credit

3 Ways Education Can Impact Your Creditworthiness

Rachel Slifka — Fri, 23 Mar 2018 09:00:06 +0000

Many factors can impact your credit score, but is education one of them?

In short, no. Education does not directly affect your credit score. Whether you have a Ph.D or are a high school dropout, credit reporting agencies couldn't care less. No matter your level of education, your credit score will remain unaffected.

On the flip side, your credit score is directly affected by factors that may relate to you if you used student loans to fund your education. And your credit score is just one factor that constitutes your creditworthiness. What do we mean by creditworthiness? As defined by Investopedia, creditworthiness is "a valuation performed by lenders that determines the possibility a borrower may default on his or her debt obligations. It considers factors such as repayment history and credit score."

While your level of education may not directly affect your credit score, it can affect your creditworthiness. Here's how.

Debt-to-income ratio

If you borrowed money to finance your education, you could have a higher debt-to-income ratio. A high debt-to-income ratio means that you owe a high percentage of your income to debt. This can affect your creditworthiness.

Student loan borrowers owe a significant chunk of change to their student loan lenders. It can be difficult to put a serious dent in these loans, especially while working an entry-level, likely lower-paying job as a recent college graduate.

As your income increases, lenders face less concern over the amount of debt you carry. That's because as your earning power goes up, you are less likely to miss debt payments. (See also: The 7 Debt Payoffs That Boost Your Credit Score the Most)

On-time payments

Failing to pay a student loan bill fully and on-time can drastically affect your creditworthiness.

Lenders don't want to credit money to borrowers with a bad repayment history. Any lender wants to know that they will be repaid, on time and on their terms.

On the other hand, paying back your student loans on schedule can help to increase your credit score and creditworthiness. Potential lenders viewing your repayment history like to see that you are a reliable borrower. (See also: What Really Happens When You Don't Pay Your Student Loans)

Work experience

Your past work experience is a big determining factor of your creditworthiness, especially in relation to home loans. When applying for a mortgage, lenders will take a look at the last two years of your work history, among other considerations. They want to know that not only are you willing to pay back owed money, but that you are also financially able to pay it back. This is why a steady job history is important to potential lenders.

While your level of education doesn't necessarily determine whether you'll have vast or limited career opportunities, you are more likely to have better career opportunities (and income opportunities) with at least a bachelor's degree.

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

6 Financial Skills to Master Before You Graduate

Kentin Waits — Mon, 12 Feb 2018 09:00:06 +0000

With graduation only months away, you can finally see light at the end of the tunnel. After four (or more) long years of study, you're well-prepared to embrace adulthood, independence, and professional success.

But are you really? Before you don that cap and gown, make sure you know the ABCs of personal money management. It could be the most important course you'll ever take. Here are the financial skills to master before you graduate.

1. Basic budgeting

If you can't build and stick to a basic budget, you risk having your life divided into a series of stressful 30-day cycles. Bills may be late, savings an afterthought, and credit cards could become an absolute necessity. Avoid this bleak fate. Set up a practice budget using the envelope system or get acquainted with online money management tools like Mint. (See also: Build Your First Budget in 5 Easy Steps)

2. Living within your means

Consistently spending more than you make is the cornerstone of bad financial decision-making. You'll have no surplus money to invest. You'll rack up credit card debt (harming your credit scores in the process). And, you'll live in a constant state of stress. Create a realistic budget, stick to it, and don't pad your lifestyle with easy credit. (See also: How to Escape the Paycheck-to-Paycheck Cycle)

3. Paying your bills on time

Credit scores affect everything from interest and insurance rates to employment. And once your score is damaged, it can take years for it to recover. Protect your credit scores, avoid late fees and penalties, and keep the bill collectors away by paying your bills on time, every time. It's a fundamental part of being an adult. (See also: Here's What to Do if You Can't Pay Your Bills On Time)

4. Using credit responsibly

Ready for my best Dad impression? "Credit is a tool, not a toy." But Dad is right. Using credit responsibly means controlling impulses, only charging what you can pay off at the end of every month, and not confusing your credit limit with your budget. Seriously — credit abuse destroys the financial lives of countless families every year. Choose to be different. (See also: 12 Habits of Highly Responsible Credit Card Users)

5. Negotiating

The unsung hero of personal finance, negotiating is a skill that can save you thousands of dollars over your lifetime. Imagine paying full price for every car and every house you buy. Or worse, imagine not knowing how to respectfully push back on the first salary offer a potential employer makes. Launch into adulthood from a position of power; know how to negotiate with confidence.

6. Setting goals and saving for the future

Financial skills are a means to an end. Determine what kind of relationship you want to have with money, exactly what you want to achieve financially, and what level of discipline and attention it will take to turn your goals into your reality. Save with that plan in mind — and save without interruption. In short, apply the same level of dogged determination to your financial life as you applied to your education. The rewards will be just as great. (See also: 5 Money Moves to Make the Moment You Graduate)

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

7 Money Conversations Parents Should Have With Their Adult Kids

Sarah Winfrey — Wed, 22 Nov 2017 10:00:07 +0000

It's hard for many of us to talk about money. Money conversations can be stressful and awkward, and you may be tempted to just stay mum on the subject. However, it's vital that you pass financial wisdom on to your kids, even when they're adults. It's important to teach them about money growing up, but there are some things better discussed when they are older. Here are the money conversations you should be having with your adult children.

1. Financial boundaries

If you are supporting your adult children and you'd like to stop, or if you want to avoid it altogether, it's important to set up some financial boundaries. If you don't want to support them financially at all, tell them that up front and stick to it. That way, you won't end up paying for things and resenting it.

If your adult kids are relying on you for part or all of their financial support, sit down together and form a plan. Cutting them off entirely probably won't work for either of you, but you can start slow; back off on payments over the course of six months to a year, and set up concrete steps along the way. For instance, you may decide to stop giving them "fun" money right away, but be willing to cover their cellphone plan for six more months.

Make sure you go about having this conversation compassionately. Tell your child that you love them and that you want this for them as well as for you. Offer to help them along the way, to be available to answer questions or aid in budgeting, and let them know that you will always be there for them in other ways. (See also: Are You Ruining Your Retirement by Spoiling Your Kids?)

2. Financial values

Have a conversation with your adult child about what they want in life and how much those things will realistically cost. This is the time to talk about the financials behind car ownership, homeownership, traveling the world, and more. Make sure they have an understanding of how much money they'll need to have in order to afford the lifestyle they want, and how much they need to make in a week, a month, and a year to achieve that.

Talk to them, also, about what is really important in life. Tell them that fancy cars, big houses, and lavish vacations aren't the keys to happiness. Ask them to think about what they would pursue if they were dying or what they would miss most if they suffered a serious injury. This can help them figure out what is important to them and what they may not be willing to trade their time and money for.

3. What it means to live within your means

Your adult kids need to understand the importance of spending less than they earn. Show them how to calculate this so they can determine for themselves when to spend their money and when it would be better to save or invest it. Your kids need to figure out how to sacrifice spending on superfluous things in order to live a financially secure life.

4. How to make a budget

Along the same lines, your adult children need to know how to make a budget. You can actually begin teaching this in childhood by giving your kid a weekly allowance and helping them break down how they want to spend their money. Even if you wait until they're older, though, you need to sit down with them and make sure your kids understand what they need to spend money on, what they want to spend money on, and how to allocate those dollars accordingly. (See also: Build a First Budget in 5 Easy Steps)

5. The benefits and dangers of loans and credit cards

In a culture where credit is readily available, your kids need to know how to evaluate different credit opportunities based on benefits and drawbacks, as well as how to wisely use credit. As soon as they are old enough to obtain financing of their own, you need to talk with your kids about credit cards, educational loans, personal loans, and home loans.

It will help to tell stories from your own life. Whether you've made financial mistakes or have been wise with your money, walking your kids through how you made your financial decisions and how they ultimately affected you will make the principles real, rather than keep them so abstract. (See also: Financial Basics Every New Grad Should Know)

6. Saving for retirement

It can be hard for people in their late teens and 20s to think about saving for retirement, because it all feels so far away. But it's critical you talk with your adult children about how much they may need for retirement, and walk through some compound interest calculations with them so they see the benefit of saving early. Make sure they understand the basics of an IRA and 401(k), as well as what it means to be fully vested and take advantage of an employer match. (See also: Basic Intro to Retirement Funds)

7. Your financial plan

As your kids get older, they also need to know about your financial plan, before they find themselves trying to figure it out without you. This can be an especially difficult conversation to have, because on top of talking about money, you're also talking about serious injury, illness, or death.

Still, it's important for your kids to know what types of insurance you have, because knowing whether you have long-term care coverage, for instance, may help them make better decisions later on. Talk to them, too, about how you plan to divide up your estate. This can keep conflicts to a minimum after you are gone, so they can grieve instead of fight. (See also: The Fair Way to Split Up Your Family's Estate)

If one of your adult children is the executor of your will, make sure they understand that responsibility and that they have all the relevant information. They should have access to the location of your accounts, the account numbers, and any identification information, as well as contact information for your lawyer. You can write all of this out for them so they can simply file it away until they need it.

Talking about money can be hard, but it's also important. Speaking with your adult children about these topics will ensure they have a better chance at a financially healthy life.

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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:

11 Ways to Prepare for Your Best Black Friday

Mikey Rox — Thu, 09 Nov 2017 09:00:07 +0000

Don't let the success of Cyber Monday fool you: Black Friday is still a massive holiday spending day. According to the National Retail Federation, over 154 million consumers shopped over Black Friday weekend in 2016 — up from 151 million the year before.

Chances are, you're going to be one of those many consumers shopping on Black Friday this year. But you don't have to totally blow your budget in the process. There are ways you can soften the blow to your bank account with advance preparation. Here's how.

1. Put your common indulgences on hold

I like to have my hair cut every two weeks. But when I'm trying to save, I push the cut out to every three weeks. My haircuts cost $17 including tip, and if I adhered to this schedule on a regular basis, I'd save a whopping $148 a year. You may have an indulgence like this that you can honor less frequently or stop altogether while you try to budget more strictly during the holidays. These indulgences usually aren't cheap, and forgoing them will provide a sizable amount of extra dough for you to use for gift shopping.

2. Focus on paying off any existing credit card debt

Before you start swiping your cards left and right, it's important to tackle any existing credit card debt, especially if you've only been making minimum payments up to this point. Concentrate on the highest-interest cards first; you'll save more in the long run by paying those down or off as soon as possible. (See also: 5 Ways to Pay Off High Interest Credit Card Debt)

3. Pause or change your media subscriptions

The holidays are busy. Shopping, parties, pageants — you know the drill. All that running around probably leaves you with little time to use the subscription services for which you're paying a premium. So don't.

"Consider pausing subscriptions for a few months, or temporarily changing services to a lower-priced tier," advises Lindsay Sakraida, director of content marketing with DealNews. "For example, if you pay extra for Hulu without ads, premium Netflix, or extra data cell service, you might want to adjust all of them for a month or two to save some cash for Black Friday and the holidays."

4. Pick up short-term gigs and odd jobs for quick cash

I participate in several "gig" services throughout the year, but this side work really picks up around the holidays — and that helps my disposable income swell. Pet sit via Rover.com, pick up passengers using Lyft, host guests in your home through Airbnb, and deliver groceries with the help of Instacart. I do it all, and I highly recommend looking into any one of these opportunities for quick cash. (See also: 8 Seasonal Side Hustles That'll Cover Your Holiday Spending)

5. Make a gift list and establish a firm maximum budget

Make your list, check it twice, and decide how much you want to spend on each recipient. Once that budget is set, stick to it. Better yet, make it your goal to come in under the amounts you've established for each person so you can treat yourself to a little something special when all is said and done. (See also: The Simple Holiday Budget Anyone Can Follow)

6. Research the Black Friday deals ahead of time

News of many Black Friday offers will be released well in advance — several retailers, like Walmart, Costco, Kohl's, and JCPenny have already whetted consumers' appetites with "leaked" deals — which allows you plenty of time to research the best of the best. There are entire sites, such as Best of Black Friday, dedicated to compiling the deals in one place.

7. Start shopping early to spread out your spending

Why wait until Black Friday if you recognize a great deal when you see one? Just because the day after Thanksgiving receives heavy promotion doesn't mean there aren't other great deals before the stampedes begin.

"Make it a point to get a jump-start on planning and shopping early so you have a few months to purchase gifts instead of waiting until the holiday season," suggests Natasha Rachel Smith, personal finance expert at TopCashback.com. "Also, don't forget about deals on Thanksgiving. Every year Black Friday has crept up earlier and earlier. In fact, in recent years, some deals sell out before Black Friday." (See also: 6 Ways to Score a Black Friday Deal Without Leaving Home)

8. Have a game plan before stepping foot in the store

Similar to never going to the supermarket on an empty stomach, don't head into the holiday season without a game plan.

"Most major retailers will release their deals for Black Friday the week before to give consumers time to plan and get excited about what they want to purchase," Smith says. "Use this time wisely to see what is going to be on sale and compare deals at each retailer. By creating a game plan, you can prioritize any items that sell fast or are at the best-discounted price. Not only will you save time but you'll save money too by planning what to get, when, and where." (See also: 8 Frugal Skills You Need to Survive Black Friday)

9. Consult your cash back apps before heading out

I've been killing it in the cash back game lately, thanks to apps like Ibotta and Checkout 51. The trick is to consult these apps before you go shopping so you know what's available and opt in if required. With Ibotta, for instance, many times it requires you to make purchases through its app — it will launch the retailers' sites for you, like Under Armour, as an example — so it can track your purchase and deposit the cash back you've earned. Every penny returned to you helps. Trust me — you will be thankful for this at holiday time. (See also: 7 Apps That Actually Pay You to Shop)

10. Consider your method of payment for maximum savings

You might think that cash in hand is the best way to shop on Black Friday (it certainly can help avoid overspending if you're disciplined), but you could be disqualifying yourself for deals available through other methods of payment. Capitalize on your Black Friday spending by deciding how you're going to buy things — cash, debit, or credit card — to reap the best benefits.

Scope out all your payment options and use the bonuses and rewards in your favor. If you do the research and find that you want to apply for a specific card, do so a couple weeks in advance to ensure you receive it in time to use it. Using the shopping season to get bonus cash back that has a spending requirement can give you help ease the holiday costs. (See also: Read This to Maximize Your Rewards and Cash Back This Holiday Season)

11. Renew your commitment to financial freedom

It's easy to go overboard during the holidays, whether it's on gifts or social activities. Don't let yourself off the hook on your financial goals just because it's the holidays. Stay committed to them and use the holidays to focus on gratitude rather than the mad dash to grab discounts.

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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:

How a Single Mother In Debt Over $200K Is Fixing Her Finances

Janet Alvarez — Mon, 16 Oct 2017 16:02:05 +0000

For those of us actively trying to improve our financial situation, it's inspiring to read about others who have succeeded. Dilenia Frias is one such example, embarking upon Wise Bread's Total Financial Transformation Plan, and successfully improving her credit score, better managing her debt, and on the road to higher earnings in just a few, short months.

When we first met Dilenia in August, she shared her financial concerns with us: Over $200,000 in student loan debt, tens of thousands owed on credit cards, personal loans, and a timeshare, a damaged credit score, and relatively low earnings despite graduating law school. To top it off, Dilenia was recently unemployed for two years, and is a single mother residing in New York City, an area with arguably the highest of cost of living in the country. (See also: The Fastest Way to Eliminate Credit Card Debt)

We decided to help Dilenia tackle these challenges one-by-one, by providing methodical advice for stabilizing her debt, raising her credit score, and improving her earnings. Read on to hear Dilenia's story in her own words — and even better, her remarkable progress in the two months since we first talked.

Credit Cards

I have $8,500 in credit card debt, spread over three cards — American Express, Children's Place, and Discover cards. My cards' interest rates are anywhere from 10.99-24%, and most are maxed out or over their credit limit.

Our advice:

Contact your creditors, explain your situation, and request lower interest rates, if possible. Always pay on time — even if it's only your minimum payments.
Try to bring your balances under the credit card's limit — this will have an immediate impact on your credit score. Long-term, your goal should be to keep your balances under 30% of your total available credit. This will significantly boost your credit.
One useful trick for repaying cards is to make two payments per month, instead of just one. For example, if you normally make one monthly payment of $100, try making two payments of $50 each. Since interest is calculated over the entire month, this will reduce your interest owed. Plus, depending on what time of the month your card reports to the credit bureaus, it may also show a lower debt level and boost your score.
Don't close your credit cards — even once you pay them off! This reduces the amount of credit you have available, which lowers your credit score.

Dilenia's credit card situation now

My Equifax credit score went up 48 points to 677!

I hadn't used my Children's Place credit card in about a year, and the suggestion was to use the card for at least a small amount, so that my account wouldn't get closed for lack of use, so I spent $125 on gift cards in August. I received my bill later in August and paid it on time. I received an email approximately a week ago that my credit limit was increased from $500 to $750.

I also paid my American Express enough so that my statement only showed a $99 balance when the statement printed (so I was using a little under 20% of my credit limit). My Discover card was also a bit over the limit last month, but I brought the balance back down in time for the September statement closing date. I am still using almost 100% of my credit limit, but at least I am no longer above my credit limit.

Personal loan and timeshare

My $7,000 personal loan was unfortunately charged off in 2015, when, after leaving my job in February 2015, was only able to make payments until May 2015. I am currently paying $150 per month to the collection agency handling the account. Based on the amount owed, I would need to make payments until April 2021.

A $9,000 loan for a timeshare is also in collections. I am currently trying to negotiate a limited-use timeshare based on the payments I have already made, but was told that I needed to make a final payment to the collection agency before they would release my account to the timeshare company. If I am able to regain the timeshare, I might be able to sublease it.

Our advice:

Aggressively try to regain use of the timeshare on a more limited-use basis. Request that the collections agency annotate your credit report to show that your are making payments on time.
Once you regain limited use of the timeshare, sublease it using services such as rentmytimesharenow.com. Apply any extra money toward repaying credit cards more quickly, starting with the highest-interest card first.
Attempt to negotiate lower payments or interest rates directly with the personal loan collections agency. Ensure they've annotated your credit report to reflect that your account is being paid on time per your agreement.

Dilenia's personal loan and timeshare situation now

I recently made a payment to the timeshare company, and I am awaiting documents transferring ownership in my previous timeshare to a new timeshare. When the paperwork is finalized, the collection account currently being reported to my credit reports will be removed. That should also increase my score, and also allow me to sublease the unit.

Student loans

I have over $200,000 in federal student loans, most of which are being repaid via the Income Based Repayment program (IBR). However, I have over $16,000 in Perkins loans which are currently on deferment; I'll need to start making payments on these, too, by March 2018. Due to my limited income and two dependents, my current monthly payment is $0.

Our advice:

Consolidate all your student loans — including the Perkins loans, so that they can all be placed on IBR and result in a low payment.
Place your IBR account on autopay — even if your payment is $0, it may result in a slightly lower interest rate.
Contact your law school's employment services office and inquire whether your school offers any debt forgiveness for students in public service or other modestly-paid legal jobs.

Income, employment, and other credit boosts

In order to be admitted to the Bar, lawyers must pass a Character & Fitness (C&F) evaluation, including a credit check. Unfortunately, given Dilenia's credit issues, being denied entry to the Bar (and a higher income as an attorney) was a real possibility.

Thankfully, by bringing all of Dilenia's accounts current and boosting her credit score, C&F should be less of an issue, thus ensuring that Dilenia should be employable as an attorney by late this year. This will likely result in higher income and allow Dilenia to repay debt more aggressively. More importantly, it'll enable her to save — even a modest amount saved every month toward an emergency fund of three-to-six months' expenses will help ensure she doesn't get into this sort of trouble again. (See also: 7 Easy Ways to Build an Emergency Fund From $0)

Dilenia's 19-year-old son is also considering seeking employment to help contribute to household expenses, and once Dilenia's timeshare is subleased, the extra income can be applied to debt and emergency fund savings.

Dilenia has made great progress, and she can do more still. Dilenia should request higher credit limits on her cards once she's made twelve on-time monthly payments and dropped her balances. Then, once her cards are paid off, she should open new lines of credit — such as gas cards — and not use them. This will all result in lower credit utilization ratios — and higher credit scores.

Recently Dilenia joined eMoneyPool, since it reports user accounts to credit bureaus like Experian. eMoneyPool is an online version of a savings club in which members make regular contributions and receive "payouts" of their savings on targeted dates. She joined two $500 money-sharing pools in August, and by early September the account was added to her Experian credit report.

Dilenia can also have her rental payments reported to the credit bureaus using services such as RentTrack or RentReporters. Depending on the lender and the type of credit score they use to determine credit worthiness, this could help her with loans or other credit applications down the line.

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

7 Money Lessons We Can Learn From Jay-Z

Tim Lemke — Tue, 25 Jul 2017 08:00:11 +0000

Hip-hop artist Jay-Z recently dropped his latest release, 4:44, and is already getting praise for an album that's fresh, honest, and full of insightful commentary.

Any observer of Jay-Z's career can learn a thing or two about entrepreneurship and handling money, as the man is worth upward of $800 million according to recent estimates. But 4:44 has some great new insights on the value of saving and investing, supporting your community, and passing wealth on to the next generation.

1. Diversify your income

Jay-Z isn't just a rapper. He's a founder and owner of record companies. He has a clothing line and a sports bar. He's a part owner of the NBA's Brooklyn Nets. He has involvement in the casino and real estate industries. He owns the majority of the music streaming service, Tidal. All of this has allowed him to amass a net worth of reportedly more than $800 million, far more than he could make from music alone. He's set for life even if he never raps another word, and if any one of his revenue streams falters, he has plenty of other streams coming in.

2. Get married

There are many benefits to being married, and it can often be great for your finances. Having a joint income can improve your buying and borrowing power, and boost the overall net worth of your family. In Jay-Z's case, he's married to Beyoncé, a hugely popular music artist with a net worth that rivals his own. In his new song, "Family Feud," Jay-Z asks, "What's better than one billionaire? Two."

3. Support your community

In his new album, Jay-Z raps at length about looking out for those in the black community, noting that "Nobody wins when the family feuds." He extends this advice to supporting black-owned businesses when he says, "Black-owned things, hundred percent, black-owned Champagne. And we merrily merrily eating off these streams."

4. Think about your heirs

Many ultrawealthy people got that way through their own business success, but many started out wealthy as money was passed on from their parents. In fact, what often separates wealthy and poorer communities is the amount of "generational wealth" and savings that remains in families over the course of decades.

Jay-Z raps about this very concept in the new song, "Legacy," saying "Generational wealth, that's the key/My parent's ain't have s**t, so that ship started with me/My mom took her money, she bought me bonds/That was the sweetest thing of all time."

Jay-Z also gives a small nod to estate planning by having his daughter Blue Ivy open "Legacy" by asking "Daddy, what's a will?"

5. Buy real estate on the cheap

Jay-Z has made good money on real estate deals, but also recognizes that he may have missed out on some bargains, too. In his song, "The Story of O.J.," he laments spending his money on frivolous items when he could have bought property in a once-troubled neighborhood.

"Wish I could take it back to the beginning/I coulda bought a place in Dumbo before it was Dumbo/For like two million/That same building today is worth 25 million/Guess how I'm feeling? Dumbo."

6. Spend wisely and invest

In "The Story of O.J.," Jay-Z digs into the idea that young people should stop worrying about "living large" and instead plan for the future. He advocates buying and holding onto things that will increase in value.

"Financial freedom my only hope/F**k living rich and dying broke/I bought some artwork for one million/Two years later, that s**t worth two million/Few years later, that s**t worth eight million."

7. Control your image and products

It remains to be seen whether Jay-Z's purchase of streaming service Tidal will pay off in the long run, but the move did give him control over how his music — and its revenue — would be distributed. Jay-Z has released his latest album exclusively on Tidal, meaning that he will no longer be at the mercy of other competitors who may take a bigger cut of revenue. Jay-Z has noted that Tidal offers higher quality streaming than other services, making it more respectful of artists.

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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:

6 Important Credit Card Lessons Your Parents Didn't Teach You

Ashley Eneriz — Wed, 12 Apr 2017 08:30:15 +0000

Our parents taught us many of life's important lessons, but did they adequately prepare us for smart credit card use? Maybe not. Here are six credit card lessons your parents might not have taught you.

1. Credit cards offer more fraud protection than debit cards

Credit cards offer a much greater level of protection against fraud than debit cards. Many credit companies come with $0 fraud liability, meaning you aren't responsible for any reported fraudulent spending. In most of these cases, the creditor will credit your account immediately. However, with debit card purchases, it can take the bank up to two weeks to refund your money, and even then you might still be held responsible for a certain percentage of the charges. (See also: 4 Reasons Credit Is Safer Than Debit)

2. You must be proactive to build your credit

A common myth is that an open credit card account is all you need to build your credit. Credit scores reflect an individual's relationship with debt management. Lenders and creditors want to see how you interact with finances, especially if you are going to take on more debt. This doesn't mean you need to be in debt to have a good credit score. Instead, a credit score is established through paying your bills on time, whether that be your credit card bill or your mortgage.

One of the biggest factors in determining your credit score is your credit utilization ratio. Lenders want to see how much debt you have versus how much credit you have access to.

Build your credit by using and paying off your credit card, making payments on time, and asking for credit line increases. (See also: How to Use Credit Cards to Improve Your Credit Score)

3. Keep your credit utilization ratio as low as possible

Generally, it is important to have a credit utilization ratio of 30 percent or less. For example, someone with $500 of debt on a $1,000 total credit line will look worse to creditors than someone who has $5,000 debt with a total credit line of $30,000.

Calculate your credit utilization ratio by dividing your debt total by your credit line total. For example, $500 of debt divided by a $1,000 credit line would equal a 50 percent credit utilization ratio, whereas $5,000 of debt divided by a $30,000 credit line is just over 16 percent. Remember, your credit line total is the combination of all lines of credit you have open.

4. Interest payments can make debt hard to pay off

A few thousand dollars of debt can feel like an impossible hurdle if you try to pay it off in minimum payments only. You will feel like you are making zero progress on your debt when you have to pay interest. Interest makes anything you purchased with a credit card more expensive. Did you really mean to pay double for that clearance shirt? (See also: Fastest Way to Pay Off $10K in Credit Card Debt)

5. Differences in interest rates do matter

Perhaps your parents didn't make a big deal about the difference between an A and A-, but when it comes to interest rates, the difference is noticeable. Even a half of a percent can make a big difference when it comes to your monthly payments on a loan. Getting a $20,000 car loan for three years at 4 percent doesn't seem much different from the same car loan at 3.25 percent, but it is. The difference is $6 a month, or $216 in the lifetime of the loan. Wouldn't you rather that money go to something necessary or fun instead of an interest payment? The same is true of paying interest on a credit card. (See also: 5 Ways to Pay Off High Interest Credit Card Debt)

6. Rewards don't negate debt

We know your mom always told you to look at the bright side of things, but credit card rewards are not the bright side. If you are constantly running up credit card debt to benefit from rewards points, then you will be sorely disappointed by their rate of return. There is no credit card on the market with a reward program that makes going into debt worth it.

Pay off your monthly credit card bill to ensure you benefit from the rewards, but aren't being burned by the interest rate. (See also: 7 Credit Card Reward Tips Many People Don't Follow)

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

Flashback Friday: 52 Money Mistakes You Need to Stop Making

Chrissa Hardy — Fri, 07 Apr 2017 08:30:16 +0000

Too much credit card spending. Not having an emergency fund. Waiting to save for retirement. Making a money mistake or two like these is fine early on, and is probably not the end of the world as you get older, but at a certain point, you need to clean up your finances and start making responsible money choices. Here are 52 money mistakes you need to stop making.

20 Money Mistakes Everyone Makes But No One Talks About — We all make money mistakes. We forget to budget, we underestimate tax bills sometimes, or go broke from a pricey college education. But the key to recovery is acknowledging the problem, so start talking about these rarely talked about money mistakes, and you'll be on your way to fixing them.

5 Money Mistakes to Stop Making by 50 — Being reckless with your finances close to retirement age is not a good look. So start putting those irresponsible money moves behind you so you don't reach age 50 lost in a sea of debt.

8 Savings Mistakes Even Smart People Make — You think smart people are immune to poor money choices? Nope! Intelligence helps you manage your money, but it doesn't mean you won't screw up. And there's something oddly comforting about knowing the smartest among us struggle sometimes.

5 Dumb 401(k) Mistakes Smart People Make — Ok, so you've got a 401(k). That's great! But just having one isn't enough. Make sure you aren't making these mistakes — that even smart people make — because you could be destroying your retirement.

The 7 Worst Money Mistakes Married People Make — Once you recite those vows and become a married pair, you should probably get your money in check. You're a team now, and you shouldn't avoid those tough financial conversations, or hide major purchases from each other.

Stop Making These 7 Basic Budget Mistakes — The work that goes into maintaining a budget is never done. You constantly need to adjust your goals to align with your financial needs. But please stop making these basic budget mistakes. You're only hurting yourself.

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

Should You Pay Your Bills With a Credit Card?

Holly Johnson — Wed, 22 Feb 2017 10:30:36 +0000

One of the smartest — and easiest — ways to earn more credit card rewards is to charge as many regular bills as makes sense. By using credit instead of your checking account to pay bills you normally pay anyway, you can increase your rewards without spending money you don't have.

First step: Get out your monthly bank statements and make a list of expenses you pay on a regular basis. These might include utility bills, insurance premiums, and even rent.

Next, determine whether you can pay these bills with credit. Using a credit card to pay your bills allows you to rack up cash back, hotel points, and airline miles a lot faster, but there are some downsides you need to consider, too. (See also: Why I Use My Credit Card for Everything)

Beware of Fees

While some businesses let you use a credit card without an added fee, others might charge a fixed or percentage-based convenience fee for using credit. This is because companies are charged a fee for processing credit card payments.

If a fee is involved, it's usually not worth it to put the payment on your credit card. That additional fee would cancel out (and sometimes be more than) any rewards you'd get for the charge.

Let's say you want to pay your $100 cellphone bill with a credit card, but your service provider charges a flat $1.95 fee for doing so. If your credit card offers 1% back for each dollar you spend, you would earn $1.00 in rewards for a $1.95 fee. You'd clearly be better off using some other payment method.

On the other hand, if you have a rewards card that offer 5% back on cellphone purchases, you'd earn $5.00 in rewards on that $100 cellphone bill in exchange for a $1.95 fee. That's still a pretty good deal.

Don't Get in Debt for Rewards

No matter what, you should never charge bills you can't afford to repay right away. There is no amount of rewards that would be worth the interest credit cards charge for carrying a balance. Before you charge any bill, you should make sure you have the cash to pay your bill in full when it's due.

Don't Use Convenience Checks

Don't think you can bypass the fees by using those convenience checks credit cards send you, either. Those are considered cash advances, and you will not only not earn rewards using them, but you will be assessed interest the moment they are cashed. The interest on cash advances are much, much higher than the standard APR, too. So never, ever use those checks to pay your bills!

Overlooked Bills You Can Pay With Credit

With all of those caveats in mind, consider this list of bills you might not currently be paying by credit card:

Cable/Internet/cellphone bill — Depending on which telecommunications service providers you use, you may be able to charge these bills to a credit card online or over the phone.
Car/homeowners/renters insurance — Most providers of these types of insurance let you pay your premiums with a credit card, though you may have to pay a fee. This is true whether you pay your bill monthly or just once or twice a year.
College tuition — Not all schools accept credit cards for tuition, and many that do charge a fee. For all the rest, charging your bill to a credit card can help you earn points and miles quickly. Because this tends to be a large bill, it's especially important to point out that this only pays off if you can pay the credit card charges in full at the end of the month. (See also: Best Credit Cards for College Students)
Day care — Many larger daycare centers let patrons charge their weekly or monthly day care expenses. Smaller providers may also accept credit cards, though they are more likely to charge a convenience fee.
Electricity, gas, water — More and more utility companies let consumers charge their bill payments to a credit card.
Health insurance — If you buy your own insurance on the open market or through the exchanges, you may be able to pay for your premiums with a credit card. Although some large health insurance companies have dropped this option, there are still some providers who allow it.
Income taxes — The Internal Revenue Service authorizes three providers to accept and process federal income tax payments by credit card. All of them charge fees, but at least part of the fee may be tax deductible. If you want to charge state income taxes, you'll need to check with your state for rules and additional details. (See also: Should You Ever Pay Your Taxes With a Credit Card?)
Kids' sports and activities — If your children are in baseball, ballet, or any other activity, don't forget to charge their activity fees or dues. You may also be able to charge equipment rental and uniform fees.
Offerings at your house of worship — An increasing number of churches, synagogues, and other houses of worship accept credit card donations. If you tithe or regularly contribute to the offering plate, this is an expense to consider charging, keeping in mind that part of your donation will go to pay for credit card processing fees.
Rent — For a few lucky tenants, paying rent with a credit card is an option. Some landlords provide this service for free. Otherwise, there are companies that will accept your credit card payment and then pay your rent or mortgage by check, but the fees are almost always greater than any rewards you could earn.
Subscriptions and membership dues — You can usually charge your fees for a gym, video streaming service, dating service, magazine, and other subscription services. Most large organizations will also let you pay for membership dues with a credit card.

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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:

6 Credit Card Mistakes That Could Be Ruining Your Credit

Jason Steele — Tue, 21 Feb 2017 10:31:29 +0000

It's difficult to overstate how important your credit record and credit score are. Not only will good credit enable you be approved for the most attractive credit cards, it's vital for receiving the lowest rates on a car loan, a mortgage, and on home and auto insurance premiums. It can even make the difference in whether you get the apartment or job you want, since both landlords and employers often run credit checks on applicants. (See also: 15 Surprising Ways Bad Credit Can Hurt You)

Unfortunately, many credit card users are making big mistakes that are ruining their credit. Since it can take years for some of the most negative items to drop off your credit report, it's crucial to avoid making these mistakes in the first place. Here are six credit card mistakes that could be ruining your credit.

1. Paying Late

The most important factor in your FICO score — the most popular credit score lenders use to evaluate you — is your payment history. It makes up 35% of your score. (See also: 5 Things with the Biggest Impact on Your Credit Score)

If you are using a credit card, your first priority should be to always pay your credit card bill on time. While one bill paid a few days late won't cause lasting damage to your credit score, paying late frequently will hurt more. On top of that you'll usually be subject to late fees.

Thankfully, there are many tools to help you pay on time. Most credit card issuers offer automatic payments to ensure that you never pay late. You can also request a specific payment due date so you can arrange all your bills to be due at the same time each month. That way you can sit down and pay bills just once a month rather than keeping track of various bills as they come in. Additionally, you can sign up for payment reminders by email or text.

2. Paying Less Than the Minimum

Paying just the minimum payment on your credit cards will hurt you financially, but paying below that is even worse — much worse.

To avoid being considered delinquent on a credit card account, you not only have to make your payments on time, but the payments must be at least the minimum amount required, which is stated on your bill. If your payment is below the minimum, it doesn't matter if it was on time. The payment will still be considered late, causing a hit to your credit score.

3. Failing to Pay

Miss a payment for at least 60 days and your creditors start wondering if you're going to pay at all. That's why you'll start to see more serious consequences than a single lapse of a few days would cause. After two missed billing cycles an issuer can impose a high penalty interest rate on the account, on top of late fees. And while those charges alone are costly, your credit will also start to really suffer.

A payment that's 90 days overdue is extremely damaging to your credit score and takes seven years to fall off your credit record. At 120 days late, your debt will likely be charged off and sold to collectors, which harms your credit score even more. (See also: What to Do If You Can't Pay Your Bills on Time)

If you are unable to pay your credit card bill for any reason, you should reach out to your card issuer to let them know. You may be able to negotiate a debt repayment plan.

4. Having High Balances

After payment history, the second most important factor in your credit score is how much you owe. It accounts for 30% of your FICO score. Maxing out your credit cards, or coming close to it, hurts your credit score.

Ideally you want your credit utilization ratio — the amount of debt you have divided by your total available credit — to be below 30%. The lower you can get it, the better off your credit score will be. The best way to lower it is to pay off your balances quickly. (See also: 5-Day Debt Reduction Plan: Pay It Off)

5. Not Having Enough Credit Cards

The other way to lower your credit utilization ratio is to increase the amount of available credit you have. If you have just one or two credit cards, and you are using up most of the credit lines available on them, you may benefit from having another card — but only if you can resist the temptation to ring up a bunch more debt on it. Remember, raising your credit line only to add more debt will drop your credit score.

Pick a basic, no-annual-fee card and then use it once a month or so for a small purchase, such as a tank of gas, that you can pay off immediately. That will keep the account active without putting you in debt. (See also: 7 Questions to Ask to Help Choose the Perfect Credit Card)

Similarly, you could request a credit line increase for the accounts you already have. If you've been paying on time, chances are you can get a credit limit increase by simply calling your issuer and asking.

Just be aware that credit card issuers will pull your credit report before approving you for a new credit card, and usually for a credit line increase, too. This will result in a hard pull on your credit, which will ding your credit score. Even a few points could be important if you're about to apply for a mortgage, so wait to ask for new credit until after you've done that.

6. Canceling Your Oldest Credit Cards

Closing any credit card will raise your credit utilization ratio, but closing your oldest accounts harms a different part of your credit score. Your length of credit history accounts for 15% of your FICO score. While an account in good standing will remain on your credit report for about 10 years after you've closed it, it will eventually be removed and hurt your score. (See also: 5 Times It's Okay to Close a Credit Card)

If you don't need to use a card, it may be better to put the card in a secure location, but keep the account open. If the account has an annual fee, you can ask to have the fee waived, or the account changed to a different card without the annual fee.

Don't let these credit card mistakes ruin your credit. (See also: How to Use Credit Cards to Improve Your Credit Score)

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

Should You Sign Up for That Store Credit Card?

Jason Steele — Fri, 17 Feb 2017 10:31:23 +0000

Shop at enough chain retailers and you'll eventually be offered a chance to apply for a store credit card. Often it comes with a tempting discount on your purchase, and maybe even a promotional financing offer. But how good are store credit cards, and should you get one?

Benefits of Store Credit Cards

Store credit cards do have some upside to consider.

Get Discounts

Retailers usually offer a discount on your day's purchases when you apply for their credit card right at the register. If you are making major purchases, the savings could be significant. In addition, many store credit cards promise to send you coupons and advance sales notices throughout the year.

Earn Rewards

Another benefit that a store card may offer is a rewards program that lets you earn points every time you buy something from the store. Rewards are often in the form of credits toward future purchases. The best store cards offer rewards or discounts of up to 5% of the amount spent.

Build Credit

Retail credit cards typically have much lower qualifications for approval than other credit cards. If you have a poor credit score or a limited credit history, you might be able to qualify for a store credit card before you can be approved for other cards. In this way, retail credit cards can help you build a credit history from scratch, or rebuild your credit after financial setbacks. (See also: How to Use Credit Cards to Improve Your Credit Score)

Disadvantages of Store Credit Cards

Now, the downsides.

High APR

While it's easier to be approved for a store credit card, it will likely have less competitive interest rates than other cards. While the average credit card has a standard APR of about 15%, it's not uncommon to find store cards with rates in the high 20s or even the 30s.

Limited Use

A store credit card may not be part of a larger payment network such as Visa or MasterCard, either. If so, then you will only be able to use your card for purchases at that store and its website, not at other merchants.

Lower Rewards

Retail credit cards may not even offer very strong rewards programs. Some store cards offer rewards valued at just 3% or 4% of your spending, which is not much higher than you could expect from one of the most competitive reward credit cards. Also, a store card's rewards will usually be in the form of store credit, which is never as valuable as cash back rewards.

Opportunity Cost

You always have to consider the opportunity cost of applying for a retail credit card. Since you can't practically apply for every credit card you are offered (and even if you could, too many applications hurt your credit score), you have to consider if a store credit card is a better deal than the best offers available elsewhere.

For example, another credit card could offer you a sign-up bonus worth far more than a one-off discount on your day's purchases. And a store credit card rarely has a rewards program that's as good as the most competitive reward cards. Additionally, there are credit cards available directly from banks that feature 0% interest on new purchases. That's superior to the promotional financing offers available from most store credit cards.

When It's Okay to Sign Up for a Store Card

If you find that you are consistently buying from one particular store, it may be worthwhile to consider whether rewards and discounts from its store credit card will put a dent in your regular spending there. But don't impulsively agree to signing up at the register for a one-time discount. Smart spenders don't just consider their purchases carefully; they also choose their payment options wisely.

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

Don't Make These 6 Credit Card Sign-Up Bonus Mistakes

Jason Steele — Thu, 16 Feb 2017 10:30:33 +0000

There are few things as rewarding as a generous sign-up bonus. Credit card issuers offering you hundreds of dollars worth of points, miles, or just plain cash back can seem irresistible. But at the same time, earning these bonuses may not be as easy as it appears. There's plenty of room for error along the way. (See also: Best Credit Cards That Offer Cash Bonuses)

The next time you are looking to score big on a credit card bonus, be careful to avoid these six mistakes.

1. Failing to Reach the Minimum Spending Amount

When it comes to sign-up bonuses, credit card issuers advertise the rewards in big bold print, but describe the minimum spending requirements in tiny type. Most credit cards require you to spend a certain amount within 90 days of account opening in order to earn the bonus. Calculate how much you'll need to spend each billing period and whether you are confident that your regular budget and spending can accommodate it. You'll have to plan ahead and make a list of all the places you'll need to change your payment method (recurring subscriptions and other payment accounts). Do it as soon as possible so you don't miss a charge.

2. Missing the Minimum Spending Deadline

When credit card issuers offer bonuses that must be earned within 90 days, it's easy to misunderstand when the clock starts on the offer. The 90 days is based on when the account was opened, which is when your application was approved. Considering that it can take up to a week from issuing you a card to actually getting it in the mail, you may already be down 10 days by the time you have the card in hand. To be extra careful, you can ask your card issuer to confirm your account opening date as well as the last date that you can make a purchase toward the minimum spending qualification for the sign-up bonus. (See also: 5 Steps to Getting a Free Vacation With Credit Card Bonuses)

3. Overspending to Earn a Bonus

It's tempting to use the large bonus to justify some extra purchases. You might even see it as a discount, since you're getting rewards for it. But it's never a good idea to go into debt to earn rewards, no matter how big the offer. Paying off your balance every month is the number one rule of using rewards cards. If you find yourself consciously or subconsciously overspending to earn rewards, then you should probably take a break from reward credit cards and focus on sticking to a budget. You'll never come out ahead if you're paying a drop of interest on those purchases.

4. Making Returns That Affect the Spending Amount

Part of the fine print of any bonus offer is that you must make a certain amount of net purchases in order to earn the rewards. Net purchases means the total amount of purchases you make, minus any returns. This prevents people from buying and returning a big-ticket item in order to get around the minimum spending requirement.

That's not to say you shouldn't return an item you're unsatisfied with. But if you do happen to return an expensive purchase such as an appliance or a new television while qualifying for a bonus, then you have to realize that it won't count toward your card's minimum spending requirements.

5. Not Reading the Exclusions for Past Cardholders

In recent years, credit card issuers have been cracking down on customers who repeatedly apply for the same cards in order to earn multiple sign-up bonuses. As a result, some credit card applications now have language that excludes bonuses for applicants who have received a bonus for that card within the last 24 months. What's more, some issuers will deny bonuses to anyone who has ever had the same card in the past. Look at your records to make sure you haven't had the card before, and if it's been a long time, you can call the issuer to check if you'd still qualify for their new offer.

6. Trying to Pool Offers That Don't Mix

Let's say you're trying to pool together a large amount of points to get a free trip for your family. If you have good credit, you might be able to get approved for multiple offers within a short period of time. But this isn't as easy as just adding points from one card to the points of another card. You need to understand how each card allows points to be redeemed. (See also: How Travel Rewards Credit Cards Really Work)

Some points are only redeemed as a statement credit toward travel purchases. Others allow you to purchase travel with points but only through their exclusive portal. And others allow you to transfer points to travel partner programs. For example, both Chase and American Express allow you to transfer points to Singapore, Virgin Atlantic, and Air France/KLM. In any case, you have to know what your travel plans are to ensure that you won't waste bonus points because you weren't able to use them all together effectively.

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

7 Ways to Save Loads of Money Using Credit Cards

Jason Steele — Wed, 15 Feb 2017 10:30:23 +0000

For many people, credit cards are simply a payment method. But savvy users take advantage of the additional benefits and services that only credit cards offer. A credit card may give you cash back, free travel, insurance, and other services worth hundreds or even thousands of dollars a year. Check out some of the most significant ways you can save money by paying with credit cards. (See also: 4 Reasons You Should Always Use Your Credit Card to Pay)

1. Get an Interest-Free Loan for a Large Purchase

If you can't afford something, it's always best to either forgo it or save up for it before making the purchase. In some cases, however, you don't have the option of waiting. Your refrigerator dies just when you need a new transmission, or your dentist orders a root canal, stat. If you are disciplined, you can swing free financing on that fridge or dental work by getting a credit card with a promotional 0% APR on purchases. These cards allow you to make new charges and carry a balance with no interest for an introductory period — in some cases, as long as 21 months. After that, your purchases will be subject to the card's standard interest rate. As long as you make your payments on time and clear your balance within the intro period, you'll stay out of debt. (See also: The Difference Between Store Credit Offers and 0% Credit Cards)

2. Get a Break From Interest on Debt

Sometimes bad decisions in the past continue to haunt us. Interest that continues to accrue on current debt makes it even harder to make up for those bad decisions. Once you've decided to put your financial life back in order and create a debt repayment plan, one of the best tools you can use to help pay off debt faster is a balance transfer to a card offering an intro 0% APR. These offers allow you to take a break from your interest charges so that you can devote 100% of your monthly payments toward paying down the principle. These interest-free offers can last up to 21 months, giving you the time you need to finally pay off your debt. (See also: When to Do a Balance Transfer)

3. Earn Cash Back

Are you diligent about paying off your credit card bill each month? If so, getting a cash back card is a no brainer. You can get a card that gives a flat rate percentage for all purchases, allowing you to get unlimited cash back. Or you can get a card with a higher return for the category that you spend the most in. For example, certain cards offer big cash back rewards for groceries. There's no reason you shouldn't get rewarded on your everyday expenses.

4. Get Free Travel

You can score hundreds of dollars worth of free travel by using a travel rewards credit card that gives you points or miles every time you use the card — again, assuming you clear your credit card balance every month. There are different types of travel rewards cards. Some allow you to use rewards to get a statement credit for any type of travel purchase you make on the card. Others let you transfer points to airline or hotel loyalty programs so you can claim award flights and stays. Many offer valuable sign-up bonuses that can get you free flights fast, and money-saving travel perks such as free checked bags and even exclusive airport lounge access. The best travel rewards card for you depends on your travel preferences and habits. Need more advice? Check out our favorite travel rewards cards.

5. Use Free Travel Insurance

Credit cards can be essential when you are traveling not just for their security and convenience, but because they include important insurance. For instance, you can decline your rental car company's expensive optional insurance and use your credit card's collision damage waiver policy instead. Some credit cards also have coverage that reimburses you for additional expenses in the event that your trip is delayed or canceled, your luggage is lost, or you're hurt while traveling. Just be sure to check with your card issuer to find out which policies your card has, and what they cover. (See also: 6 Types of Travel Insurance Your Credit Card Includes)

6. Protect Your Purchases

Many credit cards come with valuable purchase protection policies that repair or replace your purchase if it's damaged or stolen, typically within 30–90 days of when you buy the item. In addition, most cards offer extended warranty programs that add up to two years to your manufacturer's warranty. That can save you a bundle on expensive service plans. (See also: How Free Extended Warranties Work on Credit Cards)

Some cards even offer return protection policies, meaning they'll accept your return if the store won't. You'll need to ask to make the return within 90 days of purchase, but that's still longer than many stores allow for refunds.

All this is included as long as you pay for the purchase with a card that offers these features. (See also: 14 Awesome Credit Card Perks You Didn't Know About)

7. Get a Price Match

Not only can your credit card protect your purchases from theft or damage, it may also provide price matching services. If the price goes down on a purchase you made (within a specified amount of time), your card may reimburse you for the difference. Different cards have different policies, but usually you don't have to do anything more than submit a claim. Sometimes the card will even track prices for you and automatically issue you a credit for the price difference. (See also: Citi Credit Cards and Benefits)

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How to Use Credit Cards Responsibly During the Holidays

Jason Steele — Fri, 16 Dec 2016 10:00:07 +0000

Americans enjoy Christmas so much, that they often get carried away. It's one thing to go all-out decorating a tree or preparing the ultimate Christmas dinner, but some take the holiday spirit too far when they charge so much to their credit cards that they begin the New Year under a mountain of debt. At the same time, credit cards are a very secure and convenient method of payment, and shoppers can earn valuable rewards for their holiday spending.

Before you pull out the plastic this year, consider these tips for using your credit cards responsibly during the holidays

1. Set a Budget

If you had unlimited money, then you could simply buy everyone you know anything they want, and not worry about the cost. But the reality is that we all must live within our means, or face crippling debt and costly interest charges. Regardless of how much money you make, it's best to set a budget for your holiday spending and stick with it. Start with an overall figure for how much your household can afford to spend during the holidays, and then split that budget among your different expenses like gifts, decorations, parties, and travel.

2. Watch Your Credit Utilization Ratio

Your credit utilization ratio is the amount of total debt you have divided by the total amount of credit you've been extended. A rule of thumb is that you don't want to use up more than 30% of the credit that you've been extended on any one of your cards, or on all of your credit cards as a whole. The lower that percentage, the better. If you find yourself having to keep an eye on your credit limits, you can pay down your balances before you receive your statements. Also, you can apply for new credit cards or ask for credit limit increases on your existing cards. However, you want to have very low balances when you apply for new credit. As the old saying goes, banks only want to lend money to those who don't need it.

3. Use Your Credit Card Account's Alerts

It's because credit cards are so convenient to use that it's so easy to overspend. However, nearly all credit card issuers now offer ways to configure email and text alerts. You can set alerts to notify you when your payments are due, or when you've reached a certain spending threshold. Many card issuers also allow you to configure an alert that notifies you when one of your authorized users spends a certain amount. And best of all, you can use these alerts for free.

4. Look for Holiday Promotions

The credit card industry is intensely competitive, and each card issuer is trying to give you a reason to use its card over its competitors' cards. One of the ways it does this is to offer special promotions throughout the holiday season. Check if your credit card offers exclusive discounts for spending at certain stores. For example, some issuers have a shopping portal where if you click to a partner site through their portal, you will get a discount (or extra rewards) for your purchases. Others might have a Twitter feed that offers discount codes, or another program that requires you to sign in and sign up for offers. However, be careful not to make unnecessary purchases just to receive a discount.

5. Maximize the Value of Your Rewards

If you are using a rewards credit card, then you may have many choices when it comes time to redeem your points, miles, or cash back. If you are paying interest on your holiday debt, then the best thing that you can do with your rewards is to redeem them for statement credits to pay down your debt. But if you are able to avoid interest charges by paying off all of your statement balances each month, then you might be able to redeem your points and miles for travel rewards that are worth more than the cash back offered. (See also: Best Ways to Use Your Points and Miles for Holiday Gifts)

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The Self-Employed Person's Guide to Getting Credit

Dan Rafter — Thu, 14 Jul 2016 09:31:21 +0000

You work for yourself. And most times, that's great. But when you're trying to qualify for a mortgage loan or apply for a credit card, it can be a real struggle.

That's because lenders prefer loaning their dollars to borrowers who have a steady income that stays the same each month. That isn't what happens with most people who are self-employed. Your income can rise one month, and fall the next.

There is good news, though: Plenty of people who work for themselves finance homes and cars, and plenty have credit cards in their wallets. How can you join their ranks? Here are four tips for convincing lenders that just because you're self-employed doesn't mean you're a risk to default on your loans.

Prove That Your Income Has Been Steady for Years

It's far easier to qualify for financing or credit cards if you can show lenders that the income you've made as a self-employed worker has been steady or rising each year. If lenders see that what you made last year was similar or better to what you made the year before, they'll be less nervous about loaning you money.

To prove that your income is consistent, you'll have to provide lenders with at least the last two years of your income tax returns — returns that should show that your income during these last two years did not swing wildly up or down.

What if you haven't been working for yourself long enough to show at least two full years of self-employed income? Or what if your self-employment income hasn't been consistent and has soared high and fallen low? You'll struggle to qualify for a loan. It might be best to wait until you can show those two consistent years of income before applying.

Build a Top Credit Score

Your FICO credit score is a key number when applying for a loan or credit card. It's especially important for self-employed borrowers, who can rely on a high FICO score to help lessen the anxiety lenders often feel about loaning money to those who work for themselves.

Lenders today consider a FICO score of 740 or higher to be an excellent one. Such a score shows that you have a history of paying your bills on time. Such a history can put nervous lenders at ease and improve your odds of qualifying for a credit card or loan. (See also: Best Credit Cards for People with Excellent Credit)

Building a good credit score is simple: Pay your bills on time and pay off as much credit card debt as possible. Just don't close a credit card account after you've paid it off. That can actually hurt your credit score. (See also: 7 Ways to Increase Your Credit Score Quickly)

And if your FICO score is low? You might need to wait until you build it up to apply for a loan. Being self-employed and having a low score is no way to convince lenders that you're a good risk.

Build Your Savings

Lenders like all borrowers to have plenty of money saved. This way, if these borrowers should suffer a financial crisis, such as a job loss, they'll have some reserves to make at least a few mortgage or auto loan payments until they can resolve their financial struggles. Having cash reserves is especially important for self-employed borrowers. If you can show lenders that you have money in the bank, they'll be less nervous about the prospects of your self-employment income suddenly drying up.

How much savings you should have varies by lender. But most lenders want at least two months of mortgage payments saved up. If you're self-employed, saving even more than this can only help your efforts to qualify.

Come Up With a Larger Down Payment

If you're applying for a loan, coming up with a bigger down payment is one way to convince otherwise reluctant lenders to work with you. Lenders like to work with borrowers who have what they call "skin in the game," meaning that they are willing to invest more of their own money upfront when financing a home or car.

Consider applying for a mortgage loan: It's possible, depending on lender and loan program, to qualify for a mortgage while putting down just 3% of a home's final purchase price. If you're self-employed, though, you might have better luck convincing lenders to work with you if you can come up with a down payment of 10% or 20% of a home's down payment. Lenders think you're less likely to stop making mortgage payments if you've already invested more of your own money into the home.

Are you self-employed? Have you struggled to find financing?

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: