You hear about cash-back cards all the time—but which ones deliver the goods? These four cards deliver the most buck for your bang. But remember: As with most rewards cards, you MUST pay your balance in full and on time each month or get hit with steep late fees and interest rates.

1. Chase Freedom
   You earn an unlimited 1% cash back on all purchases, and 5% cash back on rotating categories of purchases like gas, groceries, travel, and more (a quarterly maximum applies). No annual fee.


2. Discover More
   This is a great cash back card—but it requires patience. You can earn 5% cash back (up to a maximum), but it does so in rotating categories (hence the need for patience). It also gives you up to 1% cash back on many other purchases—unlimited! Read the fine print. No annual fee.


3. Blue Cash from American Express
   Hey, big spenders—this is the card for you! Charge less than $6,500 per year and Blue Cash offers 1% cash back on purchases at supermarkets, drug stores and gas stations and 0.5% cash back on all other items. Spend more than $6,500 in a year and earn 5% cash back on those three categories—and 1.25% on other items. Rewards are unlimited. No annual fee.


4. Capitol One No Hassle Cash Rewards
   No hassle indeed: You get 2% cash back on gas and grocery purchases and 1% on all other purchases—and the rewards are unlimited. The card has an annual fee that varies according to your credit score.

Remember to choose a card that complements your spending habits (e.g. big grocery buyers should go for a card with a nice kick-back on groceries); has no or a low annual fee and doesn’t severely restrict the cash rewards. Comparison shop at creditcards.com.

Talk back. What's your favorite rewards card?

Catey Hill is the money editor for the New York Daily News online and the author of "Shoo, Jimmy Choo! The Modern Girl's Guide to Spending Less and Saving More."

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Erica Sandberg is a credit expert and columnist for Creditcards.com. She is also the author of "Expecting Money: The Essential Financial Plan for New and Growing Families."

Should you co-sign a loan or credit card for a friend or relative? I get this question a lot, as the economy makes it harder for people to obtain loans—and the new CARD Act makes it tough for those under 21 to get credit cards in their own names.

1. It's your debt now. As a co-signer of a credit card—or any bank loan—you are responsible for any money owed. If a friend or relative decides to charge a $3,000 trip to Mexico, say, you are liable for that debt.


2. Your credit is on the line. If the co-signee makes late payments or defaults, guess who the lender will come after? Not only could you end up paying for their debts, your credit would take a hit.


3. Protect your score. In rare cases, when you 100% trust the person, you may want to co-sign. But just remember that their debt will show up on your credit report, and could make you look overextended to creditors, who heavily weigh the percentage of your available credit when calculating your score.

Last, if you're a college student—or know one who is thinking of co-signing on a card for a friend, I have a better idea. Tell them to get a job, even a part-time one. According to the CARD Act, if 18- to 21-year-olds have a regular income source, they don't need anyone else to guarantee the account.

Bottom line
Have you ever co-signed a loan? What happened?

Erica Sandberg is a credit expert and columnist for Creditcards.com. She is also the author of "Expecting Money: The Essential Financial Plan for New and Growing Families."

Join personal finance experts and DailyWorth contributors Galia Gichon & Lora Sasiela for a live teleclass on 7/21 for "How To Gain Financial Sanity: Conquering Your Money Struggles From The Inside Out With Powerful Emotional & Practical Tools." Register here.

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Account busters
Banks make billions by charging people overdraft "protection" fees. The Center for Responsible Lending says that banks took in about $24 billion in 2008; estimates for 2009 are well over $30 billion.

New federal rules take effect on July 1 that will require you to actively accept overdraft protection (ODP) from your institution for ATM and debit-card transactions. Here's what you need to know.

The fine print
Some banks are changing their policies before the new laws take effect. Has yours? It can be tricky to figure out, because there are three types of overdraft protection, according to Ky Tran-Trong, a lawyer for the Federal Reserve Board in Washington, D.C.

• One is an overdraft line of credit, which is like a credit card linked to your checking account for ODP purposes. The interest rate is usually sky high.
• Another is an automatic transfer from your savings. Your bank may or may not charge a fee for this service.
• The last is a cushion of, say, $200 that the bank provides, if your ATM or debit-card transactions exceed your account balance.

Under the new laws, you have to agree to the ATM and debit-card overdraft. But you still may have ODP in some other form. (P.S. bounced check coverage is separate; look into that as well.)

Don't swipe and pray
Call your bank to learn what sort of overdraft coverage you have—and read all the notices your bank sends. It's up to you to choose whether you want any overdraft protection at all. It's smarter and cheaper to be your own source of protection—by knowing what's in your account, setting up an automatic transfer from savings or simply keeping a cash cushion in your account.

Tell us what your bank is doing with overdraft "protection," and how you plan to protect yourself and your money.

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Erica Sandberg is a credit expert and columnist for Creditcards.com. She is also the author of "Expecting Money: The Essential Financial Plan for New and Growing Families."

To read the original article click here.

Q: I just checked my credit report and discovered that my husband has run up $18,000 in debt when I thought we only owed $400. I'm so upset I'm shaking. What can I do?

A: Your husband's financial infidelity is frightening—but, sadly, it's not uncommon. You're lucky that you checked your credit report and caught him in the act, so to say. As with any form of cheating, you and your husband have some work to do. Here's my recommended plan:

1. Find out where the money went. Your credit report contains a list of all open accounts; ask your husband to show you those statements. In addition, he may have accounts he opened in his name. These would show up only on his credit report, so ask him to come clean.
   
   As you examine the statements, what you discover may be hard to take. Your spouse wasn't just hiding debt; he was hiding habits (perhaps even vices) that he was spending money on.
   
   Thus, you've got two main tasks, and don't ask me which is harder! First, your husband's secret spending has to stop (and the spending habit addressed). Second, the debt has to be repaid.


2. Get professional help. If you're furious, it's justified. If he's guilty or resistant, that's normal. I strongly recommend seeking the help of a marriage therapist or a credit counselor because this is a complex issue.


3. Make a debt repayment plan. As a duo, you need a plan to repay the balances in full, as quickly as possible. Credit counseling may be a good strategy if the debt seems overwhelming. Otherwise, create a budget, reduce spending, apply all excess funds to the debt and stop charging until the balance is at zero. Also, it's not out of line to have your husband sell whatever he bought and use the money toward his debt. While you're at it, propose that he work overtime or get a part-time job.


4. Talk about money. Your husband's financial infidelity is a red flag that you two are out of sync—and not just about money. Make time for regular discussions about the life you have and the life you want. As the great Russian writer and philosopher Leo Tolstoy once wrote, "What counts in making a happy marriage is not so much how compatible you are, but how you deal with incompatibility."

Have you suffered financial infidelity? Do you worry about it? Tell us.

Erica Sandberg is a credit expert and columnist for Creditcards.com. She is also the author of "Expecting Money: The Essential Financial Plan for New and Growing Families."

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This post is a follow-up to Debt Diets Part I and Part II."

Mary Reed and Gerri Detweiler are co-authors of "Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights." They also answer debt questions at DebtCollectionAnswers.com

Bankruptcy is a painful choice and a complicated one. But if you’ve trimmed your spending to the bare bones and you’re still weighed down by too much debt, it may be time for the most drastic of our three debt diets.

The beauty of bankruptcy is that once you've filed, all attempts to collect your debts stop. That's why it's sometimes called "bankruptcy protection."

There are two types of bankruptcy: Chapter 7, liquidation, and Chapter 13, reorganization. A bankruptcy attorney can tell you which one may work for you. 

Chapter 7, Liquidation: This option is typically best if you have a lot of unsecured debt (e.g. credit card and medical bills), and few assets.

Credit card and medical debt other kinds of unsecured debt are wiped out (discharged). But in return, the court may sell some of your assets—like your car—and give the money to creditors.

Remember that some types of debt—like student loans, unpaid income taxes, and child and spousal support—cannot be erased.

In Chapter 7, you get a choice about how to handle any secured debt you may owe, like your car loan and mortgage. You can:

1. Formally agree to continue paying the debt.
2. Buy the asset that secures the debt—i.e. pay off your car—assuming you and the lender can agree on its current value, and that you can pay for it with one lump sum.
3. Return or surrender the asset to your lender so it can be sold and the cash applied toward what you owe.

Chapter 13, Reorganization: This option could be best if you have assets to protect (like your home), and have some money to pay off part or most of what you owe.

You keep your assets in exchange for paying all or some of your debts, depending on the type, under a plan the court must approve. Once you’ve completed the plan—usually in 3 to 5 years—any remaining dischargeable debt is wiped out and your bankruptcy is over.

Filing for bankruptcy can be a huge relief if you’ve got a ton of debt, but it will leave scars: Your bankruptcy will be in the public record for years to come, and your credit history will take a big hit for up to ten years.

However, you can begin rebuilding your credit once your bankruptcy is filed, and you embrace better money habits.

If you need help deciding whether this is the right step for you, read When is Bankruptcy the Right Choice?

Resources
Find a federally-approved credit counseling agency. You must complete a consultation with one no less than 180 days before you file bankruptcy. To find an agency, go to http://www.uscourts.gov/bankruptcycourts/approvedagencies.html.

Find a board certified bankruptcy attorney. Locate one in your area at http://www.abcworld.org/search or at http://www.nacba.org.

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The CARD Act of 2009, which takes effect on Monday, reins in some nasty practices, but leaves some loopholes you need to be aware of.

It's still up to you to know the terms of your cards, read the fine print and stay on top of any shenanigans that card companies may pull.

Three things to do now:

1. Take stock. In advance of the new restrictions, some companies have hiked interest rates, altered due dates, imposed dormancy fees—trying to squeeze more money out of you. Read your recent statements, and call the card company to fix unwanted changes—or switch cards. This article on CardRatings.com offers suggestions.


2. Know your rights. Because the CARD Act covers many issues, it helps to laser in on the provisions that pertain to your situation. We like this pick-and-choose guide on CreditCards.com.


3. Be proactive. "Use credit responsibly" used to mean that you should pay bills on time and in full. These days, to be a model credit citizen it pays to stay informed about the evolving world of credit. Join DW contributor and credit expert Erica Sandberg and others in a live discussion with the White House about the new law on Monday, 2 PM Eastern.

 

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Many thanks to all those who participated in last week's pop quiz!

Congratulations to Sophia and Kristina, our two winners!

Although several other readers came close—Stephanie, Amanda, Kateh, Jordana, Debi, Beth, Di, Jamie—we regret to report that fuzzy math derailed almost everyone.We take credit for some of the confusion, as two of the questions could be answered in different ways.

Luckily, this presents a fabulous "teaching moment," as the moms say.

1. There are two ways to answer question 1:
   1. If you made only the minimum payment of 2.5% on a $10,000 balance at 19.99% interest, it would take 403 months—or about 33.5 years to pay it off. Use this minimum payment calculator on bankrate.com.
   
   
   2. BUT, if you read the question literally, and assumed a fixed monthly payment of $250, it would take 67 months, or about 5.5 years to pay it down.


What's the diff? The minimum payment is $250 (2.5% of $10,000)—but only at the start. It gets lower as you go: 2.5% of $9916 is only $247, etc. That why paying only the minimum turns into a 33-year jail sentence.


2. Adding an additional payment each year would shave about 5 years, 8 months off your mortgage, assuming it was a 30-year fixed loan for $160,000 @ 6.5%. Answers varied for those who used other terms. Use this mortgage calculator on bankrate.com.


3. Most people did the basic math correctly on this one ($50,000 is indeed 4% of $1.25 million), but then forgot to factor in inflation.

Assuming a 3% yearly rate of inflation, a $50,000 income would translate about $121,500. Thus, the total amount you'd need to save would be in the $2-3 million range—Sophia and Kristina came closest to getting this right. Use this retirement savings calculator on bankrate.com.

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Erica Sandberg is a credit expert and columnist for Creditcards.com. She is also the author of "Expecting Money: The Essential Financial Plan for New and Growing Families."

Q: I have been trying to improve my credit for about four years now, but my scores are still in the 600 range. Why are they so low, and what can I do?

A: Keep in mind that the three-digit FICO score is derived from information on your credit reports. If the reports are inaccurate, any score calculated from them will be inaccurate, too.

Federal law gives you the right to inspect your credit reports once a year, free, at the official site:

Carefully read the reports. If you find errors—studies show that most reports have some—follow the credit bureau's procedure for correcting them.

Now, let's look at other ways to spruce up your credit:

Payment history = 35% your score.
A history of late payments or delinquencies could explain why your scores are low. You've done what you can to fix past damage, now let time work its magic. As those accounts age, they'll have less impact. Meanwhile, it's vital that you pay your existing accounts on time. Always.

Amounts owed = 30%.
If you have balances that are high, or nearing your credit limit, that can ding your score. What to do? Concentrate on lowering your debt ratio to about 20% to 30% of your available credit: i.e. a card with a $10,000 limit should have no more than $3,000 on it. No debt is best!

Length of credit history = 15%
A lengthy record of your borrowing and repaying prowess is essential. You can't make the years fly by faster, but if you've opted out of using credit, start charging again (and paying balances on time) to build your credit history. Also, as you pay off balances, keep your oldest accounts open.

Types of credit used= 10%
In general, it's best to have a mix of installment loans, credit cards, charge cards and retail accounts. By using them all responsibly, you prove that you can handle a range of credit tools. (But don't go overboard. Just apply for what you need and will really use.)

New Credit = 10%
It's fine to pursue new credit when you need it, but too many inquiries or new account openings can hurt your score. Keep it to about two per year. Did you complete the paperwork for a lot of new accounts recently? If so, you may have knocked your score down a bit. Slow down and stop applying for a while.

Clean up your credit act now, and you should see results in six short months.

Erica Sandberg is a credit expert and columnist for Creditcards.com. She is also the author of "Expecting Money: The Essential Financial Plan for New and Growing Families."

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This post is a follow up to "Debt Diet, Part I."

Gerri Detweiler and Mary Reed are co-authors of "Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights." They also answer debt questions at DebtCollectionAnswers.com.

Debt settlement is the “liposuction” version of a debt diet, eliminating the excess debt that’s weighing you down.

If you can’t pay your credit card debt—and if credit counseling fails because the payments are too high—creditors may let you pay less.

But negotiating debt away requires moxie and muscle.

1. You must stop paying your credit cards before creditors will even discuss a settlement. (They won’t make a deal if you’re paying on time or making the minimum.)


2. Once you stop paying your bills, you must save the cash to build a war chest for settlements. Most settlements are paid in one lump sum.

As you fall behind, some creditors may approach you with deals: e.g. an offer to settle a $5,000 balance for $3,000.

Or, you can make the first move, once you've fallen a few months behind, by offering to pay what you can. (Caution: If you strike any deals, get them in writing before you pay a penny!)

PROS: When settlement works, it lets you zero out your balances much faster than if you tried to pay off everything on your own.

CONS: Your credit rating will tank, and you may owe taxes on the amount forgiven by your creditors. (If you are insolvent by IRS standards, you may not have to pay taxes on the forgiven debt, but ask a tax accountant first.) Also understand that there is a risk that some creditors won’t settle, and may sue.

If the risks seem worth the possibility of gaining debt freedom, this could be the route for you.

Listen to an interview with debt settlement expert, Mary Reed, here.

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Gerri Detweiler and Mary Reed are co-authors of "Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights." They also answer debt questions at DebtCollectionAnswers.com.

Just as the same old diet advice (eat less! exercise more!) can make you want to scream, the standard advice about ditching debt (spend less! double your payments!) can be infuriating, especially if you’re up against a mountain of debt with interest rates that match the calories in a bowl of Ben & Jerry's.

If you want to dig out, but penny pinching isn't enough, you may require an extreme debt diet. Here, the first of three debt diet articles to weigh, if you're deep in the hole. Parts II and III coming soon.

Credit Counseling. This is the packaged meal plan version of a debt diet. (Think Jenny Craig for your budget.) You seek help from a credit counseling agency (resources below), cut up your cards and make one monthly payment to the agency, which in turn pays creditors. Most creditors will reduce your interest rates, which means you pay less in the end.

The big advantage? Zero temptation. With no open accounts, you won’t be able to use a card “just this once.” That's also the challenge. If credit cards have been your back-up plan, you have to survive without your plastic safety net. If you take the credit counseling route, you need to overhaul your spending habits, revise lifestyle expectations and live on what you actually earn. No Visa supplements!

More good news: Most people with overwhelming debt have crummy credit already. Your credit rating will take an additional hit when your accounts close—but not because you're in counseling. Once you are making regular payments, on time, watch it bounce back.

• To find a credit counselor: www.nfcc.org and to www.aiccca.org
• Advice for those in a debt management plan on FTV.gov
• Fourteen questions to ask a credit counselor

Got a question or want to share? Leave a comment below.

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It seems like the worst time of year to clean up your credit. But the holidays offer surprising opportunities to polish your record, boost your score and become more credit-savvy for 2010.

• Say NO to store cards. The lure of 15% off at the register is tempting—and terrible for your credit. Every credit inquiry dings your score. That's not what you want for Christmas.
  
• Spend more cash. A big part of your score is how much credit you have available. If you carry a balance, it should be less than 25-30% of your available credit. Spending cash this season will help to keep your debt ratio down—and nudge your score up.
  
• Clean house for the New Year. It's almost 2010, have you looked at your credit reports yet? They're free at the official website, www.annualcreditreport.com. The majority of reports contain errors, so a quick clean-up (you can submit disputes online) is the fastest way to better credit, and a financially happy and healthy New Year.

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