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Bookkeeping Basics E-Zine, Issue #006 --, Credit Card Bailouts
June 20, 2009

Bookkeeping Basics EZine

Bookkeeping Basics E-Zine, Issue #006 -- Credit Card Bailouts

Bookkeeping Basics E-Zine brings you valuable bookkeeping tips, income tax advice and the latest additions to one small business owner's experiences with "bookkeeping and income tax preparation".

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Bookkeeping Basics E-Zine

In this issue...


1) Credit Card Bailouts; Issuers Slashing Card Balances


1) Home Based Bookkeeping Business


1) Free Webmaster Business Course

2) SBI! Summer Sandals $100 Special

3) Bookkeeping Jokes

4) Bookkeeping Supplies

5) Accounting Definitions

6) SiteSearch

In every issue....

1) Questions and Answers

2) Quote of the Month

3) Contact Me


1) Credit Card Bailouts; Issuers Slashing Card Balances

Published: June 15, 2009

The banks were bailed out last fall, the automobile companies last winter. For Edward McClelland, a writer in Chicago, deliverance finally arrived a few days ago.

Mr. McClelland’s credit card company was calling yet again, wondering when it could expect the next installment on his delinquent account. He proposed paying half of his $5,486 balance and calling the matter even.

It’s a deal, the account representative immediately said, not even bothering to check with a supervisor.

As they confront unprecedented numbers of troubled customers, credit card companies are increasingly doing something they have historically scorned: settling delinquent accounts for substantially less than the amount owed.

The practice started last fall as the economy worsened. But in recent months, with unemployment topping 9 percent and more people having trouble paying their bills, experts say this approach has risen drastically.

They say many credit card issuers have revised internal guidelines to give front-line employees the power to cut deals with consumers. The workers do not even have to wait for customers to call and ask for a break.

“Now it’s the card company calling you and saying, ‘Let’s talk turkey,’ ” said David Robertson, publisher of the credit industry journal The Nilson Report.

Only a few creditors are willing to confirm the practice. Bank of America and American Express say they decide on a case-by-case basis whether to accept less than the full balance. Other card companies refuse to discuss the subject, but their trade group, the American Bankers Association, acknowledges that settlements are becoming more common.

The shift comes as the financial services industry finds itself losing some of its legendary power. A credit card reform bill that makes it harder to raise rates on existing balances and prevents certain automatic fees flew through Congress and was signed by President Obama in late May.

Borrowers still have a crushing amount of debt to deal with, however.

Revolving credit, a close approximation of credit card debt, totaled $939.6 billion in March. The Federal Reserve reported that 6.5 percent of credit card debt was at least 30 days past due in the first quarter, the highest percentage since it began tracking the number in 1991. The amount being written off was also at peak levels.

After a balance has been delinquent for six months, regulations require the card company to reduce the value of the debt on its books to zero. If a borrower has not paid by this point, chances are he never will.

“The creditors would rather have a piece of something now instead of absolutely nothing down the road,” said Adam K. Levin, the founder of the consumer education Web site

Banks and credit card companies are discussing new programs that would, for the first time, allow credit counselors to invoke reductions of principal as a routine part of their strategy, said Jeffrey S. Tenenbaum, a lawyer for many counseling agencies. In the past, counselors could persuade card issuers to adjust interest rates and modify late fees, but the balance was untouchable.

An example of how quickly the card companies are shifting their approach is in the behavior of HSBC, a major issuer, toward Mr. McClelland.

He was paying fitfully on his card, which was canceled for delinquency. In April, HSBC offered him full settlement at 20 percent off. He declined. A few weeks later, it agreed to let him pay half.

Traditionally, the creditors could play tough with any accounts that became delinquent because the cardholders had assets. The creditors could sue or place a lien on a cardholder’s house.

As the recession grinds on, though, many cardholders have less to lose. Mr. McClelland, 42, is a renter. Since he is self-employed, he has no wages to garnish. But he did not want to feel like a deadbeat.

“Having this over and done with was appealing,” he said. He raised the agreed-upon $2,743 and sent it off electronically last week. He has spared himself the prospect of years of collection calls.

HSBC said it did not comment on individual cardholders and would not discuss its policy toward settlements. “Every customer situation is unique,” said a spokeswoman, Cindy Savio.

The card companies, perhaps understandably, do not want to promote the idea that settlements have become merely a matter of asking nicely. The creditors also point out that a delinquency, like a foreclosure, destroys a credit record.

And there can be a Catch-22: those with the fewest assets are the likeliest to receive a settlement offer, but they are also the least able to come up with the cash for that final negotiated payment. Some creditors, though, are helpfully letting people stretch this out over months.

Still, a line has been crossed, credit experts say.

“Even in the early stages of delinquency, settlements can be dramatic,” said Carmine Dorio, a longtime industry executive who ran collection departments for Citibank, Bank of America and Washington Mutual.

During the boom, nonpayers were treated more harshly because, paradoxically, their debt was more valuable. Collection agencies were eager to buy bundles of old debt from the card companies for as much as 15 cents on the dollar. In a healthy economy, even the hopelessly indebted can pay something.

In this recession, where collection agencies have little hope of collecting from the unemployed, that business model is suffering. Experts say 5 cents on the dollar is now the most a card company can hope to get for its past-due accounts.

Another factor undermining the card companies is the rise of debt settlement firms. These are profit-making companies that charge fees, nearly always in advance, to bargain with creditors on a consumer’s behalf.

Settlement companies are under fire from regulators, who say they promise much and deliver little. But their ubiquitous ads, which make a settlement seem not only easy but also a moral victory over shamelessly gouging card companies, have done much to spread the idea.

Although there are few independent statistics on the settlement industry, there is no doubt that some generous deals are being done.

Consider Bedros Alikcioglu, a gas station owner in Newport Beach, Calif. He owed $112,000 on four cards and was paying $3,000 a month in interest and late fees. “It was so hard to earn that money, and paying it to nowhere didn’t make sense anymore,” said Mr. Alikcioglu, 75.

He signed up with a debt settlement company named Hope Financial, which negotiated deals with his creditors to settle for about 35 percent of his balance. Hope Financial is charging Mr. Alikcioglu about 12 percent of his original debt.

“I did not want to leave the legacy of bankruptcy,” Mr. Alikcioglu said. “I am now at peace.”

Click here to read or submit more Bookkeeping News.


1) Home Based Bookkeeping Business

Learn How To Start Your Own Home Based Bookkeeping Business

Gain access to the same resources I used when starting a home based bookkeeping business of my own. From deciding on a name, obtaining an EIN and purchasing software to knowing the types of expenses you can deduct for your home office.

Click here to read the entire Home Based Bookkeeping Business article.


1) Free Webmaster Business Course

The "Business Side" of Webmastering... Success Requires More Than Creativity

Thinking about becoming an independent Webmaster? The timing is right. More and more small business owners are looking for help as they make the move to online promotion. Most do not have the time or skills to build their own site. As a result, they are actively seeking affordable Webmasters.

Capitalize on this growing demand by setting up your own home-based business. Do the kind of work you love and reap all the financial benefits -- i.e., the profit!

Starting any type of business, online or off, requires solid preparation. Without it, the foundation is weak. And it leaves you, as the owner/operator, susceptible to costly mistakes and worse yet, irreversible decisions that could stunt growth.

Webmasters Masters Course
The Webmaster Business Masters Course will start and keep you on the right track. Mark Frank, the author of the Masters Course, and owner of a home-based Web site design business, gives you an insider's perspective on what to do... and more importantly, what not to do on the "business side" of your new company.

Build Your Webmastering Business While Building Your Clients' Business... Attract, Manage and Build Your Clients to WIN-WIN Business Success!

The Webmaster Business Masters Course covers essential operational aspects, such as a well-developed business plan, targeted marketing, pricing of services, attracting clients, effective communication, and winning proposal/contract construction. It will provide you with the information and resources you need to bypass common mistakes, create satisfied clients, increase your productivity levels and generate recurring income.

Click here to download the free Webmaster BUSINESS Masters Course.

After you have downloaded, test the file to confirm that it is embedded with your RR_URL. Check this by placing your cursor over one of the landing page links in the course to make sure you see the link followed by your RR URL.

The goal of The Webmaster BUSINESS Masters Course is to elevate your business knowledge and skills, with the shortest learning curve possible. Take the course today.

Click here to download The Webmaster BUSINESS Masters Course.

2) SBI! Summer Sandals $100 Special

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3) Bookkeeping Jokes

I've heard and read some great accounting jokes throughout the years. I never really feel like I fit the stereotypes, but who knows! Some of these definitely ring true for me and give me a good and needed chuckle from time to time. I hope that you will enjoy them as well.

Read My Favorite Bookkeeping Jokes Here

4) Bookkeeping Supplies

This is one of the best places on the web to find your reliable office, accounting and bookkeeping products.

I have partnered with to build 10 individual Bookkeeping Supplies Stores. What I have done is to build one individual store tailored for each of 10 main office supply categories.

So, whichever product you are in need of -- all you have to do is click on the applicable link to go to its store.

Shop for Discounts on Bookkeeping Supplies Now

5) Accounting Definitions

There are over 100 accounting definitions and bookkeeping terms in my bookkeeping glossary for your use. Use it as an accounting resource to help improve your bookkeeping knowledge.

Click here to go to the Accounting Definitions Page.

Then, just pick a letter to go directly to the bookkeeping terms associated with that letter. Or, use the Search Engine below to search the entire website.

6) SiteSearch

Did you know that you can utilize Bookkeeping SiteSearch to find what you are looking for? Give a try today!

Questions and Answers

Are you having difficulties with Bookkeeping? Here on the Q and A page, you can ask a question about any area of bookkeeping and income taxes. It's free and easy to do.

Here is a recent posting on the Income Tax Q & A Page:

Can't Pay My Taxes

What if I can't pay my taxes?

If you can't pay your taxes, first of all - don’t panic! If you cannot pay the full amount of taxes owed by the April deadline, you should still go ahead and file your return by the deadline and pay as much money as you can in order to avoid paying penalties and interest.

You also should contact the IRS to discuss your payment options at 1-800-829-1040. The IRS may be able to provide some relief such as an installment agreement, a short-term extension to pay, or an offer in compromise. In some cases, the agency may even be able to waive penalties.

However, the IRS is unable to waive the interest charges which accrue on your unpaid tax bills. For more information, see "The Collection Process" and "Tax Payment Options" at The Form 1040 Instructions also provide guidance on filing and paying your taxes.

Click here to ask a question or

Quote Of The Month

"What you do speaks so loudly that I cannot hear what you say."

- Ralph Waldo Emerson

Comments? Ideas? Feedback?

I'd love to hear from you. Just reply to this e-zine and tell me what you think! Or, click here to Contact Me.

See you next month!


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