case against you can go forward even if you do not respond or come to the court as required. If you cannot afford to hire an attorney, your local legal aid office may be able to assist you or refer you to other services.
There are two different types of courts in Minnesota in which creditors and debt buying companies frequently sue debtors who have defaulted on their accounts:
Conciliation Court is small claims court where many people represent themselves. There are relaxed procedural rules, and relaxed rules of evidence. If you are sued in Conciliation Court you may receive lawsuit papers called a “Statement of Claim and Summons” in the mail or via personal service. The Statement of Claim and Summons will be sent with a Notice of Hearing telling you where and when you will have to go to court. You must appear at the Conciliation Court hearing to defend yourself or a default judgment against you will likely be entered. If you cannot make the hearing date, you must request a continuance from the court in writing, and send a copy of the request to the creditor or the creditor’s attorney. If possible, you can attempt to reach a settlement or payment arrangement with the creditor or the creditor’s attorney, which may preclude the creditor from pursuing a judgment against you. If you intend to fight the creditor’s claim, you should bring three copies of any proof you have, so you can give one to the creditor and one to the judge.
District Court is more complicated than Conciliation Court, and many people have difficulty representing themselves in District Court lawsuits without legal assistance. The rules of procedure and the rules of evidence are much more complicated than Conciliation Court. District Court lawsuits in Minnesota start when a “Summons and Complaint” is personally served on the defendant. A summons must be hand- delivered to the defendant or someone who currently resides with the defendant. There is no requirement that the defendant sign for the summons and complaint forms. District Court lawsuits often start before a lawsuit is actually filed with the District Court. This is called “pocket filing” so there often is no court file number on the summons and complaint forms. There is a 20-day deadline for the defendant to serve a formal legal document called an “Answer” in response to a complaint.
An answer is a formal legal document and just calling the plaintiff or the plaintiff’s attorney or sending a letter is not enough. The answer can be served by normal U.S. mail and does not need to be hand-delivered to the plaintiff or plaintiff’s lawyer. Make a note of the date that the summons and complaint was served on you or handed to someone you live with, and contact a lawyer for assistance immediately. If you do not serve an answer before the 20-day deadline, the plaintiff may file the case with the district court and obtain a default judgment against you. Many default judgments are processed administratively by the district court without any hearing dates or judge assigned to the case. If a judgment is entered against you, the plaintiff may try to garnish your earnings or accounts with a bank or credit union.
If a creditor wins a lawsuit against you, your earnings or accounts with a bank or credit union may be “garnished.” Garnishment means that money will be automatically taken out of your paycheck or account before you receive it in order to pay off the judgment. Minnesota
also has a statute that allows a plaintiff’s attorney to garnish before a judgment is entered if a defendant does not respond to a district court lawsuit and the plaintiff fulfills certain statutory requirements. (See Minnesota Statute section 571.71) This collection tactic is used far less than garnishment after a judgment is entered.
Under Minnesota Statute section 550.37, your earnings are “exempt” or protected against garnishment:
- if you currently receive government assistance based on need
- if you have received government assistance based on need within the last six months
- if you have been in prison during the last six months
- if, in a week, you earn less than 40 times the federal minimum wage per week.
Common forms of government assistance based on need in Minnesota are federal or state food support (SNAP), Medical Assistance, MinnesotaCare, Minnesota Family Investment Program (MFIP) benefits, energy assistance, and other similar programs. Any money that you receive through government assistance based on need is also exempt or protected from the claims of ordinary creditors like credit card companies and debt buyers.
However, just because your earnings and/or benefits are exempt or protected does not mean that you should ignore collection action, and you should never disobey a court order. In order to claim an exemption of your earnings or benefits money, you will have to take action by completing an exemption form. Claiming an exemption of your earnings is often easier than claiming an exemption of money in a bank or credit union account that has been frozen. Read the instructions that the plaintiff’s attorney sends to you that explain what you need to do to successfully claim an exemption of your earnings or benefits money. If you cannot understand the instructions, you should seek help from a lawyer.
In order to make an exemption claim for funds withheld in a bank or credit union, you must follow the instructions on the notice from the creditor. This will include completing the exemption form and returning it to the creditor with two months’ worth of bank statements for each account that had funds withheld. You must also notify the bank of your exemption claim. There is a tight time frame to do this, so if you have any questions about it, be sure to contact a consumer rights attorney or legal aid.
Social Security retirement and disability benefits and some other forms of federal benefits are protected by federal law, and there are additional protections that can automatically protect exempt federal benefits if the benefits are directly deposited by the federal government into just one bank or credit union account and the balance of that account does not exceed two months’ worth of benefits. You may lose these protections if the funds are transferred from the original account to another (automatic SSI deposit into checking, then transfer into savings). You should consult a lawyer if you have questions about whether your earnings or benefits are exempt under Minnesota and/or federal law.
Individuals age 18 or older who reside in, do business in, or own property in the United States may file for bankruptcy, providing they meet requirements of the U.S. Bankruptcy Code. Bankruptcy is a complex area of the law and has significant consequences. Therefore, before considering whether you are able to or want to file for bankruptcy, it is strongly recommended that you consult with a bankruptcy attorney.
The consequences of filing for bankruptcy are serious. It will jeopardize your credit rating and ability to borrow money for many years. A consumer’s bankruptcy filing may be reported by credit reporting agencies for up to ten years. Bankruptcy may also require you to give up most of your property and assets, unless there are defined as essentials and are exempt under the law.
Have more questions? Contact the LRIS to speak with an attorney, or visit LawHelpMN to read articles drafted by some of our partnering agencies: LawHelpMN: Consumer and Debt.