interest rates http://www.wisebread.com/taxonomy/term/1797/all en-US Don't Ignore These 4 Things Before Refinancing Your Student Loans http://www.wisebread.com/dont-ignore-these-4-things-before-refinancing-your-student-loans <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/dont-ignore-these-4-things-before-refinancing-your-student-loans" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/beautiful_woman_thinking_74303951.jpg" alt="Woman not ignoring things before refinancing student loans" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The average American with student loans has approximately $30,000 in debt, and makes a monthly payment of&nbsp;<a href="http://www.brookings.edu/research/papers/2014/06/19-typical-student-loan-debt-akers">nearly $250</a>. With interest rates sometimes reaching as high as 8%, many people struggle to bring down the balance. One popular solution is to&nbsp;<a href="http://www.wisebread.com/should-you-refinance-your-student-loan">refinance your loans</a>, getting a lower interest rate or lower monthly payment with a different repayment term. For some people, this can be an excellent way to make progress on eliminating their debt. For others, it can be a short-term option that ends up causing more problems later on.</p> <h2>What Is Refinancing?</h2> <p>If you have federal or private student loan debt at a high interest rate, you can refinance your debt by taking out a new loan from a&nbsp;<a href="http://www.wisebread.com/6-things-every-college-student-must-know-about-private-student-loans">private lender</a> to cover your entire current balance. You use that money to pay off your current debt, then make payments at a lower rate or different repayment term on the new loan.</p> <p>If you have high-interest debt, refinancing can be a way to save you thousands over the course of your loans. When you are researching your options, it is important to look at offers from multiple lenders to ensure you are getting the most competitive interest rate and terms. <a href="https://lendedu.com/">LendEDU</a> is a site that allows you to compare multiple offers in one place to get the most attractive loan that meets your needs.</p> <h2>4&nbsp;Factors to Consider Before Refinancing</h2> <p>While refinancing student loans is a good decision for many people, there are factors you need to consider before you sign any agreement.</p> <h3>1. Interest Rates</h3> <p>When refinancing your debt, you will have the option of choosing a variable or fixed interest rate. Variable rates as low as 2% are available. However, they can change every year and can go as high as 8% to 10%. While fixed rates are often slightly higher than the initial variable interest rate, (usually they are about 3%), that interest rate is guaranteed not to increase over the course of your debt. If you have a small amount you can pay off quickly, a variable rate can make sense. However, if you need five to 10 years to pay off your loans, a fixed rate is more secure.</p> <h3>2. Deferment Options</h3> <p>If you have federal student loans, you have the ability to defer your debt if you run into economic hardship, such as if you lose your job. When you refinance with a private lender, you may end up losing that benefit since some companies do not offer deferment options. Make sure you understand their policies regarding economic hardships to ensure you're prepared for the worst-case scenario.</p> <h3>3. Loan Terms</h3> <p>When you refinance, your monthly payment can be cut in half. While that looks great on paper and it frees up money in your budget, you actually will end up paying much more over the length of your loan. To get the payment so low, your repayment term is extended from the standard 10 years to 20 or more. Over the duration of your loan, you can end up paying thousands more in interest. If you opt for an extended repayment term, assess your budget every year. As you move up the corporate ladder and get a better salary, you can increase your monthly payments and pay the debt off more quickly, saving yourself money.</p> <h3>4. Prepayment Penalties</h3> <p>Some private lenders have prepayment penalties, meaning you will owe a fee if you pay off your new loan early. In some cases, the fee may be small, but for some companies, the cost might be prohibitive. Make sure you check if there are any prepayment penalties ahead of time.</p> <p>For some, refinancing student loans can be a great way to save money and pay down the debt faster. It can be a good strategy to get a lower interest rate or to get a more affordable monthly cost. By considering these four factors, you can ensure you are informed and empowered to make the best decision for you.</p> <p><em>Have you refinanced student loans? Has it worked out for you?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/kat-tretina">Kat Tretina</a> of <a href="http://www.wisebread.com/dont-ignore-these-4-things-before-refinancing-your-student-loans">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/3-private-lenders-that-can-really-save-you-money-on-your-student-loans">3 Private Lenders That Can Really Save You Money on Your Student Loans</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/cancel-student-loans-to-save-and-receive-an-interest-free-120-day-loan">Cancel Student Loans to Save — and Receive an Interest-Free 120-Day Loan</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-sobering-facts-about-student-loan-debt">5 Sobering Facts About Student Loan 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/4-times-student-loan-refinancing-can-save-you-big">4 Times Student Loan Refinancing Can Save You Big</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-ways-to-travel-when-you-have-student-loans">6 Ways to Travel When You Have Student Loans</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Education & Training deferment interest rates penalties private lenders refinancing repayment student loans terms Thu, 18 Aug 2016 10:00:16 +0000 Kat Tretina 1774333 at http://www.wisebread.com 5 Ways to Prevent a Debt Spiral http://www.wisebread.com/5-ways-to-prevent-a-debt-spiral <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-ways-to-prevent-a-debt-spiral" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/tablet_credit_card_92649335.jpg" alt="Woman learning ways to prevent debt from spiraling" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Do you dread opening that credit card statement each month? You're not alone.</p> <p>The big challenge with <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">credit card debt</a> is that it grows quickly thanks to the high interest rates attached to it &mdash; rates as high as 21%. If you carry a balance on your credit cards each month, this can mean that your debt can quickly spiral out of control.</p> <p>But there are steps that you can take to keep your credit card debt from becoming overwhelming. Here are five moves that can help keep that credit card debt under control while you gradually pay it down.</p> <h2>1. Pay More Than the Minimum</h2> <p>The best move when dealing with high credit card debt? Always pay more than your required minimum monthly payment. Otherwise, your debt will continue to grow, thanks to those high interest rates. (See also: <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=article">Credit Cards with Low Interest Rates</a>)</p> <p>Paying more than the minimum will greatly reduce both the time it takes you to <a href="http://www.wisebread.com/5-day-debt-reduction-plan-pay-it-off?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">pay off that debt</a> and the interest that you'll pay on it. Even if you can only pay $100 or $50 more each month, do it.</p> <h2>2. Stop Spending</h2> <p>This is an obvious one, but if you want to keep your debt from spiraling, stop adding to it. Move to spending cash until you can reduce your credit card debt. It's tempting to pull out your plastic to pay for that new computer or video game. But instead, save up the money first and <em>then</em> make your purchase. Remember, every time you make a purchase with your credit card, you are making it even more difficult to pay down that debt.</p> <h2>3. Make a Plan</h2> <p>You'll struggle to control your credit card debt if you don't first draft a plan to deal with it. One option? Target the credit card with the lowest amount of debt. Make extra payments each month on that card until it's paid off. You can then move on to the card with the next highest amount of debt, making extra payments on it.</p> <p>Or, if you prefer, follow the same strategy but start with the card with the highest interest rate, making extra payments on it each month until its balance hits zero. Then move on to the card with the next highest interest rate. (See also: <a href="http://www.wisebread.com/snowballs-or-avalanches-which-debt-reduction-strategy-is-best-for-you?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=article">Snowballs or Avalanches: Which Debt Reduction Strategy Is Best for You?</a>)</p> <p>Finally, if you can commit to a certain time frame to pay off your debt, a <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">balance transfer is a great tool</a> for getting rid of debt. Just <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">choose your balance transfer credit cards</a> wisely.</p> <p>Make sure to not close the cards that you pay off. Doing that will actually cause your FICO credit score to fall. Instead, keep the cards open but only use them for purchases that you can pay off in full each month.</p> <h2>4. Cut Unnecessary Expenses</h2> <p>If your <a href="http://www.wisebread.com/oops-i-maxed-out-my-credit-cards-now-what?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">credit card debt is out of control</a>, you need to make paying it down a priority. One way to do this is to free up extra money each month by cutting down on unnecessary expenses. This could mean reducing the number of times you eat out each month and using those extra dollars on your monthly credit card payments. It could mean ending a gym membership. You can exercise without belonging to a gym, after all.</p> <p>Just make sure that when you reduce an unnecessary monthly expense that you use this money to whittle down your credit card debt.</p> <h2>5. Tackle the Reasons Behind Your Credit Card Debt</h2> <p>The final step in controlling your credit card debt might be the most difficult: You need to determine why you ran up so much debt. What were the reasons behind your excessive debt?</p> <p>If you don't figure out why you abused your cards, you run the risk of running up your credit card debt again after you pay it off. If you want to keep your credit card debt from ever spiraling out of control again, you need to take a close look at your negative spending habits and change them &mdash; permanently.</p> <p><em>How do you keep your credit card debt from spiraling?</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/5-ways-to-prevent-a-debt-spiral">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-7"> <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-day-debt-reduction-plan-pay-it-off">5-Day Debt Reduction Plan: Pay It Off</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/8-debt-reduction-mistakes-even-smart-people-make">8 Debt Reduction Mistakes Even Smart People Make</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/12-reasons-your-debt-isnt-diminishing">12 Reasons Your Debt Isn&#039;t Diminishing</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-simple-way-to-decide-which-credit-card-to-pay-off-first">The Simple Way to Decide Which Credit Card to Pay Off First</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/how-to-manage-your-debt-in-10-minutes-a-week">How to Manage Your Debt in 10 Minutes a Week</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management avalanche method interest rates monthly payments saving money snowball method Thu, 11 Aug 2016 09:00:04 +0000 Dan Rafter 1769336 at http://www.wisebread.com 4 Reasons Millenials Should Invest in a Home http://www.wisebread.com/4-reasons-millenials-should-invest-in-a-home <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-reasons-millenials-should-invest-in-a-home" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_moving_boxes_43085150.jpg" alt="Millennial couple deciding to invest in a home" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you believe popular culture, most Millennials don't want to buy homes and would rather rent. But the numbers suggest otherwise. The National Association of Realtors found that in 2015, Millennials made up 35% of all homebuyers, up from 32% in 2014. No other age group represented a bigger percentage of buyers last year.</p> <p>If you're a Millennial who wants to make the jump from renting to owning, congratulations: There are several reasons why owning a home is a smart financial move for younger buyers.</p> <h2>Owning a Home Is an Investment</h2> <p>No one can guarantee that the home you buy will have increased in value by the time you're ready to sell. But the odds are high that it will.</p> <p>Just look at the most recent sales statistics released by the National Association of Realtors: The median existing-home price across the nation stood at $247,700 in June. That was up 4.8% from June of 2015, when that number stood at $236,300. This June marked the 52nd consecutive month that the median price rose.</p> <p>Just remember that price increases, though possible, aren't guaranteed. Plenty of people who bought homes in 2005 and 2006, before the housing market began its crash in 2007, still owe more on their mortgage loans than what their homes are worth. Many of these homes still are worth less today than what they sold for back then.</p> <h2>Interest Rates Are Still Low</h2> <p>If you're like the vast majority of buyers, you'll need a mortgage loan to finance the purchase of a home. Borrowing mortgage money today, though, is affordable thanks to historically low mortgage interest rates.</p> <p>According to the Freddie Mac Primary Mortgage Market Survey, the average interest rate on a 30-year, fixed-rate mortgage loan stood at 3.45% for the week ending July 21. For a 15-year, fixed-rate loan, that rate stood at 2.75%. These low rates mean that your monthly mortgage payment will be lower than if rates were closer to the 5% range.</p> <h2>You Can Build Equity</h2> <p>Every time you make a monthly mortgage payment, and pay down your home loan's principal balance, you build equity in your home. Say your home is worth $200,000 and you owe $180,000 on your mortgage loan: You have $20,000 worth of equity.</p> <p>You can borrow against this equity, in the form of <a href="http://www.wisebread.com/home-equity-loan-or-heloc-which-is-right-for-you">home equity loans</a> or home equity lines of credit, to fund major home improvements, <a href="http://www.wisebread.com/oops-i-maxed-out-my-credit-cards-now-what?ref=internal">pay down credit card debt</a>, or even to help fund a child's college education. When you are renting, your monthly rent check disappears in your landlord's bank account.</p> <p>Do exercise caution, though, when borrowing against your home's equity. You will have to pay back whatever you borrow, in monthly installments. Don't add too much monthly debt to your expenses or you will feel the financial squeeze. And if you can't afford to make your monthly equity loan payments, you could lose your home to your lender.</p> <p>You can boost your credit score: Your FICO credit score is a key number. Lenders rely on it to determine if you're a good lending risk. The higher your score, the more likely you are to qualify for loans and credit, and the lower the interest rate attached to these loans.</p> <p>By paying your monthly mortgage payment on time each month, you'll steadily boost your credit score. Payment history makes up 35% of your FICO score.</p> <h2>Tax Breaks</h2> <p>Owning a home also comes with tax breaks each year. The interest you pay each year on your home is tax-deductible. This break pays off more in the earlier years of owning a home, because the majority of your mortgage payment at this time is interest.</p> <p><em>Are you ready to move from renting to buying? What's holding you back? </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-reasons-millenials-should-invest-in-a-home">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/what-is-private-mortgage-insurance-anyway">What Is Private Mortgage Insurance, Anyway?</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/4-tax-deductions-new-homeowners-shouldnt-skip">4 Tax Deductions New Homeowners Shouldn&#039;t Skip</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/thinking-of-skipping-the-home-inspection-heres-what-it-will-cost-you">Thinking of Skipping the Home Inspection? Here&#039;s What It Will Cost 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/why-you-should-be-saving-big-with-bi-weekly-mortgage-payments">Why You Should Be Saving Big With Bi-Weekly Mortgage Payments</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/3-times-a-refinance-is-the-wrong-move">3 Times a Refinance Is the Wrong Move</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing building credit buying a house equity interest rates millennials new homeowners tax breaks young adults Fri, 05 Aug 2016 09:00:08 +0000 Dan Rafter 1766255 at http://www.wisebread.com All the Ways Minimum Payments Are Evil http://www.wisebread.com/all-the-ways-minimum-payments-are-evil <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/all-the-ways-minimum-payments-are-evil" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_laptop_credit_card_88164697.jpg" alt="Man learning ways minimum payments are evil" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Anyone who has a credit card is familiar with minimum payments. Most credit cards don't require cardholders to pay off their balances in full every month, but they <em>do</em> require cardholders to pay some minimum amount. This can be as low as 2% to 3% of the outstanding balance, or a minimum of $25 or $35 &mdash; whichever is higher.</p> <p>While paying the minimum technically keeps your account in good standing, there are negative consequences to this decision. Here are five reasons why minimum payments are evil and should be avoided.</p> <h2>They Keep You in Debt</h2> <p>Minimum payments may keep your credit card bills affordable, but you have to consider the big picture. In the end, minimum payments don't benefit your bottom line &mdash; they benefit your credit card company.</p> <p>The truth is, minimum payments are a sneaky trick designed to keep you a slave to credit card debt. The longer you keep a balance on your cards, the more money your creditors earns off you. If you only pay your minimums every month, you'll carry your balances for years to come. For example, if you have a credit card with a $2,000 balance and 17% interest rate, and you only make minimum payments each month (2% of your balance), it will take you <em>over 21 years</em> to pay it off. You'd have paid over $3500 in interest alone &mdash; and that's if you don't put additional purchases on the card.</p> <p>That may seem like a shock, but that's exactly why the minimum payment schedule was designed. Because they're taking a <em>percentage</em> of your balance, every month, the minimum payment required goes down. That does two things &mdash; encourages you to pay <em>less</em> so that you keep the balance longer, and it also tricks you into thinking that you're actually making progress paying off your debt. If you see that your payments are getting lower, you feel like your debt is getting smaller too. But you're actually hardly chipping away at the debt at all.</p> <p>If on the other hand, you pay $50 per month, it will take you five years to pay it off, with about $970 in interest. That's a huge difference compared to 21 years and $3500 in interest. Every little bit of extra you can put into your credit card debt will significantly cut down on your repayment time.</p> <p>If you can make reasonable plan and keep to your budget, a <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">balance transfer will put a pause on interest payments</a> and help you <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">pay off debt faster</a>.</p> <h2>Purchases Become More Expensive</h2> <p>Credit cards might be convenient, but they're also costly &mdash; and unfortunately, if you carry a balance from month-to-month and only make the minimum payment, you end up spending much more for every purchase made with the card. And once you leave a balance on your card, the grace period disappears and you immediately start accruing interest the moment you make your purchase. Grace periods are only active if there is no outstanding balance. (See also: <a href="http://www.wisebread.com/everything-you-didn-t-understand-about-credit-card-interest-grace-periods-and-penalty-aprs?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=cc_article">Everything You Didn't Know About Credit Card Interest and Grace Periods</a>)</p> <p>If you have to make a large purchase, you can get a card with a <a href="http://www.wisebread.com/5-best-credit-cards-with-0-apr-for-purchases?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">0% introductory APR on purchases</a>. For a certain period, no interest is charged on your outstanding balance. This gives you time to pay off the purchase without interest. However, once the intro period is over, the regular APR will kick in. It's important to only use that opportunity if you know you can pay off the balance during the introductory APR time period.</p> <h2>Your Credit Score Can Suffer</h2> <p>In my younger days, I thought as long as I paid my minimum payments on time, my credit score was protected. I was young and dumb and didn't realize how other factors impact credit scoring.</p> <p>Paying only the minimum may not have a direct negative impact on your score, but it doesn't exactly help it, either. A high credit card balance can result in a higher <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">credit utilization ratio</a>, which is the percentage of outstanding debt in comparison to your available credit line. Credit utilization is the second biggest factor making up your credit score, and if your credit card balances exceed 30% of your available credit, your score will take a hit.</p> <p>You can lower your credit utilization ratio &mdash; and subsequently improve your credit score &mdash; by paying more than your minimums every month. Minimum payments are just that &mdash; minimums. Even if you only double or triple your minimum, this will chip away at what you owe and reduce how much you pay in interest significantly.</p> <h2>It Affects Other Areas of Your Financial Life</h2> <p>Paying only the minimum might not seem like a big deal, until you realize how this decision can impact other areas of your financial life. If you're only making your minimum and carrying a high balance on a credit card &mdash; resulting in a lower credit score &mdash; this affects the ability to get other types of financing. If you apply for a mortgage or an auto loan, lenders will take one look at your high balances and low score and consider you a risky applicant. There's a chance you won't qualify for some loans, or the bank might not offer favorable terms.</p> <h2>Minimum Payments Can Increase</h2> <p>Another problem with minimum payments is that they aren't carved in stone. Credit cards are a revolving type of credit account. As your balance goes up, so does the amount you owe. Your minimum payments might be manageable today. But if you continue to charge to your account and don't make any efforts to significantly decrease the balance, your minimum payments can increase. If you're already struggling with your budget just to meet the minimum payments, the most important thing is to sit down and make a <a href="http://www.wisebread.com/5-day-debt-reduction-plan-stop-waiting-for-tomorrow?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">debt repayment plan</a>. Otherwise, you'll be stuck in this cycle of debt for generations.</p> <p><em>Do you pay the minimums on your credit cards?</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/all-the-ways-minimum-payments-are-evil">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-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/avoid-these-5-common-mistakes-while-rebuilding-your-credit">Avoid These 5 Common Mistakes While Rebuilding Your Credit</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/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-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-ways-being-debt-free-can-cost-you">7 Ways Being Debt Free Can Cost You</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management APR credit score credit utilization ratio interest rates minimum payments Fri, 22 Jul 2016 09:00:05 +0000 Mikey Rox 1756968 at http://www.wisebread.com 6 Moves to Make Before Cutting Up Your Credit Card http://www.wisebread.com/6-moves-to-make-before-cutting-up-your-credit-card <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-moves-to-make-before-cutting-up-your-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/cut_credit_card_39755818.jpg" alt="Making moves before cutting up your credit card" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Credit card debt got you down? Before you reach for the scissors to cut that plastic in half, consider taking these six steps.</p> <h2>1. Consolidate Your Debt Into a Lower Interest Rate</h2> <p>The first question to ask yourself when contemplating a breakup with your credit cards is &quot;Why?&quot; If it's because you've racked up too much debt &mdash; and that's usually the case, isn't it? &mdash; there are ways to alleviate some of that pain in the short term. You can consider balance transfer <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">credit cards with introductory 0% interest rates</a>, or <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">low interest credit cards</a> (they're out there if you look hard enough). If you are a homeowner with a mortgage, when you refinance your mortgage, you may be able to get a much lower mortgage rate. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">When Should You Do A Balance Transfer to Pay Off Your Credit Cards</a>)</p> <h2>2. Continue Using the Cards &mdash; Sparingly</h2> <p>Continuing to use your cards if you're susceptible to impulse buys may not be the best option, but if you can exhibit self-control, it's in your financial interest to keep using the cards regularly. Only charge small amounts that you can pay off immediately.</p> <p>&quot;If you're looking to take the first step in rebuilding a credit profile once you've paid off a balance, then hold onto your cards and make a minor purchase each month and pay it off entirely the next month,&quot; says Mike Catania, a consumer finances expert. &quot;Once you've done this on your cards for a year, then you can safely start closing one per year.&quot;</p> <h2>3. Keep the Account Open</h2> <p>An impetuous move when frustrated with your credit situation might be to close the account. Out of sight, out of mind, right? That's true, especially if you have zero access to it; the temptation is gone if there's no active account. But if you have a lot of debt on your credit cards, you don't want to suddenly reduce the amount of available credit you have. Your credit utilization ratio will shoot up, and it will <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">negatively impact your credit score</a>.</p> <p>&quot;One factor that could result in an immediate impact on your credit score when canceling a credit card is your credit utilization,&quot; warns credit expert Nicole Laoutaris. &quot;To maintain a good credit score, it is wise to utilize a maximum 35% of your available credit at any given time. For example, if you have two credit cards, both with a $10,000 credit limit, and between the two have a $6,000 balance, then your credit utilization is 30% ($6,000/$20,000). If you decided to do a balance transfer and cancel one of your credit cards, your credit utilization would rise to 60% ($6,000/$10,000); this is the main way in which canceling a credit card can affect your credit score.&quot;</p> <h2>4. Pay Off Any Lingering Balance</h2> <p>Check to see if you still have a balance on the card. Sometimes, when people cut up their credit card, they forget about it altogether. If you have an owing balance, you'll want to pay it off before you forget about it completely. You don't want it sent to collections because you tried to discipline yourself. Or, if you can't eliminate it all in one fell swoop, setup monthly reminders for yourself to pay it off.</p> <h2>5. Work Backward to Delete Traces of the Card</h2> <p>Ensure that your old card's information isn't stored anywhere online, especially at your favorite retailers. Just because the physical card is destroyed, doesn't mean you can't use it. If you're still planning to use this card for certain online bills, take note of them and incorporate these expenses into your budget.</p> <h2>6. Commit Yourself to Positive Financial Accountability</h2> <p>Prevent cutting up your credit card by forcing yourself to be more mindful with your money. I had credit cards in my late teens and early 20s that got me into a lot of trouble. I swore off them in my mid-20s to separate myself from the temptation, but when I felt equipped to adequately handle the responsibility again, I started opening new accounts as I approached my 30s. Know your limits, and hold yourself accountable.</p> <p>&quot;Many times, people in debt like to live in denial and not check their card balances, look at receipts, etc.,&quot; Laoutaris says. &quot;Using an app like Mint is great because it shows you exactly what your cash inflow versus cash outflow is. It's also great at tracking where you're spending your money.&quot; (See also: <a href="http://www.wisebread.com/5-day-debt-reduction-plan-stop-waiting-for-tomorrow?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=cc_article">5 Day Debt Reduction Plan</a>)</p> <p><em>Have you ever cut up a credit card? Did it solve your credit woes?</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/6-moves-to-make-before-cutting-up-your-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-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/what-to-expect-when-youre-expecting-a-huge-credit-card-bill">What to Expect When You&#039;re Expecting a Huge Credit Card Bill</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/how-to-build-credit-without-using-credit-cards">How to Build Credit Without Using 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/avoid-these-5-common-mistakes-while-rebuilding-your-credit">Avoid These 5 Common Mistakes While Rebuilding Your Credit</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-dirty-secrets-of-credit-cards">The Dirty Secrets of Credit Cards</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards balance transfers bills credit score credit utilization cutting up credit cards debt interest rates outstanding balances Tue, 05 Jul 2016 10:30:07 +0000 Mikey Rox 1743326 at http://www.wisebread.com 15 Personal Finance Calculators Everyone Should Use http://www.wisebread.com/15-personal-finance-calculators-everyone-should-use <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/15-personal-finance-calculators-everyone-should-use" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_computer_floor_70059811.jpg" alt="Man using personal finance calculator everyone should use" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Personal finance is ultimately all about the numbers, and you are better off armed with calculations than making decisions based on intuition, alone. Online calculators can be great tools to analyze your options and try out &quot;what-if&quot; scenarios to help plan your financial moves. Even if you are rusty at math, personal finance calculators make it easy to type in a few basic numbers and get quantitative answers to your personal finance questions.</p> <p>Lots of great calculators are available for free. Here are some of my favorites.</p> <h2>1. Mortgage Calculator</h2> <p>Buying a house is one of the biggest expenses most people will undertake. A mortgage calculator can help you evaluate how much your monthly payments will be for a house of a given price. You can try out different financing options, too, such as 30-year mortgage versus a 15-year mortgage. The monthly payments are higher for a 15-year mortgage, but you'll pay a lot less interest. How much less? Try out a <a href="http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx">Mortgage Calculator</a>.</p> <h2>2. Home Affordability Calculator</h2> <p>How much home can you afford to buy? Clearly you can't spend your entire paycheck on your mortgage payment, but how much is reasonable? Use a home affordability calculator to help figure out how much house you can afford based on your income and existing debts. Consider this <a href="http://money.cnn.com/calculator/real_estate/home-afford/">Home Affordability Calculator</a>.</p> <h2>3. Mortgage Refinance Calculator</h2> <p>If you have already bought a house, is it worth refinancing to get a lower interest rate? The answer depends on several factors, including how long you will keep the house and how much lower of an interest rate you can get. In some cases, you can save thousands of dollars by refinancing. Run some numbers on the mortgage refinance calculator and see if refinancing your house makes sense for you. See this one: <a href="http://www.bankrate.com/calculators/mortgages/refinance-calculator.aspx">Mortgage Refinance Calculator</a></p> <h2>4. Home Rent vs. Buy Calculator</h2> <p>It can be more convenient and less expensive to rent a house instead of buying a home. However, a home can be an asset that appreciates in value over time. How long you will stay in your house is a big factor in evaluating the rent versus buy decision. Use this calculator to help decide whether to rent or whether to buy a house: <a href="http://www.nytimes.com/interactive/2016/05/25/upshot/100000002894612.mobile.html">Home Rent vs. Buy Calculator</a></p> <h2>5. Investment Growth Calculator</h2> <p>An investment calculator can bring the miracle of compound interest to life. Instead of waiting for decades to see how much your investment accounts will grow, use a calculator to find out now. Of course, no one knows how the stock market will perform in the future, but you can run likely scenarios and see how your investments would grow. This <a href="https://www.investor.gov/tools/calculators/compound-interest-calculator">Investment Growth Calculator</a> is a good place to start.</p> <h2>6. Traditional Retirement Calculator</h2> <p>The biggest question that people heading into retirement have is, &quot;How much money do I need to retire?&quot; Retirement calculators can help answer this question considering life expectancy and expenses. Here's one to play with: <a href="http://www.kiplinger.com/tool/retirement/T047-S001-retirement-savings-calculator-how-much-money-do-i/">Traditional Retirement Calculator</a></p> <h2>7. Early Retirement Calculator</h2> <p>An unusual retirement calculator is FIRECalc. This calculator analyzes the risk that you will run out of money in retirement by using past actual economic data to evaluate how the stock market could perform, ranging from great to terrible. The inputs are the value of your portfolio, how much you plan to spend each year, and the length of retirement. The output is the probability that you would run out of money and a set of plots showing how your investment would grow during retirement years under a wide variety of economic conditions. This is a great tool to use to decide if you have enough money to safely retire early: <a href="http://www.firecalc.com/">Early Retirement Calculator</a></p> <h2>8. Credit Card Calculator</h2> <p>Everyone knows it is expensive to carry credit card debt, but how much is that debt really costing you? Find out with a credit card calculator. You can learn how long it will take to pay off your credit cards based on the balance, interest rate, and your payment amount. You can also find out how much you would save on interest with a balance transfer to a lower interest card by entering your consolidated balance and new interest rate into the calculator. Here is one to try: <a href="http://www.bankrate.com/calculators/managing-debt/minimum-payment-calculator.aspx">Credit Card Calculators</a></p> <h2>9. Auto Loan Calculator</h2> <p>Whether you are buying a new or a used vehicle, you can use an auto loan calculator to calculate your payments and see the total cost of the car loan. Try out different payment terms &mdash; for example, four years versus five years, and see how much that changes the monthly payment and total cost. Find out how much car you can afford before you go car shopping: <a href="http://www.cars.com/go/advice/financing/calc/loanCalc.jsp?mode=full">Auto Loan Calculator</a></p> <h2>10. Auto Lease vs. Buy Calculator</h2> <p>You can lease the same vehicle for a significantly lower monthly payment than buying a vehicle, sometimes about half as much. However, you don't get to keep the vehicle after the lease ends. Are you better off buying a vehicle or leasing? Check out your options with a lease versus buy calculator: <a href="http://www.cars.com/go/advice/financing/calc/loanLeaseCalc.jsp?mode=full">Auto Lease vs. Buy Calculator</a></p> <h2>11. Drive vs. Fly Calculator</h2> <p>It is often a difficult decision whether to drive or fly on a trip. Driving can be less expensive than flying, but the cost of additional meals, hotel stays, and time for a driving trip can make flying the less expensive option. Use a drive versus fly calculator to make sure you are factoring in all of the expenses when making your travel plans: <a href="http://www.travelmath.com/fly-or-drive/">Drive vs. Fly Calculator</a></p> <h2>12. Student Loan Payment Calculator</h2> <p>Is borrowing $80K in student loans to get a degree that will allow you to have a six-figure salary in a few short years a good idea? Use a student loan calculator to understand how much the payments on your student loan would be to help make an informed decision. Check this one from Sallie Mae: <a href="https://www.salliemae.com/plan-for-college/college-planning-toolbox/student-loan-payment-amount-estimator/">Student Loan Payment Calculator</a></p> <h2>13. College Value Calculator</h2> <p>How much is getting a college degree worth? Use a calculator to determine how much more money you could make during your career if you went ahead and got a college degree: <a href="http://www.myfico.com/CreditEducation/Calculators/what-is-the-value-of-higher-education.aspx">College Value Calculator</a></p> <h2>14. Pay Debt vs. Invest Calculator</h2> <p>Would you be better off paying off debts first before starting to invest, or should you start investing right away? The answer depends on the interest rates on your debt and the return you expect to make on your investments or savings account. Use a calculator to check the numbers and decide where to focus any extra dollars you have available: <a href="http://www.myfico.com/crediteducation/calculators/should-i-pay-off-debt-or-invest-in-savings.aspx">Pay Debt vs. Invest Calculator</a></p> <h2>15. Cost of Living Calculator</h2> <p>If you are thinking about relocating to take a job or for retirement, check out the impact of moving on your cost of living. You can compare expense categories in your current city with other cities, and see an overall expense rating. This information is useful to determine how much more &mdash; or less &mdash; money you would need to spend to live somewhere else: <a href="http://www.bestplaces.net/cost-of-living/">Cost of Living Calculator</a></p> <p><em>What personal finance calculator is most useful 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/15-personal-finance-calculators-everyone-should-use">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-5"> <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/what-happens-to-your-debt-after-you-die">What Happens to Your Debt After You Die?</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/12-money-moves-to-make-the-moment-you-decide-to-retire">12 Money Moves to Make the Moment You Decide to Retire</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-ways-to-increase-your-net-worth-this-year">10 Ways to Increase Your Net Worth This Year</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/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-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-financial-moves-you-will-always-regret">9 Financial Moves You Will Always Regret</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Banking calculators cost of living debt interest rates investing loans mortgages retirement student loans Thu, 09 Jun 2016 10:00:10 +0000 Dr Penny Pincher 1727205 at http://www.wisebread.com 5-Day Debt Reduction Plan: Add It Up http://www.wisebread.com/5-day-debt-reduction-plan-add-it-up <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-day-debt-reduction-plan-add-it-up" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_bills_calculator_64784797.jpg" alt="Man adding up his debt during debt reduction plan" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>[Editor's Note: This is part two of our five-part series on debt reduction. To read more, see the rest of the <a href="http://www.wisebread.com/topic/5-day-debt-reduction-plan">5-Day Debt Reduction Plan</a>.]</p> <p>Excuses and bad habits might have stopped you from <a href="http://www.wisebread.com/5-day-debt-reduction-plan-stop-waiting-for-tomorrow?ref=5dayplan">achieving financial success</a> in the past, but now that you're ready to tackle debt like a boss, it's time to get down to business. Paying off debt is hard work. In fact, it's probably one of the hardest financial challenges you'll take on, aside from actually making the money you'll need to pay it off. Considering that then, you won't get far without provisions in place.</p> <p>See also: <a href="http://www.wisebread.com/5-steps-toward-financial-independence?ref=5dayplan">5 Steps Toward Financial Independence</a></p> <p>To get to the finish line &mdash; or even come close to it &mdash; you'll need a certain amount of courage to attack your debt head on. It's a frightening prospect, for sure, and maybe you've tricked yourself into believing your debt problem isn't that bad. While this mindset might help you sleep better at night, it doesn't reduce balances. So before you can move forward in this process, you have to add up what you owe. Chances are, the final number will be a scary one.</p> <h2>1. Decide Which Debts to Include in Your Payoff Plan</h2> <p>Some people come up with a plan to pay off <em>all </em>of their debt, including student loans, auto loans, and mortgages, whereas others focus on unsecured debts like credit cards and personal loans. All debt isn't created equal. We're focusing this plan on credit card debt which can have more of a <a href="http://www.wisebread.com/10-surprising-ways-to-negatively-affect-your-credit-score?ref=5dayplan">negative impact on credit scores</a> and usually comes with higher, often much higher, interest rates.</p> <h2>2. Take a Few Minutes to Gather Your Statements</h2> <p>Since you're adding up what you owe, create a simple spreadsheet to record this information. It's important to get everything down. Some people have no idea of how much they owe. They might have an estimated number in their head, but it's not until they see their debt on paper that they're able to grasp the severity of a situation &mdash; and subsequently reach for a solution (or a drink).</p> <h2>3. Next, List All Your Debts</h2> <p>Include detailed information about your debt, such as your current balances for each account, minimum monthly payments, and interest rates.</p> <p>Your spreadsheet might look something like this:</p> <p>&nbsp;<img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/Screen%20Shot%202016-06-06%20at%201.56.13%20PM.png" width="605" height="299" alt="" /></p> <p>After writing down your debts, calculate the total balance and total minimum payment due. You'll see how much you owe down to the cent, as well as how much you're currently paying in minimum payments each month.</p> <h2>The Cost of Minimum Payments</h2> <p>Debt elimination works best when you <a href="http://www.wisebread.com/the-1-rule-and-other-ways-to-make-goals-manageable?ref=5dayplan">set attainable goals</a> for yourself. I've harped on this practice in plenty of my Wise Bread posts before and I can't stress the importance of goal setting enough. It isn't enough to know your numbers; you need a plan that allows you to pay down balances sooner rather than later, or else you could carry debt for decades and pay thousands of dollars in interest. You also need to do it in a reasonable way so you'll stay on track.</p> <p>At $10,000, your total minimum payments due is $200 (credit cards usually charge between 1%-3% of the balance due as their monthly minimum payment). The following month, your minimum payment due will be lower, because your balance is (slightly) lower. But if you follow this course and only make the minimum due each month, it will take you <strong>50 years</strong> to pay that off, along with paying over $28,000 in interest. I'm sure you don't want to hold on to that debt for decades, nor pay tens of thousands in interest.</p> <p>If however, you kept your monthly payments at $200, you'd be debt free in eight years, and the interest you'd have paid would be $8,916. See the difference?</p> <p>See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?ref=5dayplan&amp;utm_source=wisebread&amp;utm_medium=seealso2&amp;utm_campaign=5dayplan">Stop Paying Credit Card Interest with a Balance Transfer</a></p> <h2>Set Achievable Goals</h2> <p>Understandably, you want the balance gone within the next few weeks or months. But you have to be realistic. Unless you strike gold or get a windfall (or start being really <em>really</em> nice to the old rich person down the street), you probably won't be able to pay off $10,000 in credit card debt in three months. But you definitely can punch those numbers and get out of debt in less than eight years.</p> <p>See Also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=5dayplan&amp;utm_source=wisebread&amp;utm_medium=seealso2&amp;utm_campaign=5dayplan">Fastest Way to Pay Off $10,000 in Credit Card Debt</a></p> <p>Let's say that you are able to find an extra $300 a month in your budget to steer toward debt reduction, bringing your total debt payment to $500 per month (your current minimum due plus $300). Without interest to pay, you'd knock this down in just 20 months! Unfortunately, you actually do have to pay interest until your debt is cleared.</p> <p>The average interest rate on your $10,000 is a whopping 17.88%. (Ouch!) That means it'll actually take you two years and almost $2,000 in interest, (still a huge improvement over the eight years and almost $9,000 in interest if you just paid $200 per month).</p> <p>Every little bit you can add to your monthly debt reduction budget helps. For example, if you can increase your monthly payment by just another $50, your debt is gone in 22 months, and you'll have paid $1,600 in interest.</p> <p>The key to remember is that small amounts really do add up over time. The more of those small amounts you can find and put to work for you, the faster you will be able to eliminate your credit card balances. You won't get out of debt without making some sacrifices, however. Which leads us to the next step in this series: How to search for unnecessary costs and destroy these to improve your cashflow and free up more of your money to retire debt.</p> <h2>Debt Management Resources</h2> <ul> <li><a href="http://www.wisebread.com/how-to-manage-your-debt-in-10-minutes-a-week?ref=5dayplan">How to Manage Your Debt in 10 Minutes a Week</a></li> <li><a href="http://www.wisebread.com/5-debt-management-questions-youre-too-embarrassed-to-ask?ref=5dayplan">5 Debt Management Questions You're Too Embarrassed to Ask</a></li> <li><a href="http://www.wisebread.com/6-free-debt-management-tools?ref=5dayplan">6 Free Debt Management Tools</a></li> <li><a href="http://www.wisebread.com/12-reasons-your-debt-isnt-diminishing?ref=5dayplan">12 Reasons Your Debt Isn't Diminishing</a></li> <li><a href="http://www.wisebread.com/8-debt-reduction-mistakes-even-smart-people-make?ref=5dayplan">8 Debt Reduction Mistakes Even Smart People Make</a></li> <li><a href="http://www.wisebread.com/should-you-use-peer-to-peer-lending-to-pay-down-credit-card-debt?ref=5dayplan">Should You Use Peer-to-Peer Lending to Pay Down Credit Card Debt?</a></li> <li><a href="http://www.wisebread.com/6-common-debt-reduction-roadblocks-and-how-to-beat-them?ref=5dayplan">6 Common Debt Reduction Roadblocks &mdash; And How to Beat Them</a></li> <li><a href="http://www.wisebread.com/six-steps-to-eliminating-your-debt-painlessly?ref=5dayplan">6 Steps to Eliminating Your Debt Painlessly</a></li> <li><a href="http://www.wisebread.com/8-organizations-that-really-can-help-you-with-your-debt?ref=5dayplan">8 Organizations That REALLY Can Help You With Your Debt</a></li> <li><a href="http://www.wisebread.com/should-you-sell-your-home-to-pay-down-debt?ref=5dayplan">Should You Sell Your Home to Pay Down Debt?</a></li> <li><a href="http://www.wisebread.com/taming-your-debt-aggressive-repayment-strategies?ref=5dayplan">Taming Your Debt: Aggressive Repayment Strategies</a></li> <li><a href="http://www.wisebread.com/the-7-best-credit-card-debt-elimination-strategies?ref=5dayplan">7 Best Credit Card Debt Elimination Strategies</a></li> </ul> <p><em>Have you recently chipped away at a decent amount of debt? How did you do it? What tactics did you employ? I'd love to hear from you 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/5-day-debt-reduction-plan-add-it-up">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-9"> <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-day-debt-reduction-plan-search-and-destroy">5-Day Debt Reduction Plan: Search and Destroy</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-day-debt-reduction-plan-pay-it-off">5-Day Debt Reduction Plan: Pay It Off</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-day-debt-reduction-plan-dont-ever-stop">5-Day Debt Reduction Plan: Don&#039;t Ever Stop</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/how-much-should-you-spend-on-a-new-car">How Much Should You Spend on a New Car?</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-dark-side-motivations-to-start-saving">8 Dark-Side Motivations to Start Saving</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Budgeting Debt Management 5 day debt reduction plan goals interest rates loans minimum payment payoff plans Tue, 07 Jun 2016 10:31:03 +0000 Mikey Rox 1725700 at http://www.wisebread.com 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/while-waiting-for-rates-i-bonds">While Waiting for Rates: I-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/a-simple-guide-to-series-i-savings-bonds-i-bonds">A Simple Guide to Series I Savings Bonds (I-Bonds)</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-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-4 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-5 views-row-odd views-row-last"> <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> </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-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/5-ways-to-prevent-a-debt-spiral">5 Ways to Prevent a Debt Spiral</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-day-debt-reduction-plan-pay-it-off">5-Day Debt Reduction Plan: Pay It Off</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-day-debt-reduction-plan-dont-ever-stop">5-Day Debt Reduction Plan: Don&#039;t Ever Stop</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/dont-ignore-these-4-things-before-refinancing-your-student-loans">Don&#039;t Ignore These 4 Things Before Refinancing Your Student Loans</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-personal-finance-calculators-everyone-should-use">15 Personal Finance Calculators Everyone Should Use</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/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-5 views-row-odd views-row-last"> <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> </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-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/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-3 views-row-odd"> <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-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/all-the-ways-minimum-payments-are-evil">All the Ways Minimum Payments Are Evil</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-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/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/5-questions-to-ask-before-buying-a-second-home-in-retirement">5 Questions to Ask Before Buying a Second Home in Retirement</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 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-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-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/6-moves-to-make-before-cutting-up-your-credit-card">6 Moves to Make Before Cutting Up Your Credit Card</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/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-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/best-credit-cards-for-millennials">Best Credit Cards for Millennials</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-4"> <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/7-money-moves-to-make-as-soon-as-you-conquer-debt">7 Money Moves to Make as Soon as You Conquer Debt</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/all-the-ways-minimum-payments-are-evil">All the Ways Minimum Payments Are Evil</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/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-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-ignore-these-4-things-before-refinancing-your-student-loans">Don&#039;t Ignore These 4 Things Before Refinancing Your Student Loans</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-5"> <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/dont-ignore-these-4-things-before-refinancing-your-student-loans">Don&#039;t Ignore These 4 Things Before Refinancing Your Student Loans</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/5-ways-to-prevent-a-debt-spiral">5 Ways to Prevent a Debt Spiral</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/all-the-ways-minimum-payments-are-evil">All the Ways Minimum Payments Are Evil</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