Personal Finance

How to Dispute Mistakes On Your Credit Report

Holly Johnson — Wed, 01 Jun 2022 22:46:07 +0000

There are several obvious reasons to give a hoot about your credit score, and very few reasons you should ignore it. After all, you'll need a good credit score and a solid credit history if you ever plan to purchase a home or take out an auto loan. A bad credit score can even come back to bite you if you want to rent an apartment or apply for certain jobs.

But your score isn't the only detail you need to pay attention to. You also need to keep an eye on your credit report — the document that lists your formal credit history including any accounts you have open, balances due, and payments you've made.

Your report and your score are intricately intertwined. If bad information gets on your credit report due to fraud or misreporting, this can easily cause your credit score to nosedive. Likewise, a clear credit report with nothing but true (and positive) information can help your credit score reach greater heights.

That's why, every single year, you should get a free copy of your credit report from all three credit reporting agencies — Experian, Equifax, and TransUnion. Fortunately, this part is easy to accomplish via AnnualCreditReport.com.

How to dispute information on your credit report

Once you have a copy of your credit report from all three bureaus, you'll want to look over all the details to make sure they're correct. Incorrect information you might notice on your report may include:

Errors regarding your name or personal information
Accounts that aren't even yours
Accounts belonging to someone with a name that is similar to yours
Closed accounts that are reported as open
Incorrectly reported late payments
Accounts listed more than once
Incorrect balances on accounts
Incorrect credit limits on accounts

Thanks to the Fair Credit Reporting Act (FCRA), both the credit bureau and whoever is providing them with information are responsible for correcting misinformation on your credit report. This means that, if a specific retailer or bank is reporting an account that isn't yours or an incorrect balance, both the credit bureau and the retailer or bank have to work together to make things right.

If you find an error, here are the steps you should take right away:

Inform the credit bureau with the incorrect information of the mistake

The first step you should take is informing the credit reporting agency of their error, keeping in mind that it's possible not all the credit bureaus will have the same information. You should let them know about the mistake in writing, taking special care to list important details about the mistake with proper documentation. The Federal Trade Commission (FTC) even offers a sample letter you can use if you need help.

Note that credit bureaus usually have 30 days to investigate your claim and they are required to get back to you with a response. They are also required to forward the information you sent them to the provider who shared the information with them in the first place.

Inform whoever provided the information of the mistake

You'll also want to provide the company reporting the incorrect information with copies of any documentation that prove an error has occurred. Make sure to include all details required to prove your claim along with copies of documentation that backs you up. The FTC offers another sample dispute letter you can use for this instance.

Watch for your credit report to be updated

Generally speaking, credit reporting agencies are required to inform you in writing of the results of your case. They are also legally required to give you another free copy of your credit report if your dispute caused a permanent change.

You also have the option to ask the credit bureau to send notices of any corrections to anyone who has requested your credit report within the last six months. You can even have an updated copy sent to anyone who has asked for a modified version of your credit report for reasons regarding employment.

Caring about your credit

While the steps above may sound tedious, it's crucial to understand the damage incorrect information on your credit report can do. If you have inaccurate late payments on your report, for example, you could see your credit score plummet through no fault of your own. And if there are accounts on your credit report that aren't even yours, that could signify a much larger problem, such as outright identity theft.

Fortunately, the small amount of time required to dispute an item on your credit report really can pay off in a big way. After all, any negative information you manage to get wiped clean should immediately stop dragging your score down.

However, you should also note that you'll only be able to get false negative information removed from your credit reports. Any damaging information that's true will have to linger on your report until enough time has passed. Generally speaking, negative information and reporting can remain on your credit report for up to seven years and bankruptcy can stay on your report for 10 years.

The bottom line

Errors happen all the time, and they may never be uncovered if you don't find them yourself. In addition to staying on top of your credit reports, it can help to sign up for a free service that gives you updates on new accounts in your name or fluctuations in your credit score. CreditKarma.com and CreditSesame.com are two that offer a similar free service with these features, so they are both worth checking out.

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

The 8 Most Eye-Opening Money Attractions in the U.S.

Dr Penny Pincher — Wed, 01 Jun 2022 19:32:44 +0000

Some of my most memorable vacations have centered around money — and didn't require spending much of it at all. I had my photo taken next to a $1 million stack of bills at Binion's on a recent trip to Las Vegas. Another memorable experience was visiting the Bureau of Engraving and Printing in Washington, D.C. to see millions of dollars of being printed on the production floor.

If you get excited about money, check out these unique attractions across the U.S.

1. U.S. Mint

See the coin manufacturing process up close by taking a free tour at the Philadelphia and Denver facilities of the U.S. Mint. Learn about the process of minting coins from the design to the striking of coins. You'll be able to see how billions of coins are produced each year, and learn the history of coin-making. (See also: Where Are They Now? The Forgotten Dollar Bills (and Coins))

2. Binion's Gambling Hall and Hotel

Get a free souvenir photo of yourself standing next to $1 million in cash at Binion's Gambling Hall and Hotel in Las Vegas. Stop by to have your photo taken and come back about an hour later to pick up your free printed copy. It's pretty incredible to see that much cash up close.

3. U.S. Treasury

The main building of U.S. Treasury is the third oldest building in Washington, D.C. and has been renovated to preserve its impressive Greek Revival architecture. Some historical highlights at the U.S. Treasury include the offices of Salmon P. Chase, Secretary of the Treasury during the Civil War, and the offices used by President Andrew Johnson following Abraham Lincoln's assassination. The stately marble Cash Room has been restored to appear as it was at Ulysses S. Grant's inaugural reception in 1869. You can tour all of these sites by setting up a reservation ahead of your visit.

4. Wall Street

If your travels take you to New York City, check out the attractions of Wall Street, an area of New York City that has been focused on finance for over 200 years. Highlights include:

New York Stock Exchange: On the corner of Wall Street and Broad Street
Federal Hall National Memorial: On the corner of Wall Street and Broad Street
Museum of American Finance: Located at 48 Wall Street

You can take self-guided tours on foot, or there are other tour options available for free or under $40. (See also: 6 Confidence-Inspiring Facts About the Stock Market)

5. Chicago Board of Trade

Visit the home of the trading floors of the Chicago Board of Trade and the Chicago Mercantile Exchange to see traders at work in the pits as they buy and sell commodities. The Chicago Board of Trade building was once the tallest building in Chicago. Although it has been eclipsed by other taller buildings, it remains an Art Deco historic landmark with a glass observation deck with views of the skyline. Tours last an hour, and cost $20 per person.

6. Bureau of Engraving and Printing

If you want to see where money comes from, this is the stop for you! Learn about the production process for paper currency and watch millions of dollars being printed on the floor of the production facility at the Bureau of Engraving and Printing in Washington, D.C. The tour includes an introductory film and stops along the steps of the production process that results in legal tender. Admission is free, but a ticket is required. (See also: 10 Must-See Museums in the U.S.)

7. New York Fed Gold Vault

Unfortunately the bullion vault at Fort Knox is closed to visitors, but there is a place you can see tons of gold — literally. The gold vault at the New York Federal Reserve Bank houses approximately 508,000 gold bars, weighing in at 6,350 tons. Tour the gold vault for free and learn about the Federal Reserve System as you tour the Federal Reserve Bank.

8. Federal Reserve Bank of Cleveland

Visit the Learning Center and Money Museum at the Federal Reserve Bank of Cleveland for interactive exhibits and activities. Try your hand at bartering, see if you can correctly identify counterfeit bills, and even try making your own currency. Take a look inside the impressive building that houses the Cleveland Fed and learn how central banks operate. Admission and tours are free.

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

Someone Took Out a Loan in Your Name. Now What?

Kat Tretina — Wed, 14 Apr 2021 20:33:27 +0000

Identity theft wears many different faces. From credit cards to student loans, thieves can open different forms of credit in your name and just like that, destroy your credit history and financial standing.

If this happens to you, getting the situation fixed can be difficult and time-consuming. But you can set things right.

If someone took out a loan in your name, it's important to take action right away to prevent further damage to your credit. Follow these steps to protect yourself and get rid of the fraudulent accounts.

1. File a police report

The first thing you should do is file a police report with your local police department. You might be able to do this online. In many cases, you will be required to submit a police report documenting the theft in order for lenders to remove the fraudulent loans from your account. (See also: 9 Signs Your Identity Was Stolen)

2. Contact the lender

If someone took out a loan or opened a credit card in your name, contact the lender or credit card company directly to notify them of the fraudulent account and to have it removed from your credit report. For credit cards and even personal loans, the problem can usually be resolved quickly.

When it comes to student loans, identity theft can have huge consequences for the victim. Failure to pay a student loan can result in wage garnishment, a suspended license, or the government seizing your tax refund — so it's critical that you cut any fraudulent activity off at the pass and get the loans discharged quickly.

In general, you'll need to contact the lender who issued the student loan and provide them with a police report. The lender will also ask you to complete an identity theft report. While your application for discharge is under review, you aren't held responsible for payments.

If you have private student loans, the process is similar. Each lender has their own process for handling student loan identity theft. However, you typically will be asked to submit a police report as proof, and the lender will do an investigation.

3. Notify the school, if necessary

If someone took out student loans in your name, contact the school the thief used to take out the loans. Call their financial aid or registrar's office and explain that a student there took out loans under your name. They can flag the account in their system and prevent someone from taking out any more loans with your information. (See also: How to Protect Your Child From Identity Theft)

4. Dispute the errors with the credit bureaus

When you find evidence of fraudulent activity, you need to dispute the errors with each of the three credit reporting agencies: Experian, Equifax, and TransUnion. You should contact each one and submit evidence, such as your police report or a letter from the lender acknowledging the occurrence of identity theft. Once the credit reporting bureau has that information, they can remove the accounts from your credit history.

If your credit score took a hit due to thieves defaulting on your loans, getting them removed can help improve your score. It can take weeks or even months for your score to fully recover, but it will eventually be restored to its previous level. (See also: Don't Panic: Do This If Your Identity Gets Stolen)

5. Place a fraud alert or freeze on your credit report

As soon as you find out you're the victim of a fraudulent loan, place a fraud alert on your credit report with one of the three credit reporting agencies. You can do so online:

When you place a fraud alert on your account, potential creditors or lenders will receive a notification when they run your credit. The alert prompts them to take additional steps to verify your identity before issuing a loan or form of credit in your name. (See also: How to Get a Free Fraud Alert on Your Credit Report)

In some cases, it might be a good idea to freeze your credit. With a credit freeze, creditors cannot view your credit report or issue you new credit unless you remove the freeze.

6. Check your credit report regularly

Finally, check your credit report regularly to ensure no new accounts are opened in your name. You can request a free report from each of the three credit reporting agencies once a year at AnnualCreditReport.com. You can stagger the reports so you take out one every four months, helping you keep a close eye on account activity throughout the year. (See also: How to Read a Credit Report)

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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:

5 Things to Know Before Adding Someone to the Deed

Denise Hill — Mon, 22 Mar 2021 09:00:10 +0000

Sharing is caring — at least that's what has been drilled into our minds. And for the most part, it's true.

However, if you're contemplating making the ultimate step in sharing — adding someone to the deed on your home — it's a good idea to consider the consequences. It's important to understand that when you add someone to your deed, you are entitling them to the same "bundle of rights" — control, enjoyment, possession, exclusion and disposition — that you have as a property owner. Before adding a loved one to your deed, it's important that you speak to an estate attorney and your mortgage lender to ensure you understand your rights, and to determine if this is the right move for you.

Here are five things you should consider before adding someone to your deed.

1. You can't take it back

When you add someone to the deed, all or a portion of your ownership is transferred to that person. Once it's done, you can't take it back unless the person you've added provides consent to be removed from the deed. He or she can take out a loan on the property, tear it down, or even sell their share of the property. And in some cases, there's nothing you can do about it.

Even if you transfer only a portion of your interest in the property, that person will have full control of their portion and may be able to force a sale of the property. If you want to refinance or sell your home, you must get permission from the individual you've added. This can lead to time consuming and costly legal battles that can tie up the property for years. Make sure you fully understand the implications and consequences before you sign on the dotted line.

2. You need permission from the lender

The law doesn't forbid adding people to a deed on a home with an outstanding mortgage. Mortgage lenders are familiar and frequently work with deed changes and transfers. Most lenders incorporate a loan "due-on-sale clause," which gives them the ability to call in the loan if the deed is transferred or if the home is sold. When you "deed" your home to someone, you've effectively transferred part ownership, which could activate the "due-on-sale" clause.

It is imperative that you understand the rules governing your particular situation. And you should obtain permission from your mortgage lender before adding someone to the deed. (See also: Why You Should Call Your Mortgage Lender Every Year)

3. Exposure to additional liability

Let's say you decide to add your brother to the deed. If he fails to pay taxes and incurs a tax lien, has problems with creditors, or goes through a nasty divorce, the IRS, his creditors, or his ex-spouse can lay claim to your home, or at least to his portion. In that situation, the entity owed can place a lien on your property and attempt to force a sale to collect the debt or tie up the property and prevent you from selling.

Adding someone to the deed of your home can also generate income tax liabilities when the residence is sold in the future.

4. IRS gift taxes may apply

When you add someone to your deed, the IRS sees it as a gift. That person becomes subject to IRS regulations concerning gifts. As of 2018, the IRS allowable gift limit is $15,000 annually, per person. Gifts that exceed this amount are subject to the gift tax.

The important take away here is that you should ensure you consult a tax attorney or Certified Public Accountant (CPA) before you add someone to your deed to ensure that you understand all of the implications and don't run into any surprises down the road. Your good intentions can be costly if not accompanied by due diligence. (See also: 4 Things You Need to Know About Gift Tax)

5. It can get complicated

There are so many hidden risks and pitfalls to adding someone to the deed. Remember, you become a joint owner rather than the exclusive owner. This change can impact your eligibility to sell or refinance. And for older homeowners near retirement age, transferring assets can adversely affect Medicaid eligibility.

Another thing to consider is that adding someone to the deed does not make them responsible for the debt. Unless the original loan agreement is modified, you are still solely responsible for repayment and the other person has ownership rights.

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

Banks Still Offering Free Checking and Savings with Great Interest Rates

Ashley Jacobs — Wed, 10 Mar 2021 02:00:33 +0000

Are you shopping for a new bank thanks to the new bank fee increases?

Here are four banks that are still offering awesome perks, like free interest-bearing checking accounts and high-yield savings accounts.

Capital One 360

Capital One 360 offers a variety of products including checking, savings, loans, investing, retirement, and business services to their customers.

Simple

With Simple banking, there are no fees whatsoever. A variety of budgeting and saving tools are built into your account, including advanced record keeping, separate savings pools for your goals, and the Safe-To-Spend feature, which subtracts upcoming bill payments and pending transactions to give you an accurate idea of how much money you actually have on hand. You get a Visa debit card for making transactions anywhere Visa is accepted and at more than 50,000 fee-free ATMs. While the APY is only 0.01%, Simple is still a solid choice thanks the built-in tools and the lack of fees.

Discover Bank

Discover's Cashback Checking is definitely worth checking out. You can earn 1% cashback on up to $3,000 in debit card purchases.

Discover's savings account is also quite attractive. At .40%, the APY is over the National Savings Average. There are no monthly maintenance fees or balance requirements.

Ally Bank

Ally Bank was named one of the Best Banks of 2011 by Money Magazine, and offers checking, savings, retirement, and auto financing services.

Checking account: APY is 0.10% on accounts with under $15,000 and 0.25% on accounts with over $15,000. No fees and minimums.
Savings account: APY is 0.50% with no fees and minimums.

All the banks on this list are FDIC insured.

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

Capital One 360: A Competitive Banking Option

Miranda Marquit — Tue, 09 Mar 2021 08:35:15 +0000

It's been a few years since Capital One bought ING DIRECT, the popular bank that conducted most of its operations online. (See also: 7 Banks Still Offering Free Interest-Bearing Checking Accounts)

For most people looking to centralize their banking and find competitive rates, Capital One 360 is a viable option. Capital One 360 makes it easy to access all of your accounts, including your investment accounts, from your account summary.

Features and Benefits of Capital One 360

Capital One 360 offers a variety of banking products and services.

360 Savings

This is the classic account that started it all. There are no fees, no minimum deposit requirements, and no catches. Right now, the yield is .40% APY, which is reasonably competitive, especially when you consider that there are no minimums and no fees. It’s easy to link your account to other banks and set up automatic transfers to make saving easy.

Kids Savings Account

My son’s savings account at Capital One 360 kicks the crap out of the 0.20% he was getting at the local credit union. It’s easy to monitor the account from your own dashboard and to teach your child the value of saving early on.

360 Checking

You can open a checking account with Capital One 360 and earn a yield on the balance. Current yield is .10%. Account holders can use over 70,000 Capital One or Allpoint ATMs at no cost.

This account has no fees and no minimums, and you can use P2P Payments to send money to family and friends for free.
Bill pay is free, even when you have paper checks sent.
You can use CheckMate to deposit checks remotely, and the account comes with overdraft protection.
If you overdraw your account, you won’t end up paying a fee. Instead, you are just charged an interest fee on the overdraft until it’s paid off.

MONEY (Teen Checking)

MONEY is an account created specifically for the teen user. Teach your teen to manage her money with this no fee and no minimum account that earns interest.

CDs

The yields on the CDs from Capital One 360 are not as competitive as they could be, ranging from 0.20% to .40%. You can choose your term, and you can also choose when you want to receive your interest payments.

Business Account

Capital One 360 also offers business banking products. You can open a business savings account, or a business CD. The current yield on the business savings account is lower than what you get with personal savings, though.

You can also set up a retirement plan for your small business through Capital One. It’s fairly easy to set up, and you can offer this benefit to your employees.

Bottom Line

Overall, Capital One 360 is a viable competitor. The products offered remain fairly competitive. Additionally, the low-fee, low-hassle structure of the bank makes it easy to open accounts, and avoid watching your wealth erode due to hidden fees and complicated requirements.

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

5 Best Online Checking Accounts

Miranda Marquit — Sun, 07 Mar 2021 11:24:30 +0000

The Internet provides us almost limitless choices, especially when it comes to finances. These days, you can choose to keep your money at almost any bank in the nation rather than limit yourself to the brick-and-mortar choices in your local area.

If you aren't happy with your local offerings, turn to the Internet. There are plenty of online checking accounts with no fees, and some that even pay yields on your account balance. With low overheads, online checking account providers can afford to be more generous in their terms, and that benefits consumers.

How to Choose an Online Checking Account

The first thing you should look for is FDIC or NCUA protection — you want to make sure that your money is safe. You should also check into the reputation of the bank or credit union, since you don't want to end up with a fly-by-night operation.

Consider your individual needs. Think about whether or not you can handle maintaining a large account balance. Will you use the checking account as your primary account, or is it more of an emergency fund? Paper checks, remote deposit of checks you receive, ATM access, and other perks are also things to consider.

You can also compare yields, but it's important to recognize that yield isn't everything. If you have to maintain a high balance to get a high yield, it might not be worth the trouble — especially if you can get a great account with a little lower yield, but fewer restrictions.

Here are a few great options for online checking accounts.

Capital One 360

Capital One 360 offers an interest bearing checking account with a 0.10% APY along with no fees and no minimums. Get access to 70,000 fee-free Allpoint and Capital One ATMs. You'll also get a MasterCard debit card for purchases.

Simple

Simple is an online bank with all the features you'd expect from a traditional bank without any of the fees. You get a Visa debit card for making transactions anywhere Visa is accepted and at more than 50,000 fee-free ATMs. A variety of budgeting and saving tools are built into your account, including advanced record keeping, separate savings pools for your goals, and the Safe-To-Spend feature, which subtracts upcoming bill payments and pending transactions to give you an accurate idea of how much money you actually have on hand.

Discover Cashback Checking

Discover's Cashback Checking offers up to 1% cash back on up to $3,000 in debit purchases each month. There are no monthly fees or monthly balance requirements, and you have access to over 60,000 free ATMs.

Ally Interest Checking Account

Ally offers a checking account yield that is very competitive (currently up to 0.25%). You receive unlimited checks for check writing if you want, and there is free online bill pay. You don't have to pay any monthly fees, and you can open an account without a deposit.

Ally also reimburses you for ATM fees, offers great customer service, as well as eCheck Deposit to remotely add funds to your account.

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

5 Ways Gig Economy Workers Can Save for Retirement

Emily Guy Birken — Mon, 16 Nov 2020 22:12:58 +0000

We are in the midst of a major economic shift. While workers in the past could expect to keep a stable job with a traditional employer for decades, workers of today have found they must either cobble together a career from a variety of gigs, or supplement a lackluster salary from a traditional job by doing freelance work in their spare time.

Though you can make a living (and possibly even a good one) in the gig economy, this kind of work does leave gig workers vulnerable in one very important way: retirement planning.

Without the backing of an employer-sponsored retirement account, many gig workers are not saving enough for their golden years. According to a recent report by Betterment, seven out of 10 full-time gig workers say they are unprepared to maintain their current lifestyle during retirement, while three out of 10 say they don't regularly set aside any money for retirement.

So what's a gig worker to do if they don't want to be driving for Uber and taking TaskRabbit jobs into their 70s and 80s? Here are five things you can do to save for retirement as a member of the gig economy. (See also: 15 Lucrative Side Hustles for City Dwellers)

1. Take stock of what you have

Many people don't have a clear idea of how much money they have. And it's impossible to plan your retirement if you don't know where you are today. So any retirement savings should start with a look at what you already have in the accounts in your name.

Add up how much is in your checking and savings accounts, any neglected retirement accounts you may have picked up from previous traditional jobs, cash on hand if your gig work relies on cash tips, or any other financial accounts. The sum total could add up to more than you realize if you haven't recently taken stock of where you are.

Even if you truly have nothing more than pocket lint and a couple quarters to your name, it's better to know where you are than proceed without a clear picture of your financial reality. (See also: These 13 Numbers Are Crucial to Understanding Your Finances)

2. Open an IRA

If you don't already have a retirement account that you can contribute to, then you need to set one up ASAP. You can't save for retirement if you don't have an account to put money in.

IRAs are specifically created for individual investors and you can easily get started with one online. If you have money from a 401(k) to roll over, you have more options available to you, as some IRAs have a minimum investment amount (typically $1,000). If you have less than that to open your account, you may want to choose a Roth IRA, since those often have no minimums.

The difference between the traditional IRA and the Roth IRA is how taxes are levied. With a traditional IRA, you can fund the account with pre-tax income. In other words, every dollar you put in an IRA is a dollar you do not have to claim as income. However, you will have to pay ordinary income tax on your IRA distributions once you reach retirement. Roth IRAs are funded with money that has already been taxed, so you can take distributions tax-free in retirement.

Many gig workers choose a Roth IRA because their current tax burden is low. If you anticipate earning more over the course of your career, using a Roth IRA for retirement investments can protect you from the taxman in retirement.

Whether you choose a Roth or a traditional IRA, the contribution limit per year, as of 2018, is $5,500 for workers under 50, and $6,500 for anyone who is 50+.

3. Avoid the bite of investment fees

While no investor wants to lose portfolio growth to fees, it's especially important for gig workers to choose asset allocations that will minimize investment fees. That's because gig workers are likely to have less money to invest, so every dollar needs to be working hard for them.

Investing in index funds is one good way to make sure investment fees don't suck the life out of your retirement account. Index funds are mutual funds that are constructed to mimic a specific market index, like the S&P 500. Since there is no portfolio manager who is choosing investments, there is no management fee for index funds. (See also: How to Start Investing With Just $100)

4. Embrace automation

One of the toughest challenges of being a gig worker is the fact that your income is variable — which makes it very difficult to plan on contributing the same amount each month. This is where technology comes in.

To start, set up an automatic transfer of an amount of money you will not miss. Whether you can spare $50 per week or $5 per month, having a small amount of money quietly moving into your IRA gives you a little cushion that you don't have to think about.

From there, consider using a savings app to handle retirement savings for you. For instance, Digit will analyze your checking account's inflow and outflow, and will determine an amount that is safe to save without triggering an overdraft, and automatically move that amount into a savings account. You can then transfer your Digit savings into your retirement account.

5. Invest found money

An excellent way to make sure you're maxing out your contributions each year is to change your view of "found money." For instance, if you receive a birthday check from your grandmother, only spend half of it and put the rest in your retirement account. Similarly, if you receive a tax refund (which is a little less likely if you're a gig worker paying quarterly estimated taxes), send at least half of the refund toward your retirement.

Any gig workers who often receive cash can also make their own rules about the cash they receive. For instance, you could decide that every $5 bill you get has to go into retirement savings. That will help you change your view of the money and give you a way to boost your retirement savings.

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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:

5 Renovations That Don't Increase Your Resale Value

Emily Guy Birken — Sat, 07 Nov 2020 22:45:56 +0000

The first major home renovation my husband and I ever undertook was insulating the walls of a 1921 Craftsman bungalow we shared in Columbus, Ohio. This project made the house a great deal more comfortable in the winter and the summer, since the existing insulation was the least expensive option available in the 1920s — making it completely inadequate for maintaining heat in the winter or coolness in the summer.

Unfortunately, despite the undeniable improvement to our comfort, we found that our new insulation did nothing for our resale value. Even though we had put nearly $5,000 worth of work and materials into this renovation, we didn't see that money and effort reflected in our sale price when we had to move several years later.

Not all renovations are going to increase your resale value. That doesn't necessarily mean you should forgo working on your home if you won't see the value when it's time to sell. For instance, I would definitely insulate that house again, even knowing that the money is only going to improve my comfort.

But there are some home renovation projects that you just can't expect to recoup your investment on. Knowing that, you should consider how long you intend to live in your house and whether you're renovating just to increase your home's value before jumping into any of these home improvement projects.

1. Invisible improvements

Insulating our bungalow was the kind of invisible improvement that had to be done, but didn't appear to change the house. Unlike "sexier" improvements like updating a kitchen or bath, or even putting on a new roof, invisible improvements don't change the look of the house. These are things like re-grading the yard to keep water from getting into the basement, updating the HVAC system, tuck-pointing bricks and chimneys, and replacing gutters.

While these improvements often have to be done to protect your house, the downside is that you may not recoup the cost of these improvements when it comes time to sell. It can be helpful to think of these renovation expenses as a way of protecting your home's current value, rather than as a way to increase your future resale value.

2. Swimming pool

While homeowners in Arizona, Florida, Hawaii, and Southern California may find that having a swimming pool is a big selling point for their homes, this isn't going to be the case nationwide. According to HomeAdvisor, the average cost to install a pool is over $27,000. That doesn't include the annual maintenance costs, ranging between $500 and $4,000. It's these maintenance costs, plus the work that homeowners will have to either do themselves or contract out in order to keep their pool sparkling clean that will turn off many potential buyers. Add in the additional insurance requirements that homeowners with pools will need to purchase, and it should be clear why many prospective buyers would rather not invest in a home that comes with a pool.

This is why you should only commit to the cost of installing a pool if you truly want to use it yourself and expect to stay in your home for at least five years. Otherwise, it might make more sense to invest in a membership to your local pool.

3. Bathroom and kitchen upgrades

Remodeling your bathroom and/or kitchen is an excellent way to increase your home's value, right? Yes and no. While replacing dingy tiling and updating old appliances will definitely help your home shine for potential buyers, there's such a thing as going overboard with your bathroom or kitchen upgrades.

Specifically, if you add granite countertops, custom-made cabinets, stainless steel appliances, and ceramic tiles to your kitchen and bathroom, but the rest of the home is still an ordinary suburban home, potential buyers will see the house as a work-in-progress, rather than a home that feels move-in ready. Over-improving the bath and kitchen could make buyers think that it's not worth the effort to try to get the rest of the house to match. (See also: 9 Home Improvements You Should Always Negotiate)

4. Built-in high-end electronics

We may all dream of living in a George Jetson house — where every possible electronic need you have is already built in — but committing to this kind of renovation may hurt your resale value.

There are a couple of reasons for this. First, while your personal movie theater (with remote-controlled state-of-the-art projector) may be exactly what you want from your home, a potential buyer may just see a room that will need to be torn out and remodeled as soon as they move in. Plus, technology advances at a breakneck speed, so your cutting-edge electronics will soon look as dated as shag carpeting and harvest gold refrigerators.

If you need or want built-in high-end electronics in your home, make sure you're installing them for your own pleasure and comfort, because it's unlikely a buyer will appreciate them too.

5. Extravagant landscaping

Making improvements to your landscaping requires a gentle touch. On the one hand, landscaping is often touted as an important aspect of curb appeal, and making sure your yard and garden look attractive and welcoming is certainly a great way to draw in potential buyers.

On the other hand, an elaborate landscaping remodel can turn off buyers. Those with black thumbs might look at your vast flowering garden with sculpted shrubs and pond and decide they are not up for the challenge of keeping it up, and those who do love to garden might not like your vision and want to start over.

If recreating the gardens of Versailles is how you make your house feel like a home, then there's nothing wrong with investing in this kind of renovation. But make sure you're doing this kind of work for yourself, and not because you hope to make back the money you spent once you're ready to sell. (See also: 14 Ways to Make Your Yard Look Awesome for Under $100)

Renovate for the right reasons

While many experts focus on resale value as the deciding factor on whether to take on a home improvement project, the important thing to remember is that you live in your house now. Deciding which home renovations to work on based on what someone else might like is the way madness lies.

When you make improvements to your home, make sure you take your own comfort, your plans for living in the home, and the potential resale value into consideration. They all matter.

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 Protect Yourself From Credit Card Theft

Emily Guy Birken — Sat, 07 Nov 2020 22:45:33 +0000

Last fall, I received an email that appeared to be from my web host. The email claimed that there was a problem with my payment information and asked me to update it. I clicked on the link in the email and entered my credit card number, thinking that a recent change I'd made to my site must have caused a problem.

The next morning, I logged onto my credit card account to find two large unauthorized purchases. A scammer had successfully phished my payment information from me.

This failure of security is pretty embarrassing for a personal finance writer. I know better than to click through an email link claiming to be from my bank, credit card lender, or other financial institution. But because the email came from a source that wasn't specifically financial (and because I was thinking about the changes I had made to my website just the day before), I let myself get played.

Thankfully, because I check my credit card balance daily, the scammers didn't get away with it. However, it's better to be proactive about avoiding credit card theft so you're not stuck with the cleanup, which took me several months to complete.

Here's how you can protect yourself from credit card theft.

Protecting your physical credit card

Stealing your physical credit or debit card is in some respects the easiest way for a scammer to get their hands on your sweet, sweet money. With the actual card in hand, a scammer has all the information they need to make fraudulent purchases: the credit card number, expiration date, and the security code on the back.

That means keeping your physical cards safe is one of the best ways to protect yourself from credit card theft. Don't carry more cards than you intend to use. Having every card you own in a bulging wallet makes it more likely someone could steal one when you're not paying attention and you may not realize it's gone if you have multiple cards.

Another common place where you might be separated from your card is at a restaurant. After you've paid your bill, it can be easy to forget if you've put away your card (especially if you've been enjoying adult beverages). So make it a habit to confirm that you have your card before you leave a restaurant.

If you do find yourself missing a credit or debit card, make sure you call your bank immediately to report it lost or stolen. The faster you move to lock down the card, the less likely the scammers will be able to make fraudulent charges. Make sure you have your bank's phone number written down somewhere so you're able to contact them quickly if your card is stolen or lost. (See also: Don't Panic: Do This If Your Identity Gets Stolen)

Recognizing card skimmers

Credit card thieves also go high-tech to get your information. Credit card skimmers are small devices placed on a legitimate spot for a card scanner, such as on a gas pump or ATM.

When you scan your card to pay, the skimmer device captures all the information stored in your card's magnetic stripe. In some cases, when there's a skimmer placed on an ATM, there's also a tiny camera set up to record you entering your PIN so the fraudster has all the info they need to access your account.

The good news is that it's possible to detect a card skimmer in the wild. Gas stations and ATMs are the most common places where you'll see skimmer devices. Generally, these devices will often stick out past the panel rather than sit flush with it, as the legitimate credit card scanner is supposed to. Other red flags to look for are scanners that seem to jiggle or move slightly instead of being firmly affixed, or a pin pad that appears thicker than normal. All of these can potentially indicate a skimmer is in place.

If you find something that looks hinky, go to a different gas station or ATM. Better safe than sorry. (See also: 18 Surprising Ways Your Identity Can Be Stolen)

Protecting your credit card numbers at home

Your home is another place thieves will go searching for your sensitive information. To start, you likely receive credit card offers, the cards themselves, and your statements in the mail. While mail theft is relatively rare (it's a federal crime, after all), it's still a good idea to make sure you collect your mail daily and put a hold on it when you go out of town.

Once you get your card-related paperwork in the house, however, you still may be vulnerable. Because credit card scammers are not above a little dumpster diving to get their hands on your credit card number. This is why it's a good idea to shred any paperwork with your credit card number and other identifying information on it before you throw it away.

Finally, protecting your credit cards at home also means being wary about whom you share information with over the phone. Unless you've initiated a phone call of your own volition — not because you're calling someone who left a voicemail — you should never share your credit card numbers over the phone. Scammers will pose as customer service agents from your financial institution or a merchant you frequent to get your payment information. To be sure, you can hang up and call the institution yourself using the main phone number.

Keeping your cards safe online

You should never provide your credit card information via a link in an email purporting to be from your financial institution or a merchant. Scammers are able to make their fake emails and websites look legitimate, which was exactly the reason I fell victim to this fraud.

But even with my momentary lapse in judgment about being asked for my payment information from my "web host," there were other warning signs that I could've heeded if I had been paying attention.

The first is the actual email address. These fake emails will often have a legitimate looking display name, which is the only thing you might see in your email. However, if you hover over or click on the display name, you can see the actual email address that sent you the message. Illegitimate addresses do not follow the same email address format you'll see from the legitimate company.

In addition to that, looking at the URL that showed up when I clicked the link could've told me something weird was going on. Any legitimate site that needs your financial information will have a secure URL to accept your payment. Secure URLs start with https:// (rather than http://) and feature a lock icon in the browser bar. If these elements are missing, then you should not enter your credit card information. (See also: 3 Ways Millennials Can Avoid Financial Fraud)

Daily practices that keep you safe

In addition to these precautions, you can also protect your credit cards with the everyday choices you make. For instance, using strong, unique passwords for all of your online financial services, from shopping to banking, can help you prevent theft. Keeping those strong passwords safe — that is, not written down on a post-it note on your laptop — will also help protect your financial information.

Regularly going over your credit card and banking statements can also help ensure that you're the only one making purchases with your credit cards. It was this daily habit of mine that made sure my scammers didn't actually receive the computer they tried to purchase with my credit card. The fact that I check my balance daily meant I was able to shut down the fraudulent sale before they received the goods, even though I fell down on the job of protecting my credit card information.

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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:

5 Reasons Not to Use Debit Cards When You Shop Online

Holly Johnson — Sat, 07 Nov 2020 22:45:14 +0000

Many consumers use their debit cards for everything they buy. Using debit instead of paying with a credit card can help you avoid the potential for debt. The money is taken out of your bank account directly and immediately, so there’s little chance to spend more than you have, unlike using a credit card.

But when shopping online, there are reasons to consider using a credit card instead.

Using a debit card for online purchases can mean enduring greater losses if you're a victim of fraud. Plus, you're giving up valuable consumer protections and rewards each time you make a purchase with debit in a store or online.

Here are all the reasons you may want to stop using debit and use a credit card instead.

1. You may be putting yourself at risk for fraud

It's easy to assume you won't be liable for fraudulent purchases made with your debit card or checking account number, but this isn't the case. Where most credit cards come with zero fraud liability thanks to rules enacted in the Fair Credit Billing Act (FCBA), the same protections don't apply to transactions made with a debit card.

In fact, someone who finds your debit card number could wipe out all the money in your accounts. If you don't notice or report it in time, you won't have any way to get your money back.

According to the Federal Trade Commission (FTC), your level of liability depends on when you notice the fraud and report it. For example, if you report fraud within two business days after it's noticed, you're only liable for up to $50 in losses. If you report fraud within two to 60 days of your statement being mailed to you, you're only liable for up to $500. If you fail to report fraud once it's been 60 days from the date your statement was mailed to you, the FTC notes that you could lose "all the money taken from your ATM/debit card account, and possibly more; for example, money in accounts linked to your debit account."

2. You're missing out on rewards

In addition to putting yourself at risk for fraud, there are plenty of ways you're missing out when you shop online with a debit card. For example, you could be earning cash back or travel rewards if you made the same purchases with a rewards or travel credit card. These rewards can add up quickly, making it easier to see the world or splurge on merchandise, gift cards, and more.

While you can typically earn 1% to 3% back with a rewards or travel credit card, you can also double up on rewards by shopping through a cash back, travel rewards, or airline portal. You can also shop in portals with a debit card in some cases, but you'll mostly be limited to earning airline miles or cash back. (See also: How to Use Airline Shopping Portals to Cash In On Rewards)

3. You won't earn any sign-up bonuses

Using a debit card when you shop online also means giving up on the possibility of earning big sign-up bonuses. Keep in mind that many rewards credit cards offer consumers the chance to earn bonuses worth $500 or more when they meet a minimum spending requirement within a few months.

You may think you need to pay the annual fee on a credit card to qualify for sign-up bonuses or ongoing rewards, but this is far from the truth. The reality is, there are plenty of rewards credit cards that dole out sizable bonuses, ongoing rewards, and more without charging a fee each year. (See also: Don't Make These 6 Credit Card Sign-up Bonus Mistakes)

4. You're giving up valuable consumer protections

Another reason to use credit instead of debit is the fact that you could qualify for valuable consumer protections and free insurance. This can include travel protections like trip cancellation/interruption insurance, rental car insurance, travel accident insurance, baggage delay insurance, and more.

Other protections that can apply to your online purchases include extended warranties, purchase protection, and guaranteed returns. Most of the time, you won't qualify for any of these perks if you pay for your online purchases with a debit card. (See also: How Credit Cards Protect Your Purchases from Damage or Theft)

5. You're not building credit history

The final reason you may want to stop using your debit card is the fact that you're not building credit history based on your online purchases and everyday spending. When you use credit instead of debit, on the other hand, you're making regular purchases and payments that are reported to the three credit reporting agencies — Experian, Equifax, and TransUnion.

Having your credit usage and payments reported to the credit bureaus is huge because it helps prove your creditworthiness and gives them a basis to increase your credit score over time. Using a debit card certainly won't hurt your credit score, but it won't help it, either.

Considering a credit card? Here's a warning

While using debit online can be more risky and less rewarding, it's still important to figure out if you're a candidate for credit card use. While credit cards do come with better protection against fraud, the potential for rewards, and valuable consumer protections, they can make it easier to overspend and wind up in debt.

Before you sign up for a credit card and start using it for purchases, it's important to make sure you're committed to staying on budget and spending only what you can afford. If you wind up with a mountain of debt with the high interest rates most credit cards charge, the rewards and protections you receive won't be much help.

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

How Cosigning On a Student Loan Could Impact Your Finances

Holly Johnson — Sat, 07 Nov 2020 22:44:52 +0000

While college students can get their own federal student loans without a cosigner in most cases, there are some situations where a cosigner is required. Federal Direct Parent PLUS loans, for example, can actually be taken out on behalf of dependents to help pay for higher education. Students can also apply for private student loans to pay for college. These loans tend to have high credit requirements that make it difficult for young people to qualify on their own.

But should you really cosign on student loans for your child? And should you cosign on any loans they can't qualify for on their own? You can certainly consider it, but it helps to enter the situation with eyes wide open and understand all the pros and cons.

The main advantage of cosigning is the fact that you're helping your child (or dependent) pay for higher education when they may not be able to otherwise. However, it can also be a huge risk. Here's everything you need to know before you sign on the dotted line.

You're obligated to repay the debt no matter what

Whether you take on a Parent PLUS loan or you cosign with your child for a private student loan, the first thing you have to understand is that, no matter what, you're obligated to pay that debt back. If your child stops making payments, you'll be required to make them. If your child flat-out refuses to get a job and completely defaults on their responsibilities, you will need to repay that loan.

Cosigning on a student loan is similar to buying a house with someone or cosigning on a car loan. You're both jointly responsible for repayment regardless of what the other person does. That can be a huge problem if your child doesn't take their bills very seriously, but it may not be an issue if they treat their credit with care and stay on top of their bills.

Student loans are almost never discharged in bankruptcy

Another detail to understand is the fact that student loans are rarely ever discharged in bankruptcy. For the most part, they'll stick around forever unless the borrower dies or you can prove you have some inescapable hardship.

As a parent, you're probably trying to save for retirement and reach other financial goals, so it's important to understand that the student loans you cosign for will never go away until you pay them off — once and for all.

There's no going back

When you cosign on a student loan, you can't just change your mind and back out of the deal. Your child may be able to refinance their student loans in their name, but only if their credit score is good enough to qualify for student loan refinancing on their own. And if that was the case, they wouldn't have needed a cosigner in the first place.

Your finances may be perfectly fine right now, but you should think through how they may be in five or 10 years. If you're nearing retirement, you may not want to put yourself in a situation where you'll be stuck paying off a child's student loans. Plus, you never know how your health will be or the status of your career several years from now. Cosigning for student loans leaves you on the hook no matter what, and it's hard to change that after the fact.

Cosigning on a loan could affect your credit score

When you cosign on a student loan, you have to remember that you're jointly accepting responsibility for the debt and any consequences that arise out of late payments or delinquency. So you should only cosign if you know your child or dependent is dedicated to paying their bills on time and avoiding default at all costs.

If you're not paying attention, you could easily take a huge hit to your credit score without even knowing. Since payment history makes up 35 percent of your FICO score, it's easy to see how even one late payment could cause major damage. Just think of what could happen if the student loans you cosigned for were paid late month after month. If you're not also receiving a bill in the mail, you may not find out until the damage is already done.

The bottom line

There are situations where it can make sense to cosign on a student loan, but this decision should never be taken lightly. You may be helping your child earn their degree, but you're taking a significant risk. (See also: Should You Co-Sign a Loan?)

You may want to assess the career field they plan to enter into and figure out how much they might earn upon graduation before you cosign. Some fields have plenty of promise right now, while others offer almost none, and you should know either way before you make any type of financial commitment. Maybe your college student could even spend time improving their credit score so they can qualify for student loans on their own.

Cosigning on student loans should be a last resort for parents, not an easy fix for students who don't take time to consider all their options.

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

16 Small Steps You Can Take Now to Improve Your Finances

Alicia Rose Hudnett — Wed, 04 Nov 2020 17:32:44 +0000

You have all kinds of financial goals you want to achieve, but where should you begin? There are so many different aspects of money management that it can be difficult to find a starting point when trying to achieve financial success. If you're feeling lost and overwhelmed, take a deep breath. Progress can be made in tiny, manageable steps. Here's are 16 small things you can do right now to improve your overall financial health. (See also: These 13 Numbers Are Crucial to Understanding Your Finances)

1. Create a household budget

The biggest step toward effective money management is making a household budget. You first need to figure out exactly how much money comes in each month. Once you have that number, organize your budget in order of financial priorities: essential living expenses, contributions to retirement savings, repaying debt, and any entertainment or lifestyle costs. Having a clear picture of exactly how much is coming in and going out every month is key to reaching your financial goals.

2. Calculate your net worth

Simply put, your net worth is the total of your assets minus your debts and liabilities. You're left with a positive or negative number. If the number is positive, you're on the up and up. If the number is negative — which is especially common for young people just starting out — you'll need to keep chipping away at debt.

Remember that certain assets, like your home, count on both sides of the ledger. While you may have mortgage debt, it is secured by the resale value of your home. (See also: 10 Ways to Increase Your Net Worth This Year)

3. Review your credit reports

Your credit history determines your creditworthiness, including the interest rates you pay on loans and credit cards. It can also affect your employment opportunities and living options. Every 12 months, you can check your credit report from each of the three major credit bureaus (Experian, TransUnion, and Equifax) for free at annualcreditreport.com. It may also be a good idea to request one report from one bureau every four months, so you can keep an eye on your credit throughout the year without paying for it.

Regularly checking your credit report will help you stay on top of every account in your name and can alert you to fraudulent activity.

4. Check your credit score

Your FICO score can range from 300-850. The higher the score, the better. Keep in mind that two of the most important factors that go into making up your credit score are your payment history, specifically negative information, and how much debt you're carrying: the type of debts, and how much available credit you have at any given time. (See also: How to Boost Your Credit Score in Just 30 Days)

5. Set a monthly savings amount

Transferring a set amount of money to a savings account at the same time you pay your other monthly bills helps ensure that you're regularly and intentionally saving money for the future. Waiting to see if you have any money left over after paying for all your other discretionary lifestyle expenses can lead to uneven amounts or no savings at all.

6. Make minimum payments on all debts

The first step to maintaining a good credit standing is to avoid making late payments. Build your minimum debt reduction payments into your budget. Then, look for any extra money you can put toward paying down debt principal. (See also: The Fastest Way to Pay Off $10,000 in Credit Card Debt)

7. Increase your retirement saving rate by 1 percent

Your retirement savings and saving rate are the most important determinants of your overall financial success. Strive to save 15 percent of your income for most of your career for retirement, and that includes any employer match you may receive. If you're not saving that amount yet, plan ahead for ways you can reach that goal. For example, increase your saving rate every time you get a bonus or raise.

8. Open an IRA

An IRA is an easy and accessible retirement savings vehicle that anyone with earned income can access (although you can't contribute to a traditional IRA past age 70½). Unlike an employer-sponsored account, like a 401(k), an IRA gives you access to unlimited investment choices and is not attached to any particular employer. (See also: Stop Believing These 5 Myths About IRAs)

9. Update your account beneficiaries

Certain assets, like retirement accounts and insurance policies, have their own beneficiary designations and will be distributed based on who you have listed on those documents — not necessarily according to your estate planning documents. Review these every year and whenever you have a major life event, like a marriage.

10. Review your employer benefits

The monetary value of your employment includes your salary in addition to any other employer-provided benefits. Consider these extras part of your wealth-building tools and review them on a yearly basis. For example, a Flexible Spending Arrangement (FSA) can help pay for current health care expenses through your employer and a Health Savings Account (HSA) can help you pay for medical expenses now and in retirement. (See also: 8 Myths About Health Savings Accounts — Debunked!)

11. Review your W-4

The W-4 form you filled out when you first started your job dictates how much your employer withholds for taxes — and you can make changes to it. If you get a refund at tax time, adjusting your tax withholdings can be an easy way to increase your take-home pay. Also, remember to review this form when you have a major life event, like a marriage or after the birth of a child. (See also: Are You Withholding the Right Amount of Taxes from Your Paycheck?)

12. Ponder your need for life insurance

In general, if someone is dependent upon your income, then you may need a life insurance policy. When determining how much insurance you need, consider protecting assets and paying off all outstanding debts, as well as retirement and college costs. (See also: 15 Surprising Insurance Policies You Might Need)

13. Check your FDIC insurance coverage

First, make sure that the banking institutions you use are FDIC insured. For credit unions, you'll want to confirm it's a National Credit Union Administration (NCUA) federally-covered institution. Federal deposit insurance protects up to $250,000 of your deposits for each type of bank account you have. To determine your account coverage at a single bank or various banks, visit FDIC.gov.

14. Check your Social Security statements

Set up an online account at SSA.gov to confirm your work and income history and to get an idea of what types of benefits, if any, you're entitled to — including retirement and disability.

15. Set one financial goal to achieve it by the end of the year

An important part of financial success is recognizing where you need to focus your energy in terms of certain financial goals, like having a fully funded emergency account, for example.

If you're overwhelmed by trying to simultaneously work on reaching all of your goals, pick one that you can focus on and achieve it by the end of the year. Examples include paying off a credit card, contributing to an IRA, or saving $500.

16. Take a one-month spending break

Unfortunately, you can never take a break from paying your bills, but you do have complete control over how you spend your discretionary income. And that may be the only way to make some progress toward some of your savings goals. Try trimming some of your lifestyle expenses for just one month to cushion your checking or savings account. You could start by bringing your own lunch to work every day or meal-planning for the week to keep your grocery bill lower and forgo eating out. (See also: How a Simple "Do Not Buy" List Keeps Money in Your Pocket)

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

How to Maximize Rewards on Everyday Spending

Holly Johnson — Tue, 03 Nov 2020 17:32:44 +0000

While many rewards enthusiasts focus on signing up for new credit cards to earn signup bonuses, not everyone has the time or desire to play the signup game. There is effort involved in tracking multiple cards, annual fees, and rewards programs, after all, and some people don't want to spend their time or mental energy this way.

If you're someone who falls into this category, you may be better off maximizing one or two cards instead of chasing rewards. Fortunately, you can earn plenty of rewards over time if you're savvy about your card's benefits and bonus categories.

The key to getting the most out of your rewards cards is understanding how they work and looking for opportunities to earn more points on your everyday spending. Here are some tips that can help.

Brainstorm every bill you could pay with a credit card

Because rewards cards offer points based on each dollar you spend, maximizing the amount you can spend on credit is the best way to boost your rewards haul. The smartest strategy to use here is figuring out how many of your monthly bills you can pay with a credit card.

While you may not be notified or aware, it's possible that bills you've been paying with a check or debit card for years can be paid with a credit card without any fees. While your bills may vary, some expenses you should try to pay with a credit card include:

Rent
Utility bills like electric or gas
Health insurance
Cable television and internet
Cell phone
Taxes
Daycare
Auto and home insurance
Subscription services
College tuition or student loans
Medical bills
Lawn care

Keep in mind that these are just some of the bills you could be paying with credit. Depending on your situation, you could have additional, uncommon expenses to cover that could be paid with credit with ease.

Also, remember that these additional bills should be paid with credit on top of your everyday expenses like groceries, dining out, gas or bus fare, and miscellaneous spending. Every time you buy something in person or online, you should strive to pay with your rewards card if you can.

Leverage your rewards card bonus categories

It's also important to leverage your favorite card bonus categories, whatever they may be. This is especially important if you have a few cards with different bonus categories since you'll want to make sure you're using the right card for bills that let you earn bonus points.

Let's say you have a travel credit card that earns 3x points on dining and travel and another card that earns 6x points at the grocery store. In that case, you would be smart to use the travel card for dining and travel purchases and your other card when you stock up on food. While the amount of rewards you earn with individual purchases may seem nominal, using the right card for the right purchase can help you earn a lot more rewards over time.

Set up auto-pay bills to be paid with credit

Most of us have bills set up to be paid automatically, whether it's our Netflix and Hulu subscriptions, gym membership, or utility bills. Make sure each bill you have set up to be paid automatically is set up to be paid with your rewards card and not a debit card. This way, you can earn rewards points on those expenses every month.

Use shopping portals and dining clubs

Many flexible rewards programs, frequent flyer programs, and hotel loyalty programs have shopping portals you can access to earn extra points. Major airlines like American, Delta, and United also have shopping portals that work similarly. (See also: How to Maximize Rewards Through Credit Card Shopping Portals)

Some programs like Southwest and Delta also offer dining clubs. These programs let you earn additional points or miles just for dining at participating restaurants in your area. It's easy and it's free to join, so you may as well earn extra miles on your spending if you're going to dine out anyway. (See also: Everything You Need to Know About Airline Dining Rewards Programs)

How much the average family can earn

If you are skeptical the average family can rack up meaningful rewards without signing up for new cards over and over again, look at how this might work in real life. For example, imagine a family of four with two rewards card-toting adults. Across the two of them, they have:

A cash back card that earns 2% back
A travel credit card that earns 3% on dining and travel
A rewards card that earns 6% cash back at the grocery store on up to $6,000 in spending each year

To figure out how much this family might earn, we used Bureau of Labor Statistics spending averages from 2017. Here's a rundown of that data for the year plus how much a family could earn in rewards over 12 months based on average expenses:

Food at home ($4,363): $261.78 in rewards at 6%
Food away from home ($3,365): $100.95 at 3%
Utilities, fuels, and public services ($3,836): $76.72 at 2%
Household operations ($1,412): $28.24 at 2%
Household supplies ($755): $45.30 at 6%
Household furnishings and equipment ($1,987): $39.74 at 2%
Apparel and services ($1,833): $36.66 at 2%
Gasoline and motor oil ($1,968): $39.36 at 2%
Other vehicle expenses ($2,842): $56.84 at 2%
Healthcare ($4,928): $98.56 at 2%
Entertainment ($3,203): $64.06 at 2%
Personal care products ($762): $45.72 at 6%
Education ($1,491): $29.82 at 2%

Total rewards: $923.75

While $900+ is a lot to earn in rewards within a year, you have the potential to earn a lot more. After all, these are just some of the expenses the average family faces and not all of them. If you could pay some additional big bills with credit each month like daycare or your rent, you could significantly add to your bottom line.

What to watch out for

While maximizing rewards cards is a smart idea if you're using them already anyway, there are always pitfalls to be aware of when you're using a credit card. Here's what to watch out for during your quest for more cash back and travel rewards.

Fees for using credit

While there are many bills you can pay with credit without a fee, some vendors, merchants, and service providers charge a fee to use a credit card as payment. Fees are especially prevalent on bills such as utilities, cable or internet, rent, and insurance. Make sure to verify you aren't being charged a fee to use credit before you proceed.

Annual fees

Don't forget that some rewards cards charge annual fees. These fees may be worth it depending on your spending and rewards haul, but you should always factor them into the equation to make sure each fee is worth paying. If you're against paying annual fees, look for rewards cards that don't charge one.

Budgeting mishaps

Using a credit card for all your expenses may simplify your financial life, but it could also cause your budget to fall out of whack. Make sure you're only spending on purchases you planned to make anyway, and that you're tracking your spending and paying off your credit cards regularly.

Debt

Never use credit cards for purchases you can't afford to repay if you're pursuing rewards. The interest you'll pay will always be much more than the rewards you earn. If you're worried using credit will cause you to rack up debt you can't afford to repay, you're better off sticking to cash or debit instead.

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

How to Stay Calm During a Market Fluctuation

Emily Guy Birken — Mon, 02 Nov 2020 17:32:44 +0000

The last few weeks, I've been covering my eyes before I look at my investments, and only peeking through my fingers — as if I'm facing Freddy Kruger rather than a series of numbers. It doesn't help that the financial headlines are full of frightening potential futures: a possible recession, trade wars, and potential market corrections.

It's enough to make me want to take all of my money out of my investments and put it somewhere safe, like my mattress.

But no matter how overwhelming a market fluctuation may be, I also know that pulling my money out of the market is the worst thing I could do when my portfolio is trending downward. That's because the only way to guarantee that momentary losses become permanent is to sell.

Of course, knowing that you should stay the course is a lot easier said than done. If you're tempted to cut your losses when you hear gloom-and-doom financial predictions, it's especially important to learn how to keep your cool. Here are some ways you can stay calm when the market is scary.

Remember that it's okay to hide

Hiding your head in the sand gets a lot of flak, but there are times when it really is the best course of action. That's because of a cognitive bias that prompts us to take action in response to fear. We feel as though doing anything, even if it is counterproductive, is preferable to sitting around doing nothing. But listening to the action bias is the reason why people sell when the market is at its lowest and buy when it's at its highest. They're afraid of doing nothing.

Since it's nearly impossible to overcome the voice in our heads shouting at us to "Do something!" when the market is falling, the easier method of overcoming the action bias is to simply ignore your portfolio.

Of course, that doesn't mean you should never check on your holdings. However, obsessively consuming financial news and checking your portfolio on a daily basis will lead you to making fear-based (or greed-based) decisions, rather than following your rational investing strategy.

Instead, plan to check how your investments are doing on a regular schedule — either every month or every quarter. This will give you the information you need to keep your asset allocation balanced and make necessary changes, without falling victim to the action bias. (See also: 5 Ways to Invest Like a Pro — No Financial Adviser Required)

Take comfort in history

Although the phrase "past performance is no guarantee of future results" is all but tattooed on the foreheads of every stock market analyst and financial planner, there is good reason to look at the past performance of the market as a whole. If you study the long-term trends and overall historical returns, you'll see that markets inevitably trend upwards.

Knowing that the market will recover does not make the short-term losses and volatility any more fun to live through, but it is easier to put any momentary losses you're experiencing in context. Savvy investors who didn't panic through the market corrections of 2000 and 2008 saw their portfolios recover over time. As stressful as any decline may be, trusting in a solid investment plan and the long-term historical trends of the market can help you stay the course and feel confident that you and your money will get to the other side. (See also: How to Prepare Your Money for the Coming Economic Slowdown)

Make a volatility plan

One of the reasons why we tend to overreact to volatility is because we forget that it's a natural part of financial markets. Market downturns are normal, and we should expect to live through several of them in a long investing career. However, we often expect that markets will only go up. With that kind of expectation, even a minor dip can feel overwhelming.

A good way to counteract those expectations (and the resulting fear when they're not met) is to create a plan for what you'll do during a downturn.

Your volatility plan could be as simple as committing to your head-in-the-sand strategy for downturns. Knowing ahead of time that you'll reduce your portfolio check-ins when things are looking grim can help you stick to that plan.

Your plan can also be proactive, rather than just reactive. Since you know that market downturns are normal and natural, decide ahead of time how you'll incorporate these fluctuations into your investing strategy. You might decide to purchase more investments during a downturn, rather than see it as something to fear. (See also: 7 Easy Ways to Build an Emergency Fund From $0)

Don't panic

Human beings are not wired to be rational investors, which is why we tend to be so bad at it. Our emotions can get the better of our rational strategies, especially when we're feeling afraid. But selling your investments because of market volatility and scary headlines is using a permanent solution for a temporary problem.

Think through how to respond to frightening market changes before they happen. Then you know that you already have a plan to fall back on, and you're less likely to simply react out of fear.

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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: