payment plans

5 Alternatives to Charging Your Medical Bills

Kat Tretina — Fri, 23 Mar 2018 09:30:15 +0000

Last year, I ended up in the hospital. The experience was scary, but what was even scarier were the massive hospital bills that started pouring in once I got home. I quickly exhausted my emergency savings and, out of options, I turned to my credit cards to pay the remaining bills.

It was a costly mistake. The high interest rates on my credit cards caused my balance to balloon, and I ended up paying back far more than I originally owed. It was a hard-learned lesson that cost me thousands.

If you're like me and facing serious medical bills, it's important to know that there are other options available to you that are less costly. If you need help, here's what you need to know before handing over your credit card.

The high cost of using credit

The cost of health care is a serious problem for millions of Americans. According to the Kaiser Foundation, 26 percent of U.S. adults say that they or someone in their household had problems paying for a medical bill in the past year, or couldn't pay their bills at all.

For some, an inability to pay means they will put off necessary treatments. For those who went to the hospital, they could leave with huge amounts of medical debt, causing them to fall behind on their other bills or even file for bankruptcy.

Many people turn to credit cards to pay the hospital bills, but doing so is an expensive decision.

According to Bankrate, the average credit card interest rates are currently hovering above 16 percent. That means that the bill you charge can grow significantly over time, adding hundreds or even thousands to your credit card balance.

For example, if you used a credit card to pay for a $5,000 medical bill at 16 percent interest with a $150 minimum payment, it would take you 15 years to pay off your card. You'd pay back over $3,700 just in interest charges, making it harder to get out of debt. As interest accrues, it's easy to end up over your head. (See also: The 5 Biggest Dangers of Credit Card Debt)

The things you can do instead

When you don't have enough money in the bank, a credit card might feel like your only option. However, there are other resources you can use to pay your medical bills that are more cost-effective than a credit card.

1. Enroll in a payment plan

Some hospitals and health care practitioners offer payment plans for low-income patients. With a payment plan, you can split up your bill over several months or even years. You can pay your bill a little at a time, rather than coming up with thousands at once.

Some hospital payment plans might not even charge you interest, or will charge a low rate, making them a much cheaper option than using a credit card. (See also: What to Do If You're Hit With a Huge Medical Bill)

2. Ask about charitable funds

If you can't afford your bills even with a payment plan, ask the hospital's billing department about any charitable funds. Some places have money they set aside to pay for treatment of patients who can't afford to pay the bill themselves.

There will likely be a significant amount of paperwork to complete, and you'll have to submit documentation of your income and expenses. However, spending time completing the forms can end up saving you thousands over the long run. (See also: How to Handle a Massive Medical Bill)

3. Explore outside nonprofit organizations

If your hospital doesn't offer any financial assistance, you might be eligible for aid from a separate nonprofit. Organizations like HealthWell, Catholic Charities, and the Children's Health Fund may be able to help you with your with medical bills. Some offer upfront cash assistance or will even help you negotiate a lower bill.

You can contact United Way's 2-1-1 Information & Referral hotline to find out about programs in your area.

4. Negotiate your bill

Depending on your circumstances, you might be able to negotiate a lower bill. If you cannot afford the total balance, call the hospital's billing department and explain your situation. Ask if they'd be willing to accept a lower amount. In some cases, the hospital may agree to settle the debt for less than you were originally billed. (See also: 7 Ways to Negotiate Medical Bills)

5. Consider a personal loan

If you've exhausted your other options and still need help paying your bill, consider taking out a personal loan rather than using your credit card. If you have good credit and a stable income, you could qualify for a loan with an interest rate as low as 5 percent. And, you could choose a longer loan term, making your payments more affordable. (See also: 5 Times Personal Loans May Be Better Than Credit Cards)

Exploring your options

Before reaching for plastic, make sure you have researched all of your available payment options. Using a credit card to pay for your medical bills can end up costing you thousands more than you originally owed. (See also: Never Use Your Credit Card to Pay for These 10 Things)

Like this article? Pin it!

This article is from Kat Tretina of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Afford Your Kid's Braces or Expensive Dental Care

Emily Guy Birken — Tue, 02 Jan 2018 09:30:09 +0000

At their six-month dental checkup earlier this year, both of my sons received the dreaded diagnosis: Each one had a cavity in a baby tooth that would need to be filled.

In addition to feeling like a terrible parent, I was also not looking forward to having to pay for their fillings. Our family dentist wasn't set up to handle fillings for two squirmy young patients, and the pediatric dentist she referred us to did not accept our dental insurance.

Thankfully, my husband and I have an emergency fund for such an occasion, but not every parent is as fortunate. Taking care of your kids' teeth doesn't have to bankrupt you, even if they do need costly dental care or treatment.

I talked to Marissa Miller, DDS, of Shelby, Ohio, to find out what parents need to know about affording expensive dental care for their kids.

1. Preventive care is always cheaper than treating problems

According to Dr. Miller, "To mitigate the costs of dental procedures, my first piece of advice is have kids see the dentist early and regularly." There are two reasons for this. First, kids who get used to seeing the dentist early in their lives are less likely to develop phobias that will keep them from seeing the dentist later on.

This leads to the second reason why it's important to get your kids used to seeing the dentist early and often: It's much less expensive to have biannual tooth cleanings than it is to deal with an entrenched problem.

Even if your child does have a dental problem that will need treatment, finding it sooner rather than later will generally be easier on your wallet. "Having your kids come to the dentist at regular intervals also gives us a chance to catch any problems — such as tooth decay, narrow palate, etc. — early on," Dr. Miller says. "And catching problems in an early stage almost always leads to less costly treatment."

2. Some common pediatric dental procedures can be surprisingly expensive

Most parents are well aware of the fact that orthodontics (i.e., braces, retainers, and other tooth-straightening tools) are expensive. According to the 2013 Survey of Dental Fees, comprehensive orthodontic treatment for adolescents ranged in price from $4,685 to $6,500.

However, parents may not be aware of the fact that other common dental procedures can also cost a pretty penny. Specifically, when there is a great deal of tooth decay in baby teeth, the treatment can be expensive. According to Dr. Miller, "When deep cavities occur in children between roughly three and nine years of age, the costs of restoring those teeth can add up quickly. Fillings, stainless steel crowns, and pulpotomies (similar to root canal therapy but usually just for primary or 'baby' teeth) can all be called for in order to keep those teeth in working order." (See also: How to Handle a Massive Medical Bill)

3. Don't let cost keep you from getting treatment

Parents might assume that dental care for their kids is more cosmetic than necessary. After all, baby teeth will eventually be replaced with adult chompers, and orthodonture is an expensive procedure that just provides a straight-toothed smile. The high cost for something that feels unnecessary might tempt some parents to put off the treatment while they get their financial ducks in a row.

Dr. Miller warns against that: "The whole point of trying to keep these primary [baby] teeth until they're ready to exfoliate naturally is that they are the placeholders of the adult teeth. If primary teeth are taken out early, it is common for the adult teeth to erupt in severe misalignment, resulting in a more urgent and comprehensive need for orthodontic care."

Similarly, while straightening adult teeth for cosmetic reasons is part of the rationale for orthodontic care, it's hardly the whole reason. Properly aligned teeth promote good oral health overall — which is necessary for whole body health.

4. Your dentist wants to help you find a payment plan

Despite what you may remember from Steve Martin's portrayal of Dr. Scrivello in Little Shop of Horrors, you can rest assured that real dentists get into their practices because they truly want to help people. That means they want to see their patients get necessary treatment — and they will try to find a way to work with you on a payment plan. (See also: 7 Ways to Negotiate Medical Bills)

According to Dr. Miller, a lot of dental offices offer a variety of payment options. In particular, she recommends asking about the following:

Cash discounts. If you're prepared to pay the full case fee up front, ask about this option, especially if the cost of the procedure is over $1,000.
Third-party financing. With third-party financing, you can use something that works basically like a dental care credit card to pay for your procedure. Many of these financing companies offer you interest-free payment periods of up to 12 months. Dr. Miller describes third-party financing as "nearly universal," so feel free to ask your dentist about which company they use.
Payment plans. Some dentists will allow you to split payments over several months interest-free, although you will generally be expected to have a credit card on file and a history with the practice for your dentist to agree to this. Orthodontists offer payment plans more often than general dentists due to the nature of their treatment plans and fees.

5. Financial assistance is available

Families who simply do not have the financial ability to pay for their children's dental or orthodontic care can apply for financial assistance. The National Children's Oral Health Foundation (NCOHF, but also known as America's ToothFairy) offers access to dental care to underserved children. If you are unable to afford a specific dental treatment for your child, you can apply for funds from NCOHF through their In the Gap program.

In addition, Donated Orthodontic Services, sponsored by the American Association of Orthodontists, offers pro-bono and low-cost orthodontic services to children of families who cannot afford the regular cost of orthodonture. The nonprofit program Smiles Change Lives also offers low-cost or free orthodontic services to kids in need.

Neglect is more expensive than dentistry

Watching your children undergo dental work is no one's idea of fun — and having to pay big bucks for it can feel like adding insult to injury. But making sure your kids' pearly whites stay healthy and straight will put them on the road to good oral health for years to come.

This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Handle a Massive Medical Bill

Alaina Tweddale — Fri, 05 May 2017 08:30:12 +0000

"Have you noticed that your neck appears swollen?" That's what the nurse practitioner asked about halfway through what I had assumed was a routine office visit.

Soon after, I was swiftly catapulted into a long series of office visits that were anything but routine. There were ultrasounds, biopsies, consults with specialists, an invasive surgery, an overnight stay in the hospital, and eventually, the ok from my docs to go about living a normal life.

That's when the medical bills started rolling in.

Turns out I could kick thyroid cancer to the curb, but it wouldn't be cheap. Medical care is expensive, not just for me, but also for the one in four American adults under age 65 who have past-due medical bills, according to a recent study released by the Urban Institute.

Still, knowledge is power. At least, it is according to the same Urban Institute study, which reported, "Adults with greater financial knowledge are less likely to have past-due medical debt."

That's good news for Wise Bread readers, who are keenly interested in the fate of their financial futures. Even so, a surprise bill, particularly a large one, can take even the most educated saver by surprise. The silver lining here is that there are several specific steps you can take to help minimize the pain that often comes with the arrival of an unexpected medical expense. (See also: What to Do If You're Hit With a Huge Medical Bill)

1. Scrutinize your bill

According to various sources, as many as eight in 10 medical bills contain some sort of error — sometimes even multiple errors. I'm not surprised. Mine sure did.

When that first hospital bill arrived, it was for more than my annual deductible. A lot more. After suffering what felt like a small panic attack, I called my insurance company. As it turned out, they hadn't received a bill from the hospital. Instead, the hospital had billed me directly.

It took a few frustrating phone calls, but the hospital ultimately fixed the mistake. Still, had the bill been for a less egregious amount, I may have overlooked the error and just paid it. I mean, how many of us scour the line items of those bills?

Turns out, we should.

"Sometimes, insurance companies or doctors' offices make mistakes that they don't realize," says financial coach Maggie Germano. "They may have simply miscoded something. It's up to you to follow up and make sure they aren't charging you when they shouldn't be."

2. Negotiate with your health care provider

Looking over an itemized hospital bill is not for the weak of heart. Mine included shocking over-the-top expenses, like $27,000 for three hours in the operating room, $15,000 for an overnight stay in a recovery room, and $108 for a single dose of calcium.

Those inflated fees are all part of an elaborate dance between health care providers and insurance giants. Insurance companies don't often pay the amount that gets printed on those statements. Instead, they use it as a jumping off point for reimbursement negotiations. Sadly, it's those without health care coverage who often get stuck in this line of medical bill crossfire.

"Hospitals are always complaining that they're not reimbursed enough money from the health insurance companies, and therefore increase fees as high as possible," says Adria Gross, founder of MedWise Insurance Advocacy.

Uninsured or underinsured patients typically don't have anyone behind the scenes who can negotiate those fees on their behalf. Instead, they have to advocate for themselves.

According to money-saving expert Andrea Woroch, health care providers are not likely to negotiate costs if you have health insurance. But if you're uninsured, you may be able to talk your bill down by 10 to 20 percent. That's why it never hurts to get connected with the customer service department — no matter how long the wait or arduous the phone tree — and ask for a break. Woroch notes that some centers will even give a discount if you offer to pay in cash. (See also: 7 Ways to Negotiate Medical Bills)

3. Get smart about the actual cost of your procedure

Still, negotiating a medical bill isn't as easy as "ask and ye shall receive." It helps to come to the table prepared with "the usual, reasonable, and customary charges" for your particular medical procedure, says Gross. The first step is to track down the procedure code for the service you've been billed for. A quick internet search should do the trick. Then, check out an online database to start searching for the fair fee associated with your procedure. (Gross recommends Fair Health Consumer and Healthcare Bluebook.)

Gross says that finding that number — before you call — can help you determine whether you've been overbilled so you can fight to correct the charges.

4. Request a payment plan

If you still can't afford the bill, Germano suggests asking your doctor to set up a payment plan. "Most medical centers just want to get paid eventually, so they should work with you to make it easier for you to pay," she says.

The key to this strategy is figuring out how much of the bill you can afford to pay each month. You'll likely be paying it for a while, so make sure you can commit to this amount for the long-term.

"Get the agreement in writing, and make sure they send you a confirmation email or letter whenever you make a payment," warns Germano. Then, keep careful track of your payments along the way. "That will prevent them from accusing you of not paying what you owe," she adds.

It will also ensure that the bill doesn't get sent to collections, which will damage your credit score.

5. Plan for the future

Medical surprises happen, no matter how healthy you think you are. (Trust me on this one. No one was more surprised by my diagnosis than me.) Keeping a stash of cash on reserve in your Health Savings Account (HSA) or emergency savings may just save your future self from a couple of missed mortgage payments. (See also: How an HSA Saves You Money)

As Ben Franklin once wisely said, "An ounce of prevention is worth a pound of cure." That adage applies to your health, but also to what's in your pocketbook.

Start planning now, so you'll be prepared when the unexpected strikes. And if it doesn't? Well, it never hurts to have a few extra bucks in the bank.

Like this article? Pin it!

This article is from Alaina Tweddale of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

What to Do If You Have a Tax Lien On Your House

Mikey Rox — Mon, 17 Apr 2017 08:30:08 +0000

The government doesn't play around with taxpayers who skip out on what they owe. When you ignore your federal, state, or property tax bills — and you don't make any attempts to pay the balance — the government can place a tax lien on your house.

A tax lien is a legal claim on property for failure to pay taxes owed. It gives the tax authority (also known as the lienholder) first rights to your property over other creditors.

A lien differs from a levy in that the government doesn't seize your house or other property. Keep in mind that a lien can become a levy at some point if you never pay your taxes or never make arrangements to satisfy the debt. The tax authority decides when to impose a levy. You'll receive written notice of the levy at least 30 days before it takes place.

A lien is a serious matter because it can negatively affect your credit. Unpaid tax liens can remain on credit reports indefinitely, whereas paid tax liens can remain for up to seven years from the date filed.

Of course, the best way to handle a tax lien is to avoid one in the first place. But if the damage is done, here's how to put this ugly mark behind you.

1. Dispute a filing error

It's not uncommon for mistakes to appear on credit reports. In fact, according to recent data from the Consumer Finance Protection Bureau, 76 percent of the 185,700 credit-reporting complaints they've received since 2011 are related to errors — including state or federal tax liens that mistakenly appeared on credit reports.

If you check your credit report and find a lien reported in error, don't ignore this mistake. This can lower your credit score. Contact the IRS or your state tax office to file a dispute. If a review of your account proves that you don't owe the debt, the government withdraws the tax lien (as if it never happened). A withdrawal also removes the lien from your credit report.

Thankfully, the number of tax liens reported in error should be dropping. In response to criticisms by the CFPB, the top consumer reporting agencies — Experian, Equifax, and TransUnion — issued a new provision. As of July 1, 2017, tax lien and civil judgment data will only be included on credit reports if they contain three pieces of information: the person's name, address, and Social Security number or date of birth. This information must be current according to court records as of the last 90 days.

The association representing the credit bureaus expects half of the consumers with tax liens on their credit reports will see them removed.

2. Pay your tax bill in full

Parting with your hard-earned money isn't easy, but paying your tax bill in full is one of the fastest ways to get the government off your back and move on with your life.

Typically, the government releases tax liens within 30 days of full payment of an outstanding debt (including penalties and interest). A release removes the lien from the property.

Unfortunately, paid tax liens can still remain on your credit report for up to seven years. However, under the IRS's Fresh Start Program, after paying your balance in full, you can submit a request to have a federal tax lien withdrawn from your credit report before the seven-year mark. Some states also give taxpayers the option of requesting an early withdrawal of a state tax lien from their credit report once they've paid their debt in full.

3. Set up an installment plan

If you can't pay what you owe in full, set up an installment plan with the government. This lets you pay off your tax debt over time. The tax authority releases the lien once you've set up a payment plan.

In the case of federal debt, the IRS allows individual taxpayers to set up monthly direct debit payments on debt amounts up to $50,000 for up to six years. Go to IRS.gov and apply for installment payments through the online payment system. If you owe more than $50,000, or require longer repayment terms, request installment payments by completing and mailing Collection Information Statement Form 433-A or Form 433-F.

Taxpayers who owe less than $25,000 and who've made at least three consecutive direct debit installment payments also can request to have the lien withdrawn from their credit report. However, defaulting on an installment agreement can trigger a new tax lien.

Some states also allow installment plans to repay a tax debt, though the criteria for these plans varies by state.

4. Sell the property

If you don't have money to pay an outstanding tax debt in full, and you can't afford an installment plan, another option is selling the property and satisfying the debt with proceeds from the sale. However, this method only works if the sale price is high enough to pay off the lien and any existing mortgages on the property. If the sale won't generate enough proceeds to pay off attached liens, you can't sell the property. If you're able to sell the home, the company handling your escrow account forwards payment to the lienholder after closing.

Keep in mind that you'll need to contact the lienholder before closing to request a lien release. In the case of federal taxes, this involves requesting a Certificate of Discharge from the IRS. If the request is approved, this document releases (or removes) the lien from the asset being sold (though it stays in place in every other way), and allows the property to transfer to the new owner lien-free.

5. Refinance the property

Then again, maybe you don't want to sell your home. There's also the option of refinancing and borrowing cash from your home equity to satisfy a state or federal tax lien on the property. Since refinancing replaces an existing mortgage with a new loan, mortgage lenders will not approve your loan application unless they have first lien position on the title. This puts the lender in priority position to benefit from liquidation if the property goes into default. For this to happen, you'll have to request a lien subordination from the IRS or your state tax office before applying for the loan.

Subordination doesn't eliminate a tax lien — rather, the lien becomes secondary to a lender's lien on the property. And with the lender's security interest first, you're more likely to acquire a new mortgage.

Be aware that your ability to refinance depends on how the tax lien impacted your credit. A tax lien will reduce your credit score, and to refinance, you'll have to meet a lender's income and credit score requirements. You need a minimum credit score of 620 for a conventional loan and a minimum credit score between 500 and 580 for an FHA loan.

This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Here's What Happens If You Don't Pay Your Taxes

Carrie Kirby — Fri, 03 Mar 2017 11:00:14 +0000

As Tax Day looms, you may wonder how high the tax man should rank on your list of creditors. Is it better to postpone paying taxes in order to pay off credit card debt, or to keep the electricity running?

Here's what happens if you're not able to pay everything you owe to the IRS, as soon as you owe it.

1. You'll Pay a Penalty

Assuming that you filed your tax return on time but didn't pay your full tax bill, the IRS will charge you 0.5% of what you owe, every month until you pay, up to 25% of the debt. So if you still owed $1,000 when you filed your return on April 18, you'll owe an additional $5 a month.

It's a very good idea to file your return on time, or file an extension, even if you won't be able to pay right away — fees increase if you haven't filed a return by Tax Day. Also, filing on time might get you a break: The IRS says that if you file for an extension or file your return, you may not have to pay the penalty if you've paid 90% of what you owe by Tax Day.

2. You'll Pay Interest

The IRS isn't going to lend you that money interest-free. The rate on money you owe to the IRS is currently 4%.

3. You'll Get a Bill

If you haven't filed your tax return at all, the government will kindly figure out how much you owe for you and send a bill. Actually, not so kindly, because the way they'll calculate your taxes, you'll end up owing more than you would have if you'd done them yourself. The government doesn't have access to all your financial records, so they may not give you credit for your deductions.

Even if you file your return, if you owe money, eventually you'll start getting mail about it from the IRS.

4. You Could Get a Lien on Your Home

If you don't pay those bills (or show the IRS they're wrong and you don't owe), the next step is putting a lien on your property — usually your house, if you own one. This tends to happen if you owe $10,000 or more and haven't worked out a plan with the IRS to pay it off.

A federal tax lien is a legal document that says if you sell your property, the proceeds will go toward your debt before you see a dime. This could make it tough or impossible to take out a mortgage on your home, and complicate the deal if you try to sell your home.

The tax lien will be reported on your credit report and will stay there for seven years, even after you pay the debt. This can make it impossible to get approval for new credit cards or other loans.

5. You Could Lose Your Passport

Thanks to a new law, the State Department can now revoke your passport (or refuse to issue you one) if you owe the IRS $50,000 or more in delinquent debt. So if your plan was to skip out on your debt, you won't get far.

6. The Government Could Seize Your Property

It's called a levy, and it means the IRS can take your Chevy. Or your Ford, or your RV, or boat, or house. They can even garnish your wages or take what you owe right out of your checking account. If you think owing the mob is bad, try owing the federal government.

In the IRS' defense, it doesn't start seizing citizens' property out of the blue. You'll get lots of mail warning that you're in default, telling you that you have the right to a hearing, and explaining that next, they're coming for your stuff. Don't ignore that mail.

7. You Could Pay Larger Penalties

If the IRS determines that your failure to pay in full was due to negligence or fraud, the penalties could climb to 20% or even 75%.

8. You Could End Up in Court

The IRS would rather work with you to get the money. But if you're recalcitrant or showed intent to defraud them, they can charge you with one or more felonies. In 2008, they charged actor Wesley Snipes with conspiracy to defraud the government for refusing to pay taxes on $38 million in earnings. Snipes had joined a movement of tax deniers who interpret various laws to mean that paying taxes is not required.

9. You Could Go to Prison

Most people who owe the IRS don't do time. But Snipes did. He was convicted of three misdemeanors related to his failure to file tax returns and served three years. It could have been worse: Snipes was acquitted for the felonies he had been charged with.

10. Maybe Nothing Will Happen

If the government doesn't have record of your earnings — for instance, if you work for cash and don't get dividends on investments — the IRS may never notice if you don't file a tax return and don't pay a dime. But flaking on filing is definitely a bad idea: Not only will you live in fear of all the consequences mentioned above, but if your earnings are modest, you could be missing out on the earned income tax credit and other benefits of being on record as a wage earner, like the ability to get a mortgage loan.

It's a good idea to keep in touch with the IRS if you owe them money. In fact, if you file your tax return, pay what you can, and then call them up, they may work out a payment plan with you, or even settle for less than the full amount you owe.

This article is from Carrie Kirby of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Is Layaway Still Worth It?

Tim Lemke — Wed, 30 Mar 2016 09:00:12 +0000

A shopping payment option that was popular decades ago has made a comeback in recent years, as some customers have shied away from the use of credit cards.

The downturn in the economy several years back sent some shoppers looking to layaway as an alternative, especially during the holiday season. Under layaway, shoppers can set an item aside and pay for it over time; they only get to take the item home after it's paid for in full. While many stores phased out layaway in the 1990s, it's made a return at many major retailers including Walmart, Kmart, and Toys R Us.

Layaway is often seen as a more responsible way to pay for big-ticket items and for when budgets are tight. But what are the positives and negatives of layaway?

1. PRO: You Don't Need a Credit Card

Some may see this as a downside to layaway, but it is a hugely positive thing for people who are looking to avoid racking up credit card debt, or otherwise can't or won't use a credit card. By using layaway, you can set an item aside, save for it, then acquire it when you have the cash in full. So you get the item and avoid debt in the process.

2. PRO: You Can Lock in High-Demand Items Early

During the holiday season especially, there are certain items that always fly off the shelves. By putting something on layaway in advance of the holiday season, you can guarantee you'll have it.

3. PRO: Almost Anyone Can Do It

In most cases, you can sign up for layaway without a credit check. All you need is some form of identification to prove you're over 18, and a down payment for the items you want to buy.

4. CON: You Can't Use Layaway for Many Products

Stores make their own determination as to what products are available through layaway. Often, very popular products are restricted, and there are often minimum dollar limits. In this way, layaway is more limiting than credit cards, which can be used to buy almost anything.

5. CON: Fees

By using layaway, you avoid potential interest payments from your credit card, but there are still expenses. Many stores charge $5 or more just to sign a layaway contract, and you may have to pay $10 or more if you change your mind and decide not to buy the item. You may also incur additional fees if you don't make payments in a timely fashion.

6. CON: It's Not Offered All the Time

Last year, Walmart only offered layaway from August 28 to December 14, to service the holiday shopping season. Other stores offer it during the holidays and the spring, but not year round.

7. CON: There Are Payment Terms

Layaway isn't quite as simple as setting aside an item and getting it when you pay for it in full. Most stores still expect you to make payments according to a schedule. Kmart, for instance, offers only eight or 12-week contracts and requires payments every two weeks. Toys R Us offers only 90-day contracts, with 40% of the total price of an item due within 30 days and 70% of the item paid for within 60 days.

8. PRO or CON: You're Locked Into the Price

If you put an item on layaway and the price drops, you can't change the terms of the layaway contract to pay less. The only way around it is to cancel the purchase — mostly likely incurring a fee in the process — and buy the item elsewhere. On the flipside, you can lock in a price on layaway if you believe a product may shoot up in price at some point.

Have you ever purchased on layaway?

This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Speed Past Car Debt With This Simple Timing Trick

Keith Whelan — Tue, 26 Jan 2016 14:00:03 +0000

I like goals that are challenging, but achievable. Accordingly, I set a goal to keep a car for 12 years before burying it. A few decades ago that would have been unrealistic. Thankfully today's vehicles, if properly maintained, can run for 200,000 miles or more.

This is good news for the frugal, because it creates an opportunity to be without monthly car payments for years. Even if you're a two-car household, with a little creativity and discipline, you can still eliminate those nasty car payments for years at a time. (See also: 7 Easy Ways to Calculate Your New Car Budget)

Why is it so important to be vehicle debt-free? Because cars and trucks are bad investments. They lose value. To make matters worse, while their value falls, they also drain your monthly income as you make loan (or worse still, lease) payments along with maintenance and repair expenditures. That's money you could otherwise put to much better use. (More on that later.)

How to Stagger Car Purchases and Minimize Debt

So, how do you minimize the financial damage by staggering purchases? Here's a schedule to consider following (it's the one we follow in our household):

Now through year six: Household member #1 buys a car, takes out a loan, and pays it off in three years.
Year six: Household member #2 buys a car, takes out a loan, and pays it off in three years.
Year 12: Household member #1 replaces 12-year-old car with a new one; takes out a loan and pays it off in three years.
Year 18: Household member #2 replaces 12-year-old care with a new one; takes out a loan and pays it off in three years.
So on and so forth.

This allows you to spread out new car purchases every six years. Because each car is paid off in three years, you never have more than one car payment to make at a given time, and 50% of the time you don't have any. If we assume a loan payment of $400/month, then for each three-year period when you have no payments, you can save $12,000, or $24,000 in a single 12-year cycle.

What will you do with that extra cash? Prepay another debt. For example, pay off your unpaid credit card balance. Or maybe a student loan. Doing so frees up even more monthly cash flow. Maybe then you'll have saved enough for a down payment on a house.

See where this is going? You're getting ahead financially, big time! And it all started with spreading out and staggering your vehicle purchases.

So take financial advantage of advances in automobile technology. Change the oil regularly, free up cash flow, and use it to get farther ahead on other debts.

And while you're at it, consider saving up for any future vehicle purchases, thus avoiding car notes, in the first place. By doing so, you'll eventually stop the cycle of car debt altogether.

How long do you keep a new (or new to you) car before replacing it?

This article is from Keith Whelan of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Do This If You Have Too Much Credit Card Debt

Carrie Smith — Thu, 03 Dec 2015 12:00:39 +0000

Your credit cards are maxed out and you're feeling the pressure. You're stressed and need to make a change. You're not alone.

According to 2015 debt statistics released by NerdWallet, the average U.S. household carries just over $16,000 of credit card debt, and that number continues to climb. Here's how to overcome the stress of having too much credit card debt — and finally get a grip on your finances.

1. Stop Adding to the Debt Mountain

The first step towards regaining control of your credit card is to stop adding to the debt mountain. Cut up your credit cards, hide them away, freeze them in water — in short, do whatever you can to stop increasing the balances. If you've been relying on credit to pay essential bills, it becomes extra important to prioritize spending. Consider negotiating payment plans with your utility company, re-financing (or downsizing) your home, or other means of bringing your essential costs within budget.

The most important part about handling too much credit card debt is to stop the bleeding in the first place. Then you can take additional measures to regain control.

2. Negotiate a Lower Interest Rate

Now that you've stopped using your credit cards, it's time to request a lower interest rate. One quick phone call could help you save hundreds of dollars in interest payments over the life of your credit card balance.

Not all credit card companies will be open to lowering your interest rate, but it never hurts to ask. Remind them of your good standing as a customer, how long you've been with them, and any other things that may set your account apart. You can use this as leverage to get the best rate possible.

If you're still not able to secure a lower rate, consider whether transferring some or all of your balances to a new, lower-rate credit card (ideally one with 0% APR) can help. Keep in mind that balance transfers carry a cost, so any interest rate savings would need to outweigh this fee.

3. Work Out a Payment Plan

If you negotiate a lower interest rate, and find that you still just can't pay the minimum payment every month, it's time to review other options. You can start by asking for a deferment on your payments, or negotiate a new payment plan with the credit card company. Most companies are more than happy to receive any payment at all versus having a non-paying account on their books.

4. Limit Discretionary Spending

You've stopped overspending, negotiated a lower interest rate and better payment plan, so now it's time to limit your discretionary spending. This will help you make larger payments each month, which means getting rid of your debt faster, and paying less interest.

For extra motivation and discipline, consider joining spending challenges — these range from going on a 14-day spending diet, to a 60-day cash spending challenge, to a year-long shopping ban. The point is to start out with small spending habit changes, evaluate your budget along the way, and allocate any extra savings towards your debt.

5. Earn Extra Income Towards Debt

Ask anyone who's rid themselves of debt what their secret is, and they'll likely say it was earning extra money as a way of paying off their credit card debt faster. There's only so much you can do to limit your spending — but earning extra money is a higher gear toward debt reduction.

Seek out opportunities that allow you to earn an extra bit of money. Yes, your time may be constrained. If so, set your specific dollar amount goals, and limit your extra work to that number. Allocate all the extra funds towards your credit cards, and soon you'll have made a significant dent in your debt.

How do you stay in front of your credit card debt?

Like this article? Pin it!

This article is from Carrie Smith of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Why You Should Be Saving Big With Bi-Weekly Mortgage Payments

Dan Rafter — Thu, 01 Oct 2015 13:00:35 +0000

Sending a check to your mortgage lender every two weeks instead of once a month — through what is known as a bi-weekly mortgage program — could shorten the length of your mortgage and reduce the amount of interest you'd pay over the life of your loan. But is making mortgage payments every two weeks a smart move? Not always.

Mortgage experts say that homeowners need to look at their entire financial picture before deciding whether a bi-weekly mortgage program makes sense for them.

"There is no one-size-fits-all approach here," said Chris Birk, education director with Veterans United Home Loans in Columbia, Missouri. "You can't say that a bi-weekly payment schedule is always the smart decision. Often it is. But for other borrowers, it's not always the best choice."

How it Works

If you sign on to a bi-weekly payment plan through your lender, you'll make mortgage payments every two weeks. Because there are 52 weeks in a year, you'll make 26 payments in a calendar year. If you're good at math, you'll notice that this comes out to an extra month's payment.

When you pay off a mortgage loan in the traditional way, you make 12 payments in a year, or one per month. That would come out to 24 bi-weekly payments. But under a bank's bi-weekly payment plan, remember, you are making 26 — not 24 — bi-weekly payments. Those extra two payments at the end of the year go directly toward reducing your mortgage loan's principal balance.

Say you had a 30-year fixed-rate loan with a balance of $200,000 at an interest rate of 4.4%. If you paid that loan off with traditional once-a-month payments, your monthly payment, not including taxes and insurance, would be $1,001.52. If you took the full 30 years to pay that loan off, you'd pay more than $160,000 in total interest.

If you went with a bi-weekly payment plan, you would pay $500.76 every two weeks — again, not counting taxes and insurance. If you took the full 30 years to pay off your loan, you'd pay just more than $132,000 in total interest. That's a savings in interest of nearly $30,000.

You'd also pay off your mortgage loan in 26 years instead of 30.

It's Not Always the Right Choice

The math shows that bi-weekly mortgage plans work: They do reduce the amount of interest you pay each month while shortening the term of your mortgage.

But that doesn't mean that a bi-weekly plan is always the right choice.

If you plan on living in your home for a short period of time, a bi-weekly mortgage might not make sense. You won't save much in interest if you move out of your home in five years, say.

Bi-weekly plans also mean that you'll be sending more money to your lender each year, too. In our example of a 30-year fixed-rate loan of $200,000 with an interest rate of 4.4%, you'd pay about $1,000 more each year under a bi-weekly plan than you would with a traditional repayment program. That might not seem like much money, but if you're attempting to save for a big purchase — say a child's college education — that $1,000 could come in handy.

Then there's the fact that of all the debt to carry, mortgage debt is usually the most affordable, thanks to the low interest rates that come with it. Homeowners burdened with high interest rate debt, such as credit card debt, should pay more dollars each month toward reducing that debt rather than their mortgage balance.

"If you can financially do it, I am always an advocate of being debt-free," said Rick Roque, managing director of retail with Michigan Mutual in Port Huron, Michigan. "But because mortgage rates are so low, it often doesn't make sense to work so hard to pay off your mortgage debt."

On the flip side, Roque said, by paying off more of your principal balance at a quicker rate, which you would do with a bi-weekly plan, you do gain more access to equity. You can then take out home equity loans to help fund major home improvements or a child's college education.

"You do gain a tremendous amount of financial leverage when you have more equity," Roque said. "You can leverage that equity in your home for emergencies or educational opportunities. That is a powerful tool."

The bottom line? Bi-weekly mortgage plans work. Just consider whether they'll work for your financial needs.

Are you on a bi-weekly payment schedule?

This article is from Dan Rafter of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Ouch! 5 Ways to Make Paying for the Dentist Less Painful

Mikey Rox — Tue, 18 Aug 2015 21:00:40 +0000

A trip to the dentist might not hurt your pocket if you have dental insurance. All you have to do is flash your insurance card, cover your co-pay, and be on your merry way. But without dental insurance, a routine visit might be more than you bargained for. Not only is there the agony of dealing with all that noisy scraping, sucking, and drilling, but you can get hit with a hefty fee for services.

There isn't much you can do to make the actual appointment more enjoyable, but there are ways to ease the financial pain of paying for a dental visit. Take a look at these five tips on how to make paying the best part of your dental appointment.

1. Save Big With a Dental Discount Plan

If dental insurance isn't offered through your employer and you can't afford monthly premiums on your own, purchase a discount dental plan.

These plans vary depending on the plan provider, but are significantly cheaper than dental insurance. For example, the Careington Care 500 Series discount dental plan costs about $159 a year for a family plan, and offers discounts of 20% to 60% for most dental procedures. Instead of paying a usual fee of $57 for a routine six-month checkup, the discounted fee for plan members is $15 — a savings of 74%. The plan also covers other dental procedures, such as X-rays, fillings, crowns, root canals, tooth replacements, and tooth removals, as well as cosmetic dentistry and orthodontics care for adults and children.

If you're interested in these discount dental plans, DentalPlans can help you find the perfect plan for your needs and budget. The site allows users to search, compare, and select from more than 30 discount dental plans that offer savings of 10% to 60% off most dental procedures.

2. Don't Skip Regular Examinations

Going to the dentist might not be the highlight of your day, but skipping regular examinations could end up costing you more in the long run.

Regular six-month examinations are crucial for good oral hygiene. Your dentist can identify dental problems early and treat a small issue before it worsens and becomes an expensive one. If you have a small cavity, your dentist might be able to fill the cavity at a small expense. On the other hand, if you ignore a cavity and the decay worsens, fixing the tooth might require more than a conventional filling, and you might need a dental crown. The more extensive a dental procedure, the more you'll pay out-of-pocket.

Make sure you visit the dentist at least twice a year for a professional cleaning. And if you experience toothaches, bleeding gums, or other oral problems, let your dentist know sooner rather than later.

3. Negotiate a Cash Discount

If you don't have a dental discount plan or insurance, speak with your dentist's office in advance to see if you can get a discount for paying cash. Some dentists prefer cash payments directly from patients because they don't have to deal with insurance claims. Never underestimate the power of negotiation. If the dentist knows you don't have insurance, he might surprise you and knock money off your bill.

"Many dentists will offer around 5% off if you pay cash up front," says Dr. Lawrence Wallace, CEO of Larell Surgical Consultants, a California company that evaluates claims for insurers.

Also, it doesn't hurt to ask dentists to charge you the same rate they charge insurance companies, which is usually 10% to 15% off a regular office visit or procedure. This may not work out, but it's worth a shot.

4. Go to a Dental School

Before a dental student can graduate and start working in a dental office, she needs to practice on real people. This is where you come in. Going to a dental school for routine dental procedures, such as cleanings, fillings, and root canals can result is a cheaper dental bill. To give you an idea of the potential savings, the Indiana University School of Dentistry charges "about half what a dentist might charge for preventative care like a cleaning."

The thought of a student working on your mouth might sound scary. However, these students only perform services on patients as they near graduation, and always under the supervision of an instructor. You can check the American Dental Association's website for a list of accredited dental schools in your area. Personally, I went to a dental school to have my wisdom teeth removed after college when I didn't have insurance. Everything went according to plan, and they got me sufficiently high on gas before the procedure. All things considered, that was the best part of my day.

5. Barter for Free or Cheap Dental Care

If you don't have a lot of cash to pay for dental care, consider bartering for discounted or free services. Maybe you have a skill that can benefit the dentist, such as web design, office cleaning, or marketing skills. Contact the office manager and leave a message for the dentist asking to trade services in exchange for dental care.

Do you have other ideas on how to save money on dental appointments? Let me know in the comments below.

Like this article? Pin it!

This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

The Fastest Method to Eliminate Credit Card Debt

Andrea Cannon — Fri, 14 Aug 2015 13:00:27 +0000

Do you have credit card debt that you want to pay off quickly? Well, you're not alone. In fact, more than 45% of Americans currently have a credit card balance, and according to Ben Woolsey, director of marketing and consumer research for CreditCards.com, the average amount of debt per household is $15,956.

Millions of Americans in their late 20s and early 30s will be outlived by their credit card debt, so it's time to take charge now. If you have credit card debt, then there are several simple steps you can take to eliminate it in less time.

1. Pay Off the Highest Interest Rate Card First

Invest any extra cash you have every month into paying off your highest interest rate card, while still paying the minimums on your others. Once you've paid off your highest interest rate card, begin applying all your extra cash to the card with the next highest rate, and continue paying the minimums on the remaining cards. Each time you pay off a card, you will be left with a little more extra cash every month, which you can invest into the next card you're paying off, creating a positive payment snowball effect.

Paying off the highest interest card first is the fastest way to eliminate your credit card debt and reduce your monthly interest fees. But if your goal is to pay off a single credit card as quickly as possible, then you'll want to attack the card with the lowest balance first. This can also leave you with a huge feeling of accomplishment knowing that you've paid off one of your credit cards in full. On the other hand, if you're trying to boost your credit score, then you'll want to pay off the card with the highest utilization rate first. The utilization rate is simply your overall card balances divided by their credit limits. The lower your utilization rate is, the better your credit score is.

2. Don't Use Your Cards

The easiest and fastest way to eliminate credit card debt is to stop using your credit cards. Plan to pay in cash and you will automatically spend less. In fact, research has shown that consumers are willing to pay twice as much for an item when they are paying with a credit card as opposed to cash. If you are still using your credit cards as you are trying to pay off your debt, you will only sabotage your own efforts.

3. Get Organized

Make a spreadsheet detailing which cards you have, how much debt you have on each, and their interest rates. You'll also want to know what your total amount of debt is, and make a game plan on how you'll begin paying it off. You won't be able to tackle a problem if you don't know what you're dealing with.

4. Set a Budget

Make a budget detailing what you spend. Are there areas where you can save money? This extra money can be used to pay down your credit cards even faster. Whether you are dining out less, downgrading your cable service, going easy on the A/C, or cutting unnecessary luxury expenses, do what you need to do to reduce your spending.

5. Request a Lower Interest Rate

Call each credit card company and request a lower interest rate. Lower rates can mean lower monthly payments and fees, so every payment will pay off more of the principal. If you have good credit or you've been offered a lower rate by a competing credit card, make sure to mention that to the customer service rep.

6. Make Two Minimum Payments Per Month

Making two minimum payments every month can be your key to living debt-free in no time. Each time you make a payment, your average daily balance is reduced, which results in lower interest charges. This will result in paying off debt at a much faster speed and can also help boost your credit score.

7. Transfer a Balance

If you have a credit card with a high interest rate, you may want to consider a balance transfer. You may be eligible for a 0% promo rate, which will provide you with more time to pay off the balance and allow you to focus on other high interest rate cards. It'll also mean that you're spending less in interest fees, so more money will be going towards the principal owed. However, you want to be careful with balance transfers because there is usually a fee incurred of about 3% of the total amount transferred. (See also: Best Cards with 0% Balance Transfer APR)

8. Consolidate Your Debt

It may be in your best interest to consolidate your debt. This can usually be done by borrowing money from a bank, private lender, or a peer-to-peer lender, such as Lending Club and Prosper. You can use the loan to pay off all of your credit cards at once and then focus on paying one larger loan payment per month. (See also: Should You Use Peer-to-Peer Lending to Pay Down Credit Card Debt?)

9. Continue Paying Your Cards Off

Once you've paid one credit card off, it may be tempting to pocket what you would normally spend on that bill every month. However, the last thing you should do right now is pay less on your credit cards; the goal is to increase your payments every month. Instead, taking the money you would usually spend on that credit card and putting it towards another one will result in a faster pay-off

10. Don't Close the Card

While it may seem like a good idea to close your card after you've paid it off, this is actually not the best route. Your credit score is based partly on your credit utilization ratio, which is calculated based on the amount of credit you are using versus the total amount of credit in your name. Once you close the card, there is less credit in your name. This will cause your debt utilization ratio to increase, which will hurt you in the end. It's also important to maintain a long length of credit history, so keeping your card open will improve your score, too.

Do you have any other tips on how to eliminate credit card debt quickly? Please share your thoughts in the comments!

Like this article? Pin it!

This article is from Andrea Cannon of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Not So Fast! 5 Things You Must Do After Filing Taxes

Sarah Winfrey — Thu, 02 Apr 2015 09:00:10 +0000

Tax filing can be stressful, fraught with too many numbers and documents — but when you're finally done, it feels like such a relief. Whether you file online or mail in your return all old school, getting done usually feels like a huge weight off your shoulders.

But wait! Before you relax too much, chuck all your papers into the trash, and move on with your life, there are a few things you should keep in mind. Here's what to do after you file your taxes.

1. Keep Your Records

At the very least, keep your records easily accessible and on-hand until you receive your tax refund or until you get notice that your payment has been processed (be sure to verify this with your bank!). That way, you have everything in front of you in case you need to file again (or chase down answers about what happened with your taxes).

Otherwise, you should keep copies of your old tax returns indefinitely. It used to be common practice to get rid of these after seven to 10 years. Now that you can store them electronically, though, there's no reason not to keep them longer. Remember that the IRS can audit you for years afterward, so it's important to be prepared.

As for other tax-related paperwork, how long you keep your documentation depends on your particular tax situation. Find your particular situation on this tax checklist and store your documents accordingly.

2. Check the Status of Your Filing

If you file electronically, you can check the status of your taxes as soon as 24 hours after you file (if you mail in your return, it will take up to four weeks for your data to show up in the system). Use the IRS's simple online form, or download their IRS2Go app to check. You'll need your social security number, your filing status, and the exact amount of your refund to login.

Checking on your filing won't just aide your peace of mind, but it'll also help you avoid any potential problems before they arise. If your return doesn't show up in the system, for example, you can handle that before your filing is considered late. If you have any doubts, get in touch with your local IRS office.

3. Make Your Payments

If you owe taxes, make sure that you've paid them, and not just filed your return. Most of the time, you can pay when you e-file, or send a check when you mail in your return. If you don't do either of those, though, you can pay through the IRS payments site. Send an electronic check directly from your account, or use a credit or debit card. Pay by check or money order with their instructions.

The most important thing is that you pay whatever you owe. It isn't only essential that you file your return, but that the government gets any money that is theirs by the April 15 deadline.

4. ...Or File for a Payment Plan

If you discover that you owe more money than you expected, or if you just don't have the cash on hand, you can request a payment plan. There's an online payment agreement application, and as long as you meet their requirements, they're fairly easy to get.

It goes without saying that if you have a payment plan, you need to stick to it. Failing to pay owed money to the IRS comes with consequences.

5. If You're Struggling, File an Extension

Technically, this isn't something you do after you file your taxes. But if you're really having difficulty finishing your taxes in a timely fashion, file an extension. These are granted automatically, as long as you fill out your paperwork properly.

A tax extension will give you an extra six months to file your taxes, so your return will be due October 15 instead of April 15. Make sure you file it before the original due date and that you figure out whatever you need before your final deadline.

If you've got all these ducks in a row, take a break. Relax. Breathe. Do something fun. You definitely deserve it.

What do you do after you file your taxes? And how will you celebrate being done with them?

This article is from Sarah Winfrey of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: