Tag: finances

Gratitude in a Difficult Year

by Phillip Warren

This year took so many twists and turns we haven’t been able to keep count– often leaving us in complete overwhelm with a whirlwind of thoughts and emotions. Grief, anxiety, and sheer disappointment are just a handful that comes to mind when we reflect on the endless amount of curveballs life has thrown over the past year. Tragedy and loss plagued the entire world, leaving us speechless day after day. Despite the darkness that loomed for what seems like an eternity there has been an outpour of positives that we can’t forget to remember. As 2020 quickly comes to a close, let’s take the time to decompress and reflect on the happier moments we were lucky enough to live through and witness. Even though Thanksgiving may look less traditional than previous years, we still can readily name some things that shift our hearts to a place of gratitude.

Family first

Let’s face it – the hustle and bustle of life impact our family and friends more than we’d like to admit. Competing schedules, conflicts, and not making enough time for those that matter are often reasons why we are unable to nurture the people we hold near and dear. Because of restrictions on travel and other entertainment, we were forced to become more creative with our time indoors; in turn, helping us to restore the meaning of family and work-life balance. Quite frankly, it allowed us to hit the pause button on everything that probably was unintentionally too high on the priority list in the past. Our families served as the safety net it’s supposed to be when the weight of the world (and social media) became overbearing with less than desirable news. We utilized technology to a new degree when scheduling virtual happy hours, catch up sessions with our loved ones, and birthday celebrations in other geographic areas. It made us truly appreciate the very thing we took for granted; all the people that make up our family tribe.  

Curating and developing passions

2020 generated a newfound level of introspection, leaving our minds to really consider what it is that we really cherish the most. Whether it be career-related or new passion projects, this year made room for some much-needed self-reflection, making us reassess where our fulfillment really comes from. Leveraging books, social media outlets, and various streams of consuming knowledge-based information sent us on a path of rediscovery. Remember that ‘other’ to-do list that’s filled with the things you really don’t want to do around the house? It even made that list appear fun-filled! Home improvement projects and DIY tasks were done with enjoyment while being budget-friendly. Adulthood can be full of things that aren’t as exciting, but mustering up the courage to take ideas from ideation to execution served as a second wind. New business ventures and side hustles were birthed with unmatched creativity, a place many of us haven’t been in quite some time. Existing businesses were able to thrive despite the unprecedented events occurring nationally. Funding was also provided to various business owners which granted many small businesses to increase their visibility while positively generating profit. 

The importance of sustainment

There are a countless number of families that were impacted by job loss and/or unexpected expenses. It doesn’t matter if things started off rocky financially – what matters most is you’re still standing. Getting caught up on bills, eliminating some debt and saving are all things to be very proud of. Temporary hardships don’t have to turn into permanent problems. Creating a plan of action and sticking to it no matter what arises will always be rewarding. Celebrating the small wins should never be overlooked. We’ve all handled this year in different ways – but what’s most important is discovering what works for you. Rule of thumb for those that are battling with the ‘not enough’ emotions: don’t believe the hype. While there is a multitude of people accomplishing great things, there are also many imposters. Social media is a highlight reel, a virtual platform where people can share whatever information they choose, at their discretion. People are more likely to share their highs versus their lows, so be sure to keep in mind you may only be getting a small piece of the overall story. Don’t look at someone else’s life and fail to recognize what you’ve done on your own. Financial progress, no matter how insignificant you may think it is – is still progress. We all make financial missteps and life has a way of making things very difficult that hit us where it really hurts. Keeping your head above water, remaining afloat, maintaining your health, and providing for your family should never be considered a small feat. Grant yourself some grace and reflect on the dedication it took for you to get (and stay) where you currently are.

Back to the basics

This year forced us to really hone in on what matters and prioritize accordingly. This applies to our lives, but most importantly our finances. Pulling back the curtain to really take a look and evaluate where money was going served as a constant reminder that we should be doing this more than the occasional once or twice a year. It’s never too late (or too early) to create new money habits! Financial stability is essential – and maybe the cushion we imagined should be enough proved itself to be untrue. Our willingness to make changes at a faster rate to ensure the financial security of our families felt less painful and so much more intentional. The uncertainty of everything occurring allowed us to complain less while redefining comfort levels with our contingency plans.

No matter what has transpired this year, what are you most thankful for? As things come to mind be sure to jot them down. Reference them when your days seem laborious or when your feelings try to force you to reflect on things that aren’t as positive. It’s clear we don’t know what the future holds, but we do know (and have been reintroduced) to the moments, things, and people that continually keep us hopeful and thankful – no matter what lies ahead.

The post Gratitude in a Difficult Year appeared first on MintLife Blog.


Source: mint.intuit.com

Should You Refinance Your Student Loans?

by Phillip Warren

Due to financial consequences of COVID-19 — and the broader impact on our economy — now is an excellent time to consider refinancing most loans you have. This can include mortgage debt you have that may be converted to a new loan with a lower interest rate, as well as auto loans, personal loans, and more.

Refinancing student loans can also make sense if you’re willing to transition student loans you currently have into a new loan with a private lender. Make sure to take time to compare rates to see how you could save money on interest, potentially pay down student loans faster, or even both if you took the steps to refinance.

Get Started and Compare Rates Now

Still, it’s important to keep a close eye on policies and changes from the federal government that have already taken place, as well as changes that might come to fruition in the next weeks or months. Currently, all federal student loans are locked in at a 0% APR and payments are suspended during that time. This change started on March 13, 2020 and lasts for 60 days, so borrowers with federal loans can skip payments and avoid interest charges until the middle of May 2020.

It’s hard to say what will happen after that, but it’s smart to start figuring out your next steps and determining if student loan refinancing makes sense for your situation. Note that, in addition to lower interest rates than you can get with federal student loans, many private student lenders offer signup bonuses as well. With the help of a lower rate and an initial bonus, you could end up far “ahead” by refinancing in a financial sense.

Still, there are definitely some negatives to consider when it comes to refinancing your student loans, and we’ll go over those disadvantages below.

Should You Refinance Now?

Do you have student loan debt at a higher APR than you want to pay?

  • If no: You shouldn’t refinance.
  • If yes: Go to next question.

Do you have good credit or a cosigner? 

  • If no: You shouldn’t refinance.
  • If yes:  Go to next question.

Do you have federal student loans?

  • If no: You can consider refinancing
  • If yes: Go to next question

Are you willing to give up federal protections like deferment, forbearance, and income-driven repayment plans?

  • If no: You shouldn’t refinance
  • If yes: Consider refinancing your loans.

Reasons to Refinance

There are many reasons student borrowers ultimately refinance their student loans, although they can vary from person to person. Here are the main situations where it can make sense to refinance along with the benefits you can expect to receive:

  • Secure a lower monthly payment on your student loans.
    You may want to consider refinancing your student loans if your ultimate goal is reducing your monthly payment so it fits in better with your budget and your goals. A lower interest rate could help you lower your payment each month, but so could extending your repayment timeline.
  • Save money on interest over the long haul.
    If you plan to refinance your loans into a similar repayment timeline with a lower APR, you will definitely save money on interest over the life of your loan.
  • Change up your repayment timeline.
    Most private lenders let you refinance your student loans into a new loan product that lasts 5 to 20 years. If you want to expedite your loan repayment or extend your repayment timeline, private lenders offer that option.
  • Pay down debt faster.
    Also, keep in mind that reducing your interest rate or repayment timeline can help you get out of student loan debt considerably faster. If you’re someone who wants to get out of debt as soon as you can, this is one of the best reasons to refinance with a private lender.

Why You Might Not Want to Refinance Right Now

While the reasons to refinance above are good ones, there are plenty of reasons you may want to pause on your refinancing plans. Here are the most common:

  • You want to wait and see if the federal government will offer 0% APR or forbearance beyond May 2020 due to COVID-19.
    The federal government has only extended forbearance through the middle of May right now, but they might lengthen the timeline of this benefit if you wait it out. Since this perk only applies to federal student loans, you would likely want to keep those loans at 0% APR for as long as the federal government allows.
  • You may want to take advantage of income-driven repayment plans.
    Income-driven repayment plans like Pay As You Earn (PAYE) and Income-Based Repayment let you pay a percentage of your discretionary income each month then have your loans forgiven after 20 to 25 years. These plans only apply to federal student loans, so you shouldn’t refinance with a private lender if you are hoping to sign up.
  • You’re worried you won’t be able to keep up with your student loan payments due to your job or economic conditions.
    Federal student loans come with deferment and forbearance that can buy you time if you’re struggling to make the payments on your student loans. With that in mind, you may not want to give up these protections if you’re unsure about your future and how your finances might be.
  • Your credit score is low and you don’t have a cosigner.
    Finally, you should probably stick with federal student loans if your credit score is poor and you don’t have a cosigner. Federal student loans come with fairly low rates and most don’t require a credit check, so they’re a great deal if your credit is imperfect.

Important Things to Note

Before you move forward with student loan refinancing, there are some details you should know and understand. Here are our top tips and some important factors to keep in mind.

Compare Rates and Loan Terms

Because student loan refinancing is such a competitive industry, shopping around for loans based on their rates and terms can help you find out which lenders are offering the most lucrative refinancing options for someone with your credit profile and income.

We suggest using Credible to shop for student loan refinancing since this loan platform lets you compare offers from multiple lenders in one place. You can even get prequalified for student loan refinancing and “check your rate” without a hard inquiry on your credit score.

Check for Signup Bonuses

Some student loan refinancing companies let you score a bonus of $100 to $750 just for clicking through a specific link to start the process. This money is free money if you’re able to take advantage, and you can still qualify for low rates and fair loan terms that can help you get ahead.

We definitely suggest checking with lenders that offer bonuses provided you can also score the most competitive rates and terms.

Consider Your Personal Eligibility

Also keep your personal eligibility in mind, including factors beyond your credit score. Most applicants who are turned down for student loan refinancing are turned away based on their debt-to-income ratio and not their credit score. Generally speaking, this means they owe too much money on all their debts when you compare their liabilities to their income.

Credible also notes that adding a creditworthy cosigner can improve your chances of prequalifying for a loan. They also state that “many lenders offer cosigner release once borrowers have made a minimum number of on-time payments and can demonstrate they are ready to assume full responsibility for repayment of the loan on their own.”

It’s Not “All or Nothing”

Also, remember that you don’t have to refinance all of your student loans. You can just refinance the loans at the highest interest rates, or any particular loans you believe could benefit from a different repayment term.

4 Steps to Refinance Your Student Loans

Once you’re ready to pull the trigger, there are four simple steps involved in refinancing your student loans.

Step 1: Gather all your loan information.

Before you start the refinancing process, it helps to have all your loan information, including your student loan pay stubs, in one place. This can help you determine the total amount you want to refinance as well as the interest rates and payments you currently have on your loans.

Step 2: Compare lenders and the rates they offer.

From there, take the time to compare lenders in terms of the rates they can offer. You can use this tool to get the process started.

Ads by Money. We may be compensated if you click this ad.Ad
Where will you be attending college?
Select your state to get started
HawaiiAlaskaFloridaSouth CarolinaGeorgiaAlabamaNorth CarolinaTennesseeRIRhode IslandCTConnecticutMAMassachusettsMaineNHNew HampshireVTVermontNew YorkNJNew JerseyDEDelawareMDMarylandWest VirginiaOhioMichiganArizonaNevadaUtahColoradoNew MexicoSouth DakotaIowaIndianaIllinoisMinnesotaWisconsinMissouriLouisianaVirginiaDCWashington DCIdahoCaliforniaNorth DakotaWashingtonOregonMontanaWyomingNebraskaKansasOklahomaPennsylvaniaKentuckyMississippiArkansasTexas
View Results

Step 3: Choose the best loan offer you can qualify for.

Once you’ve filled out basic information, you can choose among multiple loan offers. Make sure to check for signup bonus offers as well as interest rates, loan repayment terms, and interest rates you can qualify for.

Step 4: Complete your loan application.

Once you decide on a lender that offers the best rates and terms, you can move forward with your full student loan refinancing application. Your student loan company will ask for more personal information and details on your existing student loans, which they will combine into your new loan with a new repayment term and monthly payment.

The Bottom Line

Whether it makes sense to refinance your student loans is a huge question that only you can answer after careful thought and consideration. Make sure you weigh all the pros and cons, including what you may be giving up if you’re refinancing federal loans with a private lender.

Refinancing your student loans can make sense if you have a plan to pay them off, but this strategy works best if you create a debt repayment plan you can stick with for the long-term.

The post Should You Refinance Your Student Loans? appeared first on Good Financial Cents®.


Source: goodfinancialcents.com

How to Get Out Of Debt Fast When You Don’t Have Much Money

by Phillip Warren

The post How to Get Out Of Debt Fast When You Don’t Have Much Money appeared first on Penny Pinchin' Mom.

How do you get out of debt when you are broke? After all, if you had the money,  you would not be in debt in the first place.  Right?

I hear this from people, just like you.  It is often not how much money you make, but the debt payoff plan you are using that is not working.  It is possible to get out of debt with no money; you just need to learn how.

get out of debt

There are plenty of inspiring stories of people sharing how they got out of debt, despite not making much money. In fact, you may feel you relate.  But yet, you don’t think you can do it. For whatever reason, you think you can’t get out of debt as they did.  It is impossible.

Or is it?

My husband and I were living on one income when we decided it was time to get out of debt.  It took us nearly 2 1/2 years but were able to pay off more than $37,000 in debt.  There are countless other stories of our readers who have paid off similar amounts in even less time.

I am here to tell you that you CAN (and should) get out of debt – no matter how little money you may make!!

 

HOW CAN YOU GET OUT OF DEBT WITH NO MONEY?

I am going to share the steps anyone can follow to learn how to get out of debt – no matter your income level.  If you struggle to make ends meet, you already know how to make the most of a dollar, and I’ll give you additional tips so that you can pay down that debt.

I have asked this on Facebook all of the time, and some of the comments include:

“There is no way I can do this. Not with my medical bills.”

“Sure, that only works or some people – not me.”

Many of you may be thinking similar things, and I completely understand that way of thinking. I was there myself and know that it seems like an unattainable goal.  That is why you are reading this right now – to find out how to make this dream a reality.

Debt is NOT a Good Thing.

If you are in debt, it could be because of your own decisions or even those you can’t control (such as health, job loss, etc.).  No matter how it happened, you need to get rid of it. Period.

The reason you need to eliminate your debt is that it genuinely is holding you back. How can you move forward financially with this obstacle standing in your way?  If you found that you needed to buy a new car, you would find a way, correct?  For most, that would probably mean an additional monthly payment – but you would do it because you needed to.  You need to look at debt the same way:

“Getting out of debt is not a desire – it is a need.”

MY STORY

I remember in 2009 when my husband and I thought there was no way we could get ever get out from under our debt.  It was an impossible dream. At that time, I was not working at that time, and so we had one income and two young children to feed.  I initially thought that there was no way at all that we could do this.  It was just not possible.

We started by looking at our finances (oh – they were awful).  Our goal was to live a great life.  We could have kept on and kept just getting by, but that was not how we wanted to live. Just “getting by” was no longer an option.

Knowing our kids would be watching us, we knew the importance of being a good role model for them.  We wanted them to learn how to handle money by following our example.

We both agreed that not having debt was pivotal in having a positive financial future. We wanted this not only for ourselves but also for our children as well. It was also essential for our marriage.  We needed to remove anything that could potentially cause stress – money, and finances being a big one.  Our relationship was good, but we knew we could even make it better.

To begin our journey, we read Dave Ramsey’s Total Money Makeover. We followed much of his advice but figured out some things that worked for us as well. Being debt free is a fantastic feeling that no one can describe.  You have to live it.

 

THE FIRST STEP TO GET OUT OF DEBT

The very first step to getting out of debt is to decide you want to do it.  That was the change both my husband, and I made.  Once we were ready and committed to getting out of debt, we began our journey.

You might be saying that you can’t do that though.  I’m here to say that you can – when you really, truly want to make it happen.

Getting out of debt doesn’t require you to be rich. Anyone can do it.  Even if you have a low income or don’t have much money. Like I said above, knowing that you want to make the changes and pay off your debt is only one small part.  The more significant issue is how in the world you actually can do this.

 

1. Face YOUR Reality

According to CNN Money, the average American family made around $59,000 in 2017. While that is the average, it is also true that many Americans make much less than this.

With a lower income, it is even more critical that you have no debt at all. After all, you are already stretching every dollar to cover your bills. You don’t need additional payments causing more financial stress.

Unless you win the lottery, a wealthy relative leaves you a small fortune, or you find a better job, you know your income won’t change.  That is the truth. You can’t change that.

However, what you can and must do is take the steps you can to work yourself out from under the mountain of debt you may be facing. You need to first create a budget, determine how much debt you have and then the steps to pay it off, no matter how much money you make.

 

2. Fully Commit

If you are not 100% ready to make changes, then you are destined for failure. It may be blunt, but it is true. If you can’t “go all in” and fully commit to making whatever difficult changes necessary (trust me, it will be challenging), then you need to stop reading right now.

If you are ready to make this lifestyle change, then read on. You’ve already made huge strides to make changes in your life.

 

3. Create (and use) a Budget and Debt Snowball Form

Knowing where your money goes is paramount to getting out of debt, no matter how much you make. Without your budget, you can’t even consider getting out of debt.

If you have never created a budget, it can be overwhelming.  But, it will also be eye-opening.  In addition to your budget, you should create a debt snowball, start using the envelope system and take better control of your money.  By doing this, you will get a better picture of your debts and how you can tackle them.

Look at paying off debt like a football team.  Each part of your finances is involved in the game:

Home Team – This is you and your family
Visiting Team – These are your debts and expenses
Your End Zone – This is where you will be debt free
PlayBook – Budget and debt snowball forms
Football – Your money
Refs and Penalties – Unexpected instances which set you back in reaching your goals

You would never expect a team to run onto the field and play the game without having the proper plays in mind. The same is true for you;  If every one of the members of your family has a different idea as to how to get your money down the field to pay off your debts, you will never make it there.

Instead, you design smart plays and work together to get there.  You work to get your money past all of the expenses you need to dodge.  There may be setbacks, and you may have to move back before you can get forward.  However, with hard work, you will get there.  You will get onto the scoreboard – and end up claiming victory!

 

4. Find extra money

Before you jump in to try to pay off your debts, you need to have savings.  The reason is that if an emergency comes up, you need to pay for it – in cash.  You do not want to run to your credit card to cover the expense.  It is best to have at least $1,000 in the bank before you get started.

So, before you jump in to pay off those debts, you listed above, make sure you’ve got money in the bank to cover your unforeseen expenses by creating an emergency fund.

Once you have that done, then you are going to have to find a way to squeeze everything you can out of every cent.  For some, it may mean no longer dining out.  For others, it could be shutting off cable television.  Where there is a will, there will always be a way to make this happen.  You just have to do what you can!

I share this true story in our budget post, but I’m putting it here again for you!  My husband and I gave up dining out. No joke. We ate dinner out very infrequently.

While I look back and think it might have been once every couple of weeks, I asked my husband recently, and he said that we were lucky to eat out once a month! It was painful, but now that we’ve cut down out all of our debts, we have income freed up so we can have dinner out more frequently (if we so desire).

For even more inspiration and ideas, you may have to find some radical ways you can get cash to help you get out of debt.  Do whatever it takes (legally and within reason, of course), to help you get out of debt.

Read More:  60 Creative Ways to Save or Make Money

 

5. Find ways to get more money (i.e. side hustle and selling items)

To be honest, if you are struggling to make ends meet on a low income, you won’t be able to just cut enough out of your budget to pay off your debt.  Like my mom use to say – “You can’t get blood out of a turnip” – which means if it isn’t there-there is nothing you can do about it.

That is the truth, and I’m not trying to lie to you. I am realistic and know that if you are making barely enough to cover your expenses, you won’t have any extra money for your debt.  I get that.

You can’t save enough money on your budget to eliminate your debt.  Well, I guess you could, but that is going to take a very, very, VERY long time.  So, what do you do when you’ve saved all you can and still can’t pay off your debts?  Well, you just have to get creative.

For some this may mean finding items you no longer need, which you can sell to raise money.  When we did this step, we had the same issue.  We could not cut anything more from our budget.

For us, this meant selling items we no longer needed. We did a large cleanout and got rid of furniture and other things we were holding onto, just in case we needed them. By doing this, we were able to come up with several thousand dollars — 100% of which went immediately towards our debt.

If that isn’t an option, you might want to consider getting a second job or side business to bring in income to indeed help you get out of debt.  We also did this. I started my website.  Now, let me be Frank in saying that this is not a great way to make money.  Most blogs make little to nothing in the first couple of years.  I was lucky, and we did pretty well, and I was able to bring a bit more each year – all of which helped us to pay off our debts.

It may not be a blog, but perhaps babysitting, or cleaning houses, raking leaves, shoveling snow — there are all sorts of ways that you can make money.

Read More:  Unique Ways to Make Money From Home

It is not the income that is holding most people back, it is the understanding and knowing even where to start.  You might have to scale back on various spending aspects of your life, but when you get to scream from the rooftops — WE’RE DEBT FREE!!!! — it will be worth it all.  I promise you!!!

 

get out of debt

The post How to Get Out Of Debt Fast When You Don’t Have Much Money appeared first on Penny Pinchin' Mom.


Source: pennypinchinmom.com

Truth About Reward and Store Credit Cards

by Phillip Warren

On the surface, reward cards are a great way to make a few extra dollars or grab some air miles without increasing your spending or your debt. If you spend a lot of money at a particular shop, store cards will seem like an equally beneficial prospect. But these cards exist for a reason—they’re there to make more money for the providers and the retailers, not you.

Sure, reward/store cards have other benefits if you use them properly, but there are a host of disadvantages and hidden terms that you need to be aware of before signing on the dotted line. 

What are Store Cards?

Store cards are tied to specific stores and offered by chains of retailers. These cards work just like traditional cards and are often branded by networks like Visa and MasterCard. The difference is that they can only be used in the issuing stores and their rewards are tied to those stores.

In essence, they are store loyalty cards that come with a lien of credit attached. 

What are Reward Cards?

Reward cards are also tied to credit card networks, including American Express and Discover, as well as Visa and MasterCard. They award points every time they’re used for qualifying purchases and these points can then be swapped for air travel and other benefits. 

Some reward schemes award a specific amount of cash back, often fixed to 1% or 2% of purchases made on specific items, such as groceries or utility bills.

How Can Providers Offer These Rewards?

If a provider offers you cash back every time you spend money on your credit card, someone has to foot the bill. Many consumers assume that the credit card network covers the cost, and to an extent, they do. But it’s not quite as simple as that.

Every time you use your credit card to make a purchase, the retailer is charged a fee, often between 1% and 3% of the purchase. This is the network’s charge. With reward cards, this fee increases, and the extra money is used to fund the rewards program.

As a result, retailers are not exactly happy with these programs as they drive their costs up and reduce their profits. The only way around this, is to increase the cost of the product or, more likely, to reward customers who pay with cash/debit. Retailers are not allowed to add a surcharge for credit card use, but there’s nothing stopping them from choosing which cards they do and don’t accept.

Your local Mom & Pop enterprise isn’t being antiquated and old-fashioned by refusing credit cards. They just can’t cover the costs. 5% may not sound like a big deal, but for retailers with minimal buying power and the massive overheads of running a brick-and-mortar store, 5% can be a deal breaker.

Smaller retailers are fighting back against reward cards while bigger ones are embracing them by adopting their own store cards. With a store card, they have more say, more control, and they know that those small losses will be offset by the increased purchases.

Issues with Store Credit Cards

Store cards carry a big risk and have far few benefits than reward cards. The advantages of these cards are obvious: If you shop a lot in a particular place, you can save money via the cash back schemes. 

They can also help with emergency purchases, providing you clear the balance in full. But, while the benefits are obvious, the same can’t be said about the disadvantages.

Con 1: They Have High Interest Rates

The average credit card interest rate in the United States is around 16%. The average rate for store cards is over 20%. That 4% may not seem like much, but if you don’t repay your balance every month that interest will compound, grow, and cost you a small fortune. 

At 16% with a $10,000 balance and a 60-month repayment term, you’ll pay $243 a month and over $4,000 in total interest.

Increase that rate to 20% and your monthly payment grows by $20 while your total interest increases by nearly $1,500. The longer you leave it and the smaller your monthly payments are, the greater that difference will be.

For example, if you repay just $200 a month on that balance, the difference between 16% and 20% is 26 extra months and close to $5,000. Of course, store cards rarely offer such high limits, but this is just as example to show you how much of a difference even the slightest percentage increase can cause.

It’s worth keeping this in mind if you ever apply for a traditional rewards card. Getting rewards in return for a higher APR is great if you repay your balance in full every month and terrible if you don’t.

Con 2: They Have High Penalty Rates

If you miss a payment on your store credit card you could be hit with a penalty APR as high as 29.99%, as well as a late payment fee of $39. The rates are high to begin with, but these penalty rates are astronomical and will make a bad situation worse.

That’s not all, as some providers are known to be very unforgiven when it comes to missed and late payments. In some cases, your account will default even if you underpay just once and just by a few dollars. 

Con 3: They Have Low Credit Limits

Retailers are not lenders. They don’t have the time, funds or patience to chase debts and deal with collection agencies. As a result, they don’t offer high credit limits and generally you’ll get a fraction of what an unsecured credit card might provide you with.

This might not seem like much of an issue. After all, a smaller credit limit means you’re less likely to accumulate large amounts of debts. However, this has a massively negative impact on your credit score that few borrowers consider.

30% of your credit score is based on something known as a credit utilization ratio. This looks at the total available credit and compares it to the debt that you have accumulated. If you have several cards with a combined credit limit of $10,000 and a balance of $5,000, then your ratio is 50%, which is considered to be quite high.

If a store card is your only account and you spend $450 on a $500 limit, then you have a credit utilization ratio of 90%, which will reduce your score. Your credit report is also negatively affected by maxed-out credit cards, a feat that’s much easier to achieve when you have a low credit limit.

Con 4: There Are Better Options

It’s better to have one good reward card than multiple store cards. The former will provide you with far better interest rates and terms, while the latter will hit your credit report with several hard inquiries and new accounts. 

A rewards card will still benefit you when shopping at those stores and will also provide you with a wealth of other benefits.

Con 5: You May Spend More

Store cards are not designed to make your life easier and give you a few freebies. Regardless of what the store tells you, they’re not made to reward loyalty, they’re made to encourage spending. 

This doesn’t always work, and research suggests that many individuals use reward cards just like they would normal cards. But for a small minority, the idea of acquiring points is enough to convince them to spend more than they usually would.

Some good can be good debt, such as when it’s used to acquire an asset or something that won’t depreciate. But very rarely do we use credit cards for this purpose and generally, if you’re spending more on a store card it means you’re wasting more money on things you don’t need.

Con 6: You Can’t Use Them Anywhere Else

A store card can only be used in that particular store. This renders it redundant as an emergency card and also means you’re encouraged to shop in that one place. You don’t have a chance to shop around and find the cheapest price; you may spend more just to use your card and get the benefits, with those benefits rarely covering the additional money you spend.

What About Reward Cards?

Some reward cards have very high rates as these rates are used to offset the rewards program. However, this isn’t always the case, because, as discussed above, networks often charge retailers more to offset these purchases and therefore don’t always need to cover the costs themselves.

Some credit cards, such as the Discover It, offer solid reward schemes and would also be included on any list of the best non-reward credit cards. It’s a solid all-rounder and it’s not alone. However, many reward cards charge high annual fees and penalty rates, just like you’ll find with a store card.

It’s important to study the small print and make sure the card is viable. If you’re going to clear the balance every month, a slightly higher interest rate won’t hurt, especially if it comes with some generous rewards. But if there is any doubt and even the slightest chance that you won’t clear the balance, it’s always best to focus on a low-interest rate first.

Even the most generous 5% cash back reward card will not offset the losses occurred by paying a few more percentage points of interest.

Will Reward/Store Cards Affect my Credit Score?

Credit cards trigger hard inquiries, which can reduce your credit score by up to 5 points. This is true for every credit card that you apply for. Rate shopping can combine multiple inquiries into one if they are for the same type of credit, but this doesn’t apply to credit cards.

A new account will also impact your score. This impact is often minimal and if you keep up with your repayments then it will vanish in time. However, if you miss a payment, max-out your card or increase your credit utilization score, it could have a detrimental effect on your score and your finances.

Keep store cards to a minimum and only sign up if you’re 100% sure you’re getting a good deal that will benefit you in the short-term and the long-term.

Truth About Reward and Store Credit Cards is a post from Pocket Your Dollars.


Source: pocketyourdollars.com

Using Credit Cards During COVID-19

by Phillip Warren

Since we’re in the middle of a pandemic, we’re all trying to figure out the new normal. Whether you’re working from home, have a houseful of kids to keep busy or find yourself facing financial uncertainty, everyone has at least a little adjusting to do. While you’re taking stock of your life and what you need to adjust, it’s probably a good idea to take a look at your finances and credit card use, too.

Wondering how you should use your credit card? We’ve got some ideas for you on how you can use your credit card in the middle of a global emergency. 

How to Use Your Credit Card During a Pandemic

But before we get started, remember to take a hard look at your personal finances before following any financial information. Everyone’s situation is different—so what might work for you might not work for someone else, and vice versa.

1. Keep Online Shopping to a Minimum

If you’re working from home, the temptation to online shop can be all too real. But when you’re in the middle of a pandemic, you might need to put your money towards unexpected expenses. 

David Lord, General Manager of Credit.com, has some advice on preventing frivolous spending. “Try browsing, putting things in your cart and leaving them for the day,” Lord suggests. “If you take a look at your cart the next day, you’ll most likely find that 90% of the time you won’t remember the things you placed in your cart in the first place.”

If the temptation to online shop is too strong, Lord suggests buying something that’ll keep you occupied for a while, like a puzzle, a paint set or a yoga mat. That way, you’ll be too distracted to buy something else.

2. Try to Keep Your Credit in Good Shape

During a global emergency, it feels like everything’s up in the air. Because of that, it’s important to stay as on top of things as you can and prepare for the worst-case scenario. Having good credit is important in the best of times, but it can be even more so in the worst. 

Let’s say you find yourself with a bill that you can’t pay on your hands. If you need to take out a loan, you’d probably want a loan with the best interest rates possible. In order to qualify for those types of loans, you’ll need a good credit score. 

If you’re in a position to do so, try to keep your credit score healthy. Here’s some quick things you can do today:

  • Keep an eye on your credit score and credit report
  • Pay your bills on time—at least the minimum payment
  • Keep your credit utilization ratio at 30%

But if you find yourself in a financial situation where you can’t keep up with everything, you can prioritize. For example, going above 30% of your credit utilization ratio won’t impact your score as much as missing a payment. That’s because credit utilization makes up 30% of your credit score, while your payment history makes up 35% of your score. 

3. Utilize Cashback Rewards

Do you have a great rewards credit card on your hands? Now’s a great time to use them. While some credit cards might not be handy right now, like travel rewards cards, there are others that could be useful. If your card offers cashback on categories such as groceries, gas and everyday purchases, take advantage. You could use those rewards to help you cover essential purchases. 

4. Use Your Balance Transfer Credit Cards

If you already have significant debt or if you’ve recently taken on new debt, you might want to consider using a balance transfer credit card. A balance transfer credit card allows you to move your debt from one card to your balance transfer card, which typically has a lower promotional interest rate. These promotional interest rates can last from six to 18 months, and sometimes longer.

These are great options if you’re faced with new debt. If you’re struggling to pay the rent, groceries or medical bills, and your stimulus check can’t cover it all, you can use your balance transfer credit card. Just make sure to be careful. You still have to pay off your debt, so make sure to do so before the promotional balance transfer offer ends. If you can, try to make regular payments on your card, so you’re not faced with an overwhelming amount of debt when the promotional offer ends.

Be Mindful of Your Situation

Above all else, be mindful of your situation. What urgent bills do you have to pay? Do you have a loved one in the hospital? Have you or your significant other lost their job? Make goals based off of your situation, and use your credit card accordingly.

Go to Guide
Privacy Policy

If you’re looking for more information on coronavirus and your finances, check out our COVID-19 Financial Resource Guide. We update it frequently, to make the most up-to-date and useful information available to you. 

The post Using Credit Cards During COVID-19 appeared first on Credit.com.


Source: credit.com

How Late Can You Be on a Car Payment, Mortgage or Other Bill?

by Phillip Warren

A man sits on a chair, looking concerned.

It’s always frustrating to come across a bill and realize it was due yesterday—or last week. If you’re late on a payment or if you miss it completely, you could end up paying late fees and taking a hit on your credit score. It can be especially difficult if you want to apply for a loan or credit and are about to make a big purchase like a house or a vehicle.

If you’re a reliable customer and have only missed this one payment, it likely shouldn’t be a big problem, and you can probably avoid a late fee. But if you wait too long, it might not be possible.

Either way, we’re going to help answer some of your biggest questions:

  • How late can you be on a car payment before it affects your credit?
  • Is there a late car payment grace period?
  • What about for rent?
  • What happens if you miss a payment completely?
  • Who should you notify?
  • How will it impact your credit score?

Read on to learn how late a credit card or car payment can be before it affects your credit score and what to do if it does.

How Late Can a Credit Card Payment Be?

People often wonder how late a payment has to be before their creditors report it to the credit bureaus. A credit card payment is considered late if it’s received after the cutoff time in your credit card agreement or if the payment submitted is less than the minimum amount due.

Missed credit card payments are generally added to your credit report when the payment is more than 30 days late. This same entry is updated if your payment is 60 days late, and then 90 days. It is important to know what your specific credit card issuer’s policies are, so you can know what to expect.

Keep in mind that one late payment among years of on-time payments is far less serious than a late payment and limited credit history.

When Is a Credit Card Payment Considered Late?

As far as credit card companies are concerned, the payment is considered late if it’s submitted after the cutoff period, which varies depending on the lender. Sometimes it’s 5 p.m. on a business day while for others it’s 8 p.m. or 11:59 p.m. Also be aware of when a late fee will be charged. Generally speaking, a late fee is issued if payment is received after the credit card issuer’s cutoff time.

30 Days Past Due

Late credit card payments usually aren’t reported to the credit bureau until after 30 days. In other words, if you make a payment after the due date but within this initial 30-day period, it won’t show up on your credit report, but you may have to pay a late fee.

60 Days Past Due

If your payment is more than 60 days late, the 30-day entry on your credit report is updated and your card’s interest rate could increase. If it increases and by how much depends on your card’s terms.

How Late Can You Be on a Car Payment?

Typically, the grace period on auto loans is 10 days, but this depends on the lender. The grace period your lender allows should be listed under the terms and conditions of your loan. This is where you’ll also find the details of the loan, including your loan balance, your interest rate, the term of the loan and the fees associated with a late or missed payment.

If you can afford to pay but simply forgot, you’ll want to pay it as soon as possible. But if you feel you can’t afford the car payment, you should get in touch with your lender and see if they would be willing to renegotiate the terms of the loan.

Deferring Car Payments

You can also look into deferring your car payment if you don’t have the funds now but you expect to later. A deferment essentially means you’re changing your due date by postponing the date of your next payment. Deferments usually don’t negatively affect your credit score.

What If I’m Late on Paying My Rent or Mortgage?

If you’re a few days late paying your rent, usually you shouldn’t have to worry about this affecting your credit score. If you know your landlord, chances are they’ll say something if you continue to submit late payments. If you’re paying a property management company, they likely won’t be as lenient on late payments. Our best advice is to pay your rent within the week it’s due.

Mortgage lenders typically report late payments to credit bureaus and usually have different grace periods. Paying within seven days should help you avoid decreasing credit scores.

One of the best ways to stay on top of your mortgage or rent payment is to set up a monthly reminder for a few days before the first of the month or, if possible, set up an automatic payment. Because your rent or mortgage payment is the same each month, it should be easy to calculate it into your personal finances.

Can a Late Credit Card Payment Made Under 30 Days Still Affect My Score?

If you make a credit card payment within the 30-day period, it generally should not be reported negatively or have any effect on your credit score. Beyond that time, however, there is a possibility your credit score could be affected. Make sure you know the terms of your credit card however, terms can vary and you don’t want any surprises.

If it turns out your late payment has been reported, know that its impact on your score generally diminishes with time, especially if it’s an isolated event. Other on-time payments can help counter the negative effects of late payments. And, as with almost any other mistake, the sooner you realize you’ve made it and try to fix it, the less likely it is to turn into a big problem.

Late Fees vs. Overdue Payments

Late fees are essentially fees charged by lenders to borrowers if a payment is received after its due date. So, if your payment is sent late—or is not the minimum payment or above—you could be charged a late fee.

Most credit card payments are due within a minimum of 21 days after the billing cycle ends, but remember, the grace period is usually only 30 days, so you’ll want to pay them off as soon as possible. Credit card late fees vary depending on your lender and requirements under the CFPB, but the late fee amount can’t be more than the minimum payment. For example, if your minimum payment is $35, your late fee won’t be higher than that.

An overdue payment, however, is a payment that was not paid by the due date. If you miss a due date, you will see the minimum balance plus the overdue payment on your next billing cycle. The overdue payment may be the full amount or a partial amount, such as if you paid part of your minimum but not all of it.

Removing Late Payments From Your Credit History

If there’s an error on your credit history, such as if a car payment is marked late but it actually wasn’t and you have proof, you can challenge it with the lender. The process involves explaining exactly what happened and asking that the error be fixed. Technically, the lender or servicer has 30 business days to respond to the error. If you don’t hear from them within about 45 days, follow up with them.

If a late payment ding on your credit report is accurate, you can still contact the lender and dispute it, especially if you’ve been diligent about paying your bills on time. The lender can provide what’s called a goodwill adjustment, which is when the lender essentially forgives your late fee.

As part of this process, you may be asked to explain the circumstances surrounding the reasons for your payment being submitted late. For example, maybe you went on vacation and forgot or you had to pay a large unexpected cost, such as medical fees, and you couldn’t afford the payment that month.

The lender may offer you a chance to enroll in automatic payments to lessen the chances of a late payment happening again.

How Long Does It Take for a Missed Payment to Come Off My Credit Report?

Unfortunately, if there’s a missed payment or a negative item on your credit history and you’re not able to have it removed, it can stay on there for seven years.

Keep in mind that if the incident occurred five years ago and you’re applying for a loan, it will have less effect than if it occurred last week. The more time that passes after the missed payment occurs, the better. Why? Because credit scores are based on recent financial behavior, so if you only miss one payment and not multiples, eventually your credit score takes your frequent on-time payments into account.

How to Prevent Late Payments in the Future

It’s hard to keep track of everything—grocery lists, kids’ schedules, work to-do lists and, of course, bill due dates—but there are ways to manage your personal finances better to ensure you never miss a payment.

  • Go paperless. Going paperless may increase the likelihood you notice when a bill comes through each month instead of being lost in piles of other mail.
  • Set up reminders. Banks sometimes offer text and email reminders that tell you when a bill, such as a car payment or credit card payment, is coming up. You can also set these up yourself to recur each month on your personal digital calendar.
  • Enroll in automatic payments. Automatic payments ensure your car payment or other loan payment is made on time. Just make sure the funds are available in your account on the day it’s due to be withdrawn to avoid potential overdraw fees.

Keep an eye on your credit report and past late payments when you sign up for Credit.com’s Credit Report Card. It gives you a letter grade in each of the five key factors of your credit.

The post How Late Can You Be on a Car Payment, Mortgage or Other Bill? appeared first on Credit.com.


Source: credit.com

How to Break Through and Overcome Financial Hardships

by Phillip Warren

Your life and personal finances don’t always go the way you hope. We all have struggles and no one achieves success without their share of hurdles and challenges. However, there are tools that can help you break through financial hardships and live the life you want.

I interviewed AJ Gibson, author of Flipping the Script: Bouncing Back from Life’s Rock Bottom Moments, an Amazon #1 new release. We talk about the personal, professional, and financial challenges that he’s overcome.

AJ is a Los-Angeles based TV host, public speaker, and coach who loves great people, food, fashion, entertainment, and travel. He’s been the host of the nationally syndicated daytime talk show, Hollywood Today Live, a co-host on Access Hollywood Live, and a frequent anchor on Good Day LA. You’ll see him on CBS’s The Talk and even on several episodes of The Wendy Williams Show.

His journey from being a closeted gay boy in Ohio to a host chatting with the some of the world’s most admired celebrities on Hollywood’s biggest red carpets is incredibly inspiring. He has a gift for busting through life’s roadblocks and persevering despite failure.

On the Money Girl podcast, AJ and I chatted about key lessons from his book. You’ll learn how to shift your perspective to find the beauty in life’s most challenging moments. We cover:

  • Overcoming the financial hurdles of becoming self-employed
  • Tips for reaching financial goals when you have big dreams
  • Why fear and shame may be causing you to ignore your financial situation
  • Leaning on professionals to help stay on top of your financial life
  • Tools for turning hopelessness into a positive, fresh outlook on your future
  • Using a focus wheel for daily motivation to achieve your dreams and goals

Listen to the interview using the audio player above, or check it out on Apple PodcastsSoundCloudStitcher, and Spotify

ABOUT THE AUTHOR

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a trusted and frequent source for the national media. Her book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show. Stay in the personal finance loop! Listen and subscribe to the Money Girl podcast on Apple, Spotify, or wherever you get your podcasts.

Join the Money Conversation
Facebook | Twitter


Source: quickanddirtytips.com