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Answer Desk Archive:

Should I declare personal bankruptcy?
How big is the national debt -- right now?
What's up with rates?

When rates goes down, should the interest rates decrease on our credit card bills as well?
Felicia T.

They should, but as you’ve no doubt noticed, they often don’t. But if your credit card lender isn’t keeping up with the latest changes in interest rates, there’s no reason to keep up your relationship with that lender.

An interest rate is nothing more or less than the current price tag on borrowed money. And just like airline seats or Bruce Springsteen tickets on eBay, the price goes up or down depending on demand. When banks accumulate deposits or borrow in volume, they pay, in effect, a wholesale price for money. Then they lend it to you and charge a retail price. As long as consumer borrowing remains strong, banks will keep that retail price as high as they possibly can.

One solution is to get a variable rate credit card, in which the bank agrees to adjust the rate every month based on a benchmark market rate like the prime rate. By some estimates, nearly half of all cards issued now carry variable rates. But, on average, you’ll pay a little more. As of last week, the average rate on a standard variable-rate card was 13.94 percent; the average rate on a standard fixed-rate card was 13.62 percent, according to

But that’s still about twice as high as the average mortgage rates. Why so high?

Your banker will tell you it’s because credit card loans are riskier. A mortgage lender can come take your house if you don’t pay back the loan. (Most mortgage lenders also quickly resell your loan to someone else after they give you the money, so they’re not even on the hook if you don’t pay.) But credit card lenders can’t exactly come and repo your latest haircut or the Chinese takeout you charged last week.

Banks also know that most people don’t bother to shop for a lower rate because of the inconvenience in opening a new account — and they’re not about to drop your rate unless you complain. So give them a call (armed with a better offer from another bank) and demand a better deal. In a survey earlier this year, the U.S. Public Interest Research Group asked a group of credit card holders to call and demand lower rates. More than half got results, cutting their rate on average from 16 percent to 10.47 percent.

If your card company says no thanks, maybe it’s time to get a new card. It may be harder than shopping for new socks, but if more people did, banks would probably be quicker to cut rates to hold onto your business. Try Web sites like, which tracks consumer interest rates nationwide. You may do better with a bank based in a state where limits are stricter on how much credit card companies can charge.

Or, if you own a home, you might consider taking out a home equity loan and use that money to pay off your credit card. Because it’s secured by your house, a home equity loan is almost always cheaper than a credit card loan. And there’s an added sweetener: you get to deduct the interest payments on a home equity loan from your income taxes.
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Uncle Sam's credit balance?
I would like to know the amount of the national debt as of today.
Bob W.

You can do even better than that. Here’s a Web site that tracks the total amount of the U.S. national debt as of this second. That number, the total amount of Treasury notes, bills and bonds outstanding, is somewhere north of $6.2 trillion - and rising.

Think of national debt as a credit bill that just gets bigger and bigger: it’s the money borrowed by the Treasury Department (by selling investors an IOU that pays interest) to cover accumulated government spending that wasn’t covered with taxes. (Don’t confuse the national debt with the federal budget deficit — which is how much the government falls behind in paying its bills in a given year. The debt is the accumulation of all of those annual deficits from past years.)

How accurate is the debt clock? The keeper of this one, a fellow named Ed Hall, reports on his site that he’s written computer code to estimates the debt increase in real time. He then periodically resets the clock to conform to the Treasury Department’s daily calculations.

To try to keep up with just how much Uncle Sam owes, the Treasury uses its far-flung data collection system to continuously poll about 50 offices in the Federal Reserve System, the nation’s central bank, which buys and sells Treasury debt to manage the amount of cash in the banking system. Every day, at around 11:30 am EST, the Treasury’s Web site posts the latest results — down to the penny.

And while Congress keeps pushing the debt higher, the Treasury is looking for any help it can get to pay it down. The department even passes the hat, inviting citizens to make voluntary contributions (after they’ve finished paying their taxes) to help pay off the debt faster.

Believe it or not, every year these charitably minded folks send the Treasury about $1.5 million. As of August, the government had received $63,271,924.86 - or about 1 percent of the total national debt — since it first took up a collection in 1961.
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Personal bankruptcyUnfortunately, I have come to a point where I can’t sell my home because the market has slowed down. We have fallen behind on our mortgage payments, and they have started the foreclosure process. I do not know exactly how far they are, but I fear that I will be left with no alternative if I don’t do something. My only alternative is bankruptcy, which I know nothing about — questions like can I keep my home, will I continue paying for it, my car, and the damage this will do to my credit report. Would I ever be able to sell and buy another property again?
Lizbeth V. — Oak Brook, Ill.

This is one of the hardest questions we get, and there are people far better qualified than we are to help. If you have a lawyer you trust, that’s a good place to start, even if bankruptcy is not their specialty.

Though personal bankruptcies are handled under federal law, it’s hard to generalize about the process. There are different “chapters” of the law available, and state laws vary in the way personal property like your home is handled in bankruptcies. In general, most debts are eliminated, though some — like alimony or back taxes — usually aren’t. Credit bureaus keep a record of a personal bankruptcy filing for 10 years, but that doesn’t mean you can’t get credit. Some lenders may extend secured credit; after two years, mortgage lenders generally care more about your down payment and current income. For more on presonal bankruptcy, check out the American Bankruptcy Institute’s Web site.

Another option is a credit counselor. The initial consultation is usually free. In some cases, a counselor can help you work out a payment schedule with a lender that lets you avoid bankruptcy. Some of these agencies are subsidized by lenders who want to help people avoid writing off their debt entirely. The National Federation of Credit Counselors is a clearinghouse for legitimate credit counselors. They can help you find a local agency in your area.

But watch out for shady credit firms that claim to help you out of debt, but end up lending you more money on predatory terms. The Federal Trade Commission Web site has some tips on how to spot the scams.
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