More taxing tidbits

Following up on yesterday's tax theme, I figured I would dust off a link to one of last year's most vital tax-tip posts: Don't forget about "adjustment to income" deductions available even to those who don't itemize. There are a handful of items you can get credits or deductions for even if you claim a standard deduction, such as tuition and student loan interest payments, moving expenses if you relocated for work, children, and adoption costs. One interesting credit is available for those who make $25,000 or less and contributed to a retirement plan like a 401(k) or IRA.

Bankrate has a helpful rundown on such tax breaks. I suspect a number of B&B readers are students or are paying off student loans; don't forget to use that to your advantage on your taxes.

Tax round-ups and refunds

We're still waiting on W2s from my new company and David's company, so no tax filing yet for me. Still, since I imagine other people might be doing theirs already, I'll start dusting off the tax posts ...

I haven't figured out whether I'm sticking with TaxACT this year or switching to something that will annoy me less, but Consumer Search has a "review of reviews" with guides to the various programs. One thing that piques me: Reviewers continue to focus on the sold-in-stores CD versions of the various programs. I always use the Web versions. Do they offer the same features? The same pricing? Reviews don't say. GRR. Anyone know of a rundown that evaluates the online versions?

This year most people will be getting an extra $30 or more back on their taxes, thanks to the telephone tax refund. The government apparently got smacked down in some court rulings over long-distance taxes and told to pay them back, to the tune of $10 billion in refunds. (I was going to look up the rulings and give more details, but a quick troll of Google News turned up nothing -- and if the beat reporters are going to be lazy about this, I am too, unless anyone is really interested.) If you had long-distance services on a cell, VoIP or land line between Feb. 28, 2003, and Aug 1., 2006, you're eligible to collect. The IRS page has the formula; I imagine all the tax-prep programs are worded up about the rebate.

You can opt for either the IRS standard rebate or you can calculate what you actually paid for the tax, and take the higher amount. I took a brief stab at calculating and gave up after finding that a) my phone bill doesn't really break out this charge; it just lists "federal taxes" on the long-distance, and b) the entire monthly "federal taxes" bill on my long distance looks to be about 65 cents -- so I'm probably better off taking the flat refund.

Be warned, if you try to claim thousands of dollars on this refund, the IRS is probably going to get cranky. They've apparently already fielded a few cases where people have claimed they paid phone taxes that would correspond to phone bills larger than their actual income.

The dangers of online account statements

In the interests of saving postage, most of my financial-services providers (and everyone else's, I imagine) have taken to sending me statements by e-mail. In the interests of avoiding boring things, I have taken to almost never looking at the statements. If I want to check balances and make sure things are running smoothly, I log in to the provider's site to check my account history, but I rarely review the detailed transaction statements I'm emailed.

I recently submitted a claim on my 2006 FSA, to try to zero out $26.65 or so I have lingering on it. Usually, I use my FSA Visa card to pay for things, but the last health-care purchase I made was for $35, and it bounced. I paid for the prescriptions in cash and filed a pay-me-back claim, figuring that would dislodge my last $26.65 and all would be good.

Except WageWorks, my FSA provider, bounced my claim in bizarre fashion. The statement it sent seemed to indicate it processed the claim for the full $35 the prescription cost, then "clawed back" earlier transactions to bring my balance right back to where it started, at $26.65.

It looked weird, but my guess was that WageWorks' system got confused trying to pay $35 in credits on an account with only $26.65 left in it, and hadn't been sufficiently clever to pay out a fractional claim. So I rang customer service, expecting a quick resolution.

Instead, I got a whole new trail of paperwork to chase down.

When you use your FSA credit card, you're supposed to keep receipts for your purchases, in case you get audited -- you're supposed to be able to prove that the $20 you spent at the drug store was for drugs, not magazines. It's a sensible restriction, and I tried to be good and squirrel away receipts. I think I have at least one or two of them in the filing cabinet. But somewhere along the line, I stopped socking away the receipts. My transactions seemed to be going through with no problems, and keeping little paper bits is a pain.

It turns out, though, that WageWorks really does want you to mail or fax them receipts for some of your card purchases. Three of mine over the past year were apparently flagged for verification. I never had any idea about this, though, because the company never sends any kind of alerts or puts any flags on your account for you to see when you log in. Instead, it puts a claim verification form in your monthly account statement, which are only available online. (I do at least open and flip through account statements that arrive the old-fashioned way, by snail mail.)

The account statements I never looked at, because I never had any idea they contained anything more than the transaction history I could check every time I logged in to the site. Grrr. When I got the monthly "your account statement is ready, click here to see it" email, I'd been deleting it.

I suppose I should have actually looked at the statements, but it also seems lame for WageWorks to not flag this verification thing in any more visible way. I just did a quick poll of friends with FSA credit cards; none of them recall ever getting verification requests.

So now I get to see if I can excavate receipts to appease WageWorks so it will release the $26.65 it's holding hostage. Remind me again how online statements and automatic payment systems are supposed to make our lives easier?

Using tax-cut apples to solve health-care crisis oranges

In honor of last night's State of the Union, it's time for another heath-care-and-taxes rant.

I'd seen articles suggesting that a health-care proposal would figure into the speech, and looking at a transcript, I see that Bush acknowledged we have a problem: "Many Americans cannot afford a health insurance policy." (Bush also said that the government has an obligation to care for "the elderly, the disabled, and poor children," and that private insurance is the best way to cover everyone else. I disagree and think we should have universal, government-based health care, but it seems like we're still a few years away from the current system collapsing into such a rubble that universal-care proposals become tenable.)

I am left genuinely confused about how the proposal is supposed to address the problem. Once again, this seems like an outright tax break camouflaged as a health-care-reform measure.

Bush's proposal is to create a new, additional standard deduction (available even if you don't itemize your return) for people who purchase health insurance. If you buy it, you'll be able to deduct $7,500 (for individuals) or $15,000 (if you have family insurance) from your taxable income. The idea seems to be that this reduced tax burden will free up money that currently uninsured people will use to purchase insurance.

The flaw in that logic? If you can't afford the premiums for a health-care plan, it's unlikely that a tax incentive will change your mind. CNN's detailed analysis includes White House estimates that this tax break would motivate 3 million to 5 million currently uninsured people to get coverage. With an estimated 46 million Americans uninsured, that's a barely noticeable dent.

This proposal would make insurance more affordable for self-employed people who don't currently get any tax write-offs for buying health care, as people with employer-sponsored plans already do. (All of my health-care premium payments are already tax-free.) That's a great thing, and I'd be happy to see tax breaks targeted at that specific issue. But this plan would also hand money back to scads of people who already have insurance and don't need this incentive. (Like me. Since the proposed $7,500 deduction is far more than amount I currently deduct to cover my premiums, this plan would effectively shelter an additional $6,000 or so of my income.) If Bush wants to increase standard deductions, fine, but, doing so under cover of "addressing the health care problems" is duplicitous.

Because this tax plan does nothing to address the real source of skyrocketing health-care expenses: a massively inefficient system. Getting more people insured does little good if insurance plans continue cutting back on what they cover and hiking premiums, while the system's worst problems, including its inscrutable and inflated cost structure, continue unchecked. For a very good (and very long) examination of what's going wrong and why, check out "The Health Care Crisis and What to Do About It."

Bush's State of the Union proposal is, of course, simply a proposal. Any actual legislation along the lines he suggestions would take months to pass and years to enact, and is unlikely to get through the current Congress, anyway. (Right now, it seems unlikely Bush could get a resolution praising fluffy kittens through Congress without vicious opposition.) But the administration's drastic misdiagnosis of the problem bodes ill for the chances of any significant reform proposals to address the urgent-and-growing problems with our health-care system.

Opting out of credit offers

Today, a quickie while I catch up on a workpile: Dislike having your mailbox cluttered with credit-card offers? Opt out.

That site, OptOutPrescreen.com, is the official opt-out registry used by the credit-reporting agencies. Adding your name to the registry means the agencies will no longer put your name on the prospecting lists they sell to people hawking credit cards, auto loans, and other such products. You can use an online form to opt out for five years; opting out permanently requires you to sign and snail-mail a firm.

While I was quick to sign up for the Do Not Call registry in an attempt to shoo away telemarketers, I'm not adding my name to this one. Why? Because those snail-mailed "you're preapproved!" credit offers are often the most competitive deals lenders offer. I've always found better rates and terms in those mailers than I have by looking online at the lenders' websites. Right now, I'm not in the market for any new credit cards, so I toss those offers out. But you never know what the future will bring ... if there's any chance you might be looking for a balance transfer deal, a new card with a low APR, or any other such offers, it can be worth keeping your name on the mailing lists. When I needed to transfer a balance off my Providian card last year, I took up a mailed Chase offer and opened a new card. (Of course, Chase then immediately annoyed the hell out of me. Caveat emptor.)

By the way, there's no impact one way or the other on your credit report from opting out of prescreened offers. While one of the factors in FICO scoring is "number of credit-report inquiries," it only counts inquiries you initiate, generally by applying for new credit lines. Inquires from marketers trolling for targets are listed on your report, but have no effect whatsoever on your FICO score or other evaluations of your creditworthiness.

Thanks to Mark for the opt-out tipoff!

Security whinging: You want to know my hobby?

Kind of a follow on to Thursday's post: I've recently noticed a number of my financial-services providers implementing a new security scheme, under which I have to provide answers for a flurry of personal-info questions. These go beyond the standard "mother's maiden name." Citibank wanted to know my hobby, my favorite movie, my favorite artist, the name of the first street I lived on ... the idea is that when I sign on to access my accounts, the company will "occasionally" ask me to answer a security question first.

Apparently, the idea is that these questions will thwart phising schemes. Some fraudster may get your log-in password, but will they be able to answer a question about your favorite food?

If only one company did this, I would raise an eyebrow but otherwise not really notice. However, a bunch of the ones I interact with did it all at once. NetBank and Citibank have; I think there's at least one other. So it seems to be on its way toward becoming an industry standard.

I have mixed views on it. On the one hand, if it really does prevent attacks, that's great. On the other hand, this is yet more bits of login info I need to keep stored into my sieve-like brain. Remembering my mother's maiden name is one thing; it's a fixed, unchanging fact. But -- my favorite movie? Er, I dunno, could be any one of five or six? Favorite artist? Same deal. My hobby? I have several. In the few weeks since these schemes went live in Citibank and Netbank, I've had a small moment of panic every time a question pops up. I have to wrack my brain to remember which hobby, which "favorite singer," which "favorite animal" I listed.

So far, I've managed to guess or remember the right answers, and haven't flunked a challenge. We'll see how long that lasts ...

The risks of digital 401(k) looting

Here's a very worrying new wrinkle in the identify theft/financial fraud: Are 401(k) accounts underprotected?

Most financial accounts held by banks are impressively impregnable. Yes, they can be hacked into -- as I keep discovering over and over -- but consumers are shielded from the crime's effects. If your credit, debit or ATM card is used fraudulently, your liability is capped by federal law at $50. (If you still physically have the card, and the thief obtained only the numbers, your liability is nothing. The bank/credit provider can't pass on any of the costs.) Meanwhile, if your whole bank goes wobbly, the FDIC (Federal Deposit Insurance Corporation) protects CDs and checking, savings and money-market accounts at up to $100,000 per depositor. With all the various regulations in place, if something nasty happens to your traditional bank account, you're in for a lot of hassle but don't have much risk of serious financial losses.

But 401(k) accounts are investment accounts. They're not subject to the liability caps attached to credit and debit cards. MSNBC had a recent article about a 401(k) theft: A hacker got access to the victim's $179,000 J.P. Morgan account and drained it.

This isn't the first time such a case has hit the headlines. Business Week wrote last year about a looted E*Trade account. This is the bit that really jumped out at me, from the Nov. 2005 article: "In the latest, most pernicious twist yet on Internet securities fraud, online brokerage accounts are being looted by hackers who exploit the weaknesses of investors' computers rather than the firms' systems. ... Six months ago, Securities & Exchange Commission investigators say, such schemes weren't even on their radar screen; now, the agency is knee-deep in them."

The frustrating part is that what happens next seems to vary by firm. The companies don't have a legal obligation to cover the stolen funds. Obviously, "Hack Attack Financially Ruins Customer" is a headline every PR person has nightmares about; the financial-services companies are going to do everything in their power to resolve the situation in a customer-pleasing way. But if they're on the hook for hundreds of thousands -- or millions -- of dollars? At what point do the hard financial costs outweigh the customer-service benefits of sheltering the theft victim?

J.P. Morgan is my 401(k) provider. After I first saw that MSNBC piece, I made a mental note to ask our HR person about fraud protections on our accounts. As often happens with my mental notes, this one disappeared into the clutter. But yesterday, my company sent out an email from J.P. Morgan, prompted by "an online article [highlighting] one particular case." (The actual article isn't linked or specifically cited. Very oblique.) The email talked about J.P. Morgan's efforts, in conjunction with law-enforcement agencies and investigators, to recover the money (apparently, they were successful), and about its "extensive precautions and controls" to protect accounts.

However, the email was noticeably lacking any assurances about what guarantees J.P. Morgan provides. It also shifted a big chunk of responsibility for protecting account information onto its customers' shoulders: "We recommend all clients, including individual participants, avoid making financial transactions on public computers or via wireless networks [emphasis mine] and that they keep their personal computers up to date with firewall and anti-virus software."

I'm down education campaigns to help people avoid phishing scams and protect their electronic information, but telling people not to do anything sensitive over wireless networks seems impractical and extreme. I also question how much responsibility consumers should bear, when the information-stealing scams are becoming ever more sophisticated.

This seems like a technical arms race between digital thieves and financial institutions, with increasingly higher stakes. Electronic credit-card and ATM card theft can net thieves hundreds or thousands of dollars per victim. Hacking investment or retirement accounts could yield hundreds of thousands of dollars -- or even millions. Unless there's a security breakthrough, digital theft could snowball into an economic disaster.

Online credit increases -- instant gratification

All this credit-report research this week got me in the mood to go check my own reports. I'm pulling them through annualcreditreport.com, the official, free, government sanctioned way to get your reports. You get one free report each year from each of the three credit-reporting agencies. You can pull all three at once or space them out, as you like. Forcing the creation of this site, and requiring the credit-reporting agencies to release one free annual report, was an excellent move on Congress's part. It's one of the most consumer-friendly pieces of legislation in years. Go politicians!

Seriously, if you're in the demographic I imagine most Birds & Bills readers are (your twenties, with all the student-debt and entry-level-salary joys that come with the age), if you do nothing else to organize your financials for the entire decade, do these two things:

-Start a 401(k), and put in whatever your employer will match. It doesn't matter if you have piles of other debt. A 401(k) match is free money, and because it comes out of your paycheck pre-tax, the bite is smaller than you'd expect. You will be intensely glad later if you do this.

-Pull your credit reports every so often and get a feel for what's on them. Ideally, pull them once a year, but doing it annually is less important than simply doing it.

I'll do a longer post later on my findings from my credit-report-pulling adventures, but one immediate one was that my FICO score is getting dinged for having overly high balances on my revolving accounts. My first reaction: er, what? I have one credit card, my Amex, that I try to concentrate my credit-card spending on. It has piles of spare credit. So why is my score getting dinged?

Then I went and checked my Amex, and realised that my utilization had crept higher than I thought. Various large items are sitting on the Amex temporarily (it's spring semester payment time, whee), and my balance had crept up to almost half my available credit. Arugh. While I still have what seems to me a pretty large amount available before hitting my credit limit, the pattern was obviously Displeasing To The FICO Gods.

Well, I thought, I can solve this problem in one of two ways ...

The balance isn't going to be fully paid down for a bit longer. Various machinations have to process behind the scenes. So, the other way to decrease my utilization percentage ...

Amex lets you request increases online. I did a back-of-the-envelope calculation of what I think is the highest balance I could ever need to carry on the card, if I'm carrying, say, big travel expenses or some such. Then I calculated the credit limit I'd need for that amount to be 1/3 my available credit limit. (Utilization below 1/3 is apparently the percentage that appeases The FICO Gods.)

That amount was about a $7,000 jump over my existing credit limit. Ow.

What the hell, I thought. Might as well go for broke ...

It went through. Instantly.

Yow.

I now have a credit limit that strikes me as borderline insane, but at least utilization percentage problems should be a thing of the past.

The real costs of minimum wage

Here in personal finance blogland, we tend to be consumed with optimizing investment strategies, big goals -- "save a million dollars"; "retire early"; or even simply "buy a house" -- and batches of financial exotica. Want to know about CD APYs? There's a whole blog devoted to it.

This is a good thing. Fiscal responsibility is good; fiscal education and control are very, very good. Money should be demystified so that people have the tools and information they need to decide how best to spend their paychecks.

But first, they need to have paychecks with enough money in them to actually spend.

Congress is in the midst of a much-publicized push to increase the minimum wage to $7.25 an hour. A number of publications are looking at how this will affect people earning the minimum. One of the best I've seen is the Washington Post's "Life at $7.25 an Hour," which deftly examines the local economy in Atchison, Kansas, through the eyes of the town's residents. At $7.25 an hour, you're not thinking about 401ks, CDs, real estate investment or money-market savings accounts. You're thinking about how to feed three people for two weeks on $70.

In New York, the minimum wage isn't anything close to a living wage. New York magazine's annual money issue (typical story tagline: "Sometimes being a billionaire can just be so complicated.") included a great piece this year on a security guard making $10 an hour. He does all the things you're "supposed" to do -- works hard, is reliable, supports his kids -- but none of that changes the cold fact that to live in New York with a biweekly paycheck of $676, you're going to make a lot of miserable compromises.

A few years ago I read Barbara Ehrenreich's Nickel and Dimed, and wrote up some thoughts in my booklog. The biggest thing that struck me is that what low-wage workers sacrifice aren't "luxuries," but basics, like health and privacy.

I don't have answers for any of this. Income disparity, and setting an income floor, is among the most daunting public policy issues out there.

But I try to always remember how incredibly lucky I am to have a salary that affords me the choices I have. I don't think I could manage with any kind of grace the life an overwhelming number of low-earning Americans have too few opportunities to escape.

Repairing past sins, part II: Rebuilding your credit score & report

My last post was about your legal responsibility for old debts, particularly those that are beyond the statue of limitations -- meaning you no longer have any legal obligation to pay. (Er, is it still "tomorrow"? Pretend I posted this Thursday ...)

This one is about how to minimize and repair the damage to your credit report and your FICO score. (Remember, your credit report is different than your credit score -- and you actually have three FICO scores, one each from Equifax, TransUnion and Experian. The FICO post explains the basics.)

First, to reiterate a point made at the end of my last post: Be very, very careful about paying anyone anything on an old debt. If you're four months late on your Visa bill, by all means, call the provider and start negotiating a payment plan you can afford that will get you current. (Remember, providers want to help you find a way to pay your debts. If they have to charge them off, they get much less than they will by working with you.) If you're four years late, ignoring the debt and refusing to pay anything might be the soundest strategy for protecting your credit report.

That's because credit reports track charge-offs (when the original creditor consigns your debt to "bad debt" and takes it off its books; this almost always happens within one year of you not paying) and accounts referred to collections (when that bad debt is sent over to an agency to hunt it down). But FICO scores and credit reports care very little about what happens after that. Depending on what's actually showing up on your individual credit report, the effect of reviving an old debt to settle it will probably range from "very mildly positive" to "crushingly bad."

MSN Money has an article that does a good job of explaining all the various pitfalls of trying to settle an old debt. The gist is that it's a murky minefield.

Basically: avoiding having items sent to collections and charge-offs is very, very good. Do that if you possibly can. (If there's interest, I can do a post on negotiating with creditors over current debts you're behind on paying.) But once an item has gone that way, the value to *you* of clearing the debt goes down dramatically, and continues dwindling as it ages.

So if you've got old black marks, what do you do?

The first step to rebuilding a good credit rating is having credit. As anyone without any loans or credit cards learns the first time they apply for credit, you don't get brownie points for not incurring debt. The only way to build a good credit rating is to actually have a credit line, with activity on it. Opening a Visa and never charging a penny on it won't do much for you.

The easiest, safest, fastest way to build a credit record is to be an authorized user on the credit card of someone else who uses the card in credit-score-improving fashion -- someone who charges purchases on it, keeps the usage below about a third of the card's total credit line, and always pays at least the minimum balance due each month, on time. (It's even better if it's a longstanding account. FICO scores weigh the length of time an account has been open as a positive factor.) There are two types of "joint" credit card accounts: actual joint accounts, where each party shares liability for the account, and "authorized user" accounts, where an individual adds someone else as an authorized user on their own account.

Authorized user accounts are pretty interesting from a credit-reporting standpoint. They get reported to credit agencies like a joint account -- ie, the activity on them will affect the credit report, and score, for the authorized user. But, unlike a joint account, the authorized user has no legal responsibility for the account, or any debt incurred on it. All responsibility remains with the individual account owner. So, if you're an authorized user on some else's account, and you run up a bill on it, they're the ones with the legal responsibility for it.

However, there's no requirement that the account holder actually give the authorized user a card to use. If you need to repair a besmirched credit report, and you have someone you're close enough to request the favor from (a parent, spouse, relative, etc.), you can ask to be added as an authorized user on one of their accounts. If they (or you) don't trust you(rself) with the credit line, cut up the card. So long as there's positive activity on the account from the main user, you'll benefit. (Credit reports don't track whose card is used for purchases; if the card you're issued as an "authorized user" is never used, it doesn't matter a bit.)

Another option is a secured credit card. The first resort for people with lousy credit, secured cards require you to pay a deposit, typically 50 to 100 percent of the card's credit line. The credit card company holds this deposit in a savings account. If you default on paying, the company can withdraw what you owe from your deposit. Because the credit provider has that security, secured cards are easy to get, even if your credit rating is in tatters. And, because it's a credit card, activity on the card affects your credit report. If you pay at least the minimum due on time each month, your credit score will start recovering. Bankrate has a list of secured cards; if you have a checking account, your bank probably offers them as well.

Those are two of the aboveboard ways to start fixing bad credit. You'll be surprised how fast your score can change; as I mentioned in an earlier post about FICO scores, I've seen mine jump 60 points in a month when I did things it recorded as positive. (In my cast, that was increasing my Amex credit limit so my utilization percentage tumbled, and paying off a balance on another card.)

The other tactic you can use is slightly sneakier: Challenge negative items on your report, even if they're accurate. The Fair Credit Reporting Act gives you the right to dispute anything in your report you think is incorrect. Once you send in a dispute, the credit reporting agency (TransUnion, Equifax or Experian) has 30 days to investigate the dispute. If at the end of 30 days they can't confirm the information, they're required to remove it from your report. This tactic can be like going to court to fight a speeding ticket; if the cop who wrote the ticket doesn't show up to affirm it, you win by default. If the creditor, collections agency, etc. doesn't provide the credit reporting agency with validation of the debt and nonpayment within the 30-day window, the item is legally supposed to disappear.

In practise, getting the agencies to honor their obligations can be a horror show. The Boston Globe had a great piece recently about one consumer's nightmare of trying to untangle an identity fraud case. Still, challenging negative items costs you nothing, and can work in your favor. You can even dispute items online now -- here are the links for Experian, TransUnion, and Equifax.

Whew, that was long. This set of posts (continued from Wednesday) was prompted by a question from a friend about repairing a bad report. I'm happy to go investigate stuff in response to questions; anyone interested can reach me in comments or by email (stacy at covehurst dot net). Discretion guaranteed, of course.

Repairing your past financial sins

Today's question from the floor: You pull up your credit report, and it includes debts that are beyond the statute of limitations. What do you do next? (I wrote about the bad-debt issue a bit last year, but I'm researching it in greater detail for these posts.)

First: keep copies of any paperwork, such as credit reports, that documents the DLA (date of last activity). That paperwork is your key to proving that the statute has run out. Retail vendors tend to have fairly aggressive bad debt write-off timeframes -- they'll ditch it within a year, to allow them to take advantage of tax breaks for it. Once a debt is sold off to a collector, it can be resold ad infinitum. Unscrupulous debt collectors have been known to fraudulently reset DLAs so they can continue pursuing legally uncollectible debts. Documentation of a beyond-the-statute DLA is your best friend in fighting further collection action.

If the collector contacts you about an expired debt: Simply tell them to stop. The Fair Debt Collection Practices Act (linked for any masochists that want to pour over legalese) requires debt collectors to cease communication once you send them a written letter telling them to stop. If you're contacted by phone, you can make the request verbally; if they ignore it, ask for an address to which you can send your stop-communication request. If they won't give you a written address, or ignore your requests and continue communicating, tell them you'll file an FTC complaint -- then do it. The form is right over here on the FTC's website. The FTC has a helpful FAQ about debt collection that covers these points.

If you do actually owe a debt, telling the collector to go away doesn't kill the debt. However, it does require them to only communicate again if they're taking a specific action. Basically, it tells them to sue or shut up. And if you're sued over an expired debt (one that you can prove has expired, thanks to the DLA records you kept), you don't legally owe it, and the suit will be dismissed.

OK, so that takes care of the legal end of the expired debt. What about your ravaged credit report?

There, you're stuck for the infamous seven years. Both accounts not paid as agreed and accounts sent to collections remain on file for seven years from the DLA. Once the debt is expired, it's legally dead, but there's nothing you can do to stop it from lurking on your credit report.

What if you want to make the black smirch go away? Be prepared to step into a hornet's nest. Even Suze Orman, who has a nice FAQ on charged-off accounts, throws up her hands here and says 'call a lawyer.' If large amounts are involved, definitely: get legal help.

But if you're struggling with bills, or have in the recent past, you're probably not rushing out to rack up legal fees. What are the other options?

Proceed with extreme caution before paying a penny. Any payment at all -- even a $5 good-faith payment -- is an activity and restarts your DLA. Not only does that allow the black mark to stick around longer, it also means a dead debt becomes a legally viable one again.

There are still steps you can take to repair your credit report, both by establishing good, new credit practises and by vigorously contesting negative information in your report. I'll blog on that tomorrow, but in the meantime, he's a post from last year on how to improve your FICO score.

Congress loudly frets about student loans, quietly does little about them

The Democratic Party's pledge to ram significant legislation through in its first 100 legislative hours (which appears to translate to about two months, in civilian hours) has an interesting angle for with student loans. "Easing the financial burden of college tuition" is on the party's First 10 Bills of 2007 list. So what kind of easing do they have in mind -- assuming, of course, that they can get a bill through, and avoid a veto from the White House?

One of my first blog posts here was about the urgency of consolidating outstanding loans before a pile of changes hit in July 2006. July is when the federal government adjusts the rates on Stafford loans (the program that covers federal student loans, both subsidized and unsubsidized). This year, for loans in repayment, the rate hiked almost 2 percent, to 7.143 percent. The bigger change is that the government did away with its variable rate, replacing it instead with a permanent, fixed rate of 6.8 percent for all loans dispersed after July 1, 2006. (I consolidated my outstanding loans before the hike hit and locked in a rate somewhere around 4.9 percent ... but needed to take a new loan for my fall semester, at the new rate. Yuck.)

Get ready to temper your expectations for what kind of relief the Democrats are offering, though. Conscious of the difficulty of passing expensive new legislation while the U.S. is still spending like a college frosh with brand-new plastic, the Democrats are cutting the cost of their plan by narrowing its scope. According to several news reports, the College Student Relief Act of 2007 that will be introduced next Wednesday (Jan. 17) will only affect new, subsidized Stafford loans . On those loans, a rate cut from 6.8 percent to 3.4 percent will be phased in over the next five years.

Reporters are still trying to suss out exactly what will be in this bill, but the general tenor of the reporting is that it'll be narrow. So, if you're already out of school and paying (or ducking) your loans, prepare to keep slogging.

Student loan repayments seem to trip up lots of people, and it's no surprise. Confront your average new grad -- with the typical new-grad paltry paycheck and new-grad naivety about personal finance -- with a bill for a scary large debt, and it's unsurprising that many go the ostrich route and ignore the bill. (I can't claim to be an exception. David dragged me out of denial before my grace period expired, so I never had problems with student-loan defaults, but I spent my first few months out of college throwing out my credit-card bills unopened. David paying my loans for me for the first few years they were due is the only thing that kept my credit and payment track record safe. Yay for better organized, more practical spouses!)

But student loans are about the hardest debt to hide from -- they don't go away in bankruptcy, and even if you never get an actual bill (a common problem plaguing transient new grads), you're responsible for knowing about and servicing the debt. This can be tricky; with banks merging and selling off assets all the time, a standard student-loan debt can change hands a half-dozen times in its lifespan. Fortunately, there are a few resources out there to help you track down your debt, such as the National Student Loan Data System. Mapping Your Future has a resource list.

Web 2.0ing my way into 2007

After a bit of a December slumber, Birds & Bills is back to tackle 2007.

I'm not one for New Year's resolutions, but more regular activity here is a goal for the year. On that front, coming soon: A major redesign. The graphics are in the works; soon, the default gray look will be banished.

One of my other goals for the year is to Web 2.0ify my life. I winced while typing that. I spend half my professional life writing articles that call "Web 2.0" a piece of nonsense jargon that's propelling the next tech bubble. And yet ... I have to admit there's something to the wave of Web apps that tackle particular problems or productivity hang-ups very elegantly. These days, when I run into an information-management obstacle, my first instinct is to throw software at it.

So, to kickoff the New Year, I'm starting with a rundown of what I'm using, what I'm kicking the tires of, and what I need.

Currently in Use:

-Eight years after I began using it, PocketMoney remains the cornerstone of my financial life. (Yes, I realise that as a desktop -- or, actually PDA -- app, this is very unWeb 2.0. Hush. It works.) The essence of Web 2.0 apps is portability, and nothing is more portable than my Palm -- it travels with me everywhere. All I need for my budgeting is an electronic replacement for a check registry, to track what's actually coming out of my checking account. PocketMoney takes care of that.

- All my bills get paid online, some through the provider's website (I go to Providian.com to pay that bill because I don't trust their processing times if I don't pay directly in a documentable fashion) or by e-pay through my bank, NetBank. The only check I write regularly is my rent check, and I haven't snail-mailed a bill payment in half a decade.

-I run through something like 60,000 air miles in a typical year ... but rarely with one (or even two or five) airlines. I'm still using USA Today's MileTracker. It's free, it's simple, it works. It's a desktop app, so it's not portable, but for me, that's not a problem -- I rarely have a burning need to see my miles. Anyone know of a good, free online tracker?


Tire Kicking:

-My mom tried for nearly a decade to get me to use a paper-and-pen DayRunner. I made a few fitful starts, but didn't stick with it. The interface just didn't work the way my brain does. When I bought my first Palm, in 1998, I wondered if it would languish like my collection of neglected DayRunners. Would I actually use my fancy new electronic gizmo to schedule things?

The answer turned out to be "oh hell yes." The Palm simply works for me; the interface meshes well with what I want from a data organizer.

Which is a long-winded way of saying "user experience matters" -- and of saying that SimoHealth has been kicked out of my information management universe. In August, I wrote about giving it a try for handling tracking of our pile of media expense records for the year. I spent a day plugging in all of our expenses and appointments, one by one. I wrote the review. And then, despite my best intentions, I never opened SimoHealth again. The though of plowing through the painful data-entry for ugly, kludgy results was too dispiriting. The problem, of untrackable medical expenses, is less painful than the solution.

Meanwhile, it seems SimoHealth has gotten rid of its most attractive feature: Its $0 price tag. My version likely still works for free, but anyone downloading it now gets a 30-day free trial and then a $39 bill. Unless there have been *dramatic* revisions to the software, I wouldn't recommend paying that.

Meanwhile, Quicken Medical Expense Manager continues stagnating and won't run on Vista.

This area is screaming for an online management app. Ideally, insurance companies would include this kind of feature in their customer portals, but so far the customer portals I've used (Aetna's and Empire Blue Cross's) are frustratingly rudimentary.

-Being a compulsive bookgeek, I am drawn like a moth to light toward book organizers. Like that moth, I keep finding out the light is a candle. Ouch. Years ago, I started cataloging our library with ReaderWare. Pros: It's extremely flexible and I could configure it to record almost precisely the info I wanted to track. Cons: It's ugly, and it's not a Web app. Flaunting your books on The Internets is half the fun.

So I migrated to LibraryThing, where our library is stalled at about one-third processed. Pros: A very elegant Web app. Con: It's optimized for social networkers, not collectors. Tracking multiple copies of variant editions is a kludge. But in any case, cataloguing the rest of our library is a project on my "to do eventually" list. (It might wait until our next move, one to two years in the future, when we'll hopefully have more room for sorting and organizing the books.)

I also want to revive my booklog, which is about two years out of date. After a fair bit of hunting, I found the perfect software for what I want: oddbook. It has exactly the features I want, and I even managed to get it installed on my server. YAY! Not yay: Two days after I got it installed, it began refusing to let me log in. It will also require some hacking to deal with the multiyear-tracking issue. Ug. Fixing that, or finding a new blog app for my booklog, is a priority for the year.

-So is reviving my installation of Gallery, a photo program that worked brilliantly for us until it broke in a server move over the summer. The thought of wrangling PHP and sever admin to get it working again gives me vapors. Still, I need to suck it up, cope, and fix the damn Gallery.

For those who don't feel the need to have a customized photo gallery hosted on their own servers, Google's Picasa Web Albums and Yahoo's Flickr seem to be doing their jobs well.

-This is a me-specific problem, but since I freelance, I need software to track submissions. After a lot of hunting, I'm currently using Writers Planner. It has some weird aspects (like the creator's rambly explanatory text), and the ads are annoying, but it's free and it's flexible enough that I've kludged it into doing the things I need. It also has a few really elegant touches, like a nice interface for viewing notes on submissions (like the text of rejection letters).


What I Need:

-Data backup: Having suffered one catastrophic hard-drive meltdown this year, I know crashes are a matter of when, not if. So, having been through data-loss hell, what have I done in the wake to safeguard my PC? Er, um. *insert sound of crickets chirping*

I've heard recommendations for Carbonite, and the copy of Lifehacker I have sitting on my desk has a chapter on automated backup. I need to investigate those, soonish.

-When you get started Organizing Things With Web Widgets, it's hard to stop. I could track my wine collection with Cellar Tracker, and/or hunt down something similar for keeping track of any art we buy. (That sounds pretentious, but when your close friend opens an art gallery, you tend to find yourself with some paintings.) I could rip all our music to our PC, invest in a really good backup system, and say goodbye to the CD racks, as my friend mamster did. (Although that's unlikely -- I think David is pretty wedded to his physical CDs and cover art and notes and whatnot.)

Ye gods and fishies, that got long. So, to any readers still with me: What are your indispensable Web widgets or 2007 information-management needs?

And on the 13th day of Christmas, returning those golden rings and partridges ....

Tis the season for rampant consumerism -- and with it, the joys of battling the Retail Industrial Complex. You may have noticed a spate of stories in the newspapers lately about "return fraud," the "growing" problem of retailers suffering losses through returns of stolen or used merchandise. While I don't have the expertise to opine about the magnitude of the problem, it's clear that increasingly sophisticated software options for tracking retail logistics means merchants with modernized systems are keeping better track of who is bringing items back, and how often.

The retail industry trade/lobbying group, the National Retail Federation, kicked off the season with a press release saying retailers will take a $3.5 billion hit during the holidays from return fraud (or, as the release calls it "this immoral, and often illegal, practice." But tell us how you really feel, NRF! Don't hold back!) . Like all loss estimates bandied about by organizations with a vested interest, that one should be taken with a grain of salt. The release also pulls out the eye-popping figure that 8.8 percent of holiday gifts are expected to be returned -- but then, it notes that typical return rates are 7.3 percent. A 1.5 percent jump post-holidays is lower than I'd anticipated, actually.

The NRF is also offering up a list of tips for "stress-free returns," with suggestions like "ask for a gift receipt" and "investigate return policies before you buy." Or you can save the retail hassle and go the regifting (or ebay -- I'll bet *their* sales have a big post-holiday spike) route.

The return-fraud flap may simply be the industry's way of grabbing cover for tightened return restrictions, but I do have sympathy for those dealing with impressively organized shoplifting rings. Speaking of eBay, CSO magazine (published by my former employer) had a fascinating article last year about how eBay is becoming the best stolen-goods fence ever created. For a more penetrating look at the return-fraud issue, go there.

Judge orders Treasury to take its money back to the drawing board

If a ruling made yesterday by a federal judge stands, we'll eventually have currency changes even more drastic than those ushered in earlier this year with the colorful bills. U.S. District Judge James Robertson ruled for the plaintiff in American Council of the Blind v. Paulson, Secretary of the Treasury, deciding that American paper currency violates the Rehabilitation Act because bills of different denominations can't be distinguished from each other by the visually impaired.

"Of the more than 180 countries that issue paper currency, only the United States prints bills that are identical in size and color in all their denominations," Robertson wrote. "More than 100 of the other issuers vary their bills in size according to denomination, and every other issuer includes at least some features that help the visually impaired."

The judge ordered officials to begin working on a remedy, but he also structured his decision to speed the inevitable appeal.

It sounds like a radical decision (and, indeed, I see some bloggers are already screaming about activist judging), but it strikes me as a sensible one. Why shouldn't we make bills easier to tell apart? There's no downside to doing so (except, I suppose, the cost of a redesign), and the benefits will be felt even beyond the visually impaired target audience. I've handed over the wrong bills to pay for things (and recieved the wrong bills back in change) when I wasn't paying close attention, and when David moved here from Australia (motto: "Our money is more colorful than a Pink Floyd laser show") the indistinguishability of American bills drove him nuts.

(By the way, thanks for all the kudos and good feedback on my op-ed yesterday. David is back in good health, so all is calm on that front.)

Birds and Bills hits the op-ed rounds

I have an op-ed in today's Baltimore Sun about my experiences with and criticisms of "consumer"-driven healthcare. Newspaper opinion pieces are like really long blog entries, done old-skool style. On paper. Crazy talk!

On overdrafts and automatic 401k deposits

My bank refunded my stolen money over the weekend, so I'm back in business. I will give my bank giant brownie points for one big customer-service selling point: No bounced-check fees. My account has a $1,000 overdraft. So long as I don't go past that $1k, my bank will process checks and debits without charging me any fees. (OK, I pay interest on the overdraft money I'm borrowing, but since I've always repaid overdrafts within days, this interest has never totaled more than a dollar.) I don't make a habit of overdrafting, but when stuff like this account hacking happens, my balance goes zooming into the red. Bounced-check fees are up a record high average of $27.40 per transaction, according to Bankrate's latest research. Not having to worry about incurring giant fees for every bounced transaction is a big relief.

In other tidbits, my company sent out a notice recently that in 2007, it will begin automatically enrolling non-participants in the 401k plan, deducting 3 percent from their paychecks for 401k contributions. (My company matches 50 percent of employees' contributions, up to 6 percent -- so, it'll effectively contribute 3 percent of your pay.) Those automatically enrolled can still opt out of contributing, but they'll need to file paperwork with JP Morgan confirming that they don't want to make 401k contributions.

I think this is a great move. I'm already contributing, so it won't affect me, but studies and anecdotal evidence consistently show that a number of people don't participate in 401ks not because they've thought through the decision and intentionally chosen to abstain, but simply because it's One More Thing to deal with. A recent Hewitt Associates study found that automatic enrollment boosts 401k participation rates from 68 percent to 90 percent. If companies didn't offer an opt-out option, I'd object, but since they do, I think it's a smart step to give people that extra nudge toward participation. I imagine automatic enrollment will be a growing trend.

Notaries and police reports -- the continuing joys of identity theft

My cheer that the thieves didn't entirely clean out my checking account proved premature. Another $700 went on Saturday -- after the card was supposedly cancelled. Arugh. The transactions seem to have come from an ATM in Quezon City. Fabulous.

I filed a police report, though I felt almost guilty adding to the NYPD workload with a crime they're not going to be able to do anything to solve. Financial identity-theft crimes are skyrocketing. While I waited to fill out the report, I chatted with a lady who was there to report a similar situation: someone had opened a DirecTV account in her name, and clearly had access to her Social Security number and other personal details. The detective who took my report said I was the seventh or eighth person that day reporting this type of crime.

It feels like the most effective way to stem crimes like the ATM scheme that keeps nailing me would be a national database overseen by a national agency, like the FBI. I'm 99% sure I got hit by a trapped ATM. If I did, then so did lots of others, but the only way to find the rogue ATM would be to cross-check the records of those hit recently. I would cheerfully turn over my bank records to an investigatory agency. (Sure, there's a risk in handing over my personal banking info -- but my account already leaks like a sieve. The chances of a bad cop stealing my info feel smaller than those of electronic thieves continuing to crack it.)

Since I doubt the police vigorously pursue these crimes, that leaves enforcement to the banks, which are the ones eating the losses. Big banks like Citibank already have the massive data access you'd need to cross-check the trails of victim -- I wonder to what extent that's already happening? The New York Times article I keep referring to about ATM fraud mentioned one crime ring that got caught after it began siphoning funds from 4,000 compromised accounts. It doesn't go into detail about how investigators cracked the case. That would be a fascinating piece ... if one has written one, I should check it out.

Once again, the most exasperating part of this process was making time to deal with all the paperwork like the police report. My bank also requires a notary to sign my dispute paperwork, so I spent an hour yesterday trudging around the Flatiron area looking for one. After stopping at two office-services shops and three banks, I finally found one available and willing. Arugh. That is my motto this week: Arugh.

Bank account hacked a-bloody-GAIN

I am some sort of lightning rod for financial identity theft.

Dedicated readers will recall my grousing last April when my American Express card got hacked and fraudulently used. I never lost the card; someone got hold of the numbers and used them. As I mentioned in April, that wasn't the first time I'd been through the theft rigmarole. It was the third -- first time with Amex, after two previous attacks on my NetBank check Visa/ATM card. Remember my oh-so-chipper post title? "At least it's less painful than having my debit card hacked."

My debit card got hacked this morning.

Logged on around 1pm to see if an expense check from my company had cleared, only to find a string of seven ATM withdrawals for $99.84 each, plus another for $19.97. None mine.

ARUGH.

I promptly called the bank to cancel, and that may have saved me a bit of money. The thieves got $718.85, but unlike the last two times this happened to my NetBank account, the account wasn't totally wiped out. The customer service person said the ATM withdrawals happened about an hour earlier, in quick succession. Seven successes, then the machine bounced the eight attempt. Maybe I got the account cancelled before the thief hit another ATM for round two.

So, tonight I'll be tromping over to my local police precinct office to file a report, and on Monday I have to tromp around near my office looking for a notary to sign my dispute forms to send my bank so they'll refund my money. Meanwhile, I have virtually no cash until NetBank gets my replacement card to me. Such fun this is.

This new attack is like the first on my NetBank account, three years or so ago -- someone got hold of my card number and my PIN, and made a duplicate card. (I still have my card. It wasn't lost. And, as before, no one -- not even my spouse -- knows my PIN.) Once again, the likeliest explanation is that I used a dodgy deli ATM with trapdoor software in it, capturing the information off cards as they're used. I know I should stick with bank ATMs, especially since this has now hit me twice. The spirit is willing, the flesh is weak. Since my bank has no ATM and I pay a fee every time I use one (no back-end fees to my bank, though), I usually just go with whatever shonky ATM is closest.

Can we please crack down on this crime, stat? I suppose I'm high risk -- I probably use an unregulated deli ATM six or seven times in an average month. But still, for this ATM-trapdoor problem to hit me twice in a matter of years seems to suggest it's a problem that's getting pretty rampant, at least in big cities like NYC.

HSA update

Well, I opted for the HSA, though I almost didn't at the last minute thanks to a loophole that makes it problematic if you have my precise, fairly unusual situation.

In my earlier post I mentioned that an HSA (health savings account) is logistically similar to an FSA (flexible spending account), with the big difference that money in your HSA doesn't disappear at the end of the year. If it's unspent, you keep it. Because of that distinction, the government doesn't want people double-dipping with an HSA/FSA combo: you can't set up an HSA, also fund an FSA, and then use the FSA money to cover your expenses, leaving your HSA savings untouched. That's a sensible restriction. If you have an HSA, you can only use an FSA for things the HSA isn't allowed to cover (which seems to be dental and vision expenses, primarily).

However, here is my particular weirdness, which only becomes an issue if you are a) married, b) don't share a health insurance plan with your spouse, and c) also have relatively separate finances. (See why I said this is a loophole that may only be a problem for me?) David and I each have separate, individual insurance through our separate employers. That's always been more cost-effective for us than sharing a plan. However, when you set up an FSA, you can use your FSA to pay for medical expenses for family members, even if those family members aren't sharing your health-insurance plan. So, this past year, I put a chunk of money in my FSA and used it to pay some of his medical expenses.

Opting for the HSA means the restrictions on what I can use my FSA for (vision and dental only) apply to everyone I would spend my FSA money on (at least, so saith my HR department). But my HSA, of course, can only be spent on me. Hence: no way for me to set up tax-free savings to pay for David's medical expenses in 2007.

The sensible thing, of course, is for him to set up an FSA and put into it however much I would have put into mine. It works out exactly the same to our overall income and spending as a couple. It's just a pain in the ass. Me having the FSA was an easy way for me to contribute an agreed-on amount to the medical costs, and meant I could do all the paperwork for reimbursements and such (which I have more tolerance for than David does). Having the FSA in David's name means we need to rebalance our finances in other areas to offset the whack that will take out of his paychecks, and means he's probably going to have to deal with more of the paperwork.

For that reason, I almost ditched the HSA and stuck with my old HMO + FSA system. However, it was making me unduly cranky to face down the prospect of once again spending a fair chunk each month for insurance that didn't actually pay for almost any of the services I actually consume. (With the HSA, the insurance still won't be paying. I will, unless something unlikely happens and I go past my deductible. But I pay less for the insurance, and I go in knowing what I'll be paying for.)

This is all more about psychology than actual dollars-and-cents calculations of what will save us money. I suspect that the HMO + FSA option would in the end have only cost me a few hundred more than my current HSA scheme, which isn't really enough money to justify the hours and angst I've devoted to thinking through all this. But part of the allure of the HSA is simply that I want to experiment with it. I still have a bad feeling it's the thin end of a nasty wedge, and I don't like the way it's portrayed as an option for insuring the uninsured but is actually a big savings/tax-sheltering opportunity for the well-off. But I figure a year of seeing what the HSA plan is like will give me a firmer foundation for spouting off about them.