A = Access to lending! Since 1997, MetroAction has been committed to providing flexible small business loans to start-up and expanding small businesses in northeastern Pennsylvania. MetroAction is one of the only nonprofit organizations in northeastern Pennsylvania authorized to provide microloans to small businesses through the U.S. Small Business Administration (SBA) and through the U.S. Department of Agriculture (USDA).

MetroAction specializes in working with people who cannot borrow from a bank due to lack of business experience, credit history or insufficient collateral.  To learn more about all of our funding programs, visit http://metroaction.org/loans.html.

B = Build better credit! MetroAction loans provide an opportunity for small business owners to build or rebuild personal credit history and raise credit scores.  As clients make on-time payments on their small business loans, MetroAction reports the payments to the major credit bureaus. This builds positive credit history and increases a borrower’s level of creditworthiness in the eyes of lenders.

If you need help repairing your credit, we partner you with Consumer Credit Counseling of NEPA. Together, we can help you assess your credit and make necessary changes to improve it!

C = Coaching through Smart Start! MetroAction’s Smart Start mentoring program, through an innovative collaboration with SCORE, pairs borrowers with a SCORE counselor for free one-on-one small business coaching.  Counselors can help develop various aspects of your business including:

•    Starting a business: licenses, taxes, permits, resources
•    Business plan development and review
•    Marketing
•    Financial and cash flow analysis
•    Management
•    Business operations
•    And much more!

Full details on our lending and mentoring programs can be found at http://www.metroaction.org/.

Consumer Credit Counseling Services of Northeastern Pennsylvania (CCCS) offers these tips:

• Consider financing the full payment of your tax liability through loans, such as a home equity or personal loan from a financial institution, or obtaining a cash advance through your credit card.  Believe it or not, the interest rate and any applicable fees charged by a bank or credit card can be lower than the combination of interest and penalties imposed by the Internal Revenue Code.
• Contact the IRS.  They offer multiple payment agreements based on your circumstances.  Some are short-term, while others are structured to stretch the payments over a longer period of time through an installment payment plan.
• If you don’t find these options appealing, you can pay the amount due by credit card.  That’s right, Uncle Sam now allows you to charge your taxes, and at first glance this might appear to be the best alternative.

Before opting to charge the amount of your tax liability, CCCS suggests that you consider the following benefits and drawbacks associated with this option:

Benefits:

• Paying your taxes by credit card gives you the opportunity to pay Uncle Sam by April 15 even if you don’t have the money available to make the payment.  The payment date will be the date the charge was authorized, but you have the flexibility of paying off the debt over time to your card issuer.
• Even though you can arrange a payment plan through the IRS, when you charge your taxes you do so without the hassle of filling out forms.
• It’s convenient.  Payments can be made by phone, Internet or when e-filing.
• You might be able to earn rewards by charging the amount due.  If you have a cash-back rewards card, or a card through which you can earn miles or points, charging a large amount could reap nice benefits.

Drawbacks:

• According to the Taxpayer Relief Act of 1997, the IRS is restricted from paying the transaction fee normally associated with credit card charges.  Therefore, the IRS outsources the credit card payments to a number of companies which are set up to accept tax liability payments.  They pass the transaction fee, now renamed a convenience fee, along to consumers.  Although the fees vary by service provider, they are all based on the amount of the payment at a rate of between 1.95 percent and 2.35 percent of the total charged.  For example, if you owe $5,000 in taxes, your fee to charge them to your credit card could be $100 or more.  This fee obviously eats into any rewards you might earn.
• Payments to the IRS may not be eligible to earn rewards.  Your issuer may not allow IRS payments as part of their rewards program, or the rewards may be tied to certain categories, one of which is not taxes. Be sure to check with your issuer before you make the charge if earning rewards is part of your reason for charging your taxes.
• Even if you are allowed to earn rewards through this charge, you need to determine if the rewards are greater than any potential fees assessed.  Many cash-back cards cap rewards at 1 percent.  Therefore, in the $5,000 scenario above, you could only earn $50.  You’ll have paid $100 in fees, and only earn $50 in rewards, not a winning situation.
• The IRS charge will be treated like any other charge to your card.  Interest can be added on, late fees will apply, and if the charge puts you over your credit limit, an over-limit fee will be tacked on.  Thus, the longer you take to pay your credit card balance, the larger your original IRS debt becomes due to the additional interest and fees.
• If the amount you charge is large, it may utilize a significant amount of your credit line, thus limiting your access to credit for other necessities.  Further, if too large a percentage of your credit line is used, it could lower your credit score.
• Since no one knows what tomorrow holds, be aware that income taxes most often cannot be included in a bankruptcy, even if they’ve been charged to a credit card.

If you’re having trouble finding the money to pay your federal income taxes, reach out to a trained and certified credit counselor at CCCS.  To find the location closest to you, call 1-800-922-9537, or go online to www.CCCSNEPA.org.

o    Issuers must now include a snapshot of how long it will take consumers to pay off their balance if they only make the minimum payment each month.  This will be contrasted against becoming debt free in three years. Many consumers are currently unaware of how deep a financial hole they’ve dug, and are content servicing their debt by only paying the minimum amount due each month.  This reality check provides them with the opportunity to stop digging deeper and instead, start digging out.

o    Credit card issuers are now required to include on customers’ statements a toll-free number where they may receive information about accessing credit counseling.  Not only will this information make consumers aware that help is available, but it will direct them to legitimate nonprofit counseling agencies for assistance.  Consumers in financial distress can now use their credit card statement as a resource to obtain solid advice and find solutions.

Pay attention to all mailings, statement stuffers and fine print.
Under most circumstances, the issuers must now give consumers 45 days notice before they increase the interest rate, change fees or make other significant alterations to the terms of an account. This provides the consumer with time to evaluate the revisions, and decide if they want to apply for another credit card that offers better rates and terms than the existing one.

Inform the creditor whether or not you want to allow transactions that will take you over your credit limit.
A consumer must tell his or her credit card company if he or she wants to allow approval of purchases over their credit limit, or the transaction may be turned down.  If a person does not opt-in to over-the-limit transactions and the credit card company allows one to go through, it cannot charge an over-the-limit fee. Also, if a consumer does opt-in to allowing transactions that takes him or her over the credit limit, the credit card company can impose only one fee per billing cycle.

Check your credit report for accuracy.
Card issuers are restricted from opening a new account or increasing credit lines unless the issuer first takes into consideration the consumer’s ability to repay under the terms of the agreement.  To satisfy this requirement, creditors will likely begin using income estimation models supplied to them by the credit bureaus.  These tools will review, among other things, data contained in the consumer’s credit bureau report. Since consumers are allowed one free credit report every 12 months from each of the three reporting bureaus, there is little reason for consumers to not review their credit report and correct any inaccuracies.

Pay your bills on time.
Consumers will know in advance when their payment is due (same date each month), have ample time to meet the due date (bill must be mailed or delivered 21 days in advance of the due date), and not have to pay to pay (no extra fees assessed if payment is made by phone or electronically). These provisions allow consumers to plan their payments, making it easier to stay current.

Consumers always need to remain diligent about managing their credit and becoming familiar with the provisions of the new act.  These changes should definitely help empower you to take control of your financial future!

This educational third-party article is being provided as a courtesy by Terri Stocki, Consumer Credit Counseling Service of NEPA.  For additional information on the information or topic(s) discussed, please contact Terri at (570) 602-2227 ext. 220.