Automatic Rent Payments
by Electronic Check or Credit Card

It is a common misconception that bankruptcy is simply spending more than you make and living beyond your means. While overspending may be partially to blame, statistics show there are a number of external factors that can catch people by surprise. The top causes leading to consumer bankruptcy are:

• Medical expenses
• Unemployment
• Accidents
• Business failure
• Divorce
• Ballooning interest rates

So what can you do to be prepared for the unknown?

Start an emergency fund - Set aside money till you have saved $1,000 for a rainy day. If you use some of your emergency funds, work to replenish them before buying something you don’t need.

Set up a monthly budget - We have included many resources that will help you set up a budget. We’ve also written a couple articles to help you get a handle on preparing a budget.

Eliminate non-essentials - When my wife and I became unemployed in the same month unexpectedly, we canceled every service and subscription that we did not need. Have a garage sale and sell whatever you can. In short, simplify your life drastically. Pay down your debts. It can be done!

Build up your emergency fund - Once you start to get a handle on your finances build up your reserves to 3-6 months of your income. That way you can survive when the unforeseen comes your way.

Dealing with medical bills - My wife and I chose many years ago to use alternative, natural health care because we can afford it. However if you get stuck with large medical bills, remember that you can negotiate to lower your medical bill or get payment terms you can live with. You can also work with an advocate who can negotiate for you. Here is a list of advocates by state.

Upside down in your mortgage? - With home values declining and ARMs kicking in for many, there is no sense in trying to save your home when you owe more than it’s worth. So what are the impacts on your credit score? A foreclosure remains on your credit report for 7 years. A Chapter 7 bankruptcy which removes all your debt remains on your credit score for 10 years.

If you have significant equity in your home, consult a real estate lawyer. Dave Ramsey also has excellent helps for avoiding bankruptcy.

The Federal Trade Commission explains your rights to access consumer reporting information that affects your credit score. You can access your credit report for free from each of the 3 credit bureaus once a year. The best way to use this to your advantage is to pull one credit report every 4 months from one of the credit bureaus: Equifax, TransUnion, or Experian. By the end of a year you will have used your 3 allotments. The only official website designated for this purpose is www.annualcreditreport.com.

If there is information on a credit report that has been reported inaccurately, then you can write that credit bureau and explain why it is not accurate. Send copies of documentation that show why the information is incorrect.

If a company denies you credit, insurance, or employment, you are entitled under federal law to ask for a copy of the credit report they pulled on you. You have 60 days to make this request in writing. The denial notice that you receive should include the name, address, and phone number of the credit bureau to contact.

Your credit score is not included with your credit report. The credit report shows factors that affect your credit score, but not that actual credit score. You will have to pay for your credit score separately. You can order that from any of the 3 credit bureaus. You can also use a FICO score estimator that is available from Bankrate, Inc and myFico.

Your credit score is a number that is also referred to as your FICO score. This gives lenders the ability to assess how likely your are to pay back a loan on time. The higher your credit score, the less risk they assume, and the better loan rate you receive.

Companies report your payment history to 3 major credit bureaus: Experian, Equifax and TransUnion. They may not all have the same information so your credit score may vary slightly depending on which bureau your credit score is pulled from. They report on your payment history, the length of your credit history, the amounts you owe, and the types of credit you have.

Credit scores can range from a low of 300 to a perfect score of 850. These are the levels of risk and FICO scales that are commonly used to determine what kind of loan you can get and the cost of that loan.

760 - 850 Excellent, lowest rates

700 - 759 Very Good, relatively low rates

680 - 699 Acceptable, normal loan rates

620 - 679 Uncertain, higher rates

Below 620 High Risk, highest rates

Many lenders use 620 as a base number since anything less is considered high risk. Do the best you can to get your credit score above 620 before seeking a new loan.

Your credit score is evaluated based on these 5 categories:

• Payment history - 35%
• Total amounts owed - 30%
• Length of credit history - 15%
• New credit - 10%
• Types of credit used - 10%

Here are some tips to raise your credit score based on the 5 main categories that are used above.

Pay your bills on time

Your recent payment history is considered as more important than what happened four to seven years ago so it is important to start a habit of paying your bills on time and stick with it. What is considered as late payment? When you wait to pay bills for 30 days or more companies can report you to the credit bureaus for late payment and this negative information can remain on your credit history for seven years.

One step you can take is to set up a personal budget to make sure you alot enough of your income to pay your bills each month. Another step is to set up automatic payment for as many of your bills as your can such as your rent, utilities, phone bill, etc. That way you don’t have to worry about whether you are late or not each month. If you have medical bills, negotiate a repayment schedule that works for you and pay that down on time.

Lower the amount owed on credit cards

Credit cards are not free money. You have to pay it back so don’t run up large credit card bills. That has a very negative impact on your credit score. Credit card companies report the amount you owe each month and it does not reflect favorably on your credit score when your credit cards are maxed out to their limit. Work at paying down your credit card balances so you are only using a portion of your credit limit. This will increase your credit score.

Applying for multiple credit cards at once to increase your credit limit will have a negative impact on your credit score. It is better to do without and pay down existing credit cards. Remember the addage: Use it up, wear it out, make it do or do without!

Keep old credit card accounts open

When you pay a credit card down and don’t want to use it anymore, it will help your credit score to leave that account open. Just put that card away in a secure place. This old account will add to your lenght of credit history and improve your credit score.

Only open new accounts that you need

In department stores, you are often asked if you want to open a credit account for their store. As an incentive they may offer you a discount. Remember that too many new accounts can hurt your credit score. Keep the number of cards that you use to a manageable minimum. Tell the clerk, “No thank you, I am protecting my credit score!”

Manage the accounts you have well

Show that you can manage the credit cards and loans that you have responsibly. That is what creditors want to see when they are looking at your ability to pay a home or car loan.

The USPS reported that last year 9.9 million Americans were victims of identify theft costing them roughly $5 billion. With the potential for loss, this is sadly an issue you cannot afford to overlook. Here are practical steps and tips you can take to avoid having your identity stolen.

Deposit mail and bills in secure U.S. Postal Service collection boxes. The days are gone when you can mail letters and bill payments from your home mail box. Thieves can and will steal your outgoing mail which contains personal checks and account information.

Pick up your mail promptly. Do not leave your mail outside overnight or while away on trips. Arrange to have a neighbor pick it up or put a hold on mail at the post office.

Buy a shredder. Make sure you shred credit card applications and any documents that contain personal or financial information. If you throw it in your garbage, any thief can steal your personal information.

Initiate the phone call to order products and services. Never give your credit card or personal information to someone who calls you. There is no way to confirm they are legitimate. If you ask the caller to leave their name and phone number most times they will decline because they do not want to be identified!

Do not send personal or financial information by e-mail. E-mail is not secure and can be intercepted by thieves. You should either fax or give sensitive information over the phone.

Never respond to an email solicitation. Go to the website you know and trust to make your online purchases and payments. Make sure there is a lock on your browser indicating they are using an encrypted payment form. Click on the lock to view their security certificate and make sure that it is still valid. Here is a very simple rule to detect fraud. Thieves will send emails with the logos of PayPal, banks, etc, pretending to be a financial institution. They will give some lame excuse such as there has been a problem with your account. Please click on the link below to correct problem. When you put your cursor over their link, you will notice that even though it says their name, the actual link goes to some other site. This is also called phishing.

Limit the information you give on social networks. Remember how a college student mined social information off the internet to gain access to Sara Palin’s Yahoo e-mail account? Thieves can go through social networks and pick up information on you and your family. That makes it easier to pretend to be you! A prime example is the birthdate that Facebook requires. Be sure to click on your profile, then the info tab, then edit the basic information to display only the month and day you were born or do not display your birthdate. Your birthdate is an important piece of information for identity thieves so don’t give it out!

Follow these safe procedures and you will greatly reduce the possibility of becoming a victim of identity theft. More to come in Part II…

AVS stands for Address Verification System and is used by payment gateways to verify the identity of the person making an electronic payment. This applies whether you are paying from your bank account or credit card. The system checks the billing address on file for that account. If the street address and zip code do not match the billing address on file, the payment will be declined to protect the cardholder.

Merchants normally have the ability to set various levels of security for their merchant account. They may require area code verification for your phone number as well. In addition, credit cards have a CVV2 number on the back of the card consisting of 3 or 4 digits. You must have the credit card to fill in the CVV2 number on an electronic payment form.

These are protective measures financial institutions have developed to maintain the privacy of your account information. Even though it may take a moment longer to complete the necessary information, it is well worth the time. The online payment form and virtual terminal used by AutoPayRent.com utilize the Address Verification System (AVS) for your benefit. Your account information will be confirmed in order for your rent payments to be accepted, and this is a good thing for all of us!

A variable expense fluctuates and is not usually a monthly expense, but comes often at unforeseen times and can stress your monthly budget. People often end up putting variable expenses on credit cards which can get them into trouble when they start piling up. Variable expenses include clothing, visits to the doctor or dentist, automobile maintenance, vacations, gifts for friends or family, and so on. These types of expenses can be difficult to get a handle on.

Here is a practical way to approach budgeting your variable expenses. Estimate what you might spend in a year for each variable category, add them up, then average that amount over 12 months. Let’s say your variable expenses average out to $300 per month. Begin setting aside this amount each month because you may have several good months with very low expenses and then get hit hard at Christmas or in the summer.

Second, you will have to set priorities. If you find out your car needs new brakes and that eats up your $300 variable expense budget for this month, then put off buying clothes or a making a trip till you have a chance to recover and build up your variable expense reserves again.

When you get to the end of a year, look at all your variable expenses and see how close you were with your budget. If necessary, adjust the amount you set aside for variable expenses and put off the things that are not as important.

There are free budgeting spreadsheets and software that have all 12 months of the year included. If you prefer this method, you can write in amounts for expenses that come in different months. Choose the method that suits you best.

One of the first steps in setting up a budget is to determine whether an expense is fixed or variable. If you get a bill every month, that is the easiest way to determine your fixed expenses. These would be expenses like rent, student loan, car payment, phone bill, insurance, internet, cable or satellite TV, and so on.

Some fixed expenses have a variable amount in them. One example would be if you go over your allotted minutes on your cell phone, the fees for additional minutes can be fairly hefty. I have unlimited minutes on weekends so I have disciplined myself to make calls to family and friends at that time.

Many consider food to be a variable expense. If this is the case for you, choose an average monthly amount and try to stay around that budget. I grew up in a home with 10 kids and we ate at home 95% of the time and to go out was a special treat. Our food budget was fairly fixed. However, when you start going out to eat more often, your food budget can get out of control. To keep your food budget steady, decide how often you will go out: once or twice or week let’s say and plan on preparing meals the rest of the time. Also, when you go grocery shopping, have an amount fixed in your brain. If your food budget is $80 per week, stay within that and leave the extra goodies and treats on the shelf.

Another expense normally classified as a variable expense is your heating bill, especially if you live in a northern state with colder winters. One way to balance out your heat payments is to set up a balanced payment plan with your utility company. This averages out your monthly payments so you really are paying a more fixed amount every month instead of large bills in the winter. Another approach is to rent an apartment that has heat or all utilities paid. Here the landlord knows the basic costs and has included them in your rent.

These are all ways to stabilize or fix your expenses so you don’t get surprised on some months and end up spending too much. Now it is time to get these expenses written down somewhere. We have given you a list of free budgeting spreadsheets and software in our resources section. Choose one that you like and get your fixed expenses entered into your budget.

This is a commonly asked question and there are several answers. First some landlords are able to set up direct payment through their bank. Not all banks provide this service, but some do. For this method, payments are set up by signing an authorization form. Most often, there will not be an online option for paying rent unless the landlord’s bank provides one.

Second, your landlord or property manager can set up an account with a payment processor to provide this payment service. Some use PayPal and others use a service like ours. Most good programs provide authorization forms and have an online payment option which gives you added convenience. Look for the greatest flexibility in a program that allows single rent payments as well as recurring payments. Then you can schedule all your rent payments in a single authorization.

The last thing to be aware of is possible fees involved including convenience fees and non sufficient funds (NSF) fees. If you pay by electronic check (e-check) and you don’t have enough funds in your account on the date of your scheduled payment, your bank will charge you an overdraft fee.  The Phoenix-Hecht Blue Book of Bank Prices™ reports the average price for a bank overdraft in 2008-2009 is $39.93. In addition, the originating financial institution trying to collect rent payment for your landlord will also charge you an NSF fee according to the amount that is stated in your payment authorization form or terms and conditions.

Convenience fees are variable and determined by your landlord. Direct payment is not free in most cases. Credit card companies charge anywhere from 2.19% or higher, plus another 0.3% for rewards cards. An e-check payment is much less and normally starts around 35¢. We have seen fees as high as $2.20 per e-check transaction. Your landlord has to decide whether they want to absorb the cost of direct payment or pass some or all of the fees on to you for offering this convenience.

Now that you understand the basics of direct payment, we invite you to talk to your landlord about using our direct payment program for paying your rent. We provide all the services mentioned above and offer your landlord some of the lowest costs in the direct payment industry.

When looking for an online rent payment program, it should allow you to schedule automatic rent payments for the term of your lease agreement. A convenient rent payment solution allows you to pay by electronic check from your bank account (e-check), or by credit card. There should be a secure online payment form that allows you to make payments from any computer with internet access. This gives you flexibility especially when you travel.

Another important feature for an automatic rent payment program is that you receive a receipt for your payments. You should receive an e-mailed receipt whenever a scheduled rent payment takes place. Your rent payments will also be recorded on your monthly bank statement or credit card statement depending on how you pay.

Can I pay my rent through a rent payment program if my landlord is not signed up? The answer to this is, “No.” The reason is because funds have to be delivered through a payment processor that your landlord has chosen. You need to talk to your landlord about whether they have automatic rent payment set up, then find out how to use it. As a convenience, your landlord may have a payment authorization form ready for you to sign with your lease agreement.

Are there convenience fees for using automatic rent payment? Some landlords don’t charge any extra fees and others do. We have seen fees as high as 3% of your payment for using a credit card and $2.20 for payment by e-check. Talk to your landlord and find out if there are any convenience fees in their automatic rent payment program.

If your landlord is not set up for automatic rent payment, we invite you to have them talk with us. We provide all the services mentioned above. Fees are determined by your landlord. Some don’t charge anything for using the program, others may charge up to 40¢ for e-checks (less than the cost of a postage stamp) or up to 2.5% of payment for credit cards.