Does Closing a Bank Account Affect Your Credit?

Ready to close a bank account but worried you could ding your credit score? Don’t be.

By taking a few simple steps and practicing good banking habits, you can avoid having your credit affected by a bank account closure. Here’s what you need to know.

Generally, closing a bank account doesn’t affect your credit

The mere act of closing a bank account doesn’t have a direct impact on your credit. The Consumer Financial Protection Bureau confirms that the three major credit bureaus — Experian, Equifax and TransUnion — don’t typically include checking account history in their credit reports. But your credit could suffer if you’re not careful when you close an account.

Your credit score could drop if your bank account isn’t in good standing

Some blemishes in your bank account history could affect your credit. For example, if you close an account while the balance is negative or a bank closes your account because it’s overdrawn for an extended period, the negative balance could go to a third-party collection agency. That could lead to your credit report being marred.

“If the bank sends this outstanding debt to a collection agency, it could be reported to any of the three credit bureaus,” Marguerita Cheng, certified financial planner and CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland, said in an email. “Collections can trigger a drop in your credit score.”

How to close your bank account so your credit isn’t affected

You’ll need to make sure that your account is in good standing and remains that way even as you close it. Here are the steps to close your bank account properly:

1. Make a list of recurring deposits and withdrawals. Note the bills and payments paid by direct debit from your account periodically. It’s just as important to note any deposits you get, even if they’re only occasional. You don’t want your tax refund to go to a closed bank account, for example, said Miguel Gomez in an email. Gomez is a wealth advisor at Lauterbach Financial Advisors in El Paso, Texas, and host of the podcast “Dinero en Español.”

2. Open your new account and move money and automatic transactions to it. “If you have automatic payments drawn from the account you’re closing and you don’t update them before closing the account, that can affect your credit due to missed payments,” Gomez said.

3. Settle any balances on your old account. You should leave some cash in your old account to cover any pending transactions you might have overlooked, Cheng said. You can also contact your bank to ask if you have any outstanding balances. If you opened an account to take advantage of a cash bonus, make sure your account has been open for the minimum time required to avoid an early closure penalty fee.

4. Close your old account and confirm its closure. Once you’ve ensured there are no pending transactions, you can close your account. You might be able to complete the closure online, but some financial institutions require that you fill out a mail-in form, visit a branch or call to close your account.

The bank may send you an email to confirm the account closure, or you can contact a representative by phone or in person to confirm the account has been closed and request confirmation in writing.

Note that if your account earned interest or a cash bonus over the year, you’ll need to get the proper paperwork from the bank for your taxes.

Follow these steps when you close your bank account and you’ll avoid fees, missed bills and credit woes.

Ruth Sarreal writes for NerdWallet.

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Lawsuit Stalls Student Debt Relief: What Now?

The 8th U.S. Circuit Court of Appeals has granted an emergency stay pending the appeal of a lawsuit seeking to delay the scheduled rollout of the Biden administration’s promised student debt relief.

In other words, borrowers hoping to see $10,000 or $20,000 wiped from their debts will have to wait while this lawsuit proceeds; hearings are already scheduled for next week. There are also four other lawsuits pending appeal or awaiting hearing.

The stay is no reason to panic, says Mike Pierce, director and co-founder of the Student Borrower Protection Center. It’s procedural. The court cannot make a ruling, says Pierce, when it hasn’t been fully briefed. The stay calls for a response from the Justice Department by Tuesday afternoon.

“There’s not really anything to see here,” says Pierce.

The temporary halt came just days before the first borrowers were expected to see their balances reduced. The White House said earlier this month it would not deliver relief prior to Oct. 23.

On Oct. 21, Biden said 22 million borrowers had already submitted their applications since the form first went live in beta form a week prior. The White House has stated an estimated 40 million borrowers would be eligible for cancellation. The debt relief application is still open.

What does the lawsuit claim?

Six states (Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina) jointly claim Biden’s debt relief would harm tax revenue in their states and the finances of state-based loan agencies. All six of the states are Republican-led.

These student loan servicers and companies manage commercially held FFELP loans, an older type of federal student loan originally funded by private companies. They claim that letting FFELP borrowers consolidate their loans to be eligible for cancellation would hurt their bottom lines because it would eliminate or reduce anticipated interest payments.

In response, the Biden administration in late September reversed cancellation eligibility for borrowers with commercially held FFELP loans.

A federal district judge dismissed the case on Oct. 20; the plaintiffs immediately filed an emergency motion with the 8th U.S. Circuit Court of Appeals for an administrative stay. They asked the court to pause the scheduled rollout of debt cancellation by 9 a.m. CST Saturday, Oct. 22.

The court didn’t wait that long; it approved the administrative stay on Friday.

Where does this leave borrowers?

Borrowers who applied or were waiting for automatic relief are now in limbo. And federal student loan payments are expected to restart in January 2023 after a nearly three-year pause due to the pandemic, unless the pause is extended again.

No additional extension has yet been announced. It’s wisest to proceed as if payments will resume as scheduled on Jan. 1.

If you qualify for debt relief and haven’t applied, do so. It can’t hurt, and you’ll secure your spot in line if legal obstacles are cleared.

If you planned to seek a refund of payments made during the pause, reconsider. You are still able to ask for a refund, but as before, the amount refunded will be added to your loan balance.

If you already received a refund on payments made during the pause, don’t spend it. If one of the lawsuits succeeds, you may want to put it back toward your loan balance.

Anna Helhoski writes for NerdWallet.

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8 Times You’re Using the Wrong Credit Card

There’s no such thing as a universal best credit card. The right card for you depends on your lifestyle, your goals and your credit history. For instance, if you’re looking for travel rewards but your friend is building credit, the best card for each of you will differ greatly.

And while there may not be one best card for you — the average American has about three cards, according to a 2021 Experian study — there are many times a card can be wrong for a specific situation.

Here are eight times you could be using the wrong credit card, and what you can do instead.

1. You’re still using your starter credit card

You may have started out by building your credit with a secured card, student card or alternative card, but once your credit is in better shape, it may be time to upgrade.

If you’ve used a starter card responsibly by keeping your utilization rate low and paying balances in full every month, you may qualify for a card that’s a better fit now. A different card could offer a higher credit limit, better rewards earnings, and perks like cell phone protection and travel benefits. Some card issuers may automatically upgrade your card once you’ve reached certain thresholds, while others may not. Contact the issuer to check your options.

2. You’re not using a card enough to earn the sign-up bonus

New cardholders can often earn a lucrative welcome bonus, but usually with a caveat: You have to spend a minimum amount within a specific time frame to get it. Note the spending requirements for a card’s sign-up bonus, and use the new credit card enough by the deadline. If you continue to pay with an older credit card that’s already in your wallet, you risk missing out on the bonus if you don’t spend enough on your new card.

A little planning can help. Think about any upcoming big purchases you need to make, such as a car repair or a new laptop. Just one of those could be enough to hit the bonus’s spending requirements.

3. You’re using a store-specific card

It’s true a store credit card can save you money, especially if you are a frequent, heavy spender at that store. However, the rewards earned with a store credit card are often only redeemable at that store, limiting their usefulness.

Most shoppers would be better off using a general rewards credit card and earning more flexible rewards. Some cards have elevated rates for online shopping purchases while others earn as much as 5% back at popular merchants like Target, Walmart and Amazon.

4. You didn’t realize 5% cards take extra work

Several cards boast a top 5% cash-back rate in popular spending categories like grocery stores, restaurants and gas. The catch, though, is that you’ll have to do some work to earn that rate. In most cases, you’ll need to track categories: Qualifying 5% purchases may rotate quarterly, or you may have to choose your own categories. If you’re spending outside of those categories with this card, you’ll likely earn a paltry 1% instead of the juicy 5% you think you’re earning.

Most times, you’ll have to activate the bonus categories before the issuer’s deadline to earn the 5%, even if you’re spending in the right category. Plus, you’ll likely run into spending caps in those 5% bonus categories; once you hit those caps, the rewards rate drops to 1%. For those who find a 5% card to be high maintenance, opt for one that earns a flat 2% cash back on every purchase instead.

5. You mix up the card names

According to a 2020 NerdWallet study, 14% of Americans view credit cards as “complicated,” and it’s not hard to see why. Some issuers offer suites of cards in the same family and have names that are nearly identical. The logos of some issuers are strikingly similar, too. Perform a quick audit of your credit cards to make sure that they are the cards you intended to get. Cards that look and sound nearly the same may be worlds apart in terms of fees and rewards structure.

6. You’re regularly using a balance transfer card for purchases

Balance transfer cards can be excellent tools for paying off debt. They consolidate several debts into one place, making them easier to keep up with, and they can give you a breather on interest for many months. However, if you’re using a balance transfer card for everyday expenses too, it will be hard to whittle that balance down to $0. Plus, many balance transfer cards don’t come with rewards. Leave the balance transfer card at home but take the cash-back card with you — and be sure to make regular payments toward both.

7. You aren’t using the right card for that purchase

It pays to know the rewards rates for all of your credit cards. Say you have two credit cards, one that earns 4% on gas and another that earns only 1%. Using the 4% card whenever you fill up would return $30 more if you spent $1,000 annually on gas. That $30 may not seem like a lot, but small amounts add up, especially if you have multiple rewards credit cards. To help keep track of different rewards rates, you could label your cards with sticky notes or keep a small reference guide in your wallet.

Often you’ll have to keep spending caps in mind, too. Issuers typically cap earnings on their highest rewards rates after you reach a certain amount of spending in a particular category. Make sure you track your progress toward that cap and switch to another card with a better rate when you reach it — until the limit resets.

8. You’re not using a credit card at all

Though they may look and feel virtually the same, a debit card is very different than a credit card. Credit cards offer protections and perks that debit cards (and cash) do not. You can earn cash back and other rewards with credit cards that you won’t get with debit, and it’s often easier to recover from losing a credit card than a wallet full of cash. More importantly, responsible credit card use builds your credit score, which can translate into more favorable loan terms and insurance rates, among other money-saving benefits.

Jae Bratton writes for NerdWallet.

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Higher Inflation Could Mean Smaller Tax Bills for Some

The latest data from the U.S. Bureau of Labor Statistics doubles down on what has become 2022’s loudest refrain: Sometimes the race to beat inflation is just a slow crawl.

And while persistently high inflation is hardly cheerful news, a set of annual adjustments that are tied to an inflation index could provide relief in one unexpected area — taxes.

Keeping bracket creep at bay

Typically in early November, the IRS releases a swath of adjustments to various tax provisions, including tax brackets, standard deductions and certain tax credits for the forthcoming tax year.

These adjustments are tied to the Chained Consumer Price Index for All Urban Consumers, or C-CPI-U, and the IRS’ goal is to prevent bracket creep. In other words, these annual tweaks allow the IRS to ensure that inflation doesn’t eat away at the original basis for a tax credit or threshold.

Take, for example, a married couple filing jointly with a taxable income of $80,000. In 2022, this would put the taxpayers in the 12% tax bracket. If that couple together were to receive a $10,000 pay bump as a cost-of-living adjustment in 2023 and no changes were made to the brackets, that raise would push a portion of their earnings into the next bracket, to be taxed at a higher rate of 22%.

By adjusting the income thresholds each year to account for inflation, the IRS is acknowledging that the economic landscape is changing and that you should not be penalized if your salary’s purchasing power essentially remains the same, says Mark Luscombe, a certified public accountant and principal federal tax analyst for Wolters Kluwer Tax and Accounting in Riverwoods, Illinois.

What’s expected to be different in 2023

This year’s historic rate of inflation has affected about everything — including projections of the adjustments that will come from the IRS this fall. Several tax analysts are anticipating a roughly 7% increase across numerous tax provisions, compared with a 3% increase last year.

Sizable tax bracket adjustments

Perhaps the most significant callout from the projections is a considerable adjustment to income thresholds across all filing statuses for 2023. According to Wolters Kluwer projections, those who are married filing jointly, for example, might see the ceiling for the 12% tax bracket rise from $83,550 in 2022 to $89,450 in 2023. This could help keep some folks out of a higher tax bracket (and potentially a higher bill).

Also likely is a larger-than-usual bump to the standard deduction, a flat amount taxpayers can use to reduce their taxable income. Wolters Kluwer projects couples who are married filing jointly might be able to take up to $27,700 in 2023, up from $25,900 in 2022.

Expanded tax credits

Another bonus we may see is adjustments to certain tax credits, which could mean additional savings for some taxpayers. A Bloomberg Tax analysis projects that the refundable portion of the popular child tax credit could rise from $1,500 to $1,600, and the earned income tax credit, a benefit meant to aid lower-income taxpayers, could jump from a maximum of $6,935 to $7,430 for families with three or more kids.

Higher savings contribution limits

Taxpayers may also get a chance to increase their contributions to certain tax-advantaged accounts, which in some cases can also lower their taxable income.

Per Bloomberg Tax, you may be able to contribute up to $6,500 in 2023 to an IRA (up $500 from 2022). Those 50 or older also generally get a catch-up contribution that lets them funnel in an extra $1,000. As for contribution limits for employer-sponsored retirement accounts, like 401(k)s, Luscombe says we should expect similarly significant increases. The IRS is expected to release the official numbers in the coming weeks.

Those with health savings accounts, or HSAs — which allow you to contribute a certain amount of your salary pretax for medical expenses — may be able to contribute up to $3,850 for themselves or up to $7,750 for a family in 2023.

No guarantees

Though these adjustments will likely allow taxpayers to take a more generous standard deduction or funnel more money into accounts that could lower taxable income, there’s no guarantee tax bills will be smaller — numerous factors affect your overall tax liability.

It’s also important to note that some tax provisions are not annually adjusted for inflation, Luscombe says. This includes certain tax breaks like the state and local tax deduction, which is capped at $10,000 until 2025, and the capital loss deduction, a provision that allows investors with net losses to lower their taxable income by a max of $3,000 per year.

The bottom line: Changes to the code are meant to act as damage control; folks whose wages may not have kept up with inflation could potentially see a benefit, and those who received a cost-of-living raise may avoid getting bumped up into a higher tax bracket. And a lucky few of us, perhaps, may end up with a lower tax bill.

Sabrina Parys writes for NerdWallet.

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Time’s Almost Up to Apply for Bigger Student Loan Forgiveness

Full student loan forgiveness could be closer than you think under temporary rules for Public Service Loan Forgiveness, or PSLF — but time is running out to apply.

“They should rush to get this done because the program is far more inclusive than it’s ever been in the past,” says Kristen Ahlenius, an accredited financial counselor and director of education at Your Money Line, a financial wellness company.

Payment requirements for the program are more lenient under a limited waiver that expires Oct. 31. Before the waiver, Ahlenius says, “PSLF was kind of this dismissed program for so long because it was so unachievable.”

The basic requirements for PSLF are to work for a qualifying public service employer, make 120 student loan payments and have federal direct loans. But the program has lots of caveats, which led to approval rates below 2% and furious, confused borrowers.

“People thought they were on track and submitted their application only to get a rejection,” says Betsy Mayotte, president and founder of The Institute of Student Loan Advisors. “In particular, that happened to people who had the wrong kind of loans and people who were on the wrong payment program.”

In addition to having direct loans, borrowers must make payments on an income-driven repayment plan to be eligible.

The PSLF waiver addresses those criticisms. It counts more time toward the required 120 months, including periods of hardship deferment, months with late payments and months not enrolled in income-driven repayment. It also opens the door to borrowers with Federal Family Education Loan Program, or FFELP, loans.

Here’s who should apply now and how to do it.

Who should apply now

Current and previous public service workers

Your job sector is the key criterion for the PSLF waiver. Your time with a qualifying employer must coincide with the time your student loans were in repayment.

These types of employment typically qualify:

  • Federal jobs.
  • State government jobs.
  • Local government jobs.
  • Tribal government jobs.
  • Not-for-profit organization jobs.
  • Military service.

Your employer is what matters — not what you do. Payments won’t count if you work for a private employer, as a government contractor or part time. Parent PLUS loans and joint spousal consolidation loans don’t qualify, either — no matter your job.

Check the PSLF employer search tool to make sure your employment qualifies. “You might be closer than you think,” Ahlenius says.

FFELP borrowers

FFELP loans normally aren’t eligible for PSLF. If you first consolidate your FFELP loans into a direct loan, however, your previous payments will be counted toward forgiveness — thanks to the waiver.

The employment qualifications still apply.

Previously denied applicants

If you were denied PSLF in the past, you could receive additional months toward the 120 needed for forgiveness under the waiver.

The Department of Education said it is reevaluating previously denied PSLF claims and will contact borrowers whose accredited time is adjusted.

“If you haven’t heard anything, you should absolutely submit again,” Mayotte says.

How to apply

Applying for the PSLF waiver has only a few steps:

  1. Log into to make sure you have direct loans.
  2. Consolidate if you don’t have direct loans.
  3. Complete your employer certification form(s) with the required signatures dated by Oct. 31.
  4. Submit the form(s) to the Education Department.

You must complete a separate employer certification form for each eligible job. Using the PSLF help tool, available at, instead of the paper form can streamline the process and help prevent errors.

“Anybody that has any period of working full time for either a government employer, any 501(c)(3), you’ve got nothing to lose and everything to potentially gain,” Mayotte says.

Cecilia Clark writes for NerdWallet.

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Will Your State Tax Your Canceled Student Debt?

Several states are poised to collect income taxes on student loan forgiveness — a move that could leave some borrowers owing as much as $1,000 during tax season.

Individuals in Indiana, Mississippi and North Carolina will almost certainly pay state income taxes on their forgiven federal student loans, according to representatives of those states’ revenue departments and analysis from the Tax Foundation, a tax policy think tank based in Washington, D.C.

Meanwhile, a handful of other states are tentatively planning to tax forgiven student loan debt unless their legislatures take measures to prevent it.

President Joe Biden’s executive order on Aug. 24 could erase all remaining federal student loan debt for as many as 20 million borrowers, according to the White House, and reduce the debts of millions more. In general, borrowers are eligible for up to $20,000 in debt cancellation if they earn less than $125,000 and file taxes as an individual or are married, file jointly and earn less than $250,000.

While the federal government explicitly stated in the March 2021 American Rescue Plan Act that it won’t collect taxes on student debt forgiven through Dec. 31, 2025, not all states are held to the same pledge. Here’s what we know about the rest.


Forgiven student debts are expected to be taxed as income in Arkansas. However, that’ll change if the state’s legislature takes action, said Scott Hardin, an Arkansas Department of Finance and Administration spokesperson, in an email. Hardin noted that the state’s legislature took action to exempt PPP loans from taxation and froze taxation on unemployment payments for two years.

Arkansas has a graduated income tax rate that ranges from 2% to 4.9% depending on annual income, according to the state’s Economic Development Commission. Individuals making less than $5,000 are exempt from state income tax.


Forgiven student debts will be taxed as income in California, said Andrew LePage, a spokesperson for California’s Franchise Tax Board, in an email. That’s because student loan forgiveness isn’t occurring under Section 1098-E of the federal Education Code, LePage said, and therefore, it doesn’t meet an exclusion requirement in the state’s tax code. Section 1098-E, titled “Income-Based Repayment,” is in Chapter 28 of the federal Education Code, which pertains to higher education and student financial aid, according to the U.S. Government Publishing Office.

If the federal government states that the program is occurring under Section 1098-E, borrowers wouldn’t have to pay taxes on that debt in California, LePage said.


Indiana residents will be taxed on forgiven student loan debts, said Natalie Rodriguez, assistant director of communications at Indiana’s Department of Revenue, in an email.

The state’s income tax rate is 3.23%, so individuals could pay up to $323 in taxes for $10,000 in student loan forgiveness or $646 for up to $20,000 in student loan forgiveness, Rodriguez said. Indiana residents will also have to pay additional county taxes on the forgiven debts, Rodriguez said.


In Minnesota, forgiven student debts are expected to be taxed as income, said Ryan Brown, a spokesperson for Minnesota’s Department of Revenue, in an email. However, that’ll only change if the state’s legislature takes a specific action, Brown said.

Minnesota has a graduated income tax rate, depending on your annual income. The tax rate ranges from 5.35% for individuals earning no more than $28,080 to as much as 9.85% for individuals earning more than $171,220, according to the state’s Department of Revenue.


Mississippi is expected to tax forgiven student loan debt as income, according to the Tax Foundation. Mississippi’s Department of Revenue could not be reached for comment by NerdWallet.

Mississippi charges a 5% income tax on all annual income over $10,000, according to the Tax Foundation.

North Carolina

Forgiven student loan debts are expected to be taxed as income in North Carolina, said Thomas Beam, public affairs manager at North Carolina’s Department of Revenue, in an email. But the rate at which individuals will be taxed remains unclear.

The state’s individual income tax is currently 4.99%, but that figure changes to 4.75% in 2023 and gradually decreases until 2026, when the rate will stand at 3.99%, per the state’s Department of Revenue.


As it stands, forgiven student loan debts will be taxed as income in Wisconsin. Changing that would require specific action from the state legislature, said Patty Mayers, communications director at Wisconsin’s Department of Revenue, in an email. That action hasn’t been taken yet, Mayers said, but it could still take place in January when the state legislature is back in session.

“We have addressed this discrepancy with federal law in our department’s biennial budget request, in an effort to ensure Wisconsin taxpayers don’t face penalties and increased taxes for having their loans forgiven,” Mayers said.

Wisconsin’s income tax rate ranges from 3.54% to 7.65%, depending on annual income and whether you’re married or single, according to the state’s Department of Revenue.

How to prepare if you’re affected

Whether those taxes are owed during the 2022 tax season (in early 2023) or the 2023 tax season will depend on a few factors, including when an individual completes the U.S. Department of Education’s debt cancellation application. The form is expected to become available in October and close in December 2023, per the Department of Education website.

If you live in a state that might tax your forgiven student loans, consider using an online tax calculator to get an idea of how much you’ll need to save. In many cases, your state’s Department of Revenue website or its franchise tax board website will have such a calculator.

You can also consider using a budget app to automatically siphon off what you’ll need to set aside from each paycheck.

Cara Smith writes for NerdWallet.

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How to Handle Your Medical Bills

When she was 19, writer Emily Maloney found herself facing about $50,000 in medical debt after hospital treatment for a mental health crisis. The debt followed her throughout her twenties, hurting her credit and leading to stressful calls from collection agencies.

Her experience is all too common: The Consumer Financial Protection Bureau reports that about 1 in 5 U.S. households carries medical debt. People with medical debt are more likely to face anxiety, stress or depression and avoid filling prescriptions because of the cost.

The risk of “medical debt looms over every consumer and impacts their lives,” says John McNamara, assistant director of consumer credit, payments and deposits markets at the CFPB. He adds that recent changes to the way medical debt is reported by credit bureaus should help consumers: Paid medical debts will no longer show up on credit reports and no new medical debt will show up until 12 months have passed (up from six months). In addition, in the first half of next year, the credit bureaus will stop reporting unpaid medical debts under $500.

Eventually, Maloney’s debt was resolved through a combination of a helpful customer service representative and exceeding her state’s statute of limitations. She wrote a book, “Cost of Living,” based on her experiences. She wants to assure others facing medical debt that they can take steps to reduce it.

“It takes time, but you can appeal the insurance company’s decision or ask [the provider] for a discount, so it’s worth a shot,” she says.

In other words, consumers might have more power than they think. Here are some ways to exercise that power over your medical debt.

Review your bill closely

It can be tempting to shove a large bill into the trash in frustration. But Dan Weissmann, creator of “An Arm and a Leg,” a podcast about the cost of health care, instead recommends checking closely for errors made by the care provider or insurance company.

“It’s an unfair amount of homework for us to do, because if you find an error, then you have to complain and invest your time, but some medical bills have errors,” he says.

Weissmann says it’s also worth checking your rights under the No Surprises Act, which went into effect in January 2022 and protects consumers from some types of unexpected medical bills.

Ask your provider for assistance

Many hospitals offer financial assistance to those who meet income thresholds. “If you get an amount you weren’t expecting, call the hospital and say, ‘Am I eligible for a discount? What is your policy on financial assistance?’” says Richard Gundling, vice president at the Healthcare Financial Management Association, an association of financial executives in the health care industry.

Hospitals often have “charity care” policies to grant a lower price or even forgive the debt altogether, but consumers may have to be aggressive in asking for them. Eligibility for the programs varies by state and hospital, but nonprofit hospitals are required to have financial assistance policies. Hospitals may also offer payment plans, so you have more time to pay.

Hospitals can also connect you with financing options such as personal loans and medical credit cards, which can be helpful but also pose risks. The CFPB’s McNamara warns that credit cards, for example, can accrue additional interest charges.

Be persistent and enlist support

Lorraine Coughlin, president of LMC Medical Claims Management in West Palm Beach, Florida, helps people work out medical bills with insurance companies for a living. She says the number one strategy is persistence.

“You have to make the phone call and ask questions. Don’t just make payments if you get a surprise bill,” she says. Sometimes it might take an hour or more, but making that call can save you thousands of dollars, she says.

Medical billing advocates like Coughlin can do that work for you, but they typically charge a fee and a percentage of any savings. McNamara warns there are predators who call themselves billing or consumer advocates but in reality, they could take your money without providing any real assistance. He recommends doing some research before sharing any personal information or paying upfront fees.

If you are struggling to get satisfactory answers from your insurance company and are employed, Gundling suggests asking your company’s employee benefits contact for help. “They can be your advocate,” he says.

Get ready for the next medical bill

The ideal time to work on handling medical debt is before you have it, Gundling says. With the rise of high-deductible health insurance plans, even people with insurance will increasingly face pricey bills, which makes an emergency fund even more important.

“If you know you have a plan with a large deductible, have the cash in the bank,” he says.

You could try setting money aside through automated deposits into a high-yield savings account or taking advantage of a health care flexible savings account if your employer offers one.

Similarly, Gundling suggests asking questions about what your insurance covers and which providers are in-network before seeking care whenever possible.

The bottom line is that attacking, not ignoring, medical debt can be your best hope of eventually putting it behind you as Maloney did.

Kimberly Palmer writes for NerdWallet.

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3 Common Credit Myths That Could Damage Your Score

Financial misinformation is rampant, and it could be hurting your credit score. A new NerdWallet survey finds that Americans hold many misconceptions about their credit, some of which could seriously damage their scores. Here are three common credit score myths and how to guard against them.

Myth 1. Leaving a balance on your credit card is good for your score

This is a sticky credit myth: Nearly half of Americans (46%) think leaving a balance on their credit card is better for their score than paying it in full, according to the survey. But carrying a balance doesn’t help your credit and can, in fact, be harmful if the balance is a large percentage of your available credit limit. That’s because it increases your credit utilization (the amount of your credit limit in use), which significantly influences your score.

Another drawback of leaving a balance on your credit card is the interest expense. Credit card debt — which you have if you leave a balance on your card, even if intentionally — is one of the most expensive types of debt due to double-digit interest rates. And while you might think leaving a small balance on your card wouldn’t be that costly, it can be because of how credit card interest is calculated.

If you don’t pay off your entire balance by the due date, interest is assessed, but not just on the remaining balance. Instead, it’s calculated on the average daily balance on your credit card. So if you leave a $10 balance on your credit card, but the average daily balance on your card over the month was $1,000, interest is charged on the $1,000 balance.

You can combat this by paying off your balance on or before the due date, which may lower your credit utilization and monthly costs.

Myth 2. Closing a credit card you don’t use is good for your credit

The survey found that close to half of Americans (46%) think closing a credit card they no longer use can help their credit score. Keeping a financial product you aren’t using seems counterintuitive, but closing a credit card can damage your score.

Closing a card may ding your credit score in two ways: increasing your credit utilization and decreasing the average age of your accounts. And while there are reasons to close a credit card account, generally, disuse isn’t enough of a reason to take the credit hit.

Even if you don’t cancel your credit card, the issuer will eventually close any account that’s not used over a certain period. To combat this, you can charge a small recurring expense — like a monthly subscription — to the card and set up autopay to wipe out the credit card balance each month.

Myth 3. A credit check won’t impact your score

More than a quarter of Americans (28%) don’t realize that a lender running a credit check can make their credit score go down, according to the survey. There are two types of credit checks, a hard inquiry and a soft inquiry. When you check your credit, it’s a soft inquiry and doesn’t affect your score. But when a lender checks your score to determine creditworthiness for a financial product, it’s a hard inquiry, and your score can go down.

There are some exceptions. For example, for certain financial products, such as a mortgage or auto loan, several inquiries made in a short period count as a single hard inquiry. The amount of time varies by credit scoring model, but it’s safest to submit all applications within a two-week period. This is known as “rate shopping” and allows you to shop around for the most favorable loan terms.

However, applying for multiple credit cards in a short period doesn’t fall under rate shopping and will result in a hard inquiry for each application. For this reason, limiting the number of card applications you submit is a good idea. Hard inquiries can stay on your credit report for two years, so before applying for a new credit card, make sure it’s available to consumers in your credit score range.

Erin El Issa writes for NerdWallet.

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