What Is a Private Label Credit Card?

Many retailers, websites, manufacturers, sports teams, nonprofit organizations and other independent businesses offer their own credit cards to clients and customers. These private-label credit cards carry the organization's name, colors and logo. They are a way for organizations to advertise and promote their goods and services and help companies develop loyalty among their customers and clients.

Issuers

Large organizations may issue the cards and manage the accounts. For smaller companies, banks such as Wells Fargo and Citigroup typically issue the cards after signing an agreement. The banks establish a line of credit with the company, which is used to finance the purchases made with the private-label card. The bank also handles the accounts by setting credit requirements for cardholders, mailing out statements, accepting payments and charging fees.

Applications

Customers apply for a private-label card just as they would for a bank's credit card: by filling out an application and giving a Social Security number used for credit screening. The process can be done almost instantaneously through the issuer, which establishes the guidelines for issuance of the cards to individual applicants. Many companies also offer an online application, allowing approved applicants to begin shopping immediately from their homes.

Promotions

Some private-label credit cards can only be used for purchases at the company using the program. Many retailers use private-label credit cards to encourage customer loyalty, offer discounts on merchandise and boost sales. They can also advertise promotions, sales and seasonal offers through inserts included with the billing statements.

Incentives

The card may offer a variety of incentives for use. A first-time customer making a credit application for a private-label card, for example, may be offered a 10 percent discount on an initial purchase with the card. A minimum monthly purchase amount may trigger another discount or points in a rewards system; a minimum number of on-time payments may also benefit the cardholder with a reduced interest rate.

Familiar Logos

Along with the company name and logo, most private-label cards carry the familiar Visa or MasterCard logo, allowing the cardholder to use the card at any retailer, restaurant or business organization that accepts credit-card payments. This convenience encourages repeat use of the cards and improves acceptance of the cards among prospective clients and customers.

Debt Issues

Private-label credit cards can be useful for retailers, but for customers the usual dangers that result from the use of easy credit are present. Private-label cards can encourage the purchase of items that a customer can't afford and increase the burden of outstanding debt on a household. In addition, credit scores are affected by the number of open accounts, and holding several private-label cards, with or without high balances, can negatively affect a credit report.

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Bankruptcy Debt Consolidation Information

Anyone struggling to make payments on their debt has probably considered getting a debt consolidation loan or filing for bankruptcy. The options for digging yourself out of a bad financial situation are tiered, with debt consolidation loans having the least impact, to debt management plans (which are seen as the last stop before bankruptcy), to bankruptcy itself. Each has its own set of benefits and drawbacks of which you must be aware before committing to one.

Debt Consolidation Loan

A debt consolidation loan pays off your current debts, so you end up making one payment per month instead of multiple payments. To qualify for a debt consolidation loan, you must use some form of collateral, such as your house. Debt consolidation may be risky for those who aren't fully committed to keeping their debt paid off; consumers are often tempted to begin spending on their newly freed credit.

Debt Management Plan

Those who have already defaulted on their accounts may be able to apply for a debt management plan. You may only qualify for a debt management plan if a credit counselor recommends one. The credit counselor then works with your creditors to lower your interest rates and/or your payoff balances. You then make one payment to your credit counseling company each month. The company then pays your creditors. The Federal Trade Commission recommends working with a counselor listed by the Association of Independent Consumer Credit Counseling Agencies or the National Foundation of Credit Counseling, since many fraudulent credit counseling programs exist.

Bankruptcy

Bankruptcy is the last resort for clearing your debt. While it's true that bankruptcy wipes out your debts, it also effectively erases your entire credit history -- which means that you have to start from scratch. Therefore, all employers, landlords and lenders see when they look at your credit report is that you've had to file for bankruptcy. It takes up to 10 years for a bankruptcy to be removed from your credit report.

Considerations

With all of these methods, it may become difficult to obtain new credit. Lenders are the least leery of debt consolidation loans, since they're set up against collateral; however, they may might take the loan as a sign that you were under financial strains after taking on too much credit. Debt management plans signal to lenders that you weren't able to pay back the entirety of what you borrowed, which will weigh heavily against you when trying to obtain new credit down the road. Above all, bankruptcy causes the most problems in qualifying for new credit -- no history means lenders have absolutely nothing to judge your credit worthiness on. Oftentimes, those who file for bankruptcy end up taking out secured credit cards in an attempt to rebuild a credit history.

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Debt Management Ideas

Knowing how to manage your consumer debt can result in lower balances and a higher credit score. The amount you owe to your creditors makes up 30 percent of your personal credit rating. Improving a low score and getting the best deal on financing can involve paying down your balances and practicing good debt management skills.

Stick to a Budget

Creating a monthly budget and staying in your budget can help avert debt. Developing a budget involves deciding how much of your income you'll spend on recurring expenditures such as housing, utilities, insurance, food, debt payments and transportation costs. Set aside a modest amount for recreation and miscellaneous spending. Going over your budget can deplete disposable income and may force you to use credit cards to make ends meet.

Avoid Extra Fees

Paying credit card statements and other bills late can result in additional finance fees or late fees. Eliminate this extra expense by always paying your bills on time. Set up automated withdrawals from your bank for a specific day each month to ensure your creditors receive bills by the due date. If you risk missing a payment due to cash flow issues, talk with your creditors a few days before your due date to ask for a payment extension.

Interest Rate

Take a chance and ask your creditors to reduce the interest rate on your accounts. They can either grant or deny your request, but you don't know until you ask. Getting a lower interest rate will save you money in interest charges each month. This results in a quicker reduction of the principal balance. Expect your creditors to quickly review your payment pattern before lowering your rate. A history of missing payments or skipping payments may prompt creditors to deny your request for a cheaper rate.

Minimum Payments

Pay more than your minimum each month. Even if you can't pay off a large lump sum of your debt, aim to increase your payments by doubling or tripling the minimum. This method pays down the interest charges, plus a higher percentage of your principal balance.

Save Your Cash

Don't use credit to instantly satisfy your wants. This can result in higher debt balances. Use credit cards only if you're confident in your ability to pay off the debt within a month or two, preferably a month to avoid paying interest. If you doubt your ability to pay off the debt, postpone the purchase and start saving to pay for the item with cash.

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How Does a Creditor Determine the Date of the First Delinquency for a Drop Off?

Federal law dictates when negative information drops off U.S. consumers' credit files. Creditors and debt collectors must abide by the law and report accurate information about when an account first became delinquent. Inaccurate reports about delinquent payments can cause negative information to remain in your credit files longer than it should.

Federal Law

The U.S. Fair Credit Reporting Act requires creditors to report the date that a customer first fell behind on payments as the first date of delinquency. That date stands independent of other actions, such as turning an account over to a collection agency. Information about past-due credit card accounts usually remains in consumer credit files for seven years from the first date of delinquency. The problem is that the date of last activity appears on credit reports instead of the first delinquency date. The two dates can cause confusion as consumers try to determine whether negative information in their credit files is more than seven years old.

Account Activity

The date of last activity shown on credit reports refers to several types of actions, including the last payment or last charge on a credit card. Nonetheless, the date of last activity has no affect on how long negative information remains in your credit file. Therefore, you need to contact your creditor or a collection company handling your account to verity the first delinquency date if you don't have information that specifies the date.

Re-aging

Debt collectors are required to report the original date of delinquency for credit card accounts, just like creditors. However, the Neighborhood Economic Development Advocacy Project indicates that some collectors may attempt to skirt the law by re-aging delinquency dates. For example, some collectors report the date a creditor turned over an account to them as the first delinquency date. Such actions keep negative account information on credit reports longer in violation of the Fair Credit Reporting Act.

Considerations

You have the right to dispute inaccurate information you find on your credit report, including inaccurate delinquency dates. Equifax, Experian and TransUnion are the major credit-reporting companies. They're required to investigate disputes consumers submit concerning the information in their credit files. You can bolster your dispute over an inaccurate delinquency date by sending a copy of an old credit card bill or other notice that shows the first date of delinquency. The companies must delete negative credit account information from files if their investigations reveal that it's more than seven years old.

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What Documents Must Be Provided in an Ohio Credit Card Lawsuit?

Failing to repay outstanding credit card debt can result in your creditor filing a civil lawsuit against you. If a creditor wins a judgment, they can pursue garnishment of your wages or bank accounts to collect what is owed. If a credit card company is suing you in Ohio, there are several documents you must provide to the court.

Answer to Summons

When a credit card company sues you, they are required to notify you of the lawsuit filing through a summons. The summons must include the creditor's name, the amount of the suit, a brief summary of the reasons for filing and the date and time of the court hearing. Prior to attending the court date, you must provide an answer to the summons, certifying that you are aware of the scheduled court date and outlining your defense as to why you believe you do not owe the debt. Generally, credit card lawsuits in Ohio are filed with the municipal court, although they may be moved to the general division docket if requested.

Request for Discovery

For a creditor to prove its case against you, it must provide some type of evidence to show that the debt is yours and that it has legal standing to collect. Once you receive the summons, you may file a Request for Discovery with the court or request written validation of the debt directly from the creditor. Once the creditor receives your request, it is required to provide you with supporting documentation of its claim within 30 days. The type of documentation that may be provided as evidence may include original account statements, signature cards or your original credit agreement. At the time of publication, the Ohio statute of limitations on credit card debt is six years.

Evidentiary Documents

If you believe you are not liable for the debt, you must provide evidence to support your claim. For instance, if believe you've already repaid the debt in full, you must provide receipts or proof of payment to prove your argument. If the debt is time-barred, meaning it has exceeded the time frame that the statute of limitations allows for a lawsuit to be filed, you must provide account statements or copies of your credit report to demonstrate the last date of activity on the account. You should also bring copies of any written communications you've had with the creditor regarding the debt.

Considerations

Failure to answer the summons or appear in court at the scheduled time will result in a summary judgment being entered against you. A summary judgment leaves the creditor free to attempt garnishment of your wages or assets. If a summary judgment is entered because you did not receive the original summons, you may be able to have the motion vacated on these grounds. If you feel the creditor has violated any of the terms of the Fair Debt Collection Practices Act, you can file a counterclaim for up to $1,000 plus your court or attorney's fees.

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Can Garnishments on Debts Be a Tax Write-Off?

Garnishment is a procedure creditors can use in most states to collect unpaid debt. This procedure involves having a court order direct your employer to deduct a portion of your earnings from your paycheck and send the funds to a court for payment of your debt. Whether garnishment amounts are tax-deductible depends on the type of debt the garnishment is intended to repay.

Deduction of Garnishment Amounts

Amounts garnished from your earnings may be tax-deductible if the debts they are intended to pay would ordinarily qualify for a tax deduction. This may include debts for qualified medical expenses, interest on a mortgage loan or property taxes. You may also deduct garnishment amounts for state taxes from your federal tax liability. However, you should consult with a qualified tax preparer or attorney before deducting any wage garnishment amounts to reduce your tax liability.

Non-Deductible Garnishment Amounts

Most debts subject to garnishment cannot be deducted to reduce your tax liability. For example, if a credit card company garnishes your wages for repayment of a credit card debt, you cannot deduct garnishment amounts. You also cannot deduct garnishments for federal taxes from your federal tax liability because this type of debt would not be deductible if you paid it directly to the Internal Revenue Service outside of a garnishment order. Likewise, garnishments for installment loans, lines of credit, alimony and child support are not tax-deductible.

Deducting Garnishment Amounts

If you plan to deduct amounts garnished from your wages from your tax liability, you will need to provide documentation that the garnishment is intended to pay a deductible debt. Make a copy of the summons and judgment order showing the nature of the debt and include this documentation with your tax return. You will also need documentation from your employer showing amounts garnished from each paycheck.

Considerations

A creditor cannot garnish your wages for most types of debts, except federal and state taxes and child support, without obtaining a legal judgment against you. Private creditors must file a civil lawsuit, typically in the municipal or magistrate court of the county where you live, and receive a judgment award from the court. In most states, the creditor must then apply for a writ of garnishment, which provides authorization for the creditor to order your employer to withhold part of your earnings for debt repayment.

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What Is a Debt Manager?

Debt poses a risk to your financial stability and thus should be eliminated as quickly as possible. Debt reduction options include debt settlement, consistent budgeting and expense tracking and bankruptcy. Using a debt manager also can get you back on track. Debt managers are not for everyone, however.

Definition

A debt manager usually refers to a debt management company, specifically to the caseworker the company assigns to work with you. These workers collect money you'd normally pay your creditors and then distribute it to those creditors on your behalf. They also teach you how to manage your funds and help you set up a repayment plan. Often, a debt manager works with your creditors to negotiate better deals, like reduced interest or forgiveness of some of what you owe.

Less commonly, the term "debt manager" may refer to software and other tools designed to aid with finances. These tools let you set up automatic payments, track spending, establish a budget and calculate how much you'd save under different repayment methods.

Advantages

Debt managers reduce the stress that comes from having many different payments. You do not have to worry about as much hassle from your creditors, as the debt manager will correspond with creditors for you. You also can save money and preserve your credit rating, since consistent payments by a debt manager on your behalf reduces late fees and other penalties.

Disadvantages

Using a debt manager isn't free. Most debt management companies charge monthly fees for the work they do, unless they are nonprofit. If you're already in need of a debt manager, you likely don't have a lot of extra cash to put toward debt manager fees. Debt management can make your debt situation worse. Debt managers don't do anything you cannot do on your own. You have to decide whether it is worth the money to have someone act as your middleman. Creditors also participate voluntarily, so you may not be able to include all your debts in your debt management plan. Using a debt manager shows up negatively on your credit report, which can negate the increase in your score that results from more consistent payments. Debt managers can and do make occasional errors. If they don't distribute your payments properly, you can incur fees and penalties and will have to straighten out the mistakes.

Who Should Use Debt Managers

Debt managers are best applied to those who have large amounts of debt and who struggle to stay organized financially. Use debt managers only if your income is stable, as you have to be able to cover the original debts, in addition to any fees the manager charges. Don't use a debt manager if your debts are fairly small and can be paid off relatively quickly. You also should avoid debt management if you've already tried negotiating with creditors. Creditors don't give debt managers any better deals than they would give directly to you.

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