- Lower fees. It's a shame to throw money away on service charges and other fees, so ask about free checking or to have fees reduced.

- Automation. Does the bank have a new website? Do they now offer free billpay? Can they help you set up a direct deposit of your paycheck?

- Special offers. Is the bank running any promotions?

Banks often introduce new products and services to meet customer demand. They're perfectly content, however, to let you keep your old low-interest, high-fee accounts. It's up to you to take the initiative to ask for better deals!

TipIt can pay to develop a relationship with a banker. When she gets to know you and your circ.u.mstances, she can make suggestions based on your needs and goals. Such advice may not matter if you have only $100 in the bank, but it becomes more valuable as you grow older-and wealthier.

Getting Fees Waived Banks make a lot of money from fees. According to a report in the Financial Times, U.S. banks were set to earn over $38 billion in overdraft fees alone in 2009. And there are plenty of other kinds of fees: stop payment fees, billpay fees, monthly service charges, returned check fees, and so on.

Banks get away with charging for this stuff because few people challenge them-folks just accept the fees as a matter of course. But it doesn't have to be that way. You may be able to get fees waived simply by asking. For best results: - Know what you want-and why. Banks are more likely to waive fees if you give them reasons to. Point out things like how long you've been a customer, how you've never had trouble before, and that you generally have a lot of money in your accounts.

- Ask in person. You'll typically have better luck speaking to a real human being-face-to-face, if possible. It's easier to say "no" to an email than to a customer you see all the time.

- Ask to speak with a manager if the person you're dealing with can't help you.

- Be polite. Remember: You have the right to ask for lower fees, but you're not ent.i.tled to them. Be calm and considerate.

For more tips on asking for things, flip back to the box on Frugal Tactics Anyone Can Use Frugal Tactics Anyone Can Use.

TipThe best way to deal with bank fees is to avoid them in the first place. To do this, read all the paperwork about your account and all the new stuff the bank sends you in the mail so you know which services are free and which aren't. Keep reading for advice on avoiding overdraft fees.

Switching Banks Moving your money to a new bank isn't hard, but a lot of people put it off because it seems like a ch.o.r.e. The biggest challenge is getting your automatic transactions stopped at the old bank and started at the new one. Here's how to switch: 1. Open an account at your new bank using some (but not all) of the cash from your current account.

2. Transfer any direct deposits or automatic payments to the new account. (It may take a couple of weeks for the remaining transactions and outstanding checks to clear, so don't close the old account yet.) 3. Start using your new account for day-to-day activities.

4. After a month or two, when you're sure that everything's set up correctly, close your old account.

That's all there is to it. Doesn't sound so bad, right? Every month you put off switching is another month you'll pay higher fees and earn less interest. If you've been procrastinating, take the plunge and start the process today.

Avoiding Overdraft Fees If you live paycheck-to-paycheck and don't track your expenses, you'll eventually be charged overdraft fees. Overdrafting is when you write a check for more than you have in your bank account. The bank will usually honor the check, but will charge you for this "favor." Here are a handful of ways to deal with overdrafts: - Some banks let you sign up for overdraft protection, which can involve linking your checking account to a second account (like a savings account), but usually takes the form of a small loan from the bank. Be careful: This option involves fees of its own.

- Create a buffer to prevent overdrafts. For example, mentally set a $100 minimum balance in your account. When you drop below this level, stop spending. (Some banks will let you sign up to receive email alerts when your accounts reach a certain balance; that way, they let you know when your account drops below $100 so you don't have to keep track yourself.) - Use the envelope budgeting system (Envelope Budgeting) to make sure you don't overspend. Your bank is more than happy to let you overdraw at the supermarket, but when you use this system and have a fixed amount of cash, you can't spend more than you have.

- Track your spending. Don't just trust the balance at the ATM; keep a checkbook register or use Quicken so you know how much you really have. (See Tracking Your Spending Tracking Your Spending for more ways to track your spending.) Good recordkeeping may not cure all your financial woes, but it can help reduce the chances that you'll overdraw. for more ways to track your spending.) Good recordkeeping may not cure all your financial woes, but it can help reduce the chances that you'll overdraw.

It seems convenient to track your spending using your bank's website, but remember that there may be checks or other transactions "in process" that don't show up online, so you might not actually have as much as the site tells you. (Even debit-card transactions can take a whole week to show up in your account.) It's your responsibility to know how much is in your account; don't simply rely on the bank.

TipDon't forget the number one way to avoid overdraft fees: Don't buy stuff you can't afford!

Targeted Savings Accounts Most people work toward several financial goals at once, but keep their money clumped together in a single account. With that setup, it's easy to forget how much you've saved for each goal-and to borrow money from one goal to pay for something else.

In The Six-Day Financial Makeover The Six-Day Financial Makeover (St. Martin's Press, 2006), Robert Pagliarini advocates targeted saving through what he calls purpose-driven investing: (St. Martin's Press, 2006), Robert Pagliarini advocates targeted saving through what he calls purpose-driven investing: Purpose-Driven Investing [lets us think] of each of our goals as a separate "basket." Each of our baskets represents a single goal with a clear purpose that we can see and grow. What does this mean in the real world? It means that we have a single investment account for every goal.

If you want to try targeted saving, ask your bank or credit union if you can give your accounts nicknames. My credit union let me name my new savings account Nintendo Wii when I decided to save for that goal. And my accounts at the online bank ING Direct are named for the things I'm saving for, as you can see in the following image: [image]

Though organizing your accounts this way might seem trivial, it can actually be a powerful motivator. Targeted saving lets you see how you're progressing toward each goal and helps you set priorities.

TipTargeted saving lets one person save for many goals. But what if you have many people who want to save for one goal? Check out SmartyPig (www.smartypig.com), which bills itself as a savings program for chasing goals. The site lets your friends and family members add money directly to your account so they can help you save for things like your wedding or a down payment on a house.

Building a CD Ladder Just as you can use systematic investing (All-in-one funds) to reduce the risk that fluctuations in the stock market pose to your portfolio, you can use a CD ladder to reduce the risk that fluctuations in interest rates pose to your savings goals.

Say you have $5,000 in savings that you want to get a better interest rate on. To build a CD ladder, you'd open CDs with staggered maturation dates. For example, you might put: - $1,000 in a 1-year CD - $1,000 in a 2-year CD - $1,000 in a 3-year CD - $1,000 in a 4-year CD - $1,000 in a 5-year CD As each CD matures, you put your money right back into a new 5-year CD; this lets you keep the 1-year stagger, or ladder. This will help you keep your interest income relatively constant.

Protecting Yourself with Parallel CDs With a CD, one of the biggest risks is that you'll need to pull your money out before it matures. When you do this, you pay a penalty. The site FiveCentNickel.com suggests that you can decrease this risk with parallel CDs: http://tinyurl.com/parallel-CDs.

Here's how it works: Let's say you have $5,000 you'd like to put into CDs. Instead of opening a single CD and putting that whole amount in it, you'd open multiple CDs, all with the same maturation date. You could open five CDs of $1,000 each, say, or open two with $1,000 and one with $3,000.

This gives you a buffer in case you need to get at the money early. If you need $500 for an emergency, for example, you can break just a single $1,000 CD. That way you don't pay a penalty on the rest of the money you have in CDs, and the penalty will be smaller than what you would have paid if you'd put the whole $5,000 in a single CD.

Get in the game Think of all this money management as a game that has real financial payoffs. If you take the time to learn about the accounts your bank offers-and the accounts that other banks offer-you can actually have fun finding ways to make more money. (Even if optimizing your accounts isn't your idea of a good time, it really is important. You don't want to end up paying $1,500 for a "free" Frisbee!) After you've got your bank accounts whipped into shape, it's time to optimize another part of your financial life: your credit cards. The next chapter shows you how.

Your Money And Your Life: Pay Yourself FirstIf you're living paycheck to paycheck, saving may seem impossible. You have to pay for things like rent, a car payment, groceries, and maybe even student loans. You'd like like to save, but at the end of the month, there's no money left to set aside. And that's the problem: Most people try to save something out of what's left over instead of saving to save, but at the end of the month, there's no money left to set aside. And that's the problem: Most people try to save something out of what's left over instead of saving first first.One of the best ways to build wealth is to set aside a portion of your income for savings before you pay your bills, buy groceries, or do anything else with your money. Here are three reasons to pay yourself first: - It makes you the priority. You're telling yourself that you you are more important than the electric company or the landlord. Think of the money you put into savings as a down payment on your future. are more important than the electric company or the landlord. Think of the money you put into savings as a down payment on your future.

- It encourages sound financial habits. Most people spend their money in the following order: bills, fun, savings. But if you b.u.mp savings to the front of that list, you can set money aside before you come up with reasons to spend it. That way, since the money is no longer in your checking account to tempt you, you end up spending less.

- It builds a cash buffer you can use later in life. Regular contributions to a savings account are an excellent way to build a nest egg. You can then use the money to deal with emergencies, buy a home, or spend during retirement.

To develop a saving habit, make the process as painless as possible. Automating is a great way to do that: Try opening a high-interest savings account at an online bank like the ones listed on The Right Bank for You The Right Bank for You. Then set up automatic transfers into this account, either directly from your paycheck or from your regular bank account. That way you get used to not having that money stay in your checking account; eventually, you'll hardly notice it's missing. (Even better, deposit your entire paycheck to your savings account and only transfer what you need to checking.)How much should you put into savings when paying yourself first? Financial gurus say you should save at least 10% of your income. That's a great goal, though it can be tough to find that much at first. But almost everyone can save at least 1% of their income. Start there, and then increase that percentage as quickly as you can. Another tactic to try: Plan to set aside a part of your next raise for saving. As you make more money, save more so you don't end up on the hedonic treadmill (Caught Up in the Rat Race).For more tips on paying yourself first, visit The Digerati Life: http://tinyurl.com/TDL-pyf.

Chapter8.Using Credit Wisely.

"Credit cards are great for convenience, but terrible for borrowing. Either cut them up, if you can't pay on time; or-if you can can pay on time-make your credit cards pay pay on time-make your credit cards pay you." you."-Andrew Tobias You already know that using credit cards carelessly can lead to debt. But did you know that people tend to spend more when they pay with credit? (See the box on Choosing a Card Choosing a Card.) That's one of the many reasons it's so important to think before you whip out the plastic.

Credit cards aren't evil, but they can be dangerous. Just as you'd treat a chainsaw with respect, you need to be careful with credit to avoid hurting yourself. And if you use them wisely, credit cards can actually give you a financial edge.

This chapter will show you how to choose a credit card and use it without getting burned. You'll also learn how to manage your credit report and find out what your credit score is-and how to boost it.

Credit Cards First, the basics: When you buy something with a credit card, you're taking out a small loan from the card issuer-Bank of America, Capital One, or your local credit union-and you owe the issuer that amount. If you pay your balance in full every month, the card basically gives you an interest-free, short-term loan. But if you carry a balance from one month to the next, you'll end up paying high interest rates and fees on top of the cost of Stuff you buy.

NoteThere's a difference between a credit card company and a card issuer. The card issuer is the bank that you're borrowing money from; credit card companies-like Visa and MasterCard-are the go-betweens that take care of handling most of the paperwork. Some credit card companies, like American Express, are also card issuers, but Visa and MasterCard are not.

How many Americans carry balances and how much does the average cardholder owe? There's a lot of conflicting info out there, but one reliable source is the Federal Reserve, the organization whose policies influence the short-term interest rates banks charge to lend money to each other (which, in turn, influence the interest rates you pay for loans and credit cards).

Every three years, the Fed publishes its Survey of Consumer Finances (http://tinyurl.com/fed-SCF), which paints a picture of the average American's financial habits. The latest study, from 2007, found that 73% of American families have at least one credit card. Of those families, about 60% carry a balance, which means about 44% of Americans have credit card debt. And of those who carry a balance, the median amount owed is $3,000. (That is, half owe more than $3,000 and half owe less.) So, while most people have no credit card debt, lots of people do. In fact, nearly a quarter of all Americans owe more than $3,000 on their credit cards. To avoid joining these folks-or to escape their ranks-you have to be careful when using credit. Let's start by looking at why you'd want to use a credit card in the first place.

NoteThough credit cards and debit cards are similar, they're not the same. Debit cards are tied directly to a bank account; credit cards let you borrow money from the issuer. Using debit instead of credit can keep you from overspending, but credit cards offer more protection if your card is lost or stolen. Lastly, credit cards affect your credit score (which you'll learn about on Your Credit Score Your Credit Score), but debit cards don't.

Why Use a Credit Card?

You don't have to use credit cards. Though the Survey of Consumer Finances (mentioned in the previous section) shows that 73% of families have credit cards, roughly one quarter of American adults don't carry plastic. So if you're worried about your self-discipline, the smart choice is to not use credit cards at all. (The box on Your Credit Report Your Credit Report has the story of someone who's gone this route, and you can read about more such folks at has the story of someone who's gone this route, and you can read about more such folks at http://tinyurl.com/no-ccards.) That said, legitimate reasons to use credit cards include: - Convenience. It's easier to carry around a single piece of plastic than to deal with cash and checks. And a lot of people like the automatic recordkeeping that comes with using a card (especially online expense tracking).

- Protection. Many cards will extend the warranties on the things you buy, and some offer insurance against theft. That's why most of us would rather have someone steal our credit card than a wallet full of cash-you rarely lose money if somebody else uses your card. (Credit card companies can charge you up to $50, but most won't hold you liable for any fraudulent charges.) - Building credit. As you'll learn in a moment, your credit score has a huge impact on your personal finances. Using credit cards carefully helps you improve your credit score so you can get the best rates on things like mortgages and other loans.

- Rewards. Some credit cards offer cash back on things you buy. Others offer frequent-flyer miles or gift certificates.

But all these benefits are meaningless if you don't use credit cards responsibly: Miss a payment or carry a balance and you've negated your cash-back bonus for months (or years), and you've hurt your credit score. Pay your full balance on time every month and credit cards can be a valuable addition to your financial toolbox.

On The Money: The Pain of PayingThere's evidence that people spend more when using credit instead of cash. For example, a study in the September 2008 issue of the Journal of Experimental Psychology: Applied Journal of Experimental Psychology: Applied ( (http://tinyurl.com/APA-spend) found that paying with cash leads to "an immediate pain of paying". But "any payment made that makes the outflow of money less vivid, and thus less painful"-like using a credit card-"reduces the psychological barrier to spend." Another study found that people remember cash expenses better than those made with credit.So it's not just you: In general, it looks like most people who use credit cards end up sh.e.l.ling out more when they pay with plastic than with cash. For more on this subject, see http://tinyurl.com/GRS-credit-spending.

Choosing a Card There are hundreds of different credit cards out there, and they all claim they're offering a good deal. So how can you tell which one is best for you?

The biggest factor to consider is whether you carry a balance on your cards. If you typically carry a balance-or think you might in the future-focus on cards with low interest rates. On the other hand, if you pay your balance in full every month, look for a card with no annual fee, a solid rewards program, and at least a 21-day grace period.

NoteThe grace period is the time between when you buy something and when you have to pay interest on it. Your grace period runs from the end of the billing cycle (usually the day the bill is mailed) until the day the bill is due. You're not charged interest during this time. Thanks to the Credit CARD Act of 2009, this is at least 21 days on cards that have a grace period (not all of them do). But if you carried a balance the previous month, there's no grace period: Whenever you buy something new, you're charged interest on it immediately.

In either case, keep the following in mind: - Take time to do research. Your goal is to find the card that best fits your situation, so don't just sign up for the first offer that comes in the mail. You can research cards at: - CardRatings.com, which has a searchable database of credit cards, a blog with tips and news, and a forum where folks can write reviews of the cards they use.

- IndexCreditCards.com, which lists over 1,200 different cards and offers tips for using them wisely.

- BankRate.com, which has a bunch of online calculators to help you choose the best card for you.

- FatWallet.com, which has a great "What credit card should I get?" discussion at http://tinyurl.com/FW-credit.

- Check with your credit union. If you belong to a credit union (Credit unions), you may be able to get a great deal on a card. A 2009 study from Pew Charitable Trusts (http://tinyurl.com/PCT-credit) found that "credit unions offered significantly lower advertised rates compared to bank credit cards, with penalty fees that were half the cost of comparable bank fees and fewer dangers a.s.sociated with 'unfair or deceptive' practices." In other words, credit unions rock.

- If you're after a rewards card, choose one that offers something you value. Some give you frequent-flyer miles, others points. If these appeal to you, great. But there's no sense in earning stuff you'll never use, so don't forget cash rewards. Cash is versatile and, unlike frequent-flyer miles, never expires.

- Watch out for extra fees. Some fancy cards will give you all sorts of perks-for a price. You're usually better off with a no-fee card than paying $20 or $50 (or more!) every year for features you hardly use.

- Look for more than just a low interest rate. Though it sounds like gibberish, a credit card's "method of computing the balance for purchases" is important. Look for cards that calculate your interest using either "average daily balance" or "adjusted balance."TipTired of getting credit-card offers in the mail? You can stop them by calling 1-888-5-OPTOUT or visiting OptOutPrescreen.com. This method, endorsed by the Federal Trade Commission (FTC), is the best way to stop such offers.

- Don't be a sucker. Don't sign up for a card just to get a free t-shirt, Frisbee, or airline ticket. And don't choose a card just because it offers a sign-up bonus or gives you a discount at your favorite store.

- Don't overdo it. There's no reason to carry a dozen cards. The fewer cards you have, the less there is to worry about. Start with one. If you discover you need another card, get it. But don't just load up your wallet with plastic for the heck of it.

Once you decide on a card, be sure you understand its limitations. Remember: Your goal is to pick a useful tool. You're not looking for a one-time bonus, but rather a long-term relationship you can live with.

On The Money: Getting More from Your Credit CardsCredit card contracts can be daunting. I opened an American Express account in 2008; the fine print on that contract would have taken up nearly a fifth of this book, but I read it all. When I had questions, I called customer service to get answers. By doing this, I learned how my credit card really worked-both for me and against me.Boring as they may be, you should always always read financial contracts-even for credit cards-not just to protect yourself, but also to know your rights. Most people don't realize their credit cards may offer a host of extra features, such as: read financial contracts-even for credit cards-not just to protect yourself, but also to know your rights. Most people don't realize their credit cards may offer a host of extra features, such as: - Shopping protection. Your card may give you extended warranties, price-drop protection, limited purchase insurance, and even satisfaction guarantees.

- Personal a.s.sistance. Some cards offer concierge services that you can use to get dinner reservations, theater tickets, and more.

- Fraud protection. This means that if you catch a problem and act quickly, you're only responsible for charges you you authorize. And most cards will help if your ident.i.ty is stolen. authorize. And most cards will help if your ident.i.ty is stolen.

- Travel a.s.sistance. Some cards let you get into airport lounges, give you ticket upgrades, and provide roadside a.s.sistance. Others offer insurance for things like lost luggage, rental cars, and trip cancelations.

If you're not taking advantage of features like these, you're not getting the most from your card.You can find an overview of your card's features at the issuer's website or by visiting American Express (http://tinyurl.com/amex-benefits), MasterCard (http://tinyurl.com/mc-benefits), or Visa (http://tinyurl.com/visa-benefits). For detailed info, read your credit card agreement or visit the card's website.

Using Credit Without Getting Burned In order to use a credit card without getting burned, you can't let it change your spending habits. (This is easier said than done-see the box on Choosing a Card Choosing a Card.) Remember: A credit card isn't a license to spend-it's just a different way to pay.

In Chapter4 Chapter4, you learned how a negative cash flow leads to debt and unhappiness. For many folks, credit cards make it far too easy to overspend and wind up in debt. Here's the most important thing to remember: If you're using credit cards to spend more than you earn, you're using them wrong.

Lots of people pay for things with credit because they don't have the money to pay cash, but that's a really bad idea that'll likely get you into debt. To change how you use your credit card, think of it as a debit card: Don't buy anything with it unless you already have cash in the bank to pay for it. And don't let your credit card influence your shopping decisions. You should decide to buy something first, and then decide how to pay for it; don't tell yourself, "I have a credit card, so I can buy this." (Like Mom always said, just because you can do something doesn't mean you should.) NoteA credit card isn't an emergency fund. You shouldn't be holding onto plastic "just in case something bad happens." That's what your actual emergency fund is for. For more on saving for a rainy day, see Establish an Emergency Fund Establish an Emergency Fund.

Here are some other ways to use credit cards effectively: - Read the fine print. Read the legal stuff that's on the application and comes with your card, and that's in any future mailings. Yes, this can be tedious, but it can help you avoid headaches and help you discover hidden features (see the box on Using Credit Without Getting Burned Using Credit Without Getting Burned). If you don't understand something, call customer service and ask them to explain it. (For help reading the legalese, check out Wells Fargo's credit card glossary: http://tinyurl.com/cc-glossary.) - Review your statement every month. Due dates, fees, and interest rates can change, so keep an eye on those notices that come in the mail. And double-checking the list of transactions can help you spot fraud. Many people (including me) check their statements online several times a month. By paying attention, you can prevent small annoyances like extra fees or unauthorized charges from becoming big ha.s.sles.

- Don't be afraid to speak up. If you notice something strange on your bill, want to dispute a charge (Disputing Charges), or want a rate reduction, call customer service.NoteAsking for rate reductions has become a little trickier since the recent credit crisis. If your credit score is too low, asking can hurt you-the issuer might actually jack up your rates. According to credit guru Liz Pulliam Weston, it's important to know your credit score (see Your Credit Score Your Credit Score) before you ask. "If your FICOs are 750 or above, you're golden," she says. "Below that, it's murkier."

- Be wary of special offers. On my desk, I have an American Express mailing about a "free" appointment book. It's not really free, of course. If I take the bait, I'm on the hook for almost 50 bucks a year! Also be wary of "courtesy checks" and offers to skip a payment. (You may want to ask your card issuer to simply stop sending you checks.) Be suspicious of other products the company tries to push, like insurance, fraud protection, and so on. These usually aren't bargains-you can find better deals elsewhere.

- Pay your bill on time and in full every month. This is the #1 way to keep credit cards under control. The Credit CARD Act of 2009 says card issuers have to send bills at least 21 days before the due date. This gives you plenty of time to send a check. But it's best to take care of business as soon as possible, so set up automatic payments or pay your bills as they arrive. (And remember that you're responsible for paying your bill every month, even if you never receive the statement.) - Set up "expense notifications" from your credit card's website. Many card issuers offer free tools that tip you off to how your card is being used. For instance, you may be able to set things up so you get an email anytime your card is charged more than $50 or $100. This can help you spot a stolen card quickly.

If you're not yet in credit card debt, don't start. Credit cards are not a source of free money-quite the opposite in fact: they can end up being the source of super-high-interest loans-so don't rely on them to support a lifestyle you can't afford. Remember: Don't resort to using a credit card just because you can't pay cash for something-use a card because you can pay cash.

Your Money And Your Life: Credit Where It's DueJim w.a.n.g, who writes about money at www.bargaineering.com, is a great example of someone who has his credit cards under control, instead of letting them control him.w.a.n.g loves credit cards. "I use credit cards for the cash-back rewards," he says. He has some cards that give 5% cash back on certain purchases. "Credit cards also make things easier from a money-management perspective. All my spending records are in one place."He has a wallet full of credit cards. "I have eight or nine cards, but I only have two that I really use," he explains. "The others are just cards I keep open for credit score reasons or for special cases." (Flip to Your Credit Score Your Credit Score for info on credit scores.) for info on credit scores.)w.a.n.g says the key to profiting from credit cards is to pay your balance every month. He's been using credit cards for 11 years and has never paid a finance charge. He's never paid a late fee, either, though he's come close. "There have been times my payments were a couple days late, but every time I've been able to call and have them remove the late fee and the finance charges. Everything's been fine."For more on savvy use of credit cards, pick up a copy of How You Can Profit from Credit Cards How You Can Profit from Credit Cards (FT Press, 2008) by Curtis Arnold. (FT Press, 2008) by Curtis Arnold.

Disputing Charges Mistakes happen. Once in a while, a restaurant will charge you twice for the same meal or an online bookstore will bill you for somebody else's purchase. When you notice something goofy on your credit card statement, it's important to act quickly to correct the problem. Here's how: - Get it in writing. To make things easier in case you have problems, always save receipts and warranties, and ask for written confirmation of promises like delivery dates.

- Start at the source. First, try to solve the problem by contacting the merchant that charged the card. Explain why you think the charge is wrong and ask them to reverse it. If that doesn't work, go to the next step.

- File a dispute with your card issuer. As soon as possible, send a written complaint to the issuer's "billing inquiries" address (not the address where you send your payments). Include info about your account, an explanation of the problem, and copies of any receipts. The FTC has a detailed description of this process at http://tinyurl.com/ftc-fcba. (Many card issuers have online dispute-resolution forms, which may be more convenient than filing a dispute by mail.) - Take your complaint elsewhere. If you're unhappy with how things turn out, contact agencies like your state's attorney general's office or the local Better Business Bureau.

NoteThese steps are for disputing improper charges, not for fighting over shoddy merchandise. Your credit card may offer some sort of protection if your new computer is a lemon, but you'll need to read your card agreement to know your rights. Save the dispute process outlined above for billing errors.

How and When to Cancel a Card If you have trouble with compulsive spending (Curbing Compulsive Spending), it's best to cancel your credit card accounts. Don't just cut up the cards-cancel them. This will buy you time to learn to manage credit responsibly without an ever-present temptation to spend.

Even if you don't have trouble managing credit, you still may want to close an account from time to time. Whatever your reasons, be aware that canceling a credit card may ding your credit score (http://tinyurl.com/cc-close). (Your Credit Score has more about credit scores.) has more about credit scores.) Part of your credit score is based on how much of your available credit you actually use (this is called your utilization ratio). When you close an unused card, this ratio jumps because you're using more of your available credit; and when the ratio jumps, your credit score goes down. Also note that the longer you've had an account, the more you'll affect your credit score by closing it.

Despite this warning, there are several arguments for closing unused accounts. Doing so prevents you from abusing credit, reduces the risk of ident.i.ty theft, and makes bookkeeping easier.

Whether these factors outweigh the potential damage to your credit score is for you to decide. When I was struggling with debt, I canceled my accounts, and I'm glad I did. It gave me time to learn about money without the temptation to spend. Now that I can manage my finances responsibly, I carry just one personal credit card.

NoteIf you think you'll take out a major loan (like a car loan or a mortgage) in the next year, don't risk dinging your credit score by canceling credit card accounts. If you're worried you'll be tempted to spend if the accounts are open, try freezing the cards in a block of ice (really!) or putting them in a safe deposit box.

Canceling a credit card is easy, but if you decide to do it, do it right. Here are a couple of things to keep in mind: - Close one account at a time, even if you want to close several accounts. Start by canceling cards that charge you fees. Also, it's better to cancel new cards before old ones. Finally, consider keeping cards that offer good rewards programs.

- Before you cancel a card, pay off the balance or transfer it elsewhere. Never try to cancel a card that you still owe money on. If you do, you might end up paying nasty fees and high interest rates.

When you're ready to cancel a card, follow these simple steps: 1. Call your credit card company. Check with customer service to be sure your balance is zero before you start the process. After you ask to cancel your card, the sales rep will try to talk you out of it; be prepared to stand your ground. Take notes about things like the time you called and who you spoke to.

2. Send written confirmation. Using the notes from your phone call, write a letter and send it to the card issuer. Here's a sample credit card cancelation letter: http://tinyurl.com/dolans-letter.

3. Watch your credit report. After you receive written confirmation that your card has been canceled, it may take several weeks for the change to show up on your credit report (Your Credit Report). It's your responsibility to make sure the report is accurate, so keep tabs on it.

4. Once you're certain the account is closed, cut up your card. Hurrah!

Should you cancel your cards? Only you can make that call. Do what makes sense for you and your situation. If you think it's important to keep a high credit score and you're sure you won't abuse them, then keep the accounts open. But it's a mistake to keep your credit cards if having them will lead you deeper into debt.

Your Money And Your Life: No Credit NeededMike Iannantuano is 29 and has never had a major credit card. He once briefly opened a department store card about 10 years ago, but closed it soon after. He's been credit card free ever since."I don't really like the idea of credit cards. I'm wary of them," Mike says. "I have a debit card with a MasterCard logo that I've been able to use anywhere I needed credit."What about renting cars? Getting a hotel room? "I haven't had a problem," he says. When a rental car company asks for a credit card, he uses his debit card instead. They place a hold on his account for $300 to $500 in case something goes wrong, but they release the hold a few days after he returns the car. The situation is similar when he stays at a hotel. (For info about the holds that specific companies will place on your account, check their websites.)And what about getting loans and a mortgage? "I haven't had problems getting loans," Mike says. "I have student loans, two car loans-one paid off, one current-through my credit union, and I have a mortgage through Wells Fargo. My credit union gave me their best rates both times." He wonders, though, if a lack of credit cards might have hurt the rate on his mortgage: "My mortgage rate was decent considering my age and other factors, but it could definitely have been better."Mike has no regrets about being credit card free, and he doesn't feel like he's missing anything. "I haven't really had any issues from not having a credit card. I can't spend what I don't have, which is how I like to operate."For a look at other folks who get by just fine without credit cards, check out this article from Money Money magazine: magazine: http://tinyurl.com/no-cards.