interest rates http://www.wisebread.com/taxonomy/term/1797/all en-US 7 Cool Things Bonds Tell You About the Economy http://www.wisebread.com/7-cool-things-bonds-tell-you-about-the-economy <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-cool-things-bonds-tell-you-about-the-economy" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/kid_investing_happy_000065886749.jpg" alt="Learning cool things bonds teach us about the economy" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Bonds are often cast as the boring stepchild of investments, but they can actually offer some great insights into the machinations of our economy. Their yields and interest rates that are affected by overall economic conditions, so you can learn a lot by owning them. And they may even predict how certain aspects of the economy will evolve. (See also:&nbsp;<a href="http://www.wisebread.com/5-crucial-things-you-should-know-about-bonds?ref=seealso" target="_blank">5 Crucial Things You Should Know About Bonds</a>)</p> <p>Here are seven things that bonds can tell us.</p> <h2>1. They Can Tell You If the Economy Is Healthy (or Not)</h2> <p>Some bonds perform well when the overall economy is in good shape. Others perform better when times are tough. High-yield bonds, emerging market bonds, and corporate bonds with low ratings tend to perform best when the economy is strong. But U.S. Treasuries &mdash; which are seen as less risky &mdash; don't perform as well when the economy is doing well.</p> <p>So, if you want to get a general sense of how the national or world economy is doing, pay attention to the types of bonds people are investing in. Generally speaking, a rush to riskier bonds means things are going well. But when times are tough, Treasuries are often the place investors flock to. Here's a <a href="http://bonds.about.com/od/bonds101/a/The-Economy-And-Bonds.htm">helpful chart</a> that shows how different bonds perform in various economic conditions.</p> <h2>2. They Can Predict a Recession</h2> <p>In the 1980s, economists began to realize that they could predict economic activity by looking at something called the bond &quot;yield curve.&quot; In simple terms, this is the difference in the interest rates between three-month and 10-year Treasury notes. If the interest rates on 10-year notes are higher than the shorter-term rates, then the <a href="https://www.clevelandfed.org/our-research/indicators-and-data/yield-curve-and-gdp-growth.aspx">chances of a recession</a> in the next 18 months are not very high, according to information published by the Federal Reserve. When the yield curve is inverted &mdash; meaning long-term interest rates are lower &mdash; then look out. This was the case in 2006, and America was in a recession within two years.</p> <h2>3. They Can Predict If You'll Pay More for Stuff</h2> <p>One of the downsides to investing in Treasury bonds is that they can lose value due to inflation. That's why the government introduced something called Treasury Inflation Protected Securities (TIPS). These are like bonds, in that they have a fixed-rate yield and regular interest payments, but the principal is adjusted according to the Consumer Price Index.</p> <p>Generally speaking, you can determine the possible rate of future inflation by examining the spread between the yield in a bond and a TIPS with a similar maturity date. So for instance, if a three-year Treasury note has a yield of 4% and a three-year TIPS note has a yield of 2%, then the expected rate of inflation over the next two years is 2%. This is not an exact science, however, as there are a multitude of factors that can drive inflation.</p> <h2>4. They Can Tell You If Stock Investors Are Skittish</h2> <p>When investors flock to bonds, it's often because they are feeling less confident about riskier investments, such as stocks. Bonds are popular investments among those close to retirement, but when all investors are drawn to bonds, it could be a sign that the stock market has taken a dive or is underperforming. Conversely, less interest in bonds could be a sign that the stock market is doing well.</p> <h2>5. They Can Tell You If Companies Are Investing in Themselves</h2> <p>Corporate bonds can give you a glimpse of what companies are doing with their money, especially whether they are looking to expand. Even large companies with a lot of cash will issue bonds in order to make big capital improvements, fund an acquisition, or invest in research and development. (Even Apple, which reported $55 billion in cash in the last quarter, also reported $10 billion in bond debt.)</p> <p>Be careful, however, as many companies go into debt simply to stay afloat. Pay attention to the ratings on corporate bonds to get a better understanding of how companies may be using debt. A company with a strong credit rating is more likely to be raising funds for investment or expansion rather than to simply fund operations.</p> <h2>6. They Can Impact What You Might Pay for Your House</h2> <p>The government does not set mortgage rates. Banks do that. But banks will often keep mortgage rates in line with those of long-term Treasury notes. That's because Treasuries and mortgages are offered for similar terms, usually in the 10- to 30-year time frame. So when Treasury notes rise, mortgage rates usually rise, as well.</p> <h2>7. They Can Let You Know if Your City Is in Trouble</h2> <p>Municipal bonds can offer insight into the economies of cities and states. Municipalities will sell bonds in order to raise money for capital projects. The size and quality of these bonds are clues into whether a city is investing properly or has too much debt. Bonds with high interest rates may come from cities with less-than-stellar credit &mdash; a sign of a city that has been struggling. (For an example, take a look at Atlantic City, which is struggling to make debt payments after years of declining tax revenue.) Moreover, bonds will tell you whether a municipality is selling bonds just to fund normal operations, or for investments in things like infrastructure that will benefit the city's financial health over the long term.</p> <p><em>Still bored by bonds?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/7-cool-things-bonds-tell-you-about-the-economy">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-stocks-and-bonds-that-will-profit-from-the-fed-rate-hike">10 Stocks and Bonds That Will Profit From the Fed Rate Hike</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-ways-bonds-can-hurt-your-portfolio">10 Ways Bonds Can Hurt Your Portfolio</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-latin-american-markets-to-watch">5 Latin American Markets to Watch</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/while-waiting-for-rates-i-bonds">While Waiting for Rates: I-Bonds</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/a-simple-guide-to-series-i-savings-bonds-i-bonds">A Simple Guide to Series I Savings Bonds (I-Bonds)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bonds Economy inflation interest rates predictions recessions Thu, 12 May 2016 09:00:05 +0000 Tim Lemke 1705414 at http://www.wisebread.com 8 Debt Reduction Mistakes Even Smart People Make http://www.wisebread.com/8-debt-reduction-mistakes-even-smart-people-make <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-debt-reduction-mistakes-even-smart-people-make" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_blindfold_money_000084064747.jpg" alt="Woman making debt reduction mistakes even smart people make" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Everyone knows it is a good idea to reduce your debt load. With less debt, you save money on interest charges and reduce your risk of financial catastrophe if your income is disrupted and you are unable to make payments. If you don't have enough to make debt payments, you can fund investments and build wealth instead of working to get back to zero net worth.</p> <p>Some people are much more successful at debt reduction than others. What key mistakes prevent people from paying down your debts?</p> <h2>1. High Interest Accounts</h2> <p>It is hard to pay down the principal on a debt when the interest rate is high. Too much of your payment gets burned up paying interest charges and too little actually goes to paying down the debt.</p> <h3>How to Fix It</h3> <p>Use a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">balance transfer card</a> to move debt from a high interest credit card to a <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards">lower interest credit card</a>, allowing you to pay off the principal faster and get out of debt sooner. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?ref=seealso">How to Use a Balance Transfer to Pay Off Credit Card Debt</a>)</p> <h2>2. Negative Cash Flow</h2> <p>If your bills and payments are higher than your income, then you are not going to get out of debt! In fact, negative cash flow may be the reason your debt has built up in the first place. There are only two ways to correct negative cash flow: Lower your expenses or raise your income &mdash; or both!</p> <h3>How to Fix It</h3> <p>Consider debt consolidation to reduce your total monthly payments, find ways to reduce nonessential expenses, and look for side hustles to boost income.</p> <h2>3. Faulty Repayment Strategy</h2> <p>I was stunned the first time I saw personal finance advisers offering the advice to pay off your smallest debts first. This strategy for paying off debt is called the &quot;<a href="http://www.wisebread.com/a-comprehensive-guide-to-the-debt-snowball-method-0">debt snowball</a>.&quot; You make minimum payments on all of your debts and put the rest of your available money toward paying off the smallest debt. After that smallest debt is paid off, you use the money that would have gone toward that debt to focus on the next smallest debt. This process is repeated until all debt is paid off.</p> <p>The reason the &quot;debt snowball&quot; strategy is surprising to me is that it is not the fastest way to get out of debt. Simple math shows that you will get out of debt faster and spend less money by paying off your highest interest debt first.</p> <h3>How to Fix It</h3> <p>Having any debt repayment strategy is better than not having a strategy at all. Use the &quot;debt snowball&quot; strategy if this motivates you, but paying your highest interest debt first will save the most money and get you out of debt fastest.</p> <h2>4. Adding More Debt</h2> <p>It you are working to pay down debt, obviously adding more debt isn't going to help. Why would anyone add more debt when they are trying to get out of debt? One reason this can happen is if unexpected expenses pop up and you have directed all available funds to paying off debts.</p> <h3>How to Fix It</h3> <p>Put off taking on new nonessential expenses until after you have paid off debts. Keep some cash in an emergency fund to help avoid using credit.</p> <h2>5. Not Tracking Progress</h2> <p>There is a reason that successful business people are so interested in looking at every financial report that comes out about their business. Feedback is essential to spot problems early and find areas for improvement to get even better results in the future.</p> <p>If you do not check your total debt on a regular basis to monitor your repayment progress, you might not be making progress at all. In fact, your debt could be growing and you wouldn't know it! You need to monitor your total debt and track how well your debt repayment plan is working.</p> <p>Once you start making progress in paying down your debt, seeing the smaller debt total every month can be a good motivator to redouble your efforts and get the debt paid off.</p> <h3>How to Fix It</h3> <p>Add up your total debt every month and monitor your debt repayment progress.</p> <h2>6. Not Everyone Is On Board</h2> <p>Many households have more than one person who makes spending decisions. For example, if you are focusing on debt reduction and your spouse is not, then you will probably not make much progress.</p> <p>I think numbers can be a good way to communicate about debt. Instead of debating purchases and problem spending areas, focus instead on agreeing on the big picture monthly budget numbers. Let each person make their own spending decisions to fit within the budget.</p> <h3>How to Fix It</h3> <p>Get all spenders committed to debt reduction goals and work together to agree on a budget plan.</p> <h2>7. Irregular Expenses</h2> <p>Getting the routine monthly bills under control can be manageable since you know what to expect, but it is easy to overlook those occasional expenses that don't follow a regular monthly billing schedule. For example, budgeting for vacations gives a lot of people trouble. When vacation time comes around, a lot of people end up getting out a credit card to cover at least some vacation expenses. In my house, vet bills are problematic since we have a lot of pets and they need expensive vaccinations and treatments at times. Many years, the vet bill has ended up going on a credit card and moving us in the wrong direction on debt reduction.</p> <h3>How to Fix It</h3> <p>Budget to set aside money ahead of time to cover irregular expenses such as vacations, pet care, and medical expenses.</p> <h2>8. Delay Starting Debt Reduction</h2> <p>For a lot of people, &quot;next month&quot; is always the best time to start debt reduction!</p> <p>Paying off debts is hard work. You have to track and control spending, and you will likely have to sacrifice buying things you want in order to pay off debts instead. It can be tempting to take another month to plan out your budget and figure out your strategy before you start seriously working on debt reduction.</p> <p>But delaying another month doesn't provide any advantage to getting your debt paid off. Your debt will hang around and maybe even keep on growing until you take action to turn things around and get it paid off. The sooner you get started, the sooner you will have your debt paid off.</p> <h3>How to Fix It</h3> <p>Start debt reduction now. Don't wait until next month.</p> <p><em>Which of these debt reduction mistakes has caused the most problems for you?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/8-debt-reduction-mistakes-even-smart-people-make">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/oops-i-maxed-out-my-credit-cards-now-what">Oops — I Maxed Out My Credit Cards. Now What?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-debt-management-questions-youre-too-embarrassed-to-ask">5 Debt Management Questions You&#039;re Too Embarrassed to Ask</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">The 5 Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-reasons-your-debt-isnt-diminishing">12 Reasons Your Debt Isn&#039;t Diminishing</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-common-debt-reduction-roadblocks-and-how-to-beat-them">6 Common Debt Reduction Roadblocks — And How to Beat Them</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management cash flow expenses interest rates progress repayment strategies snowball method Thu, 07 Apr 2016 10:30:06 +0000 Dr Penny Pincher 1685087 at http://www.wisebread.com The Fed Raised Rates — Then Something Weird Happened http://www.wisebread.com/the-fed-raised-rates-then-something-weird-happened <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-fed-raised-rates-then-something-weird-happened" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_concerned_computer_000038377234.jpg" alt="Woman wondering what happened after Fed raised rates" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>In December of last year, the Federal Reserve Board raised its benchmark Federal Funds Rate for the first time in more than a decade. Before the move, economists warned consumers to brace for a jump in the interest rates they pay on mortgage loans, auto loans, and credit cards.</p> <p>But a funny thing happened: pretty much nothing.</p> <p>Consumer interest rates haven't jumped much, if at all, since the Federal Reserve's move. That's good news for consumers who haven't had to pay more to borrow money. But it does lead to a big question: How long will the low interest rates on mortgage loans and other debt last?</p> <p>That's a question that no one can accurately answer. And, as now apparent, it's one that the Federal Reserve Board might be able to influence but won't be able to directly control.</p> <h2>The Fed's Move</h2> <p>The Federal Funds Rate is important: It affects the interest rates that banks charge on important consumer products such as mortgage loans, personal loans, auto loans, and credit cards. But the Federal Funds Rate only <em>influences </em>these rates. They don't directly set them.</p> <p>That's why consumers haven't seen, for instance, mortgage interest rates budge much from the historic lows at which they still remain.</p> <p>The Federal Reserve Board had set its funds rate at zero since 2008. Back then, the Fed took this move as a way to help the economy survive the Great Recession. But as the economy has slowly improved, members of the board's Federal Open Market Committee &mdash; which guides and sets the Federal Funds Rate &mdash; late last year decided it was finally time to increase this key rate.</p> <p>In December of last year, the Federal Reserve raised the funds rate by 25 basis points, moving it from 0% to 0.25%.</p> <p>And that's when financial experts predicted significant jumps in the interest rates that consumers pay. We're still waiting for those big jumps to happen. Why?</p> <h2>Influencing, Not Setting</h2> <p>It comes down to the difference between influencing and setting.</p> <p>Consider mortgage interest rates. Many believe that the Federal Reserve Board sets the interest rates that consumers pay on mortgage loans. It doesn't. Instead, mortgage interest rates are determined by mortgage backed securities, which are indirectly linked to the yield on 10-Year Treasury notes. When yields fall on Treasuries, so does the interest rate on mortgages. Treasury yields fall when demand for notes goes up, such as when the stock market declines (as happened in early 2016) or when the international economy stumbles (as has also happened).</p> <p>This doesn't mean that the Federal Reserve doesn't have any influence over whether mortgage rates rise or fall. After its meetings, the Federal Open Market Committee releases statements that list the opinions and feelings about the economy that its members hold. If the committee members say that the economy is strong &mdash; and their opinions about it are mostly positive &mdash; mortgage interest rates tend to rise.</p> <p>If the committee members instead express negative opinions about the economy, mortgage interest rates will usually fall.</p> <h2>Interest Rates Mostly Stable</h2> <p>Mortgage interest rates have remained at historically low levels for a long time. According to Freddie Mac, the average rate on a 30-year fixed-rate mortgage stood at 3.71% as of the week ended March 31. The average rate on a 15-year fixed-rate mortgage loan was at 2.98%. Last year the 30-year stood at 3.70% and the 15-year was 2.98%</p> <p>The New York Times on March 18 reported that the average interest rate on a 60-month loan for a new car stood at 3.15%. That's up only slightly from a year ago, when this rate was 3.11%.</p> <p>Variable-rate credit cards have seen their average interest rates rise from December of last year, but only slightly. Bankrate reported that as of Dec. 30 of last year, the average interest rate on a variable-rate card stood at 15.80%. As of March 30, the site said that this average had risen to 15.96%. (See also: <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?ref=seealso">Best Low APR Credit Cards</a>)</p> <p>So, yes, the Fed's rate hike might have had a slight impact on some interest rates but it has had no impact on others. The lesson here? Consumers should pay attention to what the Federal Reserve is doing when it comes to its Federal Funds Rate. And any increase in that rate might influence lenders and banks to raise their own rates.</p> <p>But consumers shouldn't panic, either, when the Fed does raise this benchmark rate. A higher Federal Funds Rate might not mean skyrocketing mortgage, auto, and credit card interest rates, because lots of others factors are at play.</p> <p><em>Have you benefited from low interest rates?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/the-fed-raised-rates-then-something-weird-happened">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-you-need-to-know-about-credit-scores">5 Things You Need to Know About Credit Scores</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-is-how-much-the-feds-interest-rate-hike-might-cost-you">This Is How Much the Fed&#039;s Interest Rate Hike Might Cost You</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-surprising-ways-bad-credit-can-hurt-you">15 Surprising Ways Bad Credit Can Hurt You</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-reasons-the-fed-is-keeping-rates-low-and-what-it-means-for-you">3 Reasons the Fed Is Keeping Rates Low (And What It Means for You)</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/best-of-personal-finance-credit-where-credit-is-due-edition">Best of Personal Finance: Credit Where Credit Is Due Edition</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance federal reserve interest rates loans mortgages the fed Tue, 05 Apr 2016 09:00:07 +0000 Dan Rafter 1682551 at http://www.wisebread.com Is a Balance Transfer Offer a Good Deal? http://www.wisebread.com/is-a-balance-transfer-offer-a-good-deal <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/is-a-balance-transfer-offer-a-good-deal" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_credit_card_000030704826.jpg" alt="Woman learning if balance transfer is a good deal" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>A credit card balance transfer is a practical way to consolidate debt, save money, and ditch a high-rate credit card. This involves transferring the balance from a higher-interest credit card to another, <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards">lower-interest credit card</a>.</p> <p>There are various balance transfer offers, but unfortunately, not every offer is financially rewarding. To know whether you're getting a solid deal, you have to consider the costs associated with a particular offer.</p> <h2>Balance Transfer Fee</h2> <p>In a perfect world, there wouldn't be any fees to transfer a balance &mdash; or at the very least we would pay a low, flat fee &mdash; but this is rarely the case. The typical fee is $10 or 3% of the transferred balance, whichever is higher. Some balance transfer credit cards charge a 5% fee.</p> <p>Balance transfer fees are charged directly to the card balance and reduce the actual savings of switching to a low-rate card. For example, if transferring your balance to a low-rate card saves $900 in interest, but you paid a $200 balance transfer fee, you actually only saved $700.</p> <p>Since nearly all cards have no cap on how much you pay, the bigger your transfer, the bigger the fee &mdash; hence the importance of comparing different balance transfer offers to make sure you're getting a deal. Shopping around can be the difference between paying $300 and $500 for a $10,000 balance transfer.</p> <p>There are, however, a few cards that don't charge a balance transfer fee. These can include cards offered by smaller banks and credit unions, as well as bigger financial institutions. Here are two cards from major issuers that do not charge a balance transfer fee:</p> <ul> <li><a href="http://www.wisebread.com/chase-slate-visa-review">Chase Slate</a>&nbsp;doesn't charge a balance transfer fee, but only if you transfer balances within the first 60 days of opening an account. Transfers made after that introductory period are charged 3% or $5.<br /> &nbsp;</li> <li><a href="http://www.wisebread.com/the-best-cash-back-card-for-average-credit-capital-one-quicksilverone-cash-rewards-credit-card">Capital One QuicksilverOne Cash Rewards credit card</a>&nbsp;also doesn't charge a balance transfer fee, but there is a $39 annual fee. That amount is pretty much the equivalent of paying a fee if you're transferring a balance of $1,000 or less (so it's still a better deal than most cards if you're transferring more than $1,000).</li> </ul> <h2>Longest 0% APR vs Low Standard APR</h2> <p>For a balance transfer offer to make sense, the interest savings should be significantly greater than any fees paid to transfer your balance. To win your business, many cards offer an introductory 0% interest for a set period.</p> <p>There are currently <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">offers of 0% APR up to 21 months</a>. This teaser rate eventually disappears, but if you pay off your credit card balance before the regular interest rate kicks in, you don't pay a penny of interest.</p> <p>However, some people make the mistake of only looking at the introductory rate when selecting a card, and they forget to consider the ongoing or regular APR once the promotional period ends.</p> <p>When you don't compare rates, you could unknowingly apply for a card with a regular APR that's higher than what you're currently paying. Which isn't that awful if you pay off the card during the introductory rate period. But if you don't pay off the entire balance before the end of the 0% APR period, the new interest charges might cancel out some of the potential savings.</p> <p>Let's say you have a credit card with a $2,000 balance and a 20% interest rate. If you transfer the balance to a card with 0% interest for 12 months and a balance transfer fee of 3%. You'll save about $340 over the introductory rate period.</p> <p>If the card had a 16% regular APR, you'd save about $7 per month after the intro 12 months. But if you qualify for a card with a regular interest rate of 10%, you would save $17 per month.</p> <p>Ideally, you want to find a card that has both a long intro 0% APR period <em>and</em> a low regular APR afterwards. Here's are two good choices:</p> <ul> <li><a href="http://www.wisebread.com/bankamericard-credit-card-review">BankAmericard Credit Card</a>&nbsp;gets you 18 billing cycles of 0% APR on balance transfers made within the first 60 days. Afterwards, the regular APR is 11.24%-21.24%.<br /> &nbsp;</li> <li><a href="http://www.wisebread.com/the-discover-it-card-attractive-cash-back-awards-for-shoppers">Discover it</a>&nbsp;also offers 18 months of 0% APR on balance transfers (6 months for purchases), followed by a regular APR of 11.24%-23.24%.</li> </ul> <h2>The Low Rate May Not Apply to New Purchases</h2> <p>The rules regarding interest and balance transfers vary, so it's important to read the fine print and understand an offer before you apply &mdash; or else you could end up paying interest unexpectedly.</p> <p>Some credit cards have 0% introductory rates that apply to both new purchases and balance transfers, whereas other cards only apply the teaser rate to balance transfers. So if you transfer a balance to a card, and you also use this card for new purchases, you'll have dual interest rates and you'll pay regular interest on all new purchases.</p> <p>To keep it simple, choose a card that offers a promotional rate on both purchases and balance transfers.</p> <h2>Protect Your Credit When Transferring a Balance</h2> <p>Applying for a new credit card and transferring your balance can potentially harm your credit score &mdash; but only if you do it the wrong way.</p> <p>A new card triggers an inquiry on your credit report, and each inquiry can drop your credit score by a few points. This isn't the best news, but at the end of the day, it isn't a big deal as long as you don't apply for too many new accounts in a short span of time.</p> <p>As mentioned, a balance transfer is one way to simplify your finances. You can transfer all your balances to a new card and only worry about one monthly payment. The problem, however, is that a balance transfer could throw off your credit utilization ratio if you cancel the old card that no longer has a balance on it.</p> <p>Credit utilization is your percentage of outstanding balances compared to your total credit limit. This ratio should never exceed 30%, and if your ratio is higher than this percentage, your credit score suffers.</p> <p>The way you approach a balance transfer can either help or hurt your credit score. To illustrate, imagine you have two credit cards:</p> <ul> <li>Credit card #1: $1,000 balance with a $2,000 credit limit<br /> &nbsp;</li> <li>Credit card #2: $4,000 balance with a $5,000 credit limit</li> </ul> <p>In this example, you owe a total balance of $5,000 with a total credit limit of $7,000, resulting in a total credit utilization ratio of 71%, which is more than doubled the recommended max percentage of 30%.</p> <p>Let's say you then get a new credit card with a credit limit of $10,000 and transfer both balances to this card, this new card increases your total available credit to $17,000, which drops your credit utilization ratio to 29% &mdash; but only if you keep the old paid-off accounts open!</p> <p>If you're going to open a new account and transfer balances, don't immediately start closing accounts. Run the numbers first, and only close accounts if your credit usage is no more than 30%.</p> <p><em>Have you transferred a balance? How did you make out? Let's discuss in the comments below.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/is-a-balance-transfer-offer-a-good-deal">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-questions-to-ask-before-accepting-a-credit-card-offer">10 Questions to Ask Before Accepting a Credit Card Offer</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-important-things-you-should-know-about-balance-transfer-cards">7 Important Things You Should Know About Balance Transfer Cards</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-dirty-secrets-of-credit-cards">The Dirty Secrets of Credit Cards</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/now-is-the-best-time-in-years-to-do-a-credit-card-balance-transfer">Now Is the Best Time in Years to Do a Credit Card Balance Transfer</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">The 5 Best 0% Balance Transfer Credit Cards</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Debt Management APR balance transfers credit utilization ratios debt reduction fees interest rates Wed, 09 Mar 2016 11:30:05 +0000 Mikey Rox 1669479 at http://www.wisebread.com Is it Safe to Re-Finance Your Home Close to Retirement? http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/is-it-safe-to-re-finance-your-home-close-to-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/house_payments_money_000007934078.jpg" alt="Learning if it&#039;s safe to refinance your home close to retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Lower mortgage rates can save you hundreds of dollars on your monthly payments. Refinancing your mortgage to a new one with a lower rate would then seem to make sense.</p> <p>But what if you're approaching retirement? Is refinancing a smart move when you're planning to leave the workforce in five years or less?</p> <p>Not surprisingly, the answer depends on your unique financial situation and your goal from a refinance. (See also: <a href="http://www.wisebread.com/4-mortgage-secrets-only-your-broker-knows">4 Mortgage Secrets Only Your Broker Knows</a>)</p> <h2>Consider the Time Factor</h2> <p>If your main goal is to reduce your monthly costs, refinancing might make sense. But if you plan on moving from your home shortly &mdash; in, say, less than five years &mdash; then a refinance might not be the best option. That's because refinancing a home loan isn't free. The typical refinance costs thousands of dollars &mdash; money that you'll usually roll into your new loan amount and pay off over time when you make your regular monthly payments.</p> <p>It might take you several years to save enough money each month to recover the closing costs. If you're moving too soon (and retirees often move from their homes sooner than they originally planned), you might not generate enough monthly savings to even pay back those initial closing costs.</p> <p>Then there's the time factor. A refinance, unless you are reducing the term of your loan at the same time, means that you'll be paying off your mortgage for a longer number of years. As a retiree, you might instead prefer to pay off your current mortgage in a shorter amount of time.</p> <p>&quot;One consideration is the length of the term on the new loan,&quot; said Arvin Sahakian, co-founder and vice president of BeSmartee, a start-up designed to help consumers search for mortgage loans online. &quot;When people refinance their mortgage, they are re-setting the loan term and essentially starting over again.&quot;</p> <p>As an example, if you are paying off a 30-year fixed-rate mortgage that you have been making payments on for 15 years, you'll have an additional 15 years left to pay off that loan. If you refinance that loan to a new 30-year one, you've just increased the lifespan of your mortgage by another 15 years. Do you want that monthly payment hovering over you for another 15 years, even if refinancing will result in immediate monthly savings?</p> <p>That's not an easy question to answer, especially when you consider how much of your payments on a new mortgage loan, even one with a lower interest rate, will go toward interest instead of principal.</p> <p>&quot;The first few years of mortgage payments on a new loan are designed to go toward the interest, and less towards the principal,&quot; Sahakian said. &quot;As the years go by, more of the monthly payments go toward the principal, and less toward the interest, so this is another important consideration.&quot;</p> <h2>What the Numbers Say</h2> <p>It's important for every homeowner to crunch some numbers before deciding to refinance. But it's <em>especially</em> important for those nearing retirement who might need to recover their refinancing closing costs in as few months as possible.</p> <p>Say you owe $150,000 on a 30-year fixed-rate mortgage with an interest rate of 5%. Your monthly payment, not including insurance and taxes, will be about $805. If you refinance that same amount to a 30-year fixed-rate loan with an interest rate of 3.95%, your monthly payment will drop to about $711 a month &mdash; a savings of about $94 a month, or $1,128 a year.</p> <p>That sounds good, right? But remember, refinancing can be expensive. Say refinancing that $150,000 costs $4,500 in closing fees. It will take you almost four years to save enough from your refinance to pay back these closings costs. Is that worth it? If you stay in your home for eight years or more, it might be. If you end up moving in five years, it might not be.</p> <p>But say you owe $200,000 on a 30-year fixed-rate loan with an interest rate of 5%. Then your monthly payment, again not counting taxes and insurance, would be about $1,073. If you refinance that $200,000 to a new 30-year fixed-rate loan but at an interest rate of 3.95%, your monthly payment would fall to about $949 a month. That's a savings of $124 a month, or $1,488 a year. If your loan closing cost that same $4,500, it would take you just a bit more than three years to generate enough savings to pay for your closing costs. That shorter time frame might make it more worthwhile for homeowners nearing retirement.</p> <p>There is another factor to consider, though. If you'll absolutely need to reduce your monthly living expenses after you retire, then refinancing might make sense, even if it will take you longer to recover the costs of closing.</p> <p>&quot;Many Americans who retire typically see their retirement income fall to nearly half of what they earned while they worked full time,&quot; Sahakian said. &quot;This is one of the considerations borrowers should account for when making a decision about refinancing. Will they be able to afford the monthly payments associated with the mortgage, insurance, and property taxes on their retirement income?&quot;</p> <p><em>Are you considering a home refinance?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-mortgage-secrets-only-your-broker-knows">4 Mortgage Secrets Only Your Broker Knows</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-you-should-consider-an-adjustable-rate-mortgage">Why You Should Consider an Adjustable-Rate Mortgage</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/quicken-loans-review-competitive-rates-and-good-customer-service">Quicken Loans Review: Competitive Rates and Good Customer Service</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/everything-you-need-to-know-about-freddie-mac-and-fannie-mae">Everything You Need to Know About Freddie Mac and Fannie Mae</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-ways-to-reduce-mortgage-closing-costs">8 Ways to Reduce Mortgage Closing Costs</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing Retirement closing costs home loans interest rates mortgages refinancing Mon, 08 Feb 2016 14:00:06 +0000 Dan Rafter 1649872 at http://www.wisebread.com 5 Sobering Facts About Credit Card Debt http://www.wisebread.com/5-sobering-facts-about-credit-card-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-sobering-facts-about-credit-card-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_credit_card_000081488469.jpg" alt="Woman learning sobering facts about credit card debt" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Credit cards can be very convenient. With minimal effort, you can access a sizable amount of credit to buy anything you wish. Plus, they enable you to handle almost any expense that pops up, even costly ones such as vehicle repairs, urgent home maintenance, or medical emergencies.</p> <p>So, what's the problem with credit cards? Here are five seriously sobering facts to consider.</p> <h2>1. Credit Card Balances Have Grown Explosively</h2> <p>Reliance on credit card debt has grown dramatically in recent decades. In 1976, the total of all revolving debt was around $14 billion dollars, according the Federal Reserve. Over the next few decades, the total climbed to $135 billion in 1986, $450 billion in 1996, $900 billion in 2006, and now stands at nearly one trillion dollars.</p> <p>The huge and growing amount of credit card debit results in millions of people paying billions of dollars on high interest credit card bills, instead of saving and investing for a financially secure future. This has a broader economic impact &mdash; servicing interest payments is a relatively useless economic activity, unlike making actual purchases or investing. If interest rates rise significantly from current historic lows, millions of people could be unable to keep up with their credit payments, resulting in economic chaos.</p> <h2>2. Credit Card Minimum Payments Make You Poor</h2> <p>If you've received a credit card bill, you know that it presents a minimum payment due. Of course you can send in more than the minimum to pay off your balance faster, but many people don't. This results in longer debt servicing and paying significantly more interest to the credit card company.</p> <p>Let's say you have a balance of $5,000 on a credit card account with an interest rate of 18.9%. If you make minimum payments of 4% of the balance, it will take over 11 years and cost over $8,000 to pay off this credit card. If you paid 7% instead of the minimum payment, it would take six years and cost $6,420 to pay off this balance. Paying more than the minimum adds up to significant savings: over $1,500 and five years of difference in this example.</p> <p>If you make only the minimum payment, you could end up making payments on the same credit card for well over a decade!</p> <h2>3. Ridiculous Interest Rates on Credit Cards</h2> <p>According to data from the Federal Reserve, the interest rate on the average <a href="http://www.federalreserve.gov/releases/g19/current/#table2">credit card that assesses interest</a> is 13.70%. Credit card rates can go upwards of 23%, or higher in some cases (for those with bad credit or miss payments resulting in a &quot;penalty APR&quot;).</p> <p>By way of comparison, the current average interest rate on a savings account is 0.06%. This means that you are paying over 200 times more interest on credit card accounts than you receive on a savings account. Credit cards are a very expensive way to borrow money!</p> <h2>4. So Many People Rely on Credit Cards</h2> <p>About 38% of American households carry a credit card balance. This works out to around 45 million households in the richest country on earth. Why do so many people rely on credit card debt when credit card interest is ridiculously high?</p> <p>The reason is simple &mdash; people are living above their means. Credit card financing allows people to buy things they couldn't otherwise afford, but this comes at a high price both in terms of interest payments and in terms of missed opportunities for saving and investing.</p> <h2>5. Credit Card Utilization by Older Consumers</h2> <p>I expected that young people would have the highest credit card utilization, with credit balances decreasing as their income increases and they approach retirement age. This turns out to be the opposite of the current trend.</p> <p>According to surveys by Value Penguin, Millennials (age 18 to 29) and people over 74 have the least credit card debt, with those in the middle age groups having the highest &mdash; an average balance of over $8,000. A Bankrate survey found that only 35% of adults over age 30 don't have credit cards, but this rises to 63% among Millennials.</p> <p>The fact that Millennials are not racking up a lot of credit card debt is encouraging for our economic future. But the fact that those from middle-aged through age 64 have billions of dollars in credit card balances could be a financial crisis in the making. If people do not have enough income at the prime of their careers to avoid credit card borrowing or pay off credit card debt, what is going to happen when they stop working and have much less income?</p> <h2>What to Do About Credit Card Debt?</h2> <p>High levels of credit card debt are an impediment against personal financial stability and a risk to the stability of the overall economy. The more money people spend making debt and interest payments, the less money they have available to build an emergency fund, savings, and investment for the future.</p> <p>But if you do have credit card debt, here are some common-sense tips to help pay off your balance faster:</p> <h3>1. Analyze Your Budget</h3> <p>If your credit card balances are growing, work out a detailed budget to understand how much you have coming in and how much you can afford to spend. Cut unnecessary spending, try to pick up some extra income, and work to exceed the minimum payment amounts to get those balances paid off as soon as possible.</p> <h3>2. Keep Your Credit Rating High</h3> <p>Make payments on time and keep some unused credit available on several accounts. Avoid maxing out all of your cards. A <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">good credit rating</a> will give you options to refinance debt at a lower cost.</p> <h3>3. Find Lower-Cost Loans</h3> <p>You might be able to finance your debt at a lower interest rate using a vehicle other than a credit card. See if you can get a home equity loan or <a href="http://www.wisebread.com/5-tricks-to-consolidating-your-debt-and-saving-money">credit card consolidation loan</a> through your bank or credit union. You might be able to reduce your interest rate by 50% or more.</p> <h3>4. Take Advantage of Balance Transfer Offers</h3> <p>You may be able to <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt">transfer your balance from a high interest rate credit card </a>to one with a much lower interest rate. I commonly see <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">balance transfer offers for 0% interest</a>, but you may have to pay a transfer fee of 3%. Still, this is much better than paying 16% on a balance. Use your time with 0% to pay down your balance as much as possible.</p> <h3>5. Use Cash Instead of Credit Cards</h3> <p>I use a money envelope instead of credit cards to buy food. It is more painful to spend cash, so I spend less. Plus, I stop spending when the cash is gone, so I never exceed my budget.</p> <p><em>What are you doing to to control your credit card usage?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/5-sobering-facts-about-credit-card-debt">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-dirty-secrets-of-credit-cards">The Dirty Secrets of Credit Cards</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/america-is-on-a-roll-5-economic-predictions-for-2016">America Is On a Roll: 5 Economic Predictions for 2016</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">The 5 Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-signs-its-time-to-break-up-with-your-credit-cards">7 Signs It&#039;s Time to Break Up With Your Credit Cards</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-unfounded-credit-card-fears">5 Unfounded Credit Card Fears</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards debt interest rates millennials minimum payments u.s. economy Mon, 25 Jan 2016 14:00:03 +0000 Dr Penny Pincher 1642636 at http://www.wisebread.com 7 Ways Being Debt Free Can Cost You http://www.wisebread.com/7-ways-being-debt-free-can-cost-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-ways-being-debt-free-can-cost-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/cloud_of_debt_000083150391.jpg" alt="Man learning ways being debt free can cost him" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Here at Wise Bread, we generally hate debt. Owing money to banks and credit card companies is usually a guaranteed way of never achieving the financial freedom you want. But there are cases when taking on some debt can be useful, especially as part of a long-term plan.</p> <p>Here are seven times when eschewing debt can be a bad financial move.</p> <h2>1. Market Returns May Be Higher Than Interest Rates</h2> <p>When interest rates are very low and the stock market is booming, you may be missing out on investment gains by choosing to live debt-free. For example, let's say you had $20,000 left on a mortgage with a 3.5% interest rate. If you had the cash, you <em>could</em> pay off your mortgage and avoid paying any additional interest. Or, you could put two-thirds of that money in the stock market and get a good return.</p> <p>There's a chance you'd end up with more cash in the long-run under the second scenario. This is why even super wealthy people are known to mortgage their homes. There is some risk here, especially if you don't have a fixed-rate mortgage.</p> <h2>2. Healthy Economies Rely on Debt</h2> <p>Whether we like it or not, we live in a consumer-driven economy. And one of the key ways for the economy to grow is through people spending. In an ideal world, spending can increase because people are earning more. But it's often credit card debt that fuels much of the growth.</p> <p>While too much personal debt can be a drag on the economy, some nations have found that high savings rates can make the economy sluggish. In fact, there are some nations &mdash; including Germany and China &mdash; that have sought to <em>encourage </em>more spending by their citizens. This is not an invitation to go on a spending spree, but it's worth noting that it helps to have some big spenders in our ranks.</p> <h2>3. You Might Miss Out on Opportunities</h2> <p>It's always best to try and achieve your goals without taking on debt, but sometimes there isn't much choice if you're cash poor and set on pursuing a dream. Taking on a manageable student loan to attend college could be seen as a better decision than not going at all. Borrowing to buy a car so you can make it to a well-paying job might be worth it. Taking out a loan to start a business is a common practice. If you're missing out on opportunities because you're averse to all debt, it may be worth loosening up. Just be careful not to dig yourself a hole you can't get out of.</p> <h2>4. Renting Stinks</h2> <p>There are some people who are so averse to risk that they refuse to even consider taking on a mortgage for a home. That's fine if you have the ability to pay for it all in cash, but very few of us can do that. Buying a home, even if you have to take on a 30-year mortgage, is generally a good long-term financial move, because you're building equity as you make payments. Owning a home is considered a great step on the path to wealth. Just be sure that the payments are easy for you to handle.</p> <h2>5. You Can't Build Credit</h2> <p>There's a weird paradox with credit, which is that you can't be approved for loans or credit cards until you've shown that you can pay back loans and make credit card payments. People who never borrow may have no debt, but they may also have very low credit scores because of a lack of credit history. This means that when they eventually do need a loan, they may end up with a high interest rate &mdash; if they are even approved at all.</p> <p>Credit card debt can be burdensome if you're not careful, but your credit score will rise if you keep at least a <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">modest balance on a credit card</a> and make payments on time. If you pay your credit card balance in full each month, you can still avoid debt and build a credit history.</p> <h2>6. You've Depleted Your Emergency Fund</h2> <p>Let's say you have $12,000 left on a mortgage and $13,000 in the bank. You <em>could</em> pay off the mortgage and celebrate owning your home free and clear. But then you have just $1,000 left, which isn't really enough to cover an emergency. While it may be tempting to try to pay down debt as quickly as possible using any money you have, it's important to maintain a decent-sized emergency fund to handle any unexpected costs from &quot;life events.&quot;</p> <h2>7. Frugal Isn't Always Fun</h2> <p>When you're in your early 20s, it's tempting to go out with friends, travel, and take on new experiences. But when you're young, you're also probably broke. No one wants to be 22, living at home and unable to even go out for as much as a pizza with friends. There's an argument to be made that being <em>too </em>focused on avoiding debt will cost you some good life experiences. Taking on a small amount of debt could be okay when you're young, as long as you understand how it can impact your long-term goals and have a solid plan to be debt-free once you start earning more.</p> <p><em>When has taking on some debt improved your life &mdash; and your finances?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/7-ways-being-debt-free-can-cost-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">The 5 Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-rebuild-your-credit-in-8-simple-steps">How to Rebuild Your Credit in 8 Simple Steps</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-debt-management-questions-youre-too-embarrassed-to-ask">5 Debt Management Questions You&#039;re Too Embarrassed to Ask</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-cool-things-bonds-tell-you-about-the-economy">7 Cool Things Bonds Tell You About the Economy</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/prioritize-these-5-bills-when-youre-short-on-cash">Prioritize These 5 Bills When You&#039;re Short on Cash</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management credit score Economy emergency funds interest rates market returns Fri, 22 Jan 2016 14:00:04 +0000 Tim Lemke 1643167 at http://www.wisebread.com Beware of These Common Debt Consolidation Traps http://www.wisebread.com/beware-of-these-common-debt-consolidation-traps <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/beware-of-these-common-debt-consolidation-traps" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_concerned_paperwork_000082590043.jpg" alt="Man learning to beware of common debt consolidation traps" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You've vowed to eliminate your credit card debt, but your bills are too overwhelming. You're ready to consider a final option: debt consolidation.</p> <p>It's true that consolidating your debts can make it easier to eliminate them. But debt consolidation can come with its own financial traps. Because of these potential pitfalls, consumers should be wary before signing up for debt consolidation. Bruce McClary, vice president of external affairs and public relations for the Washington D.C.-based National Foundation for Credit Counseling, says that sometimes, it makes more sense to consider other options.</p> <p>&quot;Debt consolidation is not always the right choice,&quot; McClary explains. &quot;It is not a free service. And often, you can take care of your debt on your own, if you change your spending habits and take a more disciplined approach to paying off your existing debt.&quot; (See also:&nbsp;<a href="http://www.wisebread.com/5-tricks-to-consolidating-your-debt-and-saving-money">5 Tricks to Consolidating Your Debt and Saving Money</a>)</p> <p>Here are the most common debt consolidation traps to avoid.</p> <h2>1. A Sky-High Interest Rate</h2> <p>In debt consolidation, a company will combine your debts into one single monthly payment that you can afford. In theory, it's a low-stress way to tackle what would otherwise be overwhelming.</p> <p>But even if your monthly payment is lower, this doesn't mean that you won't be spending too much. Some debt consolidation companies charge high interest rates to go along with the new monthly payment plans they set up for their clients. Make sure you ask your debt consolidation company what interest rate they'll charge you. If it seems too high, look elsewhere.</p> <h2>2. High Fees</h2> <p>Debt consolidation isn't free. But some debt consolidation firms soak their clients with especially high fees, either in the form of monthly or upfront charges.</p> <p>Again, make sure you know exactly what fees your debt consolidation company plans to charge you. Request a list of these fees in writing so that there's no confusion. If the firm won't provide this information to you, don't work with it. You want to work with a company that is clear about how much it charges.</p> <h2>3. Consolidating the Wrong Debt</h2> <p>Some forms of debt are worse than others. Credit card debt with high interest rates, for instance, is the bad kind of debt. But debts with low interest rates, such as auto loans or student loans, are generally considered good debt.</p> <p>You might be tempted to consolidate all of your debts into a single monthly payment. But rolling low-interest-rate debts into your monthly payment might be a poor financial decision depending on the interest rate of your new debt consolidation loan.</p> <p>When taking out a debt consolidation loan, focus on your debts with the highest interest rates. Pay off your low-interest-rate debt on your own.</p> <h2>4. Running Up Your Debt Again</h2> <p>Taking out one debt consolidation loan is bad enough. But if you don't change your spending habits, you might find yourself facing overwhelming debt again, even after paying off a debt consolidation loan.</p> <p>Consolidating your debt is treating the results of your bad spending habits. This isn't the same as treating the reasons for your bad spending.</p> <p>Once you've entered debt consolidation, it's time to determine why you ran up your debt in the first place. Maybe you spend when you are anxious. Maybe you overspend in an effort to keep up with your neighbors. Maybe you've never learned how to make and stick to a budget. If you don't address the reasons behind your overspending, you run the real risk of piling up debt yet again.</p> <p><em>Have you tried debt consolidation to eliminate debt? Did it work?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/beware-of-these-common-debt-consolidation-traps">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-a-balance-transfer-offer-a-good-deal">Is a Balance Transfer Offer a Good Deal?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">The 5 Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-dirty-secrets-of-credit-cards">The Dirty Secrets of Credit Cards</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/do-this-if-you-have-too-much-credit-card-debt">Do This If You Have Too Much Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-debt-reduction-mistakes-even-smart-people-make">8 Debt Reduction Mistakes Even Smart People Make</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management consolidation fees interest rates spending habits traps Wed, 20 Jan 2016 14:00:03 +0000 Dan Rafter 1638728 at http://www.wisebread.com 5 Times It's Okay to Close a Credit Card http://www.wisebread.com/5-times-its-okay-to-close-a-credit-card <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-times-its-okay-to-close-a-credit-card" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_credit_card_000054250366.jpg" alt="Woman learning times it&#039;s okay to close a credit card" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Conventional wisdom says that you should never close a credit card account unless you have an overwhelmingly pressing reason to do so.</p> <p>It's true that closing an account can hurt your credit. If you close an old account, it can shorten your credit history, which can then lower your overall credit score. Also, closing an account means that you have less credit available, so the balances you do have will take up a larger percentage of your available credit. This is called your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">credit utilization ratio</a> (an important factor in your overall credit score), and you want that percentage as low as possible.</p> <p>This doesn't mean that you should <em>never </em>close a credit card. Instead, it means that you need to be smart about which accounts you close and when you do so. Here are a few times when it makes sense to consider closing a card. (See also: <a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score?ref=seealso">How to Use Credit Cards to Improve Your Credit Score</a>)</p> <h2>1. Preventing Identity Theft</h2> <p>The more credit cards you have, the greater the danger that one will be compromised and you'll have to deal with identity theft. If you have a card that has been stolen or are anxious about identity theft, consider closing one or more cards to reduce your risk.</p> <p>The accounts most at danger are the ones you don't use very much. If a thief can get hold of one of these numbers, often by compromising a website where you used the card to make a purchase a long time ago, they can sometimes put quite a few charges on the card before getting caught. If identity theft is a worry for you, think about closing these infrequently used accounts first. An even better alternative: Avoid identity theft in the first place by practicing good credit card safety measures, such as only purchasing on secured, trusted sites using secure Wi-Fi.</p> <h2>2. High Interest Rates or High Fees</h2> <p>Cards that cost you money, especially when you aren't getting anything back, can be good candidates for closure. Sometimes, the benefits of a particular card (like one that earns you airline points) can be <a href="http://www.wisebread.com/the-5-best-credit-cards-with-annual-fees">worth the annual fee</a>. However, many people pay more in fees and interest than a card is worth.</p> <p>Before you close a card because of what it costs you, try negotiating with the company. It never hurts to ask for a lower interest rate or a waived fee. The worst the company can do is say &quot;No,&quot; and then you can go ahead and close it.</p> <h2>3. You've Already Made Your Major Purchases</h2> <p>If you're planning a major purchase that will require financing, like a car or a home, wait until that is complete before you cancel any credit card accounts. Since your credit score is almost sure to be at least a little bit higher with the cards contributing, it makes sense to wait to cancel them.</p> <p>Even if canceling your cards won't hurt your credit very much, it could earn you a slightly higher interest rate. While a quarter (or even a tenth!) of a percent may not seem like very much up front, it can mean that you'll pay thousands of dollars more over the life of the loan. That's not worth it!</p> <h2>4. You Have Too Many Cards</h2> <p>While it's generally true that leaving cards open helps your credit, having too many open, in certain scenarios, can actually hurt you. Credit cards are considered revolving credit, which is the worst kind to have. If you have too much, especially in relationship to other types of credit, your score may actually be lower than it would be without a card or two.</p> <p>In addition, it seems likely that people who manually underwrite loans look negatively on having too many cards open at once. This is mostly anecdotal but, if you're going after one of these loans, it may be wise to close down some cards.</p> <h2>5. When You Can't Stop Spending</h2> <p>No matter how much it hurts your credit, you should shut down credit card accounts if having them open is a spending temptation that you can't resist. If freezing or cutting up your cards doesn't work for you, and there isn't another way to stop yourself from building up more and more debt, then cancelling the cards makes sense.</p> <p>This is a last-ditch scenario, but I've known more than one person who faced it. Desperate times call for desperate measures, and sometimes it's better to take the credit score hit rather than continue out-of-control spending.</p> <p><em>Have you ever cancelled a credit card? What made it worth the hit to your credit score?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/sarah-winfrey">Sarah Winfrey</a> of <a href="http://www.wisebread.com/5-times-its-okay-to-close-a-credit-card">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stop-making-these-5-costly-credit-card-mistakes">Stop Making These 5 Costly Credit Card Mistakes</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-ways-to-lower-your-credit-card-interest-rate">7 Ways to Lower Your Credit Card Interest Rate</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-credit-card-truths-you-wish-you-could-tell-your-younger-self">10 Credit Card Truths You Wish You Could Tell Your Younger Self</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">The 5 Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-is-a-good-credit-score-and-why-is-it-important">What Is a Good Credit Score and Why Is It Important?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards cancelling credit score identity theft interest rates overspending Thu, 14 Jan 2016 18:01:02 +0000 Sarah Winfrey 1638125 at http://www.wisebread.com 10 Stocks and Bonds That Will Profit From the Fed Rate Hike http://www.wisebread.com/10-stocks-and-bonds-that-will-profit-from-the-fed-rate-hike <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-stocks-and-bonds-that-will-profit-from-the-fed-rate-hike" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/interest_rate_increase_000020286301.jpg" alt="Finding stocks and bonds that will profit from the fed rate hike" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The Federal Reserve finally did what it's been hinting at for some time, and raised the target on its benchmark rate by a quarter of a percentage point. It's the first interest rate hike after spending much of the last decade with interest rates near zero.</p> <p>Interest rates are still going to be historically quite low, but some investments may decline in value in the short term. After all, it's the low interest rate environment that has <em>partly </em>fueled the rise in stock prices in recent years.</p> <p>That said, it's still very possible to profit even as interest rates go up. There are some market sectors that love higher rates, and in general, a rise in rates is a signal from the Fed that the nation's economy is healthy. (See also:&nbsp;<a href="http://www.wisebread.com/this-is-how-much-the-feds-interest-rate-hike-might-cost-you">This Is How Much the Fed's Interest Rate Hike Might Cost You</a>)</p> <p>Here are ten investments that might respond well as interest rates go up.</p> <h2>1. SPDR S&amp;P Regional Bank ETF [<a href="http://finance.yahoo.com/q?s=KRE">NYSE: KRE</a>]</h2> <p>When interest rates rise, small banks do quite well because more people are willing to increase their cash holdings. This ETF counts many strong small banks in its portfolio, including Bank of the Ozarks and Great Western Bancorp. This ETF has seen a return of more than 13% over the last year, suggesting that the anticipation of higher rates may already be baked into the price. But it's still worth buying.</p> <h2>2. Wells Fargo [<a href="http://finance.yahoo.com/q?s=WFC">NYSE: WFC</a>]</h2> <p>If smaller banks aren't your thing, then take a look at some big banks. Billionaire investor Warren Buffett owns more shares of Wells Fargo than any other company. New loans made by the bank will benefit from the higher rates, as will any existing variable rate loans. Other big banks worth a look include US Bancorp and BNY Mellon.</p> <h2>3. Schwab Short-Term U.S. Treasury ETF [<a href="http://finance.yahoo.com/q?s=SCHO">NYSE: SCHO</a>]</h2> <p>The conventional wisdom is that a hike in interest rates make long-term bonds less attractive, but short-term bonds perform well. Consider that the yield on a two-year treasury note hit a year high recently. Charles Schwab reported that during the three periods when the Fed rose rates since 1990, short-term bonds were the only sector that saw increases each time. This ETF from Schwab has some of the lowests fees on the market, so it's likely a good buy if you're interested in fixed income investments. The iShares Short Treasury Bond ETF is also well regarded.</p> <h2>4. Apple [<a href="http://finance.yahoo.com/q?s=AAPL">NYSE: APPL</a>]</h2> <p>It's the biggest company in the world. It has a very healthy balance sheet. In a time of raising rates and general uncertainty, it's good to hang with companies that have solid margins, lots of cash, and low volatility. Any blue chip stock with a long track record of steady growth is a good buy in this environment.</p> <h2>5. Alphabet [<a href="http://finance.yahoo.com/q?s=GOOGL">NYSE: GOOGL</a>]</h2> <p>Another one of the largest and most stable companies in the world, most likely unaffected by a rise in interest rates. Investing in Google's parent company can help keep you insulated from any market uncertainty over the next few months.</p> <h2>6. MetLife [<a href="http://www.google.com/finance?cid=664378">NYSE: MET</a>]</h2> <p>There are few sectors clamoring for an interest rate hike more than life insurers. These companies rely on interest income to boost their margins, so they generally have not been fans of the low interest rate environment. MetLife is the a largest company in this sector. Prudential and New York Life are also worth a look.</p> <h2>7. Accushares VIX Index ETF [<a href="http://finance.yahoo.com/q?s=VXUP">NYSE: VXUP</a>]</h2> <p>It's not entirely clear how the markets will react to the news of the interest rate bump, but most observers predict some amount of volatility in the short term. You can capitalize on that volatility by buying shares of this ETF that is based on the most common volatility index. It's an esoteric product, and I wouldn't invest my life savings into it, but it may be one way to capitalize on investor uncertainty.</p> <h2>8. Starbucks [<a href="http://finance.yahoo.com/q?s=SBUX">NYSE: SBUX</a>]</h2> <p>If the Fed is raising interest rates, it's sending a signal that it believes the economy is in good shape. And a strong economy means people are doing well enough to afford discretionary items, including that morning cup of coffee. Starbucks is a leader in the restaurant/food area, and should benefit from a strong economy overall.</p> <h2>9. Mastercard [<a href="http://www.google.com/finance?cid=299286">NYSE: MA</a>]</h2> <p>Goldman Sachs put this credit card company on its list of &quot;quality&quot; stocks worth buying in advance of a rate hike, and its reasoning is sound. If the economy is strong in the Fed's eyes, then it's strong enough for people to be buying more goods and services. Companies like Mastercard do better when people go shopping.</p> <h2>10. Chipotle Mexican Grill [<a href="http://finance.yahoo.com/q?s=CMG">NYSE: CMG</a>]</h2> <p>Shares of this burrito eatery have tumbled in the last few months, in part due the company being linked to cases of <em>e.coli</em> around the country. But assuming that the cases aren't indicative of a larger problem with the restaurant, this is a well-regarded company with a solid balance sheet. Chipotle shares should be poised for a rebound with the Fed showing confidence in the nation's economy.</p> <p><em>Will your portfolio be helped or hurt by the Fed's recent rate increase?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/10-stocks-and-bonds-that-will-profit-from-the-fed-rate-hike">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-crucial-things-you-should-know-about-bonds">5 Crucial Things You Should Know About Bonds</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/laddering-for-higher-more-stable-returns">Laddering for higher, more stable returns</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-only-8-rules-of-investing-you-need-to-know">The Only 8 Rules of Investing You Need to Know</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-cool-things-bonds-tell-you-about-the-economy">7 Cool Things Bonds Tell You About the Economy</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-ways-to-invest-50-500-or-5000">The Best Ways to Invest $50, $500, or $5000</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bonds borrowing Fed interest rates investing stocks Thu, 17 Dec 2015 12:00:08 +0000 Tim Lemke 1622171 at http://www.wisebread.com America Is On a Roll: 5 Economic Predictions for 2016 http://www.wisebread.com/america-is-on-a-roll-5-economic-predictions-for-2016 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/america-is-on-a-roll-5-economic-predictions-for-2016" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/child_business_career_000022805836.jpg" alt="Child making economic predictions for America for 2016" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The past year was a good year for the American economy, and many positive <a href="http://www.wisebread.com/america-is-back-4-economic-predictions-for-2015">economic predictions</a> came true. Signs seem to indicate that 2016 will be another good one, as the U.S. will continue to outperform its peers, with GDP growth ranging from 2.1% to 4%, according to data from the International Monetary Fund.</p> <p>Here is an updated look at the economic outlook for the U.S. in 2016 &mdash; including several reasons why our nation is on a roll.</p> <h2>1. Oil Continues to Be Cheap</h2> <p>Gasoline is one of the cheaper buys of 2015 that will likely continue to be affordable throughout 2016. As many economists lower their forecasts for average oil prices next year, U.S. consumers will continue to have more room in their monthly budgets.</p> <p>The U.S. Energy Information Administration currently predicts an average retail price (including taxes) of <a href="http://www.eia.gov/forecasts/steo/">$2.06 per gallon</a> for regular grade gasoline and of $2.52 per gallon for diesel fuel for January, 2016. Lower gas prices also have a positive trickle-down effect on several industries, including the airline and retail sectors. Expect several stocks in those sectors to do well.</p> <h2>2. American Debt Is Smaller</h2> <p>The current average U.S. household credit card debt is down from the high levels of the 2007&ndash;2009 recession. For example, the average debt per U.S. household was $7,421 in 2014, down from $8,832 in 2008.</p> <p>These lower debt levels allow the average consumer to bridge a cash crunch when needed. With more consumers reaching a FICO score of 800 (19.9%) and fewer ones scoring below 550, there is strong evidence that Americans are getting better at handling debt.</p> <h2>3. Millennials Are Buying Homes</h2> <p>Improving credit scores are allowing more Americans to have access to financing.</p> <p>Pundits love to focus on stereotypes when talking about the Millennial generation. But many are missing out on the fact that Millennials are dominating the housing market in several U.S. cities.</p> <p>During the first half of 2015, <a href="http://www.bloomberg.com/news/articles/2015-09-28/the-cities-where-millennials-are-taking-over-the-housing-market">60% of home buyers</a> using a mortgage in Des Moines, Iowa were ages 25 to 34. Other cities where Millennials have the highest share of mortgages are Provo, Utah (49%), Baton Rouge, Louisiana (47%), Pittsburgh, Pennsylvania (47%), and Grand Rapids, Michigan (46%).</p> <p>While 70% of Millennial college graduates are borrowing to pay for their education, they are still able to purchase homes due to two reasons:</p> <p>First, recipients of a four-year degree make an <a href="https://www.whitehouse.gov/sites/default/files/docs/millennials_report.pdf">estimated $570,000 more</a> in lifetime earnings than those who only have a high school diploma, and even recipients of a two-year degree make an estimated $170,000 more. Second, having at least a four-year degree increases the probability of homeownership, no matter the size of your student debt. For example, the probability of homeownership for recipients of bachelor's degrees and master's degrees are <a href="http://www.zillow.com/blog/student-debt-effect-homeownership-182547/">61% and 66%</a>, respectively.</p> <p>As more Millennials are taking out more mortgages, they appear to be very responsible with their monthly payments. The percentage of the U.S. population with delinquency of at least 90 days <a href="http://www.fico.com/en/blogs/risk-compliance/us-credit-quality-continues-climb-will-level/">dropped from 6.4%</a> in April 2014 to 5.1% in April 2015. This can also partly explain the improving FICO score levels.</p> <p>Millennial home purchasing is a sign of improving economic conditions, and starts off a chain reaction of positive effects. For example, a home may need renovations, so a homeowner hires a contractor &mdash; or a kitchen needs more energy efficient appliances, so a buyer visits an electronics store. As Millennials spend, the broader economy benefits.</p> <h2>4. Wages Continue to Increase</h2> <p>In 2015, several American cities enjoyed <a href="http://www.wisebread.com/6-american-cities-with-the-highest-minimum-wage">higher minimum wages</a>, and there will be many more in 2016.</p> <p>Here are some cities and states with scheduled minimum wage bumps for next year:</p> <ul> <li>Berkeley, California: $12.53 per hour in October 1, 2016 (currently $11.00 per hour)</li> <li>Connecticut: $9.60 per hour in January 1, 2016 (currently $9.15 per hour)</li> <li>District of Columbia: $11.50 per hour in July 1, 2015 (currently $10.50 per hour)</li> <li>Honolulu, Hawaii: $8.50 per hour in January 1, 2016 (currently $7.75 per hour)</li> <li>San Francisco, California: $13.00 per hour in July 1, 2016 (currently $12.25 per hour)</li> <li>Vermont: $9.60 per hour in January 1, 2016 (currently $9.15 per hour)</li> </ul> <p>In Vermont, a full-time worker making the minimum wage would make $19,032 in 2015 and $19,968 in 2016, assuming no overtime and excluding other income, such as tips. That has the strong potential of improving the living conditions of workers who depend on the minimum wage to make a living.</p> <h2>5. U.S. Interest Rates Will (Finally!) Go Up</h2> <p>2015 was supposed to be the year that the Federal Reserve would raise interest rates.</p> <p>However, as Yogi Berra once said, &quot;It ain't over, 'til it's over.&quot; Consumer prices <a href="http://www.bls.gov/news.release/pdf/cpi.pdf">increased in October 2015</a> after two straight months of declines. Add the appreciation of the U.S. dollar against other currencies and a jobless rate that is consistent with full employment to a moderate inflation increase, and you get a very likely chance that the U.S. Federal Reserve could finally increase interest rates this December 16, 2015.</p> <p>In the event that Janet Yellen, chair of the U.S. Federal Reserve, decides to hold on off to an interest rate hike, there's a slim chance that she will delay liftoff beyond early 2016.</p> <p><em>Do you expect 2016 to be better for the economy &mdash; and your pocketbook?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/america-is-on-a-roll-5-economic-predictions-for-2016">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/best-of-personal-finance-credit-where-credit-is-due-edition">Best of Personal Finance: Credit Where Credit Is Due Edition</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-sobering-facts-about-credit-card-debt">5 Sobering Facts About Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/funding-your-401k-when-youre-in-debt">Funding your 401(k) when you&#039;re in debt</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/never-borrow-money-for-these-5-buys">Never Borrow Money for These 5 Buys</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-things-i-learned-about-money-after-getting-married">8 Things I Learned About Money After Getting Married</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance debt gas prices housing market interest rates minimum wage u.s. economy Tue, 15 Dec 2015 14:00:03 +0000 Damian Davila 1619181 at http://www.wisebread.com 4 Mortgage Secrets Only Your Broker Knows http://www.wisebread.com/4-mortgage-secrets-only-your-broker-knows <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-mortgage-secrets-only-your-broker-knows" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/buying_new_home_000073682313.jpg" alt="Learning mortgage secrets only your broker knows" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Taking out a mortgage loan to buy a home is a huge investment &mdash; probably the biggest you'll ever make. That's why it's important to cut as many costs of applying for a mortgage loan as possible. Who knows best how to reduce these costs? Mortgage lenders, of course.</p> <p>Here are four secrets that your lender should be sharing with you. Knowing these tips can save you big money.</p> <h2>1. Close Your Loan at the End of the Month</h2> <p>It doesn't matter whether you close your mortgage loan on the fifth day of the month or the 28th, right? Wrong.</p> <p>Rakesh Gupta, director of ARG Finance, says that borrowers who close near the end of the month will reduce the amount of prepaid interest they need to pay with their first mortgage payment. This one simple strategy could save you hundreds of dollars.</p> <p>&quot;There is complete liberty from the lender's end in letting you choose the day of the month on which you wish to close,&quot; Gupta said. &quot;But does he tell you that? He doesn't. He asserts you to close as soon as possible.&quot;</p> <p>Here's an example: If you close on November 5 and your first mortgage payment is due after January 1, your first payment will, of course, include the interest that accrued in December. But it will also include the interest accrued in November. If you close November 5, that's 26 days of interest.</p> <p>But if you close on November 27, you will only pay three days of interest for that month. If your interest comes out to $25 a day, closing on November 5 will cost you $650 in November interest on your first payment. If you close on November 27, it will cost you just $75.</p> <h2>2. No One Really Knows Where Interest Rates Are Heading</h2> <p>Your mortgage lender should be studying the market, and should have a rough idea of whether mortgage interest rates will be going up or down in the near future. But even the savviest lender can't tell you exactly what interest rates will do in the next week or month. No one can.</p> <p>That's why Nicholas Kensington with Scottsdale Real Estate says that if your lender quotes you a rate that you think is a good one, you should pay to lock it in place.</p> <p>&quot;Rates will end up fluctuating constantly,&quot; Kensington said. &quot;If you're out there getting quotes, that doesn't mean you're out there getting locked-in rates until you ask them to lock that rate. Don't make the assumption that anything is locked in until it's in writing.&quot;</p> <p>If you lock your interest rate, it will remain in place even if rates rise &mdash; or, on the downside, if they fall &mdash; after your lock. Make sure you know how long your lender is locking in your rate. It might be for 30 days, or it might be for 60. Make sure to get the specifics in writing.</p> <h2>3. No-Cost, No-Point Loans Don't Really Exist</h2> <p>You might hear lenders advertise no-cost, no-point mortgage loans. But Casey Fleming, author of <a href="http://www.amazon.com/gp/product/0615980708/ref=as_li_tl?ie=UTF8&amp;camp=1789&amp;creative=390957&amp;creativeASIN=0615980708&amp;linkCode=as2&amp;tag=wisbre03-20&amp;linkId=2O6XPT6EBQZGARI3">The Loan Guide: How to Get the Best Possible Mortgage</a>, says that there really is no such thing as a no-cost mortgage loan. Instead, most lenders who advertise such loans will roll the costs of originating their mortgages into your interest rate. They'll charge you a higher rate for the &quot;no-cost&quot; loan, Fleming said.</p> <p>To avoid falling for this trick, make sure you know how much you are paying for your loan, even if lenders advertise it as a no-cost one.</p> <p>&quot;Ask for the total cost of financing over the holding period of your loan for several options, including rolling the costs into the interest rate versus no points versus paying points, and choose the lowest cost,&quot; Fleming said.</p> <h2>4. Refinancing Doesn't Always Make Sense &mdash; Even If Your Payment Falls</h2> <p>Fleming says that too many homeowners automatically decide to refinance if the drop in their monthly mortgage payment allows them to pay back the costs of their refinance in a short period of time, say three years or less.</p> <p>This is not always a sound financial strategy, and too many lenders ignore this fact, Fleming said.</p> <p>If you save $225 a month on your mortgage payment after refinancing, it might take you just two-and-a-half years to pay back the closing costs. But this payback analysis ignores the increase in your loan's term and the restarting of the amortization cycle, Fleming said.</p> <p>Say you've paid off 14 years on your 30-year fixed-rate loan. If you refinance to another 30-year loan, even one with a far lower interest rate, you might pay more over time because you are, essentially, replacing a mortgage that has 16 years to pay off with one that would require 30.</p> <p>At the same time, the amortization process starts over. When you first start paying off a home loan, the majority of your payment goes toward paying off interest. By the time you're on year 14 of your 30-year loan, more of your payment will go toward paying down your mortgage's principal balance, instead. If you refinance that 30-year loan, most of your payments again will go toward interest.</p> <p>&quot;Look at the total cost of financing over your anticipated holding period for both your existing loan and the proposed loan, including costs, and choose the lower,&quot; Fleming said.</p> <p><em>Have you taken advantage of any of these mortgage tricks?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/4-mortgage-secrets-only-your-broker-knows">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement">Is it Safe to Re-Finance Your Home Close to Retirement?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-times-a-refinance-is-the-wrong-move">3 Times a Refinance Is the Wrong Move</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/choosing-the-right-mortgage-loan-15-or-30-years">Choosing the Right Mortgage Loan: 15 or 30 Years?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-only-5-rules-of-home-buying-you-need-to-know">The Only 5 Rules of Home Buying You Need to Know</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/everything-you-need-to-know-about-freddie-mac-and-fannie-mae">Everything You Need to Know About Freddie Mac and Fannie Mae</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing closing costs interest rates lenders mortgage loan refinancing Secrets Mon, 14 Dec 2015 14:01:05 +0000 Dan Rafter 1619297 at http://www.wisebread.com Do This If You Have Too Much Credit Card Debt http://www.wisebread.com/do-this-if-you-have-too-much-credit-card-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/do-this-if-you-have-too-much-credit-card-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_stressed_finances_000062304938.jpg" alt="Couple learning what to do with too much credit card debt" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Your credit cards are maxed out and you're feeling the pressure. You're stressed and need to make a change. You're not alone.</p> <p>According to 2015 debt statistics released by NerdWallet, the average U.S. household carries just over $16,000 of credit card debt, and that number continues to climb. Here's how to overcome the stress of having too much credit card debt &mdash; and finally get a grip on your finances.</p> <h2>1. Stop Adding to the Debt Mountain</h2> <p>The first step towards regaining control of your credit card is to stop adding to the debt mountain. Cut up your credit cards, hide them away, freeze them in water &mdash; in short, do whatever you can to stop increasing the balances. If you've been relying on credit to pay essential bills, it becomes extra important to prioritize spending. Consider negotiating payment plans with your utility company, re-financing (or downsizing) your home, or other means of bringing your essential costs within budget.</p> <p>The most important part about handling too much credit card debt is to stop the bleeding in the first place. Then you can take additional measures to regain control.</p> <h2>2. Negotiate a Lower Interest Rate</h2> <p>Now that you've stopped using your credit cards, it's time to request a lower interest rate. One quick phone call could help you save hundreds of dollars in interest payments over the life of your credit card balance.</p> <p>Not all credit card companies will be open to lowering your interest rate, but it never hurts to ask. Remind them of your good standing as a customer, how long you've been with them, and any other things that may set your account apart. You can use this as leverage to get the best rate possible.</p> <p>If you're still not able to secure a lower rate, consider whether transferring some or all of your balances to a new, lower-rate credit card (<a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">ideally one with 0% APR</a>) can help. Keep in mind that balance transfers carry a cost, so any interest rate savings would need to outweigh this fee.</p> <p>See also: (<a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt">When Should You Do A Balance Transfer to Pay Down Credit Card Debt?</a>)</p> <h2>3. Work Out a Payment Plan</h2> <p>If you negotiate a lower interest rate, and find that you still just can't pay the minimum payment every month, it's time to review other options. You can start by asking for a deferment on your payments, or negotiate a new payment plan with the credit card company. Most companies are more than happy to receive any payment at all versus having a non-paying account on their books.</p> <h2>4. Limit Discretionary Spending</h2> <p>You've stopped overspending, negotiated a lower interest rate and better payment plan, so now it's time to limit your discretionary spending. This will help you make larger payments each month, which means getting rid of your debt faster, and paying less interest.</p> <p>For extra motivation and discipline, consider joining spending challenges &mdash; these range from going on a 14-day spending diet, to a 60-day cash spending challenge, to a year-long shopping ban. The point is to start out with small spending habit changes, evaluate your budget along the way, and allocate any extra savings towards your debt.</p> <h2>5. Earn Extra Income Towards Debt</h2> <p>Ask anyone who's rid themselves of debt what their secret is, and they'll likely say it was earning extra money as a way of paying off their credit card debt faster. There's only so much you can do to limit your spending &mdash; but earning extra money is a higher gear toward debt reduction.</p> <p>Seek out opportunities that allow you to earn an extra bit of money. Yes, your time may be constrained. If so, set your specific dollar amount goals, and limit your extra work to that number. Allocate all the extra funds towards your credit cards, and soon you'll have made a significant dent in your debt.</p> <p><em>How do you stay in front of your credit card debt?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-smith">Carrie Smith</a> of <a href="http://www.wisebread.com/do-this-if-you-have-too-much-credit-card-debt">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">The 5 Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-dirty-secrets-of-credit-cards">The Dirty Secrets of Credit Cards</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt">The Fastest Method to Eliminate Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-youve-crossed-from-healthy-debt-to-problem-debt">8 Signs You&#039;ve Crossed From &quot;Healthy&quot; Debt to &quot;Problem&quot; Debt</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/a-comprehensive-guide-to-the-debt-snowball-method-0">A Comprehensive Guide to the Debt Snowball Method</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management downsizing interest rates overspending payment plans Thu, 03 Dec 2015 12:00:39 +0000 Carrie Smith 1617567 at http://www.wisebread.com How to Pay Less Interest on Your Credit Card Debt http://www.wisebread.com/how-to-pay-less-interest-on-your-credit-card-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-pay-less-interest-on-your-credit-card-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/000060969640.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you&rsquo;ve got credit card debt, it may be hard to see the light at the end of the tunnel. Each month your payments go to reducing the debt, but it also goes to interest. And if you&rsquo;re like most people with sky-high credit card debt, your interest rate is sky-high as well. If you can get approved, <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt">transferring your balance</a> to a credit card with a lower interest rate or one with a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">0% Intro APR on balance transfers</a> can help. But if you can&rsquo;t do that, a personal loan might be the solution. (See also: <a href="http://www.wisebread.com/should-you-use-peer-to-peer-lending-to-pay-down-credit-card-debt?ref=seealso">Should You Use Peer-to-Peer Lending to Pay Down Credit Card Debt?</a>)</p> <h2>Using Personal Loans to Tackle Credit Card Debt</h2> <p>Banks and credit unions might be willing to approve you for a personal loan with a lower interest rate than those attached to your credit card debt. But there are some warnings here: It&rsquo;s not always easy to qualify for a personal loan if you&rsquo;re already struggling with high credit card bills.</p> <p>Secondly, if you don&rsquo;t change your spending habits, the odds are high that you&rsquo;ll run your credit card debt up again after taking out a personal loan to pay it off. Then, you&rsquo;ll be stuck with your new credit card debt <em>and</em> a personal loan to pay off.</p> <p>Make sure that if you are getting new credit to help pay down debt, you have created a plan for spending that doesn&rsquo;t include racking up new debt on your old credit cards.</p> <p>Personal loans can be a good alternative. They usually come with lower interest rates than credit cards, so it costs less over the long haul to pay these back. In essence, when you take out a personal loan, you&rsquo;ll be swapping credit card debt that comes with higher interest rates for the same amount of debt at more reasonable rates.</p> <p>You still have to pay your debt back &mdash; it just doesn&rsquo;t generate as much interest each month, which means you can get rid of your debt faster.</p> <h2>How to Find Personal Loans</h2> <p>If you think a personal loan might be a good fit for you, here are some places to start.</p> <p><a href="http://sofi.com/wisebreadPL">SoFi</a> has some of the lowest rates available for personal loans, starting at 5.50% for fixed and 4.05% for variable. There are no origination fees like many peer to peer loans and you can choose from three, five, or seven-year terms. They also provide unemployment protection which allows you to pause your payments while you&rsquo;re looking for a new job. <a href="http://sofi.com/wisebreadPL">Click here to learn more about SoFi personal loans</a>.</p> <p><a href="http://www.jdoqocy.com/click-2822544-12188828-1431034321000">Upstart</a> looks beyond your credit score and income when underwriting loans. They take into account the college you attended, area of study, academic performance, and even work history. This offers investors more information to decide to approve a loan and borrowers the opportunity to show more evidence of their ability to pay back the loan. APR starts as low as 4.66% but they only offer three-year terms.</p> <p><a href="http://www.dpbolvw.net/click-2822544-11789034-1427835327000">Avant</a> offers personal loans as low as $1,000 up to $35,000. Their APR starts on the high side, at around 9.95% for loans between 24&ndash;60 months. There are no origination fees.</p> <p><a target="_blank" href="http://track.linkoffers.net/a.aspx?foid=26230639&amp;fot=9999&amp;foc=1" rel="nofollow">PersonalLoans.com</a> provides access to potential lenders for various types of loans, such as peer to peer loans, personal installment loans, and bank personal loans. They send your loan application to their affiliates and if approved, you can review the agreement and decide whether to accept.</p> <p><a target="_blank" href="http://track.linkoffers.net/a.aspx?foid=22964539&amp;fot=9999&amp;foc=1" rel="nofollow">Prosper</a> is the original peer to peer loan site, with APRs starting at 5.99% for loans $2,000&ndash;$35,000. Their competitor is Lending Club so it might be helpful to compare rates between the two. Keep in mind that there are often origination fees associated with these types of loans.</p> <p><a target="_blank" href="http://track.linkoffers.net/a.aspx?foid=22949027&amp;fot=9999&amp;foc=1" rel="nofollow">Lending Club</a> is a peer to peer marketplace that matches borrowers with investors. For some people with low credit scores, this may be the best option to get a personal loan, since some investors may be willing to take on higher risk loans than traditional banks. Keep in mind there are origination fees.</p> <p><a target="_blank" href="http://track.linkoffers.net/a.aspx?foid=26228790&amp;fot=9999&amp;foc=1" rel="nofollow">CircleBack Lending</a> offers personal loans up to $35,000 with APR as low as 5.96%. Origination fees are between 0.99%&ndash;2.99%. The investor pool is a bit different than Lending Club and Prosper. They use institutional investors.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/how-to-pay-less-interest-on-your-credit-card-debt">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">The 5 Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-dirty-secrets-of-credit-cards">The Dirty Secrets of Credit Cards</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-a-balance-transfer-offer-a-good-deal">Is a Balance Transfer Offer a Good Deal?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/oops-i-maxed-out-my-credit-cards-now-what">Oops — I Maxed Out My Credit Cards. Now What?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards">The Best Low Interest Rate Credit Cards</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Debt Management interest rates personal loans Thu, 19 Nov 2015 05:14:09 +0000 Dan Rafter 1615248 at http://www.wisebread.com 3 Times a Refinance Is the Wrong Move http://www.wisebread.com/3-times-a-refinance-is-the-wrong-move <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-times-a-refinance-is-the-wrong-move" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/000041245128.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It seems that everyone &mdash; your neighbor, brother-in-law, boss &mdash; has a lower interest rate on their mortgage loan than you do. And that's probably not surprising, given that mortgage rates have fallen to historic lows, with rates in the mid to high 3% range for 30-year, fixed-rate loans.</p> <p>That means it's <a href="http://www.wisebread.com/refi-shy-how-to-determine-if-now-is-the-time-to-refinance">time for you to refinance</a>, right? Not necessarily.</p> <p>A refinance doesn't always make sense, even if it will reduce your interest rate by more than a point. Several factors play a role in whether a refinance is the right choice: the cost of refinancing in your area, your current interest rate, the amount of time you plan to spend in your home, and how much of your existing mortgage you've already paid off.</p> <p>Too many homeowners, though, only pay attention to how much their rate might drop. Peter Grabel, managing director with Luxury Mortgage Corp. in Stamford, Connecticut, says that this is the wrong approach.</p> <p>&quot;Deciding whether to go ahead with a refinance requires not just an analysis of how much you might save each month, but also a look at your entire life,&quot; Grabel said. &quot;You need to look at your age, your income, your future plans. You need to take on a real study of your life and your goals before deciding whether refinancing makes sense.&quot;</p> <p>Here are three times when a refinance might not be the smart choice.</p> <h2>1. Your Rate Won't Drop Enough to Recover Refi Costs</h2> <p>Refinances aren't free. The Federal Reserve Board estimates that a refinance can cost 3% to 6% of your loan's outstanding balance in closing costs. If your rate doesn't drop by enough, you might not save enough money each month to recover these closing costs for four years or more.</p> <p>Consider this example: You are paying off a $200,000 30-year, fixed-rate mortgage at an interest rate of 4.5%. Your monthly payment at this rate will be about $1,013, not including whatever you pay for insurance and property taxes.</p> <p>You decide to refinance. When you approach a lender, you have a remaining balance on your loan of $190,000. You qualify for an interest rate of 4% for your new 30-year, fixed-rate mortgage. At that rate, your monthly payment will fall to about $907, again not including insurance and taxes. You'll be saving about $106 a month, or about $1,275 a year.</p> <p>But say your refinance costs 3% of your outstanding loan balance of $190,000. That comes out to $5,700 in closing costs. At $1,275 in savings a year, it will take you nearly four-and-a-half years to pay back the costs of the transaction.</p> <p>And remember, that's at the low end of the Federal Reserve Board's estimate when it comes to refinancing costs. Grabel said that homeowners pay different refinancing costs in different parts of the country. So you might pay more to close your refinance, which would mean an even longer payback time.</p> <p>If your payback time is too long? A refinance might not make sense. Especially if...</p> <h2>2. You Plan to Move Soon</h2> <p>Refinancing makes more sense for owners who plan to live in their residences for at least five years. These owners plan to stay put long enough to enjoy more months of savings after they've recovered their closing costs.</p> <p>Grabel recently counseled a couple to skip a refinance. Why? The couple was ready to have their second child and expected to move to a larger home in one or two years. Grabel calculated that the break-even point on their refinance would come a year after they closed it. If this couple did move that soon after hitting this point, the costs and the work involved in a refinance &mdash; you'll need plenty of paperwork to close one &mdash; wouldn't be worth it.</p> <h2>3. You're Too Far Into Your Existing Mortgage</h2> <p>Here's what homeowners sometimes don't consider: In the early days of your mortgage loan, most of your monthly payment goes toward paying off interest and little to actually reducing your principal, the amount of money you originally borrowed.</p> <p>But as the years pass, you slowly begin paying off more principal than interest each month. That's a good thing.</p> <p>When you refinance, though, you start over with a new mortgage. This means that most of your monthly payments will again go toward paying off interest instead of paying down your principal balance.</p> <p>Starting over might not matter much when you've only been paying off your loan for a year or two. But if you're eight, 10, or 15 years into your loan? Starting over means that you'll be paying much more interest over the lifetime of your new loan.</p> <p>You'll also reach the end of your loan later in life. Say you refinance to a new 30-year, fixed-rate mortgage when you are 35. If you take the full three decades to pay off this new loan, you'll be 65 before you make your last payment.</p> <p>This is why Grabel recommends that homeowners who have paid off a significant portion of their existing mortgages take out new loans with shorter terms. Instead of taking out a 30-year mortgage, it might make more sense to refinance to a 15-year or 20-year loan. This way, you'll pay off your loan faster and you won't pay as much interest over the life of your loan.</p> <p>Again, though, the decision requires an in-depth look at your own financial goals.</p> <p>&quot;Maybe cash flow is an issue,&quot; Grabel said. &quot;Then you'd want to refinance to the loan that gives you the lowest monthly payment. That'd usually be a 30-year loan. But if you are more interested in the lifetime costs of your mortgage, then going with a shorter-term loan that doesn't come with as much interest is the way to go.&quot;</p> <p><em>Have you re-fied lately? What was your break even?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/3-times-a-refinance-is-the-wrong-move">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/choosing-the-right-mortgage-loan-15-or-30-years">Choosing the Right Mortgage Loan: 15 or 30 Years?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-what-to-do-if-you-cant-afford-your-mortgage-payment">Here&#039;s What to Do If You Can&#039;t Afford Your Mortgage Payment</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement">Is it Safe to Re-Finance Your Home Close to Retirement?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-secrets-to-refinancing-an-underwater-mortgage">7 Secrets to Refinancing an Underwater Mortgage</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-mortgage-secrets-only-your-broker-knows">4 Mortgage Secrets Only Your Broker Knows</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing equity interest rates loans mortgage owning a home refinancing Mon, 02 Nov 2015 13:15:15 +0000 Dan Rafter 1603197 at http://www.wisebread.com