Category: Finance

How to Choose the Right Credit Card

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For many, choosing a credit card is a reflection of identity. It can help you pay for the things you need, enhance the things you love like traveling, and with time, it can improve your credit score. So, which credit card is right for you? Choosing a new card depends on a few factors. Take these steps before you apply.

Check Your Credit Score 

The first step is to learn which credit cards you qualify for. “You might want to check your credit score before searching for credit cards, as some are only available to those with good credit,” David Bakke of Money Crashers said. You can view your TransUnion and Equifax credit scores for free on our website here. It’s also wise to check your credit reports to ensure that your accounts are reported accurately and there are no errors that could impact your scores. You can also access your free reports once a year through Annual Credit Report. 

Decide How You’ll Use It

Once you know your credit score and the cards you qualify for, consider how you’ll use your card to narrow your focus. A few ideas include: 

  • Credit Score Improvement: If you’ve struggled with credit damage in the past, it’s a good idea to choose a card that can help you get back on track. Secured credit cards allow you to pre-load cash like a debit card to use for purchases. That said, your account activity is reported to the credit bureaus like a credit card with the same benefits of positive use. A successful trial period may also qualify you to convert your account to standard revolving credit.
  • Rewards for Everyday Purchases: Some cards offer rewards and cash back on necessity purchases like groceries and gasoline. Review your budget to highlight the big-ticket items; you may find a card that can help you save.
  • Investments: Some investment firms offer credit cards that allow you to funnel rewards into a retirement account or a college savings plan. This strategy frees up money in your budget while also helping you to focus on the future.
  • Airline Miles and Travel Perks: Some credit card issuers partner with airlines to provide miles and amenities to frequent flyers. Plan your trips and choose a card based on destinations, preferred airline and other travel factors. “Plenty of cards have generous sign up bonuses,” Bakke said. “And if travelling internationally, look for one with no foreign transaction fees.” 

Choose Long-Term Use

It’s tempting to open a credit card that offers short-term rewards or discounts, but it’s better to choose something that offers long-term benefits. The reason? Closing an account down the road could hurt your score and undo your efforts to improve. A lower credit score could impact your ability to secure a low-interest loan, finance a home or car and even open new credit cards.

Avoid Fees and APR 

The benefits of a credit card can amount to nothing if they are overshadowed by annual fees. Financial planner Jay Schurman of the Lincoln Financial Group advises clients to weigh their options carefully. “Do you really need a credit card that has a yearly fee?” he said. “They have to give you something of greater value than the fee or this is a bad deal.” Do the math before allowing upscale perks to persuade you.

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How Store Credit Cards Impact Your Credit

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These days it seems that everywhere you go, no matter which store you’re in, someone wants to sign you up for a new store credit card. Whether shopping for apples or zip-ties, the checkout clerk is often certain you need to save 10% on your purchase by applying today — and by the time they’re done describing the many benefits of your new card, you may begin to feel pretty certain, too.

However, just because the card offers you a nice discount doesn’t mean you should hop on its bandwagon. What many people often forget about the temptation-rich store credit card is the “credit card” part. The plastic may say “Kohls” instead of “Chase,” but that doesn’t make it safe; a store credit card can have just as much of an impact on your credit score as its more traditional counterparts.

Store Cards Can Have Real Credit Impacts

To start, the initial application for a store credit card comes with the same hard pull of your credit report as for any other credit application. Depending on the state of your credit, that hard pull can cause your FICO score to drop by as much as five points and your VantageScore by 10 to 20 points. If you have any major purchases coming up for which you might need a loan, such as a vehicle or house purchase, avoid opening any new credit accounts, including store credit cards.

Once you’ve applied, just as with a regular card, the issuer will consider your entire credit history before deciding whether to approve you. Despite popular lore, while store credit cards may be a bit easier to get than other types, stores (or, more specifically, the banks backing the stores’ credit cards) do not simply approve anyone who applies for a card. Those with less-than-perfect credit will have the best luck applying for a privately backed card (one without a major issuer logo). That said, if your poor credit is preventing you from obtaining even a store credit card, you may need to consider a subprime issuer who specializes in credit cards for bad credit.

At the other end of the spectrum, not only does applying for a store credit card impact your credit, but so too can closing an old one. Depending on how long you have had the card — and the age of your other accounts — you may actually see a dip in your credit score from closing a store credit card. The average age of all of your credit accounts combined is one of the main factors that goes into calculating your credit score.

On the Plus Side

While it may sound like a lot of negatives, store credit cards (and credit cards in general) aren’t all bad. The responsible use of a store credit card can have many of the same positive impacts to your credit score as would a non-store credit card. For instance, by avoiding late or missing payments on credit cards that report to all three credit bureaus, you can demonstrate positive credit behavior, improving your credit score and your chances of being approved for future credit.

Additionally, not only do many stores have special coupons exclusively for cardholders, but most stores will stack the cardholder discount with in-store coupons. Example? Pair a great Kohl’s coupon with the 25% discount for opening a Kohl’s charge card and you could save hundreds off your purchase.

Spend Wisely

Regardless of your reasons for opening the card, be it for the discounts, the peripheral perks, or simply to improve your credit, always be wary of carrying a balance on a store credit card. Store cards come with notoriously high interest rates that can quickly negate any savings from an in-store discount. To illustrate this point, let’s consider a shopping trip where $100 worth of items are purchased with a store card. If we say the initial savings from using the store card is 10% (or $10), it leaves a $90 balance on the card. By paying the minimum monthly payment of $5 and carrying the rest of the balance, it would take almost two years to pay off that shopping trip — and it will cost $21 in interest charges.

If you’ve already given into temptation — or a particularly convincing checkout clerk — a few too many times and gotten in over your head with store credit cards, you’ve likely already seen the negative effects they can have on your credit. While getting a handle on your debt is the first step toward rebuilding your credit, it isn’t always easy, especially if the debt is spread across multiple accounts. In this case, working with a reputable debt relief company can be the best way to establish a plan to get back in charge of your finances.

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5 Painless Ways to Cut Expenses in 2017

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Spending money is complicated; at least, that’s what our brains tell us. According to a Capital One Bank survey, 54% of Americans feel happy when they save money, and yet, 25% struggle to keep up with their monthly bills. Feeling motivated to save is tough when your wants and needs are at war, and let’s be honest: You aren’t likely to afford a home or save for retirement by kicking a Starbucks habit. Big changes require bigger savings. The good news is, there are a few painless ways to accomplish your goals.

  1. Track Spending: It’s difficult to cut expenses without a plan. Creating a budget is the fastest way to gauge financial strength and learn how to save. Download your free budget template
  2. Embrace Eco-Friendly Living: Saving money doesn’t always require a lifestyle change. In fact, it’s possible to cut costs and help the environment with a few basic steps. “Get a home energy audit conducted on your house through your energy provider; most do them for free,” David Bakke, financial blogger and owner of Money Crashers said. “Also, only run full loads of laundry and dishes.”

Take your efforts further by investing in a smart thermostat and Energy Star products that provide eco-friendly designs, monthly bill savings and even product rebates for mindful consumers.

  1. Negotiate Revolving Expenses: The average American household spent $103 per month on cable in 2015 according to a survey conducted by Leichtman Research Group. Even if you aren’t willing to cut the cable cord, there’s still room to cut costs. “You won’t get a discount without asking,” Andrew Marshall, a San Diego-based financial planner said. “Call your cable company, your phone provider and other companies with bills you want to pay less for and ask for a discount.  I recently had $80 taken off my monthly cable bill for being a longtime customer.”

Other experts suggest leveraging the competitive marketplace to slash fees in addition to your monthly bill. “There are so many TV alternatives; having a station that only has one program on at a time almost feels archaic. Ditch it,” Michael Newcomer, vice president of Retirement Advisory Consultants said. “Some carriers even eliminate taxes and fees, making it easy to budget phone and internet prices every month.”

The lesson: Everything is negotiable. Contact your service providers and communicate your budgetary needs.

  1. Clear Away Clutter: Financial dissonance can be as stressful as physical clutter. According to Phil Risher, the voice of Young Adult Survival Guide who paid off $30,000 in student loans in 12 months, there are a few ways to spring clean your spending. “As you question your expenses, ask yourself: Why do I have it? Does this fit with my goals in life? Will this change my life if I get rid of it?” Judging expenses based on emotional value could ease the pain of cutting back. Consider changing your perspective as you redefine necessity.
  2. Read the Fine Print: Automated bill pay has made life more convenient, but it has also created a risk of abuse. Mobile apps like FeeBelly sniff out hidden fees associated with paying off loans early, buying a plane ticket, transferring money and other transactions. Once identified, you may be able to have them waived or choose another provider who doesn’t impose the same costs.Similarly, other apps like Prosper Daily take the mindlessness out of spending by illustrating costs by frequency. “It highlights your recurring purchases,” said Jared Franklin, product manager for the financial tech company, Blispay. “It’s a good way to see a bunch of those annual $20-30 services you pay for, but don’t use much. I identified a few services this way that I cut ties with.”

Saving money isn’t always easy, but it doesn’t need to be painful. Take advantage of creative saving opportunities as they arise. The result can help you plan for emergencies, invest for the future and focus on credit health.

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15 Smart Ways to Save on Your Wedding

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Planning a wedding can be an exhilarating and fun experience…until you see the price tag. According to The Knot, the average nuptials totaled $35,329 in 2016. Although you may want a lavish affair, paying for a wedding should never mean borrowing against your retirement accounts, emptying your savings or taking out a personal loan. So, how do you plan a beautiful wedding on a budget? Consider these strategies.

  1. Get Married on Sunday: Saturday is the most popular wedding day in America, and booking a venue for Sunday could shave significant costs off your site and reception rentals.
  2. Don’t Take Requests: Planning a wedding is tricky when everyone has an opinion. Your parents might want to invite their old friends, your sister wants her daughter to be the flower girl, your boss doesn’t eat gluten, etc. While it’s important to consider your loved ones in the process, you shouldn’t put yourself in debt to accommodate everyone. Make choices based on your budget and personal preferences.
  3. Choose Three Things—and Cut Them: Your wedding budget can spiral out of control without a little willpower. Look at your list of expenses and consider cutting three things. For example, choose one party favor to give instead of two, or choose one brand of wine instead to serve of three. Small savings can add up quickly.
  4. Outsource the Details: Family and friends are usually eager to help a couple plan their big day, and now is the time to enlist their help. If your sister runs an Etsy shop, ask her to make your guestbook instead of buying one. If you need a ride to the airport after the reception, ask a groomsman to give you a lift instead of renting a limo.
  5. Shop Online: Bridal shops are skilled at providing an experience that results in sales—often at a premium. Search online before buying anything at a physical store. You may find a better deal and waived sales tax through an online retailer.
  6. Hit the Outlet Mall: Ceremony and reception décor doesn’t need to be wedding-specific. For example, Crate and Barrel’s outlet store might sell votives for less than a typical bridal shop. Search online and check your local outlets to find the items you need.
  7. Send Digital Save the Dates: Save the Dates are a popular way to announce your wedding plans ahead of time, but printing and mailing them can be expensive. Consider sending a festive email or creating a free website through WordPress.com to keep your guests updated on wedding details.
  8. RSVP by Email: Wedding invitations usually come with an RVSP card with postage attached. Cut costs by asking guests to RSVP by email or through your website instead.
  9. Buy a Basic Photography Package: Wedding photos are something you’ll cherish, but you don’t have to buy the most expensive package right away. Most photographers store your images for later purchase. They may even have a registry that allows your guests to buy prints for you as a gift. Consult your budget and buy only what you can afford.
  10. Book a Flexible Venue: Hotels and event halls often charge couples a package price for their wedding that includes food and beverage. This means you can’t hire your own caterer or negotiate costs. Find a public park, formal restaurant or industrial space that allows you to choose your vendors.
  11. Shop Wholesale: Are you dreaming of a wedding filled with flowers? Costco can help with that. They advertise a variety of blooms for bulk pricing. For example, they offer 256 roses (16 bouquets) with eucalyptus for $169.99.
  12. Cap the Open Bar: An open bar can cause your catering bill to skyrocket. Consider putting a time or bottle limit on the tap, and then switch to cash-only for your guests.
  13. Go All-Inclusive: If you crave a beach wedding but can’t afford the price, consider hosting an all-inclusive wedding that allows you to predict costs up-front and simplify your budget.
  14. Register for Honeymoon Expenses: The honeymoon is the final and sometimes priciest piece of the wedding puzzle, and many couples choose to register for experiences rather than flatware. Consider booking your getaway with a hotel or resort that allows you to register for dinners, excursions and other costly honeymoon expenses.
  15. Remember Your Goals: It’s easy to get lost in the fog of wedded bliss, but it’s also important to remember your goals and responsibilities along the way. Prioritize your post-nuptial security and plan your wedding accordingly.

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5 Reasons Not to Pay Medical Bills with a Credit Card

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Medical debt is a burden faced by millions of Americans. In fact, a study conducted by The New York Times and the Kaiser Family Foundation earlier this year discovered that 26% of Americans (both insured and uninsured) have suffered severe financial hardship because of struggling to pay their medical bills.

Whether you can’t afford to make payments and are desperately seeking a way to cover those bills or you crave frequent flyer miles, choosing to pay off your medical debt with a credit card can be tempting. Think twice before taking this route, however. You may be discounting these five risk factors.

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