FAQ - Credit Cards

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Family Budget Services, Inc.
4555 NW 103rd AVE, SUITE 250,
Sunrise, FL 33351.

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FREQUENTLY ASKED QUESTIONS: Credit Cards

What is the difference between secured debt and unsecured debt?
Is a Home Equity Loan a good way to pay off debt?
What is the Fair Debt Collection Practices Act (FDCPA)?
What are my rights as a consumer?



What is the difference between secured debt and unsecured debt?

Secured debt is the type of debt where a loan is supported by the use of an asset as a guarantee the loan will be satisfied. Some examples of secured debt are a mortgage, auto loans, home equity lines of credit (HELOC), and secured credit cards (tied to a bank account).

Unsecured debt means there is no collateral backing the loan or line of credit being borrowed. Some examples of unsecured debt are unsecured credit cards (not tied to a bank account), student loans, and personal loans.

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Is a Home Equity Loan a good way to pay off debt?

While credit cards are a form of unsecured debt, a home equity loan is a form of secured debt where the home is used as collateral to secure that loan. If you fail to pay on a secured loan the home can be taken as a form of satisfying the loan.

Utilizing a secured loan to satisfy the terms of unsecured debt can put you deeper in jeopardy with the secured loan. Not only will you now be extending your payments over ten to thirty years to pay off those credit cards but you will also have an interest rate. Some creditors may go down to as low as 0% APR until it is paid off. Also, if you were to experience a divorce, job loss, illness, a death in the family, or other catastrophes that make it impossible to pay the loan, the bank may force you to sell the home. If you do not get enough from the sale from the home, they could go as far as placing a lawsuit against you to obtain the remaining difference of what you owe to them.

The point to be made is not to use the home as a means of taking care of other financial issues. When using the home to pay for the credit card debt, there is likelihood the credit cards will continue to be used and the high balances will return; again putting you deeper in debt.

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What are my rights as a consumer?

There are many laws in place to help the consumer protect their rights and be treated in a fair and just manner. Some of the laws have been established for many years and others have recently been enacted.

The Fair Credit Reporting Act was enacted in 1971 and it ensures the accuracy, fairness and privacy of information maintained by the credit bureaus and consumer agencies. It provides the consumers the right to know what information credit bureaus and consumer agencies are distributing about them to creditors. The law was updated last in 1996.

The Fair Debt Collection Practices Act (FDCPA) was passed in 1996 and applies to personal, families, and household debts. Under this act debt collectors are prohibited from engaging in unfair, deceptive, or abusive practices.

Most recently the Credit Card Accountability, Responsibility and Disclosure Act of 2009 was created to ensure consumers receive better protections against credit card lending practices that have been determined to be unfair and/or predatory.

The United States Congress in 2010 passed Dodd-Frank Wall Street Reform and Consumer Protection Act. This act is intended to provide additional protection for consumers against costly lending practices. An example is when consumers are turned down for a line of credit or receive a rate higher than anticipated based on their credit history or score. The consumer has a right to get a free copy of document used to reject them and the explanation of what happened.

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