Check out the 5 financial tips for the second week of May 2013

Tip no 1: If you plan on keeping your car garaged for a long time, drop your collision coverage to reduce your monthly premium.

Drop your collision coverage if your car stays in garage for most part of the year. If you hardly drive your car on the road, then there are a fewer chances of accidents. Your car is less likely to collide with another vehicle if it remains in your garage for most of the time in the year. In that case, you can give up the collision coverage and save on your premiums. You can also think about dropping collision coverage when your car is 5 years older.

Tip no 2: If you are having your new car financed, make sure you purchase GAP insurance.

Purchase a GAP insurance policy when you're having your new car financed. You can never say that your car won't be stolen or written off anytime in future. In case your car gets stolen or written off, then the Guaranteed Asset Protection (GAP) insurance policy will reimburse you the difference between the actual worth of the car and the amount you spent for your vehicle initially. The reimbursement amount will depend upon a few factors which are (a) how much you spent on your vehicle (b) how much you owe on your vehicle (c) how much you've to spend to purchase the vehicle at the present moment.

Tip no 3: Review your home insurance policy every year to include additions and changes to your household.

It is important to review your health insurance policy at least once a year. If you're underinsured, then you add coverage to your policy. For instance: if you've renovated your home recently, then you may want to increase your coverage. On the other hand, if you're over insured, then you can drop coverage to save on your premiums. If your existing insurer charges an exorbitant amount on your premiums for including additions, then you can switch to a new insurer. Just compare the quote and switch to the insurer who charges low premium rate.

Tip no 4: The newly introduced Consumer Credit Fairness Act cuts down the New York SOL for debts to 3 years. Find out the date of your first delinquency.

As per the Consumer Credit Fairness Act passed by the New York State Assembly, the statute of limitations (SOL) period for debts has been reduced from 6 years to 3 years. So, do check your credit card statements and find out the first date of your delinquency. If 3 years have passed from the date you've made the first default on the debt, then the creditor/collection agency won't be able to file a lawsuit against you. You’re not legally obligated for the debt anymore. Hence, your wages or bank account can’t be garnished. In case, a lawsuit is filed against you at the court, then you can just prove that the debt is beyond the SOL period.

Tip no 5: Using money orders to pay collection agencies is cheaper than buying a prepaid debit card.

You can get money orders from post offices, grocery stores and convenience stores. You can get money orders from convenience stores at a cheap rate. All you need to do is spend $0.99 to purchase money orders. You can buy a postal money order from a post office between $1.05 and $1.55.

Prepaid debit cards are costlier than that of the money orders. You'll have to pay several fees on the prepaid debit cards. You may have to pay as much as $30 just to purchase and activate a new prepaid debit card. So, it is definitely better to pay collection agencies through money orders instead of prepaid debit cards.