Tag: Purchase

Mortgage Escrow Fraud: What Homebuyers Need to Know

by Phillip Warren

When you’re buying a home, there are tons of steps you have to complete. One of the more important ones is making your down payment and closing on your home, which occurs when you’re in the final stretch of the homebuying process. This step in the homebuying process is one of the most — if […]

The post Mortgage Escrow Fraud: What Homebuyers Need to Know appeared first on The Simple Dollar.


Source: thesimpledollar.com

Does Paying the Minimum Hurt Your Credit Score

by Phillip Warren

Credit card bills can be confusing. If everything was straightforward and clear, credit card debt wouldn’t be such a big issue. But it’s not clear, and debt is a massive issue for millions of consumers. 

One of the most confusing aspects is the minimum payment, with few consumers understanding how this works, how much damage (if any) it does to their credit score, and why it’s important to pay more than the minimum.

We’ll address all of those things and more in this guide, looking at how minimum credit card payments can impact your FICO score and your credit report.

What is a Credit Card Minimum Payment?

The minimum payment is the lowest amount you need to pay during any given month. It’s often fixed as a fraction of your total balance and includes fees and interest.  

If you fail to make this minimum payment, you may be hit with late fees and if you still haven’t paid after 30 days, your creditor will report your activity to the major credit bureaus and your credit score will take a hit.

When this happens, you could lose up to 100 points and gain a derogatory mark that remains on your credit report for up to 7 years. Making minimum payments will not result in a derogatory mark, but it can indirectly affect your credit score and we’ll discuss that a little later.

Firstly, it’s important to understand why you’re being asked to pay a minimum amount and how you can avoid it.

How Much is a Minimum Credit Card Payment?

Prior to 2004, monthly payments could be as low as 2% of the balance. This caused all kinds of problems as most of your monthly payment is interest and will, therefore, inflate every month so that every time you reduce the balance it grows back. 

Regulators forced a change when they realized that some users were being locked into a cycle of credit card debt, one that could see them repaying thousands more than the balance and taking many years to repay in full.

These days, a minimum payment must be at least 1% of the balance plus all interest and fees that have accumulated during that month, ensuring the balance decreases by at least 1% if only the minimum payment is met.

Do I Need to Make the Minimum Payment?

If you have a rolling balance, you need to make the minimum monthly payment to avoid derogatory marks. If you fail to do so and keep missing those payments, your account will eventually default and cause all kinds of issues.

However, you can avoid the minimum payment by clearing your balance in full.

Let’s assume that you have a brand-new credit card and you spend $2,000 in the first billing cycle. In the next cycle, you will be required to pay this balance in full. However, you will also be offered a minimum payment, which will likely be anywhere from $30 to $100. If this is all that you pay, the issuer will start charging you interest on your balance and your problems will begin.

If you spend $2,000 in the next billing cycle, you have just doubled your debt (minus whatever principal the minimum payment cleared) and your problems.

This is a cycle that many consumers get locked into. They do what they can to pay off their balance in full, but then they have a difficult month and that minimum payment begins to look very tempting. They convince themselves that one month won’t hurt and they’ll repay the balance in full next month, but by that point they’ve spent more, it has grown more, and they just don’t have the funds.

To avoid falling into this trap, try the following tips:

  • Only Spend What You Have: A credit card should be used to spend money you have now or will have in the future. Don’t spend in the hope you’ll somehow come into some money before the billing period ends and the credit card balance rolls over.
  • Get an Introductory Interest Rate: Many credit card issuers offer a 0% intro APR for a fixed period of time, allowing you to accumulate debt without interest. This can help if you need to make some essential purchases, but it’s important not to abuse this as you’ll still need to clear the full balance before the intro period ends.
  • Use a Balance Transfer: If you’re in too deep and the intro rate is coming to an end, consider a balance transfer credit card. These cards allow you to move your full balance from one card (or cards) to another, taking advantage of yet another 0% APR and essentially extending the one you have.
  • Pay the Minimum: If you can’t pay the balance in full, make sure you at least pay the minimum. A missed payment or late payment can incur fees and may hurt your credit score. 

Why Pay More Than the Minimum?

You may have heard experts recommending that you pay more than the minimum every month, but why? If you’re locked into a cycle of credit card debt, it can seem counterproductive. After all, if you have a debt of $10,000 that’s costing you $400 a month, what’s the point of taking an extra $100 out of your budget?

Your interest and fees are covered by your minimum payment and account for a sizeable percentage of that minimum payment. By adding just 50% more, you could be doubling and even tripling the amount of the principal that you repay every month.

What’s more, your interest accumulates every single day and this interest compounds. Imagine, for instance, that you have a balance of $10,000 today and with interest, this grows to $10,040. The next day, the interest will be calculated based on that $10,040 figure, which means it could grow to $10,081, which will then become the new balance for the next day. 

This continues every single day, and the larger your balance is, the more interest will compound and the greater the amount will be due over the term. By paying more than your minimum payment when you can, you’re reducing the balance and slowing things down.

Does Paying the Minimum Hurt My Credit Score?

Paying the minimum amount every month ensures you are doing the bare minimum to avoid hurting your credit history or accumulating fees. However, it can indirectly reduce your score via your credit utilization ratio.

Your credit utilization ratio is a score that compares the credit limit of all available credit cards to the total debt on those cards. It accounts for 30% of your credit score and is, therefore, a very important aspect of the credit scoring process.

The more credit card debt you accumulate, the lower your credit utilization rate will be and the more your score will be impacted. If you only pay the minimum, this rate will become stagnant and may take years to improve. By increasing the payment amount, however, you can bring that ratio down and improve your credit score.

You can calculate your credit utilization score by adding together the total amount of credit limits and debts and then comparing the latter to the former. A combined credit limit of $10,000 and a balance of $5,000, for instance, would equate to a 50% ratio, which is on the high side.

Can Credit Card Fees Hurt My Credit Score?

As with interest charges, credit card fees will not directly reduce your score but may have an indirect effect. Cash advance fees, for instance, can be substantial, with many credit card companies (including Capital One) charging 3% with a $10 minimum charge. This means that every time you withdraw cash, you’re paying at least $10, even if you’re only withdrawing $10.

What many consumers don’t realize is that these fees are also charged every time you buy casino chips or pay for some other form of gambling, and every time you purchase money orders and other cash products. 

Along with foreign transaction fees and penalty fees, these can increase your balance and your minimum payment, making it harder to make on time payments and thus increasing the risk of a late payment.

Does Paying the Minimum Hurt Your Credit Score is a post from Pocket Your Dollars.


Source: pocketyourdollars.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

Best credit cards for Airbnb

by Phillip Warren

Many of us are avoiding travel during the pandemic.

But if you have to shelter in place under quarantine once you get to your destination, wouldn’t you rather do it in an environment that at least seems more within your control?

If the choice is between a hotel where you must trust your experience to a faceless corporation or a local host you can talk to through homestay sites like Airbnb and Vrbo, the latter may be the better option for these times (provided you don’t violate their party guidelines).

Whatever option you choose, credit card issuers now reward homestays with points and cash back in the same way they’ve long doled out rewards for hotels and other travel expenses.

These are the best cards on the market for homestays like Airbnb.

See related: Strategies for planning 2021 travel

Wells Fargo Propel American Express® card: Best no-annual-fee, high rewards option
  • Chase Sapphire Reserve: Best introductory bonus
  • Bank of America® Premium Rewards® credit card: Best for bonus rewards
  • Capital One Venture Rewards Credit Card: Best flat-rate miles card
  • Amazon Prime Rewards Visa Signature card: Best for online shopping
  • Discover it® Miles: Best no-fee option
  • Wells Fargo Propel American Express® card: Best no-annual-fee, high rewards option

    The Wells Fargo Propel American Express card includes arguably one of the highest rates of return on points for some of the most popular redemption categories out there, including homestays like Airbnb and Vrbo.

    The greatest advantages of this card – besides earning 3 points per dollar spent on some popular spending categories – are that there’s no point limit or expiration, no annual fee and no rotating categories that you constantly have to remind yourself to activate. You get three times the points in the relevant categories all the time without restriction, with travel – including all homestays – and transit being one of those prominent categories.

    The card also charges no foreign currency conversion fee, so buying things abroad is less expensive. If that weren’t enough, here’s what you also get:

    • 3 points per dollar spent on travel and transit purchases
    • 3 points per dollar spent on eating out and ordering in
    • 3 points per dollar spent on gas and rideshares
    • 3 points per dollar spent on select streaming services such as Hulu, Netflix, Sirius XM and Spotify Premium
    • 1 point per dollar spent everywhere else
    • No annual fee
    • No points limit or expiration
    • Premium access to presale tickets, offers and protections from American Express
    • 20,000 points when you spend $1,000 in the first three months
    ProudMoney.

    Chase Sapphire Reserve: Best introductory bonus

    Before the Wells Fargo Propel card debuted, Chase Sapphire Reserve was the go-to credit card option for Airbnb fans. It offers a 50,000-point introductory bonus when you spend $4,000 in your first three months of membership. Those points are worth up to $750 when you book travel through Chase Ultimate Rewards.

    Though equipped with fewer spending categories offering 3X points and carrying a large annual fee of $550, the benefits of the Chase Sapphire Reserve card are more specifically geared toward frequent travelers.

    At the same time, that large annual fee is offset by a $300 annual credit that will reimburse any travel expense – including Airbnb. And from June 1, 2020, to June 30, 2021, gas station and grocery store purchases count toward the travel credit.

    Add to that a $100 credit covering the application to Global Entry/TSA Precheck every four years and the annual fee is almost completely offset in the first year.

    Meanwhile, there are even more travel benefits:

    • 50,000 bonus points after you spend $4,000 in the first three months (worth up to $750 in travel)
    • 3 points per dollar spent on travel (excluding purchases covered by the $300 travel credit)
    • 3 points per dollar spent on dining (including delivery and takeout) and travel; $1,000 in grocery purchases, including eligible pick-up and delivery services, from Nov. 1, 2020 to April 30, 2021
    • Complimentary airport lounge access through Priority Pass Select Membership
    • Trip cancellation/interruption insurance
    • Primary car rental insurance
    • Lost luggage reimbursement

    Bank of America® Premium Rewards® credit card: Best for bonus rewards

    While the points per dollar offered by Bank of America Premium Rewards credit card on travel and Airbnb are fewer than the credit cards above, the sign-up bonus and up to $200 in annual statement credits make it a decent option, even with less flexibility on what qualifies as a credit than the credit cards above.

    This card should absolutely move to the top of your list if you are already a Bank of America Preferred Rewards client. That designation automatically increases your return even higher than what the other credit cards above offer on travel and dining – you can get a rewards bonus of up to 75%.

    Combine that with a generous sign-up bonus and the Bank of America Premium Rewards is one of the most potent rewards cards for Preferred Rewards clients.

    The card includes:

    • Introductory bonus: 50,000 points when you spend $3,000 in the first 90 days (worth up to $500 in free travel)
    • 2 points per dollar spent on dining and travel purchases, including Airbnb and Vrbo
    • 1.5 points per dollar spent on everything else
    • Get up to $200 in travel statement credit rewards, including $100 for incidental spending per year and $100 toward a TSA Precheck/Global Entry application every four years
    • No foreign transaction fees
    • Bank of America Preferred Rewards clients earn up to 3.5 points per dollar on travel and dining purchases and up to 2.62 points per dollar on all other purchases
    • $95 annual fee
    Travel loyalty programs offer extended perks in pandemic

    Capital One Venture Rewards Credit Card: Best flat-rate miles option

    The Capital One Venture Rewards Credit Card is remarkably similar to Bank of America’s Premium Rewards card, right down to the $95 annual fee, but without the additional benefits afforded to Bank of America Preferred Rewards clients.

    However, Capital One Venture Rewards offers 2 points per dollar spent on every purchase, not just travel and dining.

    • Earn 60,000 travel miles after you spend $3,000 in purchases in the first three months – equaling $600 in travel credit
    • Earn 2 miles per dollar spent on every purchase, every day
    • Points can be redeemed for statement credit on travel purchases, including Airbnb
    • $95 annual fee
    • No foreign transaction fees

    Amazon Prime Rewards Visa Signature card: Best for online shopping

    You may be wondering why the Amazon Prime Rewards Visa Signature card is on a list highlighting the best credit cards for AirBnb, Vrbo and other homestays.

    Shouldn’t this card be limited to the “best credit cards for online shopping” list? Not when Amazon offers Airbnb gift cards and the Amazon Prime Rewards card gives you 5% cash back on Amazon.com purchases as long as you have a Prime membership, which essentially acts as the annual fee ($119).

    Just purchase an AirBnb gift card from Amazon with the card, and it’s as if you are getting 5% cash back for your AirBnb stay when you apply the gift card towards it. It’s the highest rate on this list, Amazon or not.

    You’ll receive the following additional benefits:

    • 5% cash back on Whole Foods and Amazon purchases (with Prime membership)
    • 2% cash back on purchases at drugstores, gas stations and restaurants
    • 1% cash back on all other purchases
    • A $100 Amazon gift card upon credit card application approval
    • No foreign transaction fees
    • $500,000 travel accident insurance
    • $3,000 per passenger lost luggage reimbursement
    • Baggage delay insurance of up to $100 a day for three days
    • Extended warranty coverage for an additional year

    See related: How to pay off Amazon purchases over time

    Discover it® Miles: Best no-fee option

    Though the points per dollar on this card are lower than any other credit card on the list, Discover it Miles gives you much more freedom in how you can manage your points and account.

    You can redeem miles in any amount, your miles don’t expire even if you close your account and 1% of your miles can be converted directly into cash for your bank account.

    Discover it Miles offers:

    • 1.5 miles for every dollar spent on every purchase (matched at the end of the first year)
    • Points can be redeemed for statement credit on travel expenses, including Airbnb, gas stations and restaurants.
    • Miles can be converted into cash at rate of 1 cent per mile and transferred directly into your bank account
    • Redeem miles in any amount
    • Miles never expire and you don’t lose them even when you close your account
    • No late payment fee or penalty APR on your first late payment, up to $40 thereafter
    • No foreign transaction fees
    • No annual fee
    • 0% APR on purchases for 14 months (11.99% to 22.99% variable APR after that)
    creditcards.com

    How Does Cash Back Work?

    by Phillip Warren

    How Does Cash Back Work?

    Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the issuer.

    Credit card companies typically offer a plethora of rewards options for their cardholders to take advantage of. But cash back has long been a favorite of many, as it gives you the chance to earn cold, hard money for making everyday purchases. If you’re confused about how cash back works, read on for a full explanation.

    How Cash Back Works

    At its core, cash back refers to a predetermined percentage of a purchase you make being returned to you as cash rewards. Cash back rates typically range between 1% and 5%, though there are some outliers to be mindful of. Credit card issuers will usually clearly label what types of purchases earn what level of cash back. But like anything in the credit card industry, you must read the fine print.

    This is mainly because all purchases and cash back rewards are governed by merchant category codes, or MCCs. Credit card companies ultimately determine these designations, with Mastercard, Visa, American Express and Discover calling the shots. Some common codes are “restaurant,” “department store,” “airline” and “entertainment,” among others. So if you earn 5% bonus cash back at restaurants and you go to Burger King — which has a restaurant MCC — you’ll get that 5% back.

    But what these limiting MCCs sometimes don’t take into account are businesses that could fit into more than one category. Included in this group are hotels, superstores like Walmart, tourist attractions like museums and other multi-faceted establishments. In turn, you could lose out on cash back if you’re confused about which category a purchase you made falls into.

    As an example, let’s say your family orders room service while on vacation in The Bahamas. You pay with your credit card thinking you’ll get the advertised 3% cash back on dining. When your credit card statement comes in the mail, however, you’ve only received the base 1% earnings. This is because the MCC of your hotel is just that, a hotel, which leaves your credit card issuer blind to what you really bought.

    Unfortunately situations like these often offer very little recourse, as your card’s issuer has no ability to change these codes. In fact, only the major credit companies can change their own code selections.

    New cardholders will often receive cash back promotions and bonuses. These offers can either be recurring — monthly, quarterly, yearly, etc. — or simply for just one period of time, usually at the beginning of your account’s life. Hypothetically, a recurring bonus might look like this: “Earn 3% cash back at supermarkets and wholesale clubs, up to $1,500 in purchases each quarter.” On the other hand, a one-time promotion might allow for 5% cash back on airfare purchases made during the first three months you’re a cardholder.

    Depending on your card, cash back may be capped or it could expire after a period of time. While some cards feature both an earnings limit and expiration dates, others may have no restrictions. All cash back cards have their own, unique system surrounding them. So it’s important to refer to your documentation whenever you have a particular question.

    Using Your Cash Back Earnings

    How Does Cash Back Work?

    The vast majority of cash back credit cards offer variations of the same choices for redeeming rewards. Most often, you’ll see statement credits, checks, bank account deposits, gift cards and charitable donations available to you.

    • Statement credit – Instead of receiving your cash back in-hand, you can apply it to your upcoming monthly bill, saving you money in the process.
    • Check – As one of the more direct ways of redeeming cash back, checks allow you to basically do whatever you want with its value.
    • Bank deposits – Eligible accounts usually include checking accounts, savings accounts or investment accounts.
    • Gift cards – With this option, you can convert cash back into retail credit at a store or website at which you want to shop.
    • Donations – Many card issuers have open relations with charities. These partnerships open the door for you to aid your favorite causes with real money.

    It’s by far the easiest to redeem cash back through your card issuer’s website that it provides. Here you’ll not only see your rewards status, you will also know every possible redemption you could make. If you’d rather talk to a real person, most companies still have rewards phone lines you can call, as well.

    Those who’d rather not have to worry about where their rewards currently stand will find that a redemption threshold might be helpful. Not all cards offer this feature. But if yours does, set a threshold at which your cash back is automatically redeemed in any manner you desire. Additionally, some cards require you to attain a certain amount of cash back before redeeming is possible.

    Cash Back With Each Major Credit Card Company

    what is cash back

    There are tons of different cash back cards, depending on your credit score you may be eligible for some but not others. While it’s impossible to give universal specifics for each credit card company, below we’ve provided overviews of some of the most popular cash back cards.

    Citi Double Cash Card (Mastercard)

    Cash Back Rate: 1% at the time of purchase, 1% when you pay them off

    Limit or Expiration: No limit; Expires if no eligible purchases are made for 12 months

    Redemption Options: As a check, statement credit or gift card

    The “double cash” nature of the Citi Double Cash Card means you effectively earn cash back twice: first when you make the initial purchase and again when you pay your credit card bill. The 12-month expiration is fairly standard and the lack of limits on how much cash back you can earn is generous. Statement credits, checks and gift cards are three of the most common redemption choices, so it’s no surprise to see them offered here.

    Bank of America® Cash Rewards credit card (Mastercard)

    Cash Back Rate: 3% in the category of your choice, 2% on purchases at grocery stores and wholesale clubs, 1% on other purchases

    Limit or Expiration: Cash back on choice category, grocery stores and wholesale club purchases is limited on up to $2,500 in combined purchases each quarter; No expiration dates

    Redemption Options: Once you have $25 or more, you can redeem as a statement credit, a check or a deposit to an eligible Bank of America® or Merrill Lynch® account

    Take note of the combined $2,500 quarterly limit on 3% and 2% cash back in category of choice and at grocery stores and wholesale clubs, respectively. The Bank of America® Cash Rewards credit card also requires cardholders to have a minimum of $25 in earned cash back before they can redeem.

    Blue Cash Everyday American Express Card (American Express)

    Cash Back Rate: 3% on U.S. supermarket purchases, 2% on U.S. gas stations and select U.S. department store purchases, 1% on other purchases

    Limit or Expiration: 3% rate at U.S. supermarkets is limited to $6,000 a year in purchases then drops to 1%; No expiration dates

    Redemption Options: After earning at least $25, redeem as a statement credit in $25 increments; Gift cards and merchandise redemptions from time to time

    Amex offers some of the strongest rewards cards around, and the Blue Cash Everyday American Express Card is no exception. It does come with some limits; namely the 3% cash back rate on U.S. grocery store purchases is capped at $6,000 in purchases a year. At that time, cardholders earn 1% in cash back on groceries.

    Discover it® Card (Discover)

    Cash Back Rate: 5% in rotating categories like gas station, supermarket, restaurant, Amazon.com and wholesale club purchases, 1% on other purchases; Full cash back match at the end of your first year

    Limit or Expiration: $1,500 cap on purchases that earn the 5% rate each quarter; No expiration dates

    Redemption Options: Statement credits, deposits to a bank account, gift cards and eCertificates, pay with cash back at select merchants and charitable donations

    Discover cards offer great first-year cash back matches and distinctive cash back categories. These traits are on full display with the Discover it® Card. This includes 5% cash back on purchases ranging from dining to Amazon.com. However, there are limits for this rate and you have to opt in to categories each quarter to qualify. This card also offers five redemption options — the most on this list.

    Tips to Maximize Cash Back Potential and Minimize Credit Risk
    • Cash back is one of the most prolific perks that the modern credit card market has to offer. But it’s important that you don’t overspend outside of your means just for the sake of rewards. Because many cash back cards come with higher annual percentage rates (APRs), this could force you into large, unsustainable interest payments.
    • Whenever possible, swipe your card for purchases in bonus categories. Not all cards have these to offer, but most do. So make sure you know which cards in your wallet offer bonuses at places like gas stations and supermarkets.
    • Know what types of redemptions — statement credits, bank account deposits, gift cards etc. — work best for you. This will drastically narrow down your card options, making the decision process much simpler.

    Photo Credit: ©iStock.com/4×6, Â©iStock.com/Pgiam, Â©iStock.com/Ridofranz

    Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the issuer.

    Advertiser Disclosure: The card offers that appear on this site are from companies from which SmartAsset.com receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). SmartAsset.com does not include all card companies or all card offers available in the marketplace.

    The post How Does Cash Back Work? appeared first on SmartAsset Blog.


    Source: smartasset.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

    Best Credit Cards for Bad Credit

    by Phillip Warren

    When it comes to excuses consumers give for their poor credit scores, banks and lenders have heard it all. 

    Maybe you lost your job and couldn’t pay your student loan payment for a few months. Or perhaps you thought you’d gotten a deferment but were too busy job hunting to find out for sure. 

    Maybe you thought you paid your credit card bill but it’s actually sitting on your kitchen counter waiting for the mail.

    Whatever the reason for your low credit score, one thing is for certain — lenders don’t care.

    In fact, banks and other lenders lean on your credit score and other factors to determine whether they should approve you for a credit card or a loan — and that’s about it. Your personal situation is never considered, nor should it be.

    It would be wonderful if credit card companies understood that “life happens” and made special exceptions to help people out, but that’s not the world we live in.  As most of us already know, that’s not typically how credit works. Credit cards are backed by banks, and banks have rules for a reason.

    Now, here’s the good news: Credit cards can help rebuild your credit, earn cash back for each dollar you spend, make travel easier, and serve as an emergency fund if you’re stuck paying a huge bill at the last minute. This is true even if you have poor credit, although the selection of credit cards you can qualify for may be somewhat limited. 

    Keep reading to learn about the best credit cards for bad credit, how they work, and how you can get approved.

    Best Cards for Bad Credit This Year

    Before you give up on building credit, you should check out all the credit cards that are available to consumers who need some help. Our list of the best credit cards for bad credit includes some of the top offers with the lowest fees and fair terms.

    • Total Visa®
    • Discover it® Secured
    • Credit One Bank® Visa® Credit Card
    • Secured Mastercard® from Capital One®
    • Milestone® Gold Mastercard®
    • Credit One Bank® Unsecured Visa® with Cash Back Rewards

    #1: Total Visa®

    The Total Visa® is one of the easiest credit cards to get approved for in today’s market, and it’s easy to use all over the world since it’s a true Visa credit card. However, this card does come with high rates and fees since it’s available to consumers with poor credit or a limited credit history.

    Processing your application will cost $89, which is extremely high when you consider the fact that most credit cards don’t charge an application fee. You’ll also pay an initial annual fee of $75 and a $48 annual fee for each year thereafter.

    Once you sign up, you’ll be able to pick your preferred card design and your credit card payments will be reported to all three credit reporting agencies — Experian, Equifax, and TransUnion. This is the main benefit of this card since your on-time payments can easily help boost your credit score over time. 

    For the most part, the Total Visa® is best for consumers who don’t mind paying a few fees to access an unsecured line of credit. Since this card doesn’t dole out rewards, however, there are few cardholder perks to look forward to. 

    • APR: 35.99% APR
    • Fees: Application fee and annual fee
    • Minimum Credit Score: Not specified
    • Rewards: No

    #2: Discover it® Secured

    While secured cards don’t offer an unsecured line of credit like unsecured credit cards do, they are extremely easy to qualify for. The Discover it® Secured may not be ideal for everyone, but it does offer a simple online application process and the ability to get approved with little to no credit history.

    Keep in mind, however, that secured cards do work differently than traditional credit cards. With a secured credit card, you’re required to put down a cash deposit upfront as collateral. However, you will get your cash deposit back when you close your account in good standing.

    Amazingly, the Discover it® Secured lets you earn rewards with no annual fee. You’ll start by earning 2% back on up to $1,000 spent each quarter in dining and gas. You’ll also earn an unlimited 1% back on everything else you buy.

    The Discover it® Secured doesn’t charge an application fee or an annual fee, although you’ll need to come up with the cash for your initial deposit upfront. For the most part, this card is best for consumers who have little to no credit and want to build their credit history while earning rewards.

    • APR: 24.74%
    • Fees: No annual fee or monthly fees
    • Minimum Credit Score: Not specified
    • Rewards: Yes

    #3: Credit One Bank® Visa® Credit Card

    The Credit One Bank® Visa® Credit Card is another credit card for bad credit that lets you earn rewards on your everyday spending. You’ll earn a flat 1% cash back for every dollar you spend with this credit card, and since it’s unsecured, you don’t have to put down a cash deposit to get started.

    Other benefits include the fact you can get pre-qualified for this card online without a hard inquiry on your credit report — and that you get a free copy of your Experian credit score on your online account management page.

    You may be required to pay an annual fee up to $95 for this card for the first year, but it depends on your creditworthiness. After that, your annual fee could be between $0 and $99.

    • APR: 19.99% to 25.99%
    • Fees: Annual fee up to $95 the first year depending on creditworthiness; after that $0 to $99
    • Minimum Credit Score: Not specified
    • Rewards: Yes

    #4: Secured Mastercard® from Capital One®

    The Secured Mastercard® from Capital One® is another secured credit card that extends a line of credit to consumers who can put down a cash deposit as collateral. This card is geared to people with bad credit or no credit history, so it’s easy to get approved for. One downside, however, is that your initial line of credit will likely be just $200 — and that doesn’t give you much to work with. 

    On the upside, this card doesn’t charge an annual fee or any application fees. That makes it a good option if you don’t want to pay any fees you won’t get back.

    You’ll also get access to 24/7 customer service, $0 fraud liability, and other cardholder perks.

    • APR: 26.49%
    • Fees: No ongoing fees
    • Minimum Credit Score: Not specified
    • Rewards: No

    #5: Milestone® Gold Mastercard®

    The Milestone® Gold Mastercard® is an unsecured credit card that lets you get pre-qualified online without a hard inquiry on your credit report. You won’t earn any rewards on your purchases, but you do get benefits like the ability to select your card’s design, chip and pin technology, and easy online account access.

    You will have to pay a one-time fee of $25 to open your account, and there’s an annual fee of $50 the first year and $99 for each year after that.

    • APR: 24.90%
    • Fees: Account opening fee and annual fees
    • Minimum Credit Score: Not specified
    • Rewards: No

    #6: Credit One Bank® Unsecured Visa® with Cash Back Rewards

    The Credit One Bank® Unsecured Visa® with Cash Back Rewards lets you earn 1% back on every purchase you make with no limits or exclusions. There’s no annual fee or application fee either, which makes this card a winner for consumers who don’t want to get hit with a lot of out-of-pocket costs.

    As a cardholder, you’ll get free access to your Experian credit score, zero fraud liability, and access to a mobile app that makes tracking your purchases and rewards a breeze. You can also get pre-qualified online without a hard inquiry on your credit report.

    • APR: 25.99%
    • Fees: No annual fee or application fee
    • Minimum Credit Score: Not specified
    • Rewards: Yes

    The Downside of Credit Cards with Bad Credit

    While your odds of getting approved for one of the credit cards for bad credit listed above are high, you should be aware that there are plenty of pitfalls to be aware of. Here are the major downsides you’ll find with these credit cards for bad credit and others comparable cards:

    • Higher fees: While someone with excellent credit can shop around for credit cards without any fees, this isn’t the case of you have bad credit. If your credit score is poor or you have a thin credit profile, you should expect to pay higher fees and more of them.
    • Higher interest rates: While some credit cards come with 0% interest for a limited time or lower interest rates overall, consumers with poor credit typically have to pay the highest interest rates available today. Some credit cards for bad credit even come with APRs as high as 35%.
    • No perks: Looking for cardholder benefits like cash back on purchases or points toward airfare or movie tickets? You’ll need to wait until your credit score climbs back into “good” or “great” territory. Even if you can find a card for applicants with bad credit that offers cash back, your rewards may not make up for the higher fees.
    • No balance transfers: If you’re looking for relief from other out-of-control credit card balances, look elsewhere. Credit cards for bad credit typically don’t offer balance transfers. If they do, the terms make them cost-prohibitive.
    • Low credit limits: Credit cards for bad credit tend to offer initial credit limits in the $300 to $500 range with the possibility of increasing to $2,000 after a year of on-time monthly payments. If you need to borrow a lot more than that, you’ll have to consider other options.
    • Security deposit requirement: Secured credit cards require you to put down a cash deposit to secure your line of credit. While this shouldn’t necessarily be a deal-breaker — and it may be required if you can’t get approved for an unsecured credit card — you’ll need to come up with a few hundred dollars before you apply.
    • Checking account requirement: Most new credit card accounts now require cardholders to pay bills online, which means you’ll need a checking account. If you’re mostly “unbanked,” you may need to open a traditional bank account before you apply.

    Benefits of Improving Your Credit Score

    People with bad credit often consider their personal finances a lost cause. The road to better credit can seem long and stressful, and it’s sometimes easier to give up then it is to try to fix credit mistakes you’ve made in the past.

    But, there are some real advantages that come with having at least “good” credit, which typically means any FICO score of 670 or above. Here are some of the real-life benefits better credit can mean for your life and your lifestyle:

    • Higher credit limits: The higher your credit score goes, the more money banks are typically willing to lend. With good credit, you’ll have a better chance at qualifying for a car loan, taking out a personal loan, or getting a credit card with a reasonable limit.
    • Lower interest rates: A higher credit score tells lenders you’re not as risky as a borrower —a sign that typically translates into lower interest rates. When you pay a lower APR each time you borrow, you can save huge amounts of money on interest over time.
    • Lower payments: Borrowing money with a lower interest rate typically means you can usually get lower payments all your loans, including a home loan or a car loan.
    • Ability to shop around: When you’re an ideal candidate for a loan, you can shop around to get the best deals on credit cards, mortgages, personal loans, and more.
    • Ability to help others: If your kid wants to buy a car but doesn’t have any credit history, better credit puts you in the position to help him or her out. If your credit is poor, you won’t be in the position to help anyone.
    • More options in life: Your credit score can also impact your ability to open a bank account or rent a new apartment. Since employers can request to see a modified version of your credit report before they hire you, excellent credit can also give you a leg up when it comes to beating out other candidates for a job. 

    In addition to the benefits listed above, most insurance companies now consider your credit score when you apply for coverage. For that reason, life, auto, and home insurance rates tend to be lower for people with higher credit scores.

    This may seem unfair, but you have to remember that research has shown people with high credit scores tend to file fewer insurance claims.

    How to Improve Your Credit: Slow and Steady

    When you have a low credit score, there are two ways to handle it. If you don’t mind the consequences of poor credit enough to do anything about it, you can wait a decade until the bad marks age off your credit report. Depending on when your creditors give up and write off your debt, you may not even need to wait that long.

    If you don’t like the idea of letting your credit decay while you wait it out, you can also try to fix your past credit mistakes. This typically means paying off debt — and especially delinquent debts — but it can also mean applying for new loan products that are geared to people who need to repair their credit.

    If you decide to take actionable steps to build credit fast, the credit cards on this page can help. They’ll give you an opportunity to show the credit bureaus that you’ve changed your ways.

    Before you take steps to improve your credit score, however, keep in mind all the different factors used to determine your standing in the first place. The FICO scoring method considers the following factors when assigning your score:

    • On-time payments: Paying all your bills on time, including credit cards, makes up 35% of your FICO score. For that reason, paying all your bills early or on time is absolutely essential.
    • Outstanding debts: How much you owe matters, which is why paying off your credit cards each month or as often as possible helps your score. According to myFICO.com, the amounts you owe in relation to your credit limits make up another 30% of your FICO score.
    • New credit: Apply for too many new cards or accounts at once can impact your score in a negative way. In fact, this determinant makes up another 10% of your FICO score.
    • Credit mix: Having a variety of open accounts impresses the credit bureau algorithm Gods. If all you have are personal loans right now, mixing in a credit card can help. If you already have four or five credit cards, it may be wise to back off a little.
    • Length of credit history: The length of your credit history also plays a role in your score. The longer your credit history, the better off you are.

    If you want to improve your credit score, consider all the factors above and how you can change your behavior to score higher in each category. It’s pretty easy to see how paying all your bills early or on time and paying off debt could make a big positive impact on your credit score when you consider that these two factors alone make up 65% of your FICO score.

    If you want a way to track your progress, also look into an app like Credit Karma, one of my favorite tools. This app lets you monitor your credit progress over time and even receive notifications when your score has changed. Best of all, it’s free.

    Should You Use a Credit Card to Rebuild Your Credit Score?

    If you’re on the fence about picking up a credit card for bad credit, your first step should be thinking over your goals. What exactly are you trying to accomplish?

    If you’re looking for spending power, the cards on this list probably won’t help. Some are secured cards, meaning you need a cash deposit to put down as collateral. Others offer low credit limits and high fees and interest rates, making them costly to use over the long-term.

    If you really want to start over from scratch and repair credit mistakes made in the past, on the other hand, one of these cards may be exactly what you need. If you’re determined to improve your score, they can speed things along.

    You may pay higher fees and interest rates along the way, but it’s important to remember that none of the cards on this list need to be your top card forever. Ideally, you’ll use a credit card for poor credit to rebuild your credit and boost your score. Once you’ve reached your goal, you can upgrade to a new card with better benefits and terms.

    The post Best Credit Cards for Bad Credit appeared first on Good Financial Cents®.


    Source: goodfinancialcents.com

    My House Failed Its First Real Estate Inspection—Here’s What I Did To Get Through Escrow

    by Phillip Warren
    Mikolette/Getty Images

    When I was buying my first house, everything seemed too good to be true—at least at the start of the process. I found a home within a couple of weeks, the price was fabulously low, it was in a cute lake community with a style I loved, and funding came through quickly and easily. I even received a first-time home buyer’s bonus for tax time. Plus, I didn’t need much of a down payment.

    But it turned out too good to be true. My smooth path to homeownership suddenly became rocky when the inspection report came back with a big fat failure on it. I immediately panicked. What did it mean? Was I still able to buy the house? And if I did, was it going to fall apart?

    After a few calls with my real estate agent (who, at that point, had become more of a home-buying therapist), I learned that a bad inspection isn’t that rare. In fact, my new home wasn’t in as bad of shape as I initially feared. We were able to make some repairs and, after a second inspection, the house was appraised and the sale was able to go through.

    During the process, though, I learned a lot more than I ever expected about home inspections. Whether you’re a first-time or repeat home buyer, here’s my advice for getting the house you want after a shaky home inspection.

    Houses don’t really pass or fail

    Though my home inspection appeared to be a failure, homes aren’t actually graded on a pass/fail system.

    “There is no such thing as a failed inspection,” said Karen Kostiw, an agent with Warburg Realty in New York. “The inspection just points out small and potentially larger issues that you may not be aware of.”

    Sure, some houses can sail through the process and others may fare poorly, but it’s not a “You can never buy this” situation if there are problems with the property.

    For me, my mortgage hinged on a solid inspection—so the initial results meant I wouldn’t get the loan unless things were fixed. That being said, if I had enough cash on hand or wanted to try a different mortgage lender, I could have continued with the purchase even with a negative inspection report.

    So if the house you’re set on buying ends up having issues, don’t panic. You still have options.

    Most inspection issues are small

    It’s important to remember every home inspection report will come back with something, according to Kate Ziegler, a real estate agent with Arborview Realty in Boston. My inspection report had noted about 40 fixes. But a lot of times, the problems aren’t as bad as you think.

    Keep in mind that the inspector’s job is to call out any trouble spot. Also, all issues noted in the report aren’t equal: Some problems flagged by an inspector can wait.

    “The inspector will find defects—sometimes many defects—but that does not mean buyers are not purchasing a good home,” Kostiw says. “The small leak might mean a bolt needs to be tightened, or the dishwasher is not working because the waterline was switched off by accident. These are easy fixes. However, when buyers see a laundry list of items, it can seem as if the home is falling down. This is most often not the case.”

    Red flags do exist

    Ziegler and Kostiw agree that though most repairs are easy fixes, some items should give you pause if you see them on your report.

    Structural problems, antique electrical systems, old windows, unexplained water damage, evidence of termites or wood rot, a bad roof, asbestos, mold, radon, and lead paint are all red flags that can show up during a home inspection. If fixing these problems is impossible or way beyond the means your budget, you may want to reconsider your purchase.

    “Whether or not inspection items warrant backing out entirely depends quite a bit on any individual buyer’s experience and bandwidth, as well as personal risk tolerances and financial situation,” Ziegler says. “It’s true that houses don’t stay in good repair on their own. They require maintenance and care, just like your houseplants and your sourdough starter!”

    Don’t try to fix things yourself

    Unless a repair is something truly minor like caulking a bathroom tub or putting a cabinet door back on its hinges, don’t try to fix anything on your own. You could make things worse or even injure yourself. Hire licensed contractors that you’ve vetted to handle any problems. And try not to leave it all up to the seller—they’re not going to be living in the home. You will be.

    “Motivations in this case are not aligned,” Ziegler says. “The seller wants to spend as little as possible to meet their contractual obligations, but [a] buyer should be more concerned with the quality of the repair.”

    Work the costs into the sale

    At first I worried I would have to pay to fix everything that was wrong with my house. But it’s important to know you can work the cost of repairs—and how long it should take to make them—into the sale.

    Say you can’t afford to fix the busted water heater but the seller can. You can raise the offer price by that cost, or you can trade off: The seller fixes one thing, and you fix another. In my case, I only had to add a banister to one stairwell. The sellers were particularly motivated to unload the home so they handled everything else.

    Hopefully by the end of this process, every issue will be fixed and you’ll be ready to purchase your home. And you’ll be able to move in with a clear head, knowing everything is really as good as it seems.

    The post My House Failed Its First Real Estate Inspection—Here’s What I Did To Get Through Escrow appeared first on Real Estate News & Insights | realtor.com®.


    Source: realtor.com

    A Guide To Everything You Need To Know About Home Ownership Costs [Free Download]

    by Phillip Warren

    Along with the excitement of purchasing a new home, comes the additional costs that you will be expected to pay as a homeowner. Apart from covering the mortgage of your home, you’ll have additional expenses – such as home insurance – that you will be expected to cover. If you’re looking to budget for a home purchase, it’s important that you consider these costs as they can add up to thousands of dollars each year.

    To help you make educated decisions when budgeting, we’ve compiled a list of the major home ownership costs in one free, downloadable guide. Get the Home Ownership Costs to Consider guide here.

    Home Insurance

    Home insurance policies help protect against serious damage and destruction, like fires, leaks, floods, or break-ins. It also protects a homeowner from personal liability. Some banks may offer home insurance products, although you can typically purchase a home insurance policy through a home insurance agent or broker. 

    Tip: You may get better rates if you use a broker or agent. It’s also important to keep in mind that policies typically renew on an annual basis.

    Condo Fees

    The cost of maintenance fees should be taken into account when you’re buying a condo. This recurring cost is in addition to your mortgage and impacts how much home you can afford. 

    Your mandatory monthly fee will vary by your building and square footage. It typically covers:

    • Utilities (such as water and garbage collection)
    • Building insurance
    • Maintenance of common areas (such as the gym, pool, front desk, hallways, landscaping)
    • Building reserve fund (covers emergencies and long-term maintenance projects such as a new roof or elevators repairs)

    What Are Status Certificates?

    If you’re looking to purchase a condo, you’ll want to look into obtaining a status certificate so that you have as much information about the building and your unit as possible before buying. A status certificate provides valuable information about the condo corporation and its financial

    situation. It includes details on the budget, legal issues, the reserve fund, maintenance fees, and any fee increases expected in the future. 

    Tip: You’ll want to carefully review your status certificate with your lawyer before making a purchase.

    Property Tax

    Property taxes are paid annually by homeowners to their municipality. These taxes are ongoing and are separate from your mortgage. Your annual property tax can often be paid in installments.

    Tip: It’s important to remember that this cost is not due at closing, but is a recurring cost.

    How Are Property Taxes Calculated?

    Your property tax rate will vary depending on the value of your property as assessed by your provincial assessment authority. This is then multiplied by a rate that falls between 0.5% to 2.5%.

    How Do You Pay Property Taxes?

    You can pay your property taxes either through your mortgage provider or directly to your municipality. 

    Your Utility Bills

    When you purchase a home, you’ll have to set up or transfer your utility bills to your new home. If you live in a condo, these costs may be included in your monthly maintenance fee. Your utility bill will include:

    • Hydro (electricity)
    • Heat
    • Water and Garbage
    • Internet, Phone, Cable

    For the full details on the home buyer’s journey including examples, advice, pictures and sample calculations, download a copy of our free Home Ownership Costs to Consider Guide here.

    The post A Guide To Everything You Need To Know About Home Ownership Costs [Free Download] appeared first on Zoocasa Blog.


    Source: zoocasa.com