interest http://www.wisebread.com/taxonomy/term/798/all en-US 7 Times You Definitely Will Be Charged Credit Card Interest http://www.wisebread.com/7-times-you-definitely-will-be-charged-credit-card-interest <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-times-you-definitely-will-be-charged-credit-card-interest" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/young_woman_paying_by_credit_card_shopping_online.jpg" alt="Young woman paying by credit card shopping online" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Credit card interest is the worst. For one thing, most cards have APRs of nearly 17% on average, according to CreditCards.com. That's compared to less than 4% for a mortgage or 11% on a personal loan.</p> <p>When you use credit cards, you should aim to avoid paying interest whenever possible. Every time you open a credit card bill, check the line at the top that shows how much interest you have been charged. If this amount is not zero, figure out why you got charged interest so that it doesn't happen again.</p> <p>If you're paying your full balance before the payment due date each month, that number should be zero. Here are some times when credit cards charge you interest.</p> <h2>1. When you pay late</h2> <p>Most cards offer a <a href="http://www.wisebread.com/everything-you-didn-t-understand-about-credit-card-interest-grace-periods-and-penalty-aprs?ref=internal" target="_blank">grace period</a>, which means that a new purchase is not subject to interest until after the payment due date. The law requires interest-free grace periods to be at least 21 days. But the grace period applies only if you <em>do</em> <em>not have a balance</em> at the beginning of the billing period.</p> <p>Let's say you have a new card with no balance. You charge $100 on your card on July 1, the billing cycle closes on July 28, and payment is due on August 18. You have until August 18 to pay your $100 balance off in full without paying any interest. This means that in effect, you're getting nearly two months of an interest-free loan.</p> <p>However, if you forget to send your payment and it's late, you'll pay a late fee as well as interest on the balance, including on the late fee. While you might think that if you pay your balance two days after the due date, you'll be charged two days' interest, you will actually be charged much more than that. By paying late, you've lost your grace period retroactively, and interest is calculated starting July 1 &mdash; the day you made the purchase.</p> <p>How much will you be charged? Credit cards disclose how they calculate the interest they'll charge in those thin-papered, lengthy disclosures they send you, but in general, for every day that you have a balance during that month, you'll owe that day's balance multiplied by your daily periodic rate. You get your daily periodic rate by dividing your APR by 365. So the daily rate for a 20% APR is 0.054%. Depending on the card issuer, this rate may compound daily, meaning you will pay interest upon your interest each day.</p> <p>You'll see charges for this balance on next month's bill. You started the new billing period with a balance, so you won't have a grace period in the new billing cycle, either. At the end of the new month, you'll pay for the interest on last month's balance, which runs into the new month's balance as well, plus interest on any new charges you make all month, and of course, a late fee for not paying on time. In addition, you may pay &quot;trailing interest&quot; the following month. More on that in a moment.</p> <h2>2. When you pay on time, but not the full balance</h2> <p>As we mentioned before, the grace period that cards offer only applies when you start the billing cycle with no balance. If you charged $1,000 last month, but only paid $900, you are starting the new billing cycle with a $100 balance. You might think that the bank would start charging interest only on the $100 balance that starts at the new billing period. But that's not so.</p> <p>As we saw in the example above, interest is charged <em>retroactively </em>if a purchase is not paid in full within the grace period. So you'll be charged interest on the full $1,000 for the duration of last month's billing cycle until the date the payment for the $900 was received by your issuer. At that point, your balance dropped to $100, and interest will then be calculated on that new balance until this month's statement closes.</p> <p>Want that grace period back? You'll need to pay off the $100 balance plus the interest shown on your current month's statement. But that's not all. You may also be charged interest in the days between when the statement is issued and when your payment is received. This is sometimes called &quot;trailing interest&quot; or &quot;residual interest,&quot; and it's most pronounced if you pay your bill with a check, which takes a few days to reach the issuer and clear.</p> <p>For example, imagine you started February with that $100 balance. You receive a statement dated February 5 and send your check for the $100 plus interest on February 10. The issuer applies payment to your account on the 15th. Next month, you receive another statement saying you currently have a balance of $3.23. That's the amount of the residual interest, which was charged to your account between February 5 and February 15. One way to avoid this is to use online payments, but even then you should call the bank and ask exactly how much you will owe if you make your online payment on February 5. Then pay that amount in full on February 5.</p> <p>Unfortunately, even doing that is no guarantee. Some credit cards require you to have no revolving balance for two full billing cycles before you get your grace period back.</p> <h2>3. When a promotional 0% interest offer ends</h2> <p>There are a number of credit cards that offer a promotional period of <a href="http://www.wisebread.com/5-best-credit-cards-with-0-apr-for-purchases?ref=internal" target="_blank">0% interest on your purchases</a>. You won't be charged any interest during the promotional period. But you <em>will</em> be charged interest on any new purchases as soon as the promotional period ends &mdash; and those interest rates can be high. That's why it's important to pay off the whole balance before the promotional period ends, and only use the card if you can pay off the full balance every month.</p> <p>Also note that you can be charged interest if you pay late or violate some other part of the card's terms and conditions. If you choose to take advantage of an offer like this, read every word of fine print to make sure you understand what you're getting into. Check each month's statement to check that you have not been charged any interest.</p> <h2>4. When you take out a cash advance</h2> <p>Your card agreement will lay this out: Your grace period usually does not apply to <a href="http://www.wisebread.com/how-a-credit-card-cash-advance-costs-you-more-than-a-purchase?ref=internal" target="_blank">cash advances</a>. Interest will start accruing the day you get the advance. Not only that, but cash advances often charge a higher interest rate than purchases and may come with a fee as well.</p> <h2>5. When you use a convenience check</h2> <p>Those paper checks that your credit card mails you are basically like low-tech cash advances, with the same disadvantages: Interest starts accruing the moment the check is deposited, probably at a higher rate than your regular rate, and there may be fees. When I get these, I immediately shred them.</p> <h2>6. When you charge a lottery ticket</h2> <p>I was surprised to find this warning in one of my credit card agreements: Purchases of &quot;cash equivalents&quot; such as lottery tickets, traveler's checks, money orders, and gambling chips are not subject to the grace period. You may be charged interest on such purchases starting the day you make them, even if you don't carry a balance.</p> <h2>7. When you transfer a balance from another card</h2> <p>Transferring a balance from a high rate card to a lower rate card can save you money, especially since many <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?ref=internal" target="_blank">balance transfer cards offer 0% interest</a> for a limited amount of time. But you should keep in mind that once you have transferred a balance to a card, you are carrying a balance until you pay it in full. That means that you will not have a grace period on that card.</p> <p>That may not matter as long as you're in the 0% promotional period and only have the transferred balance on the card. But as soon as you make a purchase on the card, it's subject to interest from the moment you bought the item.</p> <p>Not only that, but because of the way payments are allocated, it will take you longer to pay off the balance than if you'd put that purchase on a different card. According to the law, an issuer can apply the minimum payment amount to whichever balance it chooses (the 0% transferred balance or the higher-interest new purchase balance). The bank will no doubt choose to put that minimum payment toward the no-interest balance. Whatever you pay above the minimum must, by law, go to the higher-interest purchase balance. But if it's not enough to clear the purchase balance, you'll now accrue more interest charges on it next month. Bottom line: Don't put new purchases on a balance transfer card.</p> <p>And, as with the cards that offer 0% APR on new purchases for an introductory period, if you pay late or violate some other terms of the card, you could immediately lose your promotional rate and be subject to interest going forward. (See also: <a href="http://www.wisebread.com/your-comprehensive-checklist-for-a-successful-balance-transfer#avoidpurchases?ref=seealso" target="_blank">Your Comprehensive Checklist for a Successful Balance Transfer</a>)</p> <h2>Beware the penalty APR</h2> <p>If you have multiple late payments, or if you write bad checks that the company has to return to you, your credit card company might slap you with a higher APR, which would apply to all future purchases, not just the late payment. Some cards will review your account and return your APR to your previous rate if you make consecutive on-time payments immediately for a certain amount of time.</p> <h2>Do you really have to pay?</h2> <p>Just because you see an interest charge on your credit card statement doesn't mean you absolutely have to pay it. If you have a sterling &mdash; and long &mdash; history with this card company, they may be understanding if you slip up only occasionally. I have successfully had customer service agents waive both late fees and interest charges when I accidentally paid a few days late or even when I forgot a monthly payment altogether. On other occasions, customer service waived the fee but not the interest. It never hurts to ask.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="http://www.wisebread.com/7-times-you-definitely-will-be-charged-credit-card-interest">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/your-interest-rates-are-about-to-go-up">Your Interest Rates Are About to Go Up</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-dirty-secrets-of-credit-cards">The Dirty Secrets of Credit Cards</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/everything-you-didn-t-understand-about-credit-card-interest-grace-periods-and-penalty-aprs">Everything You Didn’t Understand About Credit Card Interest, Grace Periods, and Penalty APRs</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-important-things-you-should-know-about-balance-transfer-cards">7 Important Things You Should Know About Balance Transfer Cards</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/now-is-the-best-time-in-years-to-do-a-credit-card-balance-transfer">Now Is the Best Time in Years to Do a Credit Card Balance Transfer</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Debt Management 0% interest APR credit card grace period interest Mon, 18 Jun 2018 08:30:26 +0000 Carrie Kirby 2148865 at http://www.wisebread.com 5 Credit Card Mistakes to Get Over by Age 30 http://www.wisebread.com/5-credit-card-mistakes-to-get-over-by-age-30 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-credit-card-mistakes-to-get-over-by-age-30" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/happy_online_shopping.jpg" alt="Happy online shopping" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Your 30th birthday is fast approaching. There's no denying it now: You're an adult. But when it comes to those credit cards in your wallet, are you still acting like a kid?</p> <p>Credit cards are an important financial tool. When you use them properly, they can help you build your credit score and even rack up useful rewards. But if you misuse your cards, you'll wind up facing a growing mountain of high-interest debt &mdash; one that only grows as you move past your 30s.</p> <p>You need to stop making these credit card mistakes by the time you're 30. If you do, you might be surprised at how much better your financial health gets as you grow older.</p> <h2>1. Making only the minimum payments</h2> <p>The problem with credit card debt is the high interest rates. The debt grows quickly, especially if you carry a large balance from month to month. And if you only make the minimum required monthly payment, it can take you years to pay off your credit card debt.</p> <p>Say you have $6,000 in credit card debt at an interest rate of 18 percent. If you only make your minimum payment (usually calculated at 3 percent payment &mdash; or even less &mdash; of your balance) each month, it will take you 210 months, or more than 17 years, to pay it off. You'll also pay more than $5,600 in interest on that debt. And those figures will be even worse if you continue to add to your debt while you're making those minimum payments.</p> <p>The lesson is clear: Pay more than the minimum, each month, until that debt is paid off. (See also: <a href="http://www.wisebread.com/all-the-ways-minimum-payments-are-evil?ref=seealso" target="_blank">All the Ways Minimum Payments Are Evil</a>)</p> <h2>2. Paying late</h2> <p>Paying your credit card bill late can have a devastating impact on your credit score. One late payment can send your score tumbling by 100 points. Your late payment will also remain on your credit reports for seven years.</p> <p>Fortunately, a payment won't be listed as officially late for credit score purposes until it is 30 days past due. But the card company will still probably charge you a late fee of $27 or more. If you're a couple of weeks late, make that payment immediately. (See also: <a href="http://www.wisebread.com/5-simple-ways-to-never-make-a-late-credit-card-payment?ref=seealso" target="_blank">5 Simple Ways to Never Make a Late Credit Card Payment</a>)</p> <h2>3. Not paying at all</h2> <p>Your credit card debt might be so overwhelming that you decide to stop paying on it completely. This is a big mistake. If you miss your credit card payments for six months, your credit card company will issue what is known as a charge-off; a declaration that the institution considers your credit card debt a loss on its balance sheet. By the time your credit card account gets to this point, your creditor will have probably shut it off, meaning that you won't be able to use your card for future purchases.</p> <p>This doesn't mean that your credit card issuer won't try to get you to pay up. You are still responsible for paying off your credit card debt. You might now, though, have to deal with a collections agency. (See also: <a href="http://www.wisebread.com/account-in-collections-heres-how-to-fix-it?ref=seealso" target="_blank">Account in Collections? Here's How to Fix It</a>)</p> <p>A charge-off will show up in your credit reports for seven years. It will also seriously weaken your credit score. If you are struggling to pay even your minimum monthly payment, don't ignore the problem, or your bill. Instead, call your credit card company. Your creditor might be able to come up with a solution that lets you stay current on your payments.</p> <h2>4. Not reading your credit card statements</h2> <p>As more of us pay our credit card bills online, it can be easy to ignore the monthly statements that come with them. This, though, can be a costly mistake. What if someone has been making fraudulent purchases with your card? You'll never know if you don't read the statement.</p> <p>Yes, it can be boring. But take time to read your statements &mdash; even if you no longer receive paper versions &mdash; before you make your credit card payments. If you do find suspicious transactions, call your credit card company immediately.</p> <h2>5. Closing unused cards</h2> <p>You might think it makes good financial sense to close a credit card account that you rarely use. But doing this can hurt your credit score because of something called your credit utilization ratio.</p> <p>This ratio measures how much of your available credit you are using. The higher your ratio, the more of a negative impact it has on your credit score.</p> <p>Say you have $12,000 of available credit and you owe a total of $5,000 on your cards. You are using about 42 percent of your total available credit. Now say you close a card with a credit limit of $2,000. You just lowered your overall available credit limit. You are now using up $5,000 of $10,000 in available credit, which will have boosted your credit-utilization ratio from 42 percent to 50 percent without making a single purchase. (See also: <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=seealso" target="_blank">This One Ratio Is the Key to a Good Credit Score</a>)</p> <p>Keep those credit card accounts open, even if you don't plan on using all of them. You want your credit utilization ratio to be as low as possible.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F5-credit-card-mistakes-to-get-over-by-age-30&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F5%2520Credit%2520Card%2520Mistakes%2520to%2520Get%2520Over%2520by%2520Age%252030.jpg&amp;description=5%20Credit%20Card%20Mistakes%20to%20Get%20Over%20by%20Age%2030"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/5%20Credit%20Card%20Mistakes%20to%20Get%20Over%20by%20Age%2030.jpg" alt="5 Credit Card Mistakes to Get Over by Age 30" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-credit-card-mistakes-to-get-over-by-age-30">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-millennials-guide-to-avoiding-credit-card-debt">The Millennials Guide to Avoiding Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/avoid-these-6-mistakes-newbies-make-with-their-first-credit-cards">Avoid These 6 Mistakes Newbies Make With Their First Credit Cards</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-to-do-right-now-to-boost-your-600-credit-score">5 Things to Do Right Now to Boost Your 600 Credit Score</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-happens-when-your-credit-card-debt-is-charged-off">What Happens When Your Credit Card Debt Is Charged Off?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">This One Ratio Is the Key to a Good Credit Score</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards 30 closing accounts credit card debt credit score credit utilization ratio interest late payments middle aged minimum payments Mistakes Wed, 07 Feb 2018 10:01:04 +0000 Dan Rafter 2097693 at http://www.wisebread.com 5 Ways Your Money Is Being a Jerk (And How to Fight Back) http://www.wisebread.com/5-ways-your-money-is-being-a-jerk-and-how-to-fight-back <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-ways-your-money-is-being-a-jerk-and-how-to-fight-back" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/sad_businesswoman_holding_empty_wallet.jpg" alt="Sad businesswoman holding empty wallet" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>They say money is the root of all evil. That&rsquo;s debatable, but it can certainly be at the center of a lot of problems. You want to get out more, but your money says no. You want to retire someday, but your money gives you the finger. You want to take a vacation to Europe, your money laughs in your face. Money can be a real jerk sometimes. But, you can fight back. Take control of your finances, and you&rsquo;ll be the one calling the shots.</p> <h2>1. Your credit cards are tempting you to spend, spend, spend</h2> <p>Oh, those credit cards with their promotional APRs, low-rate balance transfers (with a 3 percent fee, of course), and flashy rewards programs. Your mailbox is stuffed with offer after offer of five-minute applications and 60-second approvals. Credit lines are upward of $10,000. That&rsquo;s $10K you can spend on whatever you want, whenever you want, and you don&rsquo;t even have to pay it all back at once.</p> <p>Want a new coat? Swipe the card. Have your eye on a new watch? Grab that plastic. Thinking about a new car? The down payment is in your pocket. And when you have so many of these cards, it feels like a license to spend. The thing is, credit cards aren't free money, and it&rsquo;s way easier to spend with them than it is to pay them back.</p> <h3>How to fight back</h3> <p>Credit cards are financial tools, and if used correctly, they can be very good to you. They help you build credit, <a href="http://www.wisebread.com/top-5-travel-reward-credit-cards?ref=internal" target="_blank">offer travel rewards</a> and <a href="http://www.wisebread.com/11-credit-card-perks-that-make-life-easier-and-way-more-fun?ref=internal" target="_blank">perks that make life easier</a>, and are safer and easier to carry than cash. <em>But</em>, you must use them wisely.</p> <p>Do not spend money on a credit card unless you can afford to pay off the balance in full at the end of each billing cycle. If you don&rsquo;t have the money to do that, well, maybe you shouldn&rsquo;t be buying the item you cannot afford. Once you stop paying the full balance, interest is added. And the longer you keep a balance, the more interest is added on. If you&rsquo;re not careful, the debt will bury you over time. (See also: <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt?ref=seealso" target="_blank">The Fastest Method to Eliminate Credit Card Debt</a>)</p> <h2>2. Your monthly debt payments are ripping off your budget</h2> <p>You look at the amount of money you have coming in every month and you&rsquo;re happy with it. But then you look at your debts and monthly obligations; The credit cards. The car payment. The mortgage. The student loan. By the time you&rsquo;ve paid those bills, you barely have enough left to buy groceries. And money for fun, like going out to eat or a weekend away? Forget about it. Your debt is like a ball and chain around your whole life.</p> <h3>How to fight back</h3> <p>The first thing you need to do is get your financial house in order. Analyze your monthly bills, and make a list of your debts, the payments, and the length of time needed to pay them all off. If this already makes your head hurt, consider meeting with a financial adviser who can help you break the process down into simpler steps. (See also: <a href="http://www.wisebread.com/5-day-debt-reduction-plan-search-and-destroy?ref=seealso" target="_blank">5-Day Debt Reduction Plan: Search and Destroy</a>)</p> <p>Once you have all your ducks in a row, look at ways to pay down the debt. You may have to make some sacrifices to get this done. No trips to Starbucks for a while. Go for cheaper generic brands (which, to be honest, are usually made in the same facility as the expensive brand names). Pack your lunches every day. Free up as much money as possible, and do something with your debt called &ldquo;snowballing.&rdquo; Put every cent you can toward paying off the smallest debt first, and make minimum payments on the others. When that debt is paid off, move onto the next in line, applying the maximum to it, and the minimum to the others. It&rsquo;s a satisfying way to tackle debt because it progresses quickly. (See also: <a href="http://www.wisebread.com/6-secrets-to-mastering-the-debt-snowball?ref=seealso" target="_blank">6 Secrets to Mastering the Debt Snowball</a>)</p> <p>At the same time, look into other ways to generate extra cash. Can you refinance your home and pay off a debt while still hanging onto a substantial chunk of the equity? Paying 4 percent interest per month is way better than the 22 percent interest some credit cards charge.</p> <h2>3. Your &ldquo;savings&rdquo; account is laughing at your dreams</h2> <p>Savings; that&rsquo;s wishful thinking. For a lot of us, a savings account is just a temporary resting place for our money until the next emergency beckons it.</p> <p>A recent GOBankingRates study found that 34 percent of Americans have no savings at all, and 35 percent have less than $1,000. Sure, you want to go on that trip to Europe, or finish the basement for the kids. But guess what? The water heater just went on the fritz. Or the furnace just curled up its toes and died. Instead of looking forward to some time away, or something to make home life a little easier, you&rsquo;re staring into a savings account filled with cobwebs and shattered dreams.</p> <h3>How to fight back</h3> <p>Every financial adviser will offer you the following piece of advice: Pay yourself first. Sure, it&rsquo;s easier said than done, but you need to get into the habit of squirreling away a percentage of your income each month automatically.</p> <p>A dedicated emergency fund is critical for surprise expenses that threaten to wipe out your other savings &mdash; savings you may have wanted to use for that overseas trip or basement remodel. Many experts recommend having between six and 12 months' worth of your expenses covered in this fund. If you have nothing set aside in an emergency fund, now is the time to start building one.</p> <p>Set up an automated transfer from your checking account to a savings account and your emergency fund. Find small ways to save money without even thinking about it. There&rsquo;s an app called Earny that checks price drops on purchases you have made, and automatically claims the difference on your behalf (Earny takes 25 percent of the refund). Put any Earny refunds into your savings account or emergency fund.</p> <p>Other apps like Digit, Chime, and Acorns can help you save money without even noticing it. Acorns simply rounds up purchases to the nearest dollar, and puts the change into an investment account (fees range from $1 per month for balances under $5,000, to 0.25 percent for larger balances). Do whatever you can to make saving a monthly, or even weekly, habit. (See also: <a href="http://www.wisebread.com/11-ways-life-is-amazing-with-an-emergency-fund?ref=seealso" target="_blank">11 Ways Life Is Amazing With an Emergency Fund</a>)</p> <h2>4. Your retirement fund is MIA</h2> <p>You&rsquo;re sitting on a beach with a cool breeze kissing your face. The sun is out. The waves are lapping around your feet. You're sipping a Piña Colada. And then you hear that record needle scratch, open your eyes, and realize it&rsquo;s a dream; a far-off dream. Your 401(k) is looking about as healthy as a fly that just splattered against the windshield of your car. You have been working your butt off for 20 years, and have very little to show for it. At this rate, you&rsquo;ll be dreaming of retirement for the rest of your life.</p> <h3>How to fight back</h3> <p>Start by taking a breath. Hopefully retirement is still a good 20 or 30 years away, and that gives you time to beef up your fund and take advantage of compound interest.</p> <p>If you are employed by a company, you probably have a 401(k) match of some kind. The first thing you need to do is max out that match. If it&rsquo;s 6 percent, put in 6 percent of your salary each month. You&rsquo;ll actually be saving 12 percent of your salary, and that&rsquo;s an excellent start. If it&rsquo;s a maximum amount each year, hit that figure.</p> <p>Next, look at the kind of 401(k) fund you have. You should be able to choose what kind of risk you want to take, and if retirement is 25 years from now, you can afford to be in an aggressive fund; one that&rsquo;s going to be a bigger roller coaster ride for your money, but will lead to bigger gains over time. (See also: <a href="http://www.wisebread.com/7-roadblocks-to-retirement-and-how-to-clear-them?ref=seealso" target="_blank">7 Roadblocks to Retirement (And How to Clear Them)</a>)</p> <h2>5. You&rsquo;ll be making the minimum payment &hellip; forever!</h2> <p>Those accounts whisper in your ear constantly; &ldquo;There&rsquo;s no need to empty your bank account to pay me off. Just make this teeny, tiny minimum payment. You&rsquo;ll hardly notice it.&rdquo; Yeah, well, that might seem better in the short term, but in the long run those small minimum payments are keeping you in a never-ending cycle of debt.</p> <p>When you make the minimum payment, most of the money goes toward the interest that was applied to the balance. You pay it, forget about it, and next month you do it again. And again. And again. The balance never seems to go down, and that&rsquo;s what the credit card companies want. Before you know it, you&rsquo;ve spent five years paying the minimum and the end is nowhere in sight. (See also: <a href="http://www.wisebread.com/all-the-ways-minimum-payments-are-evil?ref=seealso" target="_blank">All the Ways Minimum Payments Are Evil</a>)</p> <h3>How to fight back</h3> <p><em>Never</em> make the minimum payment unless it&rsquo;s part of a debt snowball plan mentioned earlier. Paying just 2&ndash;3 percent of the balance is only making the credit card companies richer.</p> <p>You also need to stop using the credit card. By paying the minimum and adding to the balance, you&rsquo;re putting yourself in the pocket of the credit card company for the rest of your life. Instead, cut down expenses and find other ways to make purchases until you can get this balance down to zero.</p> <p>Look for <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?ref=internal" target="_blank">0% balance transfer credit card offers</a>. Some will give you 18 months or more at zero interest. Once you grab one of those, all of the money you pay each month goes toward the principal. Find ways to cut costs from your monthly budget and apply that to the payment on this card. The 0% interest combined with a much bigger monthly payment will really help you shrink that balance significantly. Just make sure to pay off the balance transfer card in full within the promotional APR window to avoid interest.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F5-ways-your-money-is-being-a-jerk-and-how-to-fight-back&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F5%2520Ways%2520Your%2520Money%2520Is%2520Being%2520a%2520Jerk%2520%2528And%2520How%2520to%2520Fight%2520Back%2529.jpg&amp;description=5%20Ways%20Your%20Money%20Is%20Being%20a%20Jerk%20(And%20How%20to%20Fight%20Back)"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/5%20Ways%20Your%20Money%20Is%20Being%20a%20Jerk%20%28And%20How%20to%20Fight%20Back%29.jpg" alt="5 Ways Your Money Is Being a Jerk (And How to Fight Back)" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/paul-michael">Paul Michael</a> of <a href="http://www.wisebread.com/5-ways-your-money-is-being-a-jerk-and-how-to-fight-back">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-smart-things-you-can-do-with-your-finances-even-if-youre-broke">15 Smart Things You Can Do With Your Finances, Even if You&#039;re Broke</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-reasons-youre-still-struggling-to-pay-bills">6 Reasons You&#039;re Still Struggling to Pay Bills</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/when-to-use-savings-to-pay-off-debt">When to Use Savings to Pay Off Debt</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-reasons-why-financial-planning-isnt-just-for-the-wealthy">6 Reasons Why Financial Planning Isn&#039;t Just for the Wealthy</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-smart-moves-to-make-after-getting-a-raise-or-promotion">9 Smart Moves to Make After Getting a Raise or Promotion</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance broke credit card debt emergency fund interest money problems paycheck to paycheck retirement savings Tue, 16 Jan 2018 09:00:07 +0000 Paul Michael 2086756 at http://www.wisebread.com Why Playing It Safe With Your Money Is Actually Risky http://www.wisebread.com/why-playing-it-safe-with-your-money-is-actually-risky <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-playing-it-safe-with-your-money-is-actually-risky" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retirement_chances.jpg" alt="Retirement chances" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The stock market has had a good run lately, but all good things come to an end eventually. And many of us remember a time not too long ago when a big crash wiped out billions of dollars in investment gains.</p> <p>Fear of a downturn, however, should not be an excuse to get too conservative in your investment approach. While it may be tempting to avoid stocks and keep all your money in cash and bonds, there is a real risk that you may find yourself without enough saved for retirement.</p> <p>While many of us may view stocks as &ldquo;risky&rdquo; investments, the more risky move is to play it too safe. Here&rsquo;s why.</p> <h2>1. You may live a long time</h2> <p>It was once common for someone to work into their 60s and pass away in their 70s. It wasn&rsquo;t necessary to prepare for a retirement of more than 15 years or so. But now, there are many cases of people living into their 90s and beyond. In fact, it&rsquo;s not unheard of to have a retirement that lasts longer than your work life. Are you on track to save enough to last 30 or 40 years?</p> <p>Accumulating enough for this length of time requires the investor to expand their risk tolerance and invest largely in stocks, especially earlier in life. It&rsquo;s OK to shift to some cash and bonds later, but going too conservative will leave your nest egg short of what you need. (See also: <a href="http://www.wisebread.com/7-reasons-to-invest-in-stocks-past-age-50?ref=seealso" target="_blank">7 Reasons to Invest in Stocks Past Age 50</a>)</p> <h2>2. Interest rates are low</h2> <p>You may be tempted to put money in a savings account or in certificates of deposit due to their safety. But bank interest rates and bond yields are still very low by historical standards. Consider that you&rsquo;ll be lucky to get a 1.5 percent annual yield from a savings account, while bond yields are between 1 and 3 percent. With rates this low, your money may barely grow faster than the rate of inflation if you don&rsquo;t invest in something more aggressive. It&rsquo;s fine to keep a sizable fund in cash in the event of an emergency, but keeping the bulk of your retirement fund in low-interest accounts is not the ticket to a comfortable retirement.</p> <h2>3. There&rsquo;s no pension to help you</h2> <p>We&rsquo;ve all heard stories of our parents and grandparents walking into retirement with a hefty pension that took care of them for however long they had left on Earth. Those days are gone. While many employers still contribute to retirement through 401(k) plans, their overall contribution is less than in the past, or at least partially dependent on you setting aside some of your own money. It&rsquo;s now up to the individual to set aside enough money for a comfortable retirement, and this may require taking some risk and investing in stocks with a potential for growth. Play it too safe, and you may find yourself short on cash later in life. (See also: <a href="http://www.wisebread.com/if-youre-lucky-enough-to-receive-a-pension-here-are-6-things-you-need-to-do?ref=seealso" target="_blank">If You're Lucky Enough to Receive a Pension, Here Are 6 Things You Need to Do</a>)</p> <h2>4. You may end up helping your kids</h2> <p>You may envision your retirement as a time spent traveling with your spouse, lounging on beaches, and doing crossword puzzles. In truth, it may be all that, plus a hefty dose of financial and child care support for your kids. A survey from TD Ameritrade revealed that millennial parents receive an average $11,000 annually from their own parents in the form of financial assistance or free child care. While these older citizens are eager to help their kids, 47 percent of them do admit that they have to make sacrifices in their own life to offer this assistance.</p> <p>In planning for your retirement, are you taking into account the possible expense of helping out your own kids? This assistance can add tens of thousands of dollars to your retirement costs, so it&rsquo;s important to have an investment strategy that is aggressive enough to take these costs into account. (See also: <a href="http://www.wisebread.com/are-you-ruining-your-retirement-by-spoiling-your-kids?ref=seealso" target="_blank">Are You Ruining Your Retirement by Spoiling Your Kids?</a>)</p> <h2>5. Future benefits aren&rsquo;t guaranteed</h2> <p>You may be banking on Social Security and other government programs to help support you when you get older. We all hope they&rsquo;ll be in place when we retire, but the stability and future of those benefits is subject to the whims of our lawmakers. Social Security and Medicare both are facing long-term budget shortfalls, and many lawmakers have advocated for adjustments to benefits in order to ensure these programs remain solvent.</p> <p>It&rsquo;s impossible to predict what government benefits will exist for retirees decades into the future, but no one should assume they will remain as-is forever. Moreover, these benefits were never designed to support a robust, active retirement. By taking a more aggressive approach with your own saving and investing, you can accumulate enough to enjoy a good retirement regardless of what government benefits look like in the future. (See also: <a href="http://www.wisebread.com/5-sobering-facts-about-social-security-you-shouldnt-panic-over?ref=seealso" target="_blank">5 Sobering Facts About Social Security You Shouldn't Panic Over</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fwhy-playing-it-safe-with-your-money-is-actually-risky&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FWhy%2520Playing%2520It%2520Safe%2520With%2520Your%2520Money%2520Is%2520Actually%2520Risky.jpg&amp;description=Why%20Playing%20It%20Safe%20With%20Your%20Money%20Is%20Actually%20Risky"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Why%20Playing%20It%20Safe%20With%20Your%20Money%20Is%20Actually%20Risky.jpg" alt="Why Playing It Safe With Your Money Is Actually Risky" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/why-playing-it-safe-with-your-money-is-actually-risky">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-9"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-treat-your-social-security-benefits-like-a-bond">Should You Treat Your Social Security Benefits Like a Bond?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-make-sure-you-dont-run-out-of-money-in-retirement">How to Make Sure You Don&#039;t Run Out of Money in Retirement</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-startling-facts-that-will-make-you-want-to-invest">8 Startling Facts That Will Make You Want to Invest</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-reasons-youre-never-too-old-to-buy-stocks">7 Reasons You&#039;re Never Too Old to Buy Stocks</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-plan-for-a-forced-early-retirement">How to Plan for a Forced Early Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement 401(k) plans benefits fear of investing growth inflation interest market downturns pensions risk social security Fri, 22 Dec 2017 10:00:06 +0000 Tim Lemke 2073022 at http://www.wisebread.com 6 Reasons Cash Back Is Better Than Travel Rewards http://www.wisebread.com/6-reasons-cash-back-is-better-than-travel-rewards <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-reasons-cash-back-is-better-than-travel-rewards" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_shopping_holding_credit_card_cash_dollar_bills.jpg" alt="Woman shopping holding credit card cash dollar bills" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When you apply for a rewards credit card, you usually have to choose between cash back and travel rewards. To help sway your decision, the companies that offer travel rewards credit cards often try to seduce you with images of exciting vacation destinations that you can supposedly use your rewards for. (See also: <a href="http://www.wisebread.com/how-travel-rewards-credit-cards-really-work?ref=seealso" target="_blank">How Travel Rewards Credit Cards Really Work</a>)</p> <p>For people who travel often, these rewards programs can be very valuable. Some expensive airfares, for instance, can be had for rewards rates that no cash-back card can compete with. (See also: <a href="http://www.wisebread.com/comparing-miles-which-airline-loyalty-program-is-better?ref=seealso" target="_blank">Which Airlines Offer the Best Value for Their Miles?</a>)</p> <p>But most people don't travel enough to earn the points needed to score such deals. You may find the points and miles that these travel reward cards offer to be difficult, or sometimes impossible, to redeem for reservations you need. As a result, cash back credit cards are the better choice for many people. (See also: <a href="http://www.wisebread.com/how-rewards-credit-cards-really-work?ref=seealso" target="_blank">How Cash Rewards Credit Cards Really Work</a>)</p> <p>Here are six reasons that <a href="http://www.wisebread.com/5-best-cash-back-credit-cards?ref=internal" target="_blank">cash-back cards</a> could be a better choice than travel rewards.</p> <h2>1. Cash back offers consistent value</h2> <p>What's a point or mile worth with your favorite airline or hotel program? You may never know, as you could receive excellent value from your rewards one day, and very poor value at another time. But with cash back, you always know exactly what your rewards are worth (usually 1 cent per point or a certain percentage of your purchases).</p> <p>See also: <a href="http://www.wisebread.com/best-credit-cards-that-offer-flat-rate-rewards-for-all-spending?ref=seealso2" target="_blank">Best Credit Cards that Offer Flat Rate Rewards for All Spending</a></p> <h2>2. Cash-back cards have gotten more competitive</h2> <p>It used to be that a strong cash-back card allowed you to earn 1 percent on most purchases, and perhaps 2 percent on a few bonus categories such as groceries or gas. But now, there are plenty of cards that offer as much as 5 or 6 percent bonus cash back on purchases from eligible merchants such as <a href="http://www.wisebread.com/5-best-gas-rewards-credit-cards?ref=internal" target="_blank">gas stations</a>, <a href="http://www.wisebread.com/the-best-5-credit-cards-for-groceries?ref=internal" target="_blank">grocery stores</a>, and <a href="http://www.wisebread.com/best-credit-cards-for-office-supply-purchases?ref=internal" target="_blank">office supply stores</a>. (See also: <a href="http://www.wisebread.com/how-credit-card-issuers-classify-your-purchases-for-bonus-rewards?ref=seealso" target="_blank">How Credit Card Issuers Classify Your Purchases for Bonus Points</a>)</p> <h2>3. Frequent traveler programs are less valuable</h2> <p>If you've tried to redeem your airline miles or hotel points recently, then you know how hard it can be to get substantial value from your rewards. For example, most airlines now charge a &quot;standard&quot; rate that requires at least double the miles of the traditional rates, often referred to now as the &quot;saver&quot; rates. Unfortunately, airlines have gotten stingy about the amount of award seats available at the saver rate. (See also: <a href="http://www.wisebread.com/which-credit-cards-have-the-best-travel-redemption-value?ref=seealso" target="_blank">Which Credit Cards Have the Best Travel Redemption Value?</a>)</p> <p>Likewise, hotel programs may claim to make every standard room available as an award for points, but many independently owned properties have gotten around this by curtailing the number of rooms that are labeled &quot;standard.&quot; As a result, you may well be told that no rooms are available for your points, as the remaining ones have a superior &quot;city view&quot; or &quot;garden view.&quot;</p> <h2>4. Cash back is more flexible</h2> <p>Even when you can earn travel rewards that are equal in value to the cash back that you could have earned, you may find yourself wanting cash instead. By using a travel rewards card, you are limiting yourself to travel rewards, whether or not you actually want or need to travel. For example, if you have several thousand dollars' worth of travel rewards, you might regret not earning cash back if you decide not to travel next year due to illness, job loss, or just a busy work schedule.</p> <p>In short, you can always use your cash back to pay for travel reservations, but you can't pay your bills with frequent flyer miles. (See also: <a href="http://www.wisebread.com/5-ways-to-earn-cashback-rewards-without-extra-spending?ref=seealso" target="_blank">Best Ways to Earn Cash Back Without Spending Extra</a>)</p> <h2>5. Points and miles depreciate, while cash earns interest</h2> <p>As travel reward programs have become less valuable, your points and miles have fallen in value as a &quot;currency.&quot; And there's seemingly no end to this process. It's a fair bet to say you can expect the miles that you've already earned to fall in value each year. This is important as it can take some people years to save up enough travel points for a big trip. On the other hand, you can invest your cash back rewards and earn interest just as you would on your other savings.</p> <h2>6. Travel prices are falling</h2> <p>Flying is less expensive than it once was, thanks in part to low fuel prices and increased competition from ultra low-cost airlines. It's actually common to find sales offering domestic airfare for less than $100 each way. While that's great news for travelers, it also means that your frequent flyer miles are worth less than they were when flights were more expensive. In addition, home sharing services like Airbnb have reduced the cost of lodging for many travelers. This makes hotel stays less necessary and their rewards points less valuable.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F6-reasons-cash-back-is-better-than-travel-rewards&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F6%2520Reasons%2520Cash%2520Back%2520Is%2520Better%2520Than%2520Travel%2520Rewards.jpg&amp;description=6%20Reasons%20Cash%20Back%20Is%20Better%20Than%20Travel%20Rewards"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/6%20Reasons%20Cash%20Back%20Is%20Better%20Than%20Travel%20Rewards.jpg" alt="6 Reasons Cash Back Is Better Than Travel Rewards" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/jason-steele">Jason Steele</a> of <a href="http://www.wisebread.com/6-reasons-cash-back-is-better-than-travel-rewards">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-9"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-turn-credit-card-rewards-into-real-wealth">5 Ways to Turn Credit Card Rewards Into Real Wealth</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-things-you-should-never-do-with-your-travel-rewards-credit-cards">7 Things You Should Never Do With Your Travel Rewards Credit Cards</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-ways-to-use-travel-rewards-cards-to-get-free-trips">How to Use Travel Rewards Cards to Get Free Trips</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-expert-tips-for-redeeming-miles-for-free-travel">12 Expert Tips for Redeeming Miles for Free Travel</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-credit-card-transactions-that-dont-earn-rewards">4 Credit Card Transactions That Don&#039;t Earn Rewards</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards best value cash back interest points rewards travel Tue, 12 Sep 2017 08:30:10 +0000 Jason Steele 2019383 at http://www.wisebread.com When Does Your Credit Card Start Charging Interest on a Purchase? http://www.wisebread.com/when-does-your-credit-card-start-charging-interest-on-a-purchase <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/when-does-your-credit-card-start-charging-interest-on-a-purchase" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/young_girl_is_paying_using_her_credit_card.jpg" alt="Young girl is paying using her credit card" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Credit card interest can be a mystery. It's all explained somewhere in the fine print, and any experienced attorney should be able to figure it all out. But for the rest of us, the most important thing to know is when our credit card will start charging us interest. (See also: <a href="http://www.wisebread.com/everything-you-didn-t-understand-about-credit-card-interest-grace-periods-and-penalty-aprs?ref=seealso" target="_blank">Everything You Didn&rsquo;t Understand About Credit Card Interest, Grace Periods, and Penalty APRs</a>)</p> <h2>The basics of credit card interest</h2> <p>Credit cards calculate your interest based on your average daily balance. At the end of each day, your account's balance is added up, including any new charges, fees, payments, or credits. And at the end of your statement period, the average daily balance is determined by adding up each day's balance, and dividing it by the number of days in the billing period.</p> <p>This means that you will be incurring interest charges on your purchases from the date of the transaction. Just keep in mind that many transactions initially begin as &quot;pending&quot; and can take a few days to change to &quot;posted.&quot; Nevertheless, your average daily balance, and your interest charges will be based on the date the transaction occurs, not when it actually becomes &quot;posted.&quot;</p> <p>For example, let's assume that your credit card statement period begins on the 15th of June and ends on the 14th of July. If you were to make a $1,000 charge on the 15th of June, it might be pending for a few days before it posts. Nevertheless, the charge will appear on your account as of the 15th of June. And if you don't make any further charges that month, your average daily balance will be $1,000. But if you make that charge at a later time, your average daily balance will be less, as will your interest charges. (See also: <a href="http://www.wisebread.com/7-ways-to-lower-your-credit-card-interest-rate?ref=seealso" target="_blank">7 Ways to Lower Your Credit Card Interest Rate</a>)</p> <h2>The exception to the rule</h2> <p>Now that you see how credit card interest begins the day you make a purchase, it's important to understand a key exception to this rule. Nearly all credit cards allow you to avoid interest charges by paying your monthly statement balance in full. Technically, interest is still being accrued, but those charges get waived when you pay your entire statement balances by the due date.</p> <p>The period of time between your statement closing date and your payment due date is called a grace period. Almost all credit cards offer grace periods, with the typical length being 25 days. If a credit card offers a grace period, by law it must mail your bill at least 21 days before your payment is due.</p> <p>If you fail to pay your entire statement balance in full before the due date, then you lose your grace period and will accrue interest on your average daily balance. Those charges will appear on your next statement. And once you've lost your grace period, then you will have to pay interest charges on your current and future transactions until you've paid off your entire statement balance in full again. (See also: <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?ref=seealso" target="_blank">The Best Low Interest Rate Credit Cards</a>)</p> <h2>Getting a bit of extra free interest</h2> <p>Paying your balance in full each month is the best way to manage your credit card accounts, as you'll pay no interest charges on your purchases. This gives you essentially a free loan from the date of your purchase until the next statement's due date.</p> <p>In fact, you can get as much free interest as possible with a simple trick. If you can delay a major purchase until after just your statement has closed, then you will get an additional month of free interest compared to a purchase made just before your statement closes. By waiting until after the statement closes, the purchase will appear on the following statement, which will have a due date a month later than the previous statement.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fwhen-does-your-credit-card-start-charging-interest-on-a-purchase&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FWhen%2520Does%2520Your%2520Credit%2520Card%2520Start%2520Charging%2520Interest%2520on%2520a%2520Purchase-.jpg&amp;description=When%20Does%20Your%20Credit%20Card%20Start%20Charging%20Interest%20on%20a%20Purchase%3F"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/When%20Does%20Your%20Credit%20Card%20Start%20Charging%20Interest%20on%20a%20Purchase-.jpg" alt="When Does Your Credit Card Start Charging Interest on a Purchase?" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/jason-steele">Jason Steele</a> of <a href="http://www.wisebread.com/when-does-your-credit-card-start-charging-interest-on-a-purchase">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-smart-reasons-to-pay-your-credit-card-bill-before-its-due">6 Smart Reasons to Pay Your Credit Card Bill Before It&#039;s Due</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/never-use-cash-for-these-11-things">Never Use Cash for These 11 Things</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-best-credit-cards-for-travel-purchases">Best Credit Cards for Travel Purchases</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/are-debit-cards-as-safe-as-credit-cards">Debit Cards vs. Credit Cards: Fees and Fraud Protection</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/can-your-spending-patterns-affect-your-credit">Can Your Spending Patterns Affect Your Credit?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards billing period buying due dates interest payments shopping Fri, 25 Aug 2017 08:30:06 +0000 Jason Steele 2009179 at http://www.wisebread.com 6 Smart Reasons to Pay Your Credit Card Bill Before It's Due http://www.wisebread.com/6-smart-reasons-to-pay-your-credit-card-bill-before-its-due <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-smart-reasons-to-pay-your-credit-card-bill-before-its-due" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/girl_with_a_credit_card_buying_online.jpg" alt="Girl with a credit card buying online" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>We all know there can be dire consequences if you are late in paying your credit card bill. But is there also a benefit to paying your bill early?</p> <p>It may seem unnecessary to pay your bill any sooner than required, but there are some advantages to sending in your payment earlier.</p> <h2>1. It frees up your credit</h2> <p>Most credit cards have a limit to the amount you can charge. But you can actually charge more if you pay off any spending right away. This is helpful if you plan to use the credit card to make a big-ticket purchase. It also makes sense if you plan to travel, because hotels, airlines, and rental car companies can place holds on your card that may last several days, or even as long as a week.</p> <h2>2. It can improve your credit score</h2> <p>The easiest way to prove to the credit bureaus that you are creditworthy is to pay your bill, and paying it off early can only help. Moreover, credit bureaus base your debt on the total at the end of the statement cycle. So if you can pay off debt before the cycle even ends, it reduces the debt reported. (See also: <a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score?ref=seealso" target="_blank">How to Use Credit Cards to Improve Your Credit Score</a>)</p> <h2>3. You'll do a better job of tracking spending</h2> <p>If you get in the habit of paying off credit card charges as they come in, you will likely check your balance more frequently. By doing this, you will be more aware of how much you are spending, and on what.</p> <h2>4. It reduces the interest you are charged</h2> <p>If you've carried over a credit card balance from the month before, interest is charged each day, so it can accumulate over the course of the month. If you pay part (or all) of your bill early, that means you will have a smaller average daily balance and lower interest payments. (See also: <a href="http://www.wisebread.com/7-ways-to-lower-your-credit-card-interest-rate?ref=seealso" target="_blank">7 Ways to Lower Your Credit Card Interest Rate</a>)</p> <h2>5. You'll chip away at debt faster</h2> <p>Consider this: If you direct money to pay off your credit card bill as soon as you can, that means your money can't be used anywhere else. In essence, you are preventing yourself from spending cash on something that might be wasteful. You are making a commitment to use money to <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt?ref=internal" target="_blank">pay off debt</a> rather than add to it.</p> <h2>6. You'll be less likely to forget about it</h2> <p>When you pay bills only after you see the final monthly statement, mistakes can happen. Bills can get lost in the mail. You can set it aside but lose it between the couch cushions. But if you are in the habit of checking your credit card balances and making payments frequently, you'll be less likely to have a problem. (See also: <a href="http://www.wisebread.com/5-simple-ways-to-never-make-a-late-credit-card-payment?ref=seealso" target="_blank">How to Never Make a Late Payment on Your Credit Card Again</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F6-smart-reasons-to-pay-your-credit-card-bill-before-its-due&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F6%2520Smart%2520Reasons%2520to%2520Pay%2520Your%2520Credit%2520Card%2520Bill%2520Before%2520Its%2520Due.jpg&amp;description=6%20Smart%20Reasons%20to%20Pay%20Your%20Credit%20Card%20Bill%20Before%20Its%20Due"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/6%20Smart%20Reasons%20to%20Pay%20Your%20Credit%20Card%20Bill%20Before%20Its%20Due.jpg" alt="6 Smart Reasons to Pay Your Credit Card Bill Before It's Due" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/6-smart-reasons-to-pay-your-credit-card-bill-before-its-due">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-expect-when-youre-expecting-a-huge-credit-card-bill">What to Expect When You&#039;re Expecting a Huge Credit Card Bill</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-moves-to-make-before-cutting-up-your-credit-card">6 Moves to Make Before Cutting Up Your Credit Card</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-credit-without-using-credit-cards">How to Build Credit Without Using Credit Cards</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-happens-when-your-credit-card-debt-is-charged-off">What Happens When Your Credit Card Debt Is Charged Off?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-a-solid-credit-score-saves-you-money">How a Solid Credit Score Saves You Money</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards bills credit balances credit score debt early interest payments revolving debt tracking spending Wed, 05 Jul 2017 09:00:11 +0000 Tim Lemke 1977308 at http://www.wisebread.com How to Build Equity in Your Home http://www.wisebread.com/how-to-build-equity-in-your-home <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-build-equity-in-your-home" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/imagine_owning_our_dream_house.jpg" alt="Imagine owning our dream house" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Equity is the difference between what you owe on your mortgage loan and what your home is currently worth. Say you owe $150,000 on your mortgage and your home is worth $200,000. You now have $50,000 worth of equity built up in your home. Congratulations!</p> <p>Equity is important when you sell your home. If you sell the home in the above example for $200,000, you'd end up with a sizable check, whatever is left of that $50,000 equity after you subtract your real estate agent's commission and any other fees you might have to pay to close the sale. (See also: <a href="http://www.wisebread.com/8-unexpected-costs-of-selling-a-home?ref=seealso" target="_blank">8 Unexpected Costs of Selling a Home</a>)</p> <p>You can also tap your home's equity for home equity loans or home equity lines of credit. Maybe you want to remodel your bathroom. If you have enough equity, you can take out a home-equity loan of, say, $20,000 to pay for it. You can also rely on home equity loans to pay for a child's college tuition or pay off high-interest credit card debt.</p> <p>And if you ever want to refinance your mortgage loan to one with a lower interest rate, you'll usually need equity to do so. Most lenders won't approve a refinance unless you have at least 20 percent equity built up in your home.</p> <p>So how do you build equity? Mostly by making your mortgage payments on time and hoping that the value of homes in your local housing market continues to rise.</p> <h2>Keep making your mortgage payments</h2> <p>Every time you make a mortgage payment, you'll gain a small bit of equity, as long as your home's value isn't falling at the same time. But don't think that if you are paying $1,500 each month, you are gaining $1,500 worth of equity with every payment. Not all of your monthly payment goes toward reducing your mortgage's principal balance.</p> <p>There's something known as PITI, which stands for principal, interest, taxes, and insurance. This means that a portion of each of your mortgage payments goes toward paying off your loan's principal balance, interest, property taxes, and homeowners insurance. Only the portion that goes toward paying off your principal helps you build equity.</p> <p>In the earliest days of your payments, a greater chunk of your mortgage check will be used to pay off interest. The deeper you get into your mortgage's life span, the more principal you'll pay off with each payment &mdash; and the more equity you will gain.</p> <h2>Count on rising home values</h2> <p>When you buy a home, you hope that its value will continue to increase. If your home does rise in value, the equity you have will automatically increase.</p> <p>If your home is worth $200,000 and you owe $190,000 on your mortgage, you have $10,000 in equity. But if your home's value was instead $210,000, owing that same $190,000 would leave you with $20,000 worth of equity. Just be aware that your home is not guaranteed to rise in value.</p> <h2>Make a bigger down payment</h2> <p>If you are using a mortgage to finance the purchase of a home, you'll usually have to come up with a down payment. With some loan products, that down payment can be as low as 3 percent of your home's purchase price. For a home costing $200,000, a down payment of 3 percent comes out to $6,000.</p> <p>The larger your down payment, however, the more equity you'll have as soon as you take ownership of your house. When you reach 20 percent equity, you'll no longer have to pay private mortgage insurance (PMI). That's why if you can afford it, it makes financial sense to come up with as large of a down payment as possible. (See also: <a href="http://www.wisebread.com/do-you-really-need-a-20-percent-down-payment-for-a-house?ref=seealso" target="_blank">Do You Really Need a 20 Percent Down Payment for a House?</a>)</p> <h2>Take out a shorter mortgage</h2> <p>Taking out a loan with a shorter term means larger monthly payments. But it also means that you'll build your home's equity at a faster pace. If you take out a 15-year, fixed-rate mortgage instead of a 30-year, fixed-rate loan, your monthly payment will be significantly higher because you are stretching out your payback period over a smaller number of months.</p> <p>But that larger monthly payment also means that you'll be reducing your mortgage's principal balance by a greater amount each month, something that will help you build equity much faster. This is one reason why, if you can afford the larger monthly payment, a shorter-term mortgage is a smarter financial move. Just be careful not to take a shorter-term mortgage if the monthly payment will be a struggle.</p> <h2>Make bigger mortgage payments each month</h2> <p>You can increase the speed at which you gain equity by making larger mortgage payments each month, as long as you tell your lender that you want this extra money to go toward paying down your loan's principal balance.</p> <p>If you owe $1,700 each month on your mortgage, you might instead send a check for $1,900, with the extra $200 allocated to paying down your principal. Your lender's mortgage statement probably has a line that you can fill out stating that you want your extra money to go toward principal. Make sure to fill that out.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fhow-to-build-equity-in-your-home&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520to%2520Build%2520Equity%2520in%2520Your%2520Home.jpg&amp;description=How%20to%20Build%20Equity%20in%20Your%20Home"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/How%20to%20Build%20Equity%20in%20Your%20Home.jpg" alt="How to Build Equity in Your Home" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/how-to-build-equity-in-your-home">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-respond-to-house-shaming">How to Respond to House-Shaming</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/weak-credit-you-can-still-get-a-mortgage-despite-tough-lending-standards">Weak Credit? You Can Still Get a Mortgage Despite Tough Lending Standards</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-common-homebuying-myths-debunked">6 Common Homebuying Myths, Debunked</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-worst-reasons-to-buy-a-house">4 Worst Reasons to Buy a House</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-benefits-of-carrying-a-mortgage-into-retirement">5 Benefits of Carrying a Mortgage Into Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing down payments equity homeownership interest loans mortgages principal Tue, 20 Jun 2017 09:00:08 +0000 Dan Rafter 1966194 at http://www.wisebread.com The New Grad's Guide to Debt Management http://www.wisebread.com/the-new-grads-guide-to-debt-management <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-new-grads-guide-to-debt-management" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/graduating_student_worrying_about_career_path_and_financial_future.jpg" alt="Graduating Student Worrying About Career Path and Financial Future" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>According to Student Loan Hero, the average 2016 graduate left college with $37,172 in student loan debt. The class of 2017 will graduate owing roughly the same amount, if not more.</p> <p>For many young adults, a student loan is the only option for obtaining a degree. The problem, however, is that it takes years to pay off these balances. Some graduates also have difficulty juggling student debt with their other expenses.</p> <p>Luckily, student loan debt doesn't have to cripple a new grad's finances. Here are a few strategies to help graduates manage their debt and stay on track.</p> <h2>1. Get organized and prepared for that first bill</h2> <p>Student loan repayment typically begins six to nine months after graduating college. You'll likely receive information regarding your first payment in advance. If you haven't received this information yet, it doesn't hurt to contact your student loan lender to ask about your due date and minimum payment. Having this information early helps you prepare your budget ahead of time.</p> <p>To stay organized and avoid late payments, set up automatic reminders a few days before your student loan payments are due. If you have multiple lenders, look into consolidating all your loans into a single loan. This way, you don't have to juggle multiple payments and due dates. If consolidation isn't an option, contact your lenders to see if you're allowed to change your due dates. It might be easier to manage student debt when due dates are within a few days of each other. (See also: <a href="http://www.wisebread.com/what-s-the-difference-between-student-loan-refinancing-and-consolidation?ref=seealso" target="_blank">What's the Difference Between Student Loan Refinancing and Consolidation?</a>)</p> <h2>2. Sign up for autopay to stay on schedule</h2> <p>Signing up for autopay is one way to avoid missing a due date on your student loans, which can trigger a late fee or a negative mark on your credit report. With autopay, your student loan lender automatically drafts monthly payments from your checking or savings account on a specific day of the month. As a bonus, your lender may reduce your interest rate when you agree to automated payments. This results in paying less interest over the life of the loan.</p> <p>Of course, the key to making this a successful solution is ensuring that there's always enough money in your checking account to cover the deductions &mdash; something you'll really need to stay on top of.</p> <h2>3. Request forbearance if you need more time</h2> <p>If you're scheduled to begin repaying your student loan, but you don't have enough income, don't ignore the bills. Student loan lenders &mdash; especially federal lenders &mdash; are flexible and offer assistance to students requiring financial help.</p> <p>One provision is forbearance, which allows you to temporarily suspend student loan payments for a certain number of months. For example, request a one-month forbearance if you have a temporary hardship, or request a one-year forbearance if you experience longer financial troubles. Keep in mind that interest continues to accrue with forbearance, which can put you deeper in the hole. Only use this option as a last resort.</p> <p>Deferment, on the other hand, is an income-based hardship provision. This option works the same as forbearance in that it suspends monthly payments without penalty. With a deferment, however, the federal government pays the interest that accrues during this period. (See also: <a href="http://www.wisebread.com/4-things-you-need-to-know-about-deferring-student-loans?ref=seealso" target="_blank">4 Things You Need to Know About Deferring Student Loans</a>)</p> <h2>4. Deduct student loan interest</h2> <p>Student loan interest is a deductible expense, so remember to include this item when filing your income taxes. This is critical in cutting your tax liability, especially when you're already on a tight budget. Since it's an &quot;above-the-line deduction,&quot; you don't have to itemize your tax return to take advantage of this write-off. You're allowed to write off up to $2,500 of student loan interest paid annually. This will reduce how much you owe in federal and state taxes. (See also: <a href="http://www.wisebread.com/4-ways-student-loans-impact-your-taxes?Ref=seealso" target="_blank">4 Ways Student Loans Impact Your Taxes</a>)</p> <h2>5. Hold off on other types of financing</h2> <p>After finishing college, you're likely ready to get your &quot;adult&quot; life started. This might include buying a new car and furnishing an apartment. But since you're fresh out of school with student loan debt, try to hold off on other types of financing &mdash; at least for now.</p> <p>The more debt you acquire, the harder it might be to juggle student loan and other credit payments. If you can avoid a car loan and unnecessary credit card debt, the money you would have spent on these expenses can go toward paying down student loan debt.</p> <h2>6. Live at home</h2> <p>The financial decisions you make as a young adult can affect your life later on. Although your friends might move into their own apartments, buy new cars, and spend most of their money on fun stuff, consider the benefits of living at home after graduation. By doing so, there's an opportunity to put a major dent in your debt. I did it for two years immediately following college, and I wasn't even a little bit embarrassed about it; I've paid off two student loans as a result.</p> <p>Whether you have credit card debt or student loan debt, minimizing your expenses now and prioritizing debt elimination sets the foundation for a strong financial future. Not only should you pay off debt, you should use this time to build a solid emergency fund. It'll be easier to save money and get ahead financially when you commit to living as cheaply as possible. (See also: <a href="http://www.wisebread.com/8-surprising-ways-to-pay-off-your-student-loans?ref=seealso" target="_blank">8 Surprising Ways to Pay Off Your Student Loans</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fthe-new-grads-guide-to-debt-management&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FThe%2520New%2520Grad%2527s%2520Guide%2520to%2520Debt%2520Management_0.jpg&amp;description=The%20New%20Grad's%20Guide%20to%20Debt%20Management"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/The%20New%20Grad%27s%20Guide%20to%20Debt%20Management_0.jpg" alt="The New Grad's Guide to Debt Management" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/the-new-grads-guide-to-debt-management">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-things-you-need-to-know-about-deferring-student-loans">4 Things You Need to Know About Deferring Student Loans</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-times-student-loan-refinancing-can-save-you-big">4 Times Student Loan Refinancing Can Save You Big</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-is-student-loan-forbearance-anyway">What Is Student Loan Forbearance, Anyway?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/student-loan-debt-in-collections-try-these-5-steps">Student Loan Debt in Collections? Try These 5 Steps</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-student-loans-impact-your-taxes">4 Ways Student Loans Impact Your Taxes</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Education & Training college grads deductions forbearance interest new graduates student loans taxes Wed, 14 Jun 2017 08:31:16 +0000 Mikey Rox 1963760 at http://www.wisebread.com 8 Biggest Regrets of New Homeowners http://www.wisebread.com/8-biggest-regrets-of-new-homeowners <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-biggest-regrets-of-new-homeowners" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/house_key_on_keychain.jpg" alt="House key on keychain" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Buying a home is a big decision. When you buy your first home, it can turn out to be one of the happiest moments of your life, and set you and your family up for years of comfort. But there are also countless decisions to make during the buying process, and it's easy to make one you'll regret later.</p> <p>It helps to know common traps others have learned from. Try to avoid these mistakes that many new homebuyers have made. (See also: <a href="http://www.wisebread.com/what-you-need-to-know-before-buying-your-first-home?ref=seealso" target="_blank">What You Need to Know Before Buying Your First Home</a>)</p> <h2>1. You bought more house than you can afford</h2> <p>It's easy to purchase a home that may be out of your price range. Banks are known to approve homebuyers for loans that are way beyond what should be sensibly budgeted. It's also tempting to buy a more costly home than you need, based on the assumption that you will earn more in the future.</p> <p>A good rule of thumb is to avoid paying more than 30 percent of your gross income on housing. Anything more than that, and you may find yourself financially handcuffed. When searching for homes, be sure to have a budget in mind, and do your best to stick to that budget even if it means walking away from homes you like. (See also: <a href="http://www.wisebread.com/how-to-make-ends-meet-when-youre-house-poor?ref=seealso" target="_blank">How to Make Ends Meet When You're House Poor</a>)</p> <h2>2. You did not put enough money down</h2> <p>Making a big down payment can make things much easier for a homeowner in the long run. If you are able to save up enough to put down at least 20 percent, there's a good chance you'll avoid paying private mortgage insurance (PMI), which can add thousands of dollars in overall costs. Plus, a bigger down payment will help you qualify for a more favorable loan, and will reduce the amount you need to borrow.</p> <p>Homeowners who can't make a sizable down payment often find themselves struggling financially because the mortgage costs are onerous. The more money you put down, the more money you'll save &mdash; and the better off you'll be.</p> <h2>3. You did not get the right kind of mortgage</h2> <p>There are many different mortgage products out there. <a href="http://www.wisebread.com/fixed-or-adjustable-choosing-the-right-mortgage-loan?utm_source=feedburner&amp;utm_medium=feed&amp;utm_campaign=Feed:+wisebread+(Wise+Bread)" target="_blank">Loans with fixed interest rates or adjustable rates</a>, interest-only loans, <a href="http://www.wisebread.com/choosing-the-right-mortgage-loan-15-or-30-years" target="_blank">30-year loans, and 15-year loans</a>. It can be bewildering and hard to find the right mortgage for you. The key is to understand what kind of homebuyer you are.</p> <p>Generally speaking, if you want to build equity in your home and plan to stay a while, you will want a fixed-rate mortgage. A 30-year term is most common and often allows for manageable monthly payments, but shorter terms can make sense if you want to pay off your loan sooner and you can afford to pay more each month.</p> <p>Adjustable rate mortgages, which often start with low interest rates that can change after a certain time period, make sense for those who think they may only stay in the home for a few years.</p> <p>Interest-only loans, in which you begin paying interest before any principal, tend to be riskier and don't help you build equity. But they might be right for people who want very low payments to start and think they can refinance or handle higher payments later.</p> <p>Do you plan to stay in the house a long time or move within a few years? What is your budget, both in terms of down payment and monthly payments? These are hard decisions, but it is important to research your mortgage loan options thoroughly before locking one in.</p> <h2>4. You didn't reduce debt and improve your credit before buying</h2> <p>The interest rate on your mortgage is based on a variety of factors, most importantly your current debt level and credit score. If you already have a high debt load and your credit score is mediocre or poor, you may end up with a higher interest rate. This could add thousands of dollars to the overall cost of your home.</p> <p>You may be eager to buy that first house, but you should first take time to pay off any current debts and <a href="http://www.wisebread.com/how-to-rebuild-your-credit-in-8-simple-steps" target="_blank">improve your overall credit picture</a>.</p> <h2>5. You should have continued renting</h2> <p>There is a lot of pressure on people to buy instead of rent, because it can be a path to long-term financial security. But there are many cases where it's perfectly fine &mdash; and perhaps wiser &mdash; to continue renting.</p> <p>If your income is inconsistent or your job security is in question, renting is a better option. If you expect you may need to move within a short period of time, renting makes sense. If you don't have enough money for a sizable down payment yet, continuing to rent is fine. Renting offers flexibility and is often cheaper, so there should be no rush to buy if you're not comfortable doing so. (See also: <a href="http://www.wisebread.com/rent-your-home-or-buy-heres-how-to-decide?ref=seealso" target="_blank">Rent Your Home or Buy? Here's How to Decide</a>)</p> <h2>6. You bought a home that needed work</h2> <p>A so-called &quot;fixer upper&quot; can be a great bargain for those willing to invest the time, sweat, and money on making necessary repairs. But this type of home isn't for everyone.</p> <p>Purchasing a home that requires heavy renovation can be a source of stress, and if you're not handy enough to fix things yourself, it may be more expensive for you in the long run.</p> <h2>7. You waived the inspection</h2> <p>During the housing boom a decade ago, competition for homes was so fierce that buyers were willing to forgo a routine inspection in order to close a deal. In fact, some sellers saw a demand for an inspection as a deal-breaker. Today, this is a recipe for potential disaster.</p> <p>An inspection should be an essential part of the homebuying process, allowing you to learn about any problems before you make a financial commitment. No homeowner should find themselves stuck with a house full of problems simply because they waived their right to inspect the property beforehand. (See also: <a href="http://www.wisebread.com/thinking-of-skipping-the-home-inspection-heres-what-it-will-cost-you?ref=seealso" target="_blank">Thinking of Skipping the Home Inspection? Here's What It Will Cost You</a>)</p> <h2>8. You researched the house, but not the area</h2> <p>It's a beautiful house and you got it for a great price. But after moving in, you realize that your commute to work just doubled. Or maybe you learned that the school system is not well-regarded. Or that the neighborhood has a high crime rate. Or the home backs up to the wastewater treatment plant.</p> <p>Remember that when you buy a home, you're not just buying a property. You're selecting a place to live and possibly raise your family. There's more to home than just the structure and the yard. If you don't do the research on your new neighborhood, you could end up sorely disappointed. (See also: <a href="http://www.wisebread.com/how-to-evaluate-a-neighborhood-before-you-buy?ref=seealso" target="_blank">How to Evaluate a Neighborhood Before You Buy</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/8-biggest-regrets-of-new-homeowners">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-respond-to-house-shaming">How to Respond to House-Shaming</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-equity-in-your-home">How to Build Equity in Your Home</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-home-buying-habits-we-can-learn-from-millennials">4 Home-Buying Habits We Can Learn From Millennials</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-faster-for-mortgage-payoff-100-month-extra-or-1-payment-year-extra">What&#039;s Faster for Mortgage Payoff: $100/Month Extra or 1 Payment/Year Extra?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-youre-paying-too-much-for-your-mortgage">8 Signs You&#039;re Paying Too Much for Your Mortgage</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing house house poor inspections interest loans mortgages new homeowner payments regrets renting Tue, 06 Jun 2017 09:00:09 +0000 Tim Lemke 1959133 at http://www.wisebread.com 5 Ways to Turn Credit Card Rewards Into Real Wealth http://www.wisebread.com/5-ways-to-turn-credit-card-rewards-into-real-wealth <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-ways-to-turn-credit-card-rewards-into-real-wealth" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-623196850.jpg" alt="Man turning credit card rewards into real wealth" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Using a rewards credit card is an easy way to pocket a few hundred dollars a year in cash back rewards, or earn free travel. And if you're willing to put in the effort, you'll find there are plenty of ways to parlay your points into something more meaningful and long-lasting.</p> <h2>1. Invest your cash back for the long haul</h2> <p>The simplest way to make <a href="http://www.wisebread.com/5-best-cash-back-credit-cards?ref=internal" target="_blank">cash back rewards</a> even more rewarding is to put the money into a retirement account and let compound interest work its magic. For example, we've worked out how to save <a href="http://www.wisebread.com/how-to-save-an-extra-109486-a-year?ref=internal" target="_blank">over a thousand dollars a year</a> using credit cards.</p> <p>Let's say you banked your $1,000 in rewards and savings and invested them in a Roth IRA each year for 20 years. If you earned an average return of 6 percent, you'd have almost $40,000 after 20 years, before fees.</p> <h2>2. Invest in experiences</h2> <p>Ask any dying person what they value most, and it won't be money they speak of. Most people look back on their lives and cherish the memories they've made &mdash; the sight of beautiful places, the laughter of their children, and the life-changing moments they've spent with the people they love.</p> <p><a href="http://www.wisebread.com/top-5-travel-reward-credit-cards?ref=internal" target="_blank">Travel rewards cards</a> may not help anyone grow rich, but they can help them afford a wide range of experiences that may otherwise be out of reach. An Alaskan cruise may fit into even a modest budget with the smart use of credit card rewards. Meanwhile, a $1000+ economy flight to Europe can be had for as little as 45,000 American Airlines frequent flyer miles, which you can earn with an <a href="http://www.wisebread.com/which-american-airlines-us-airways-credit-card-should-you-get?ref=internal" target="_blank">American Airlines credit card</a>.</p> <p>Used wisely, travel rewards can help families make memories they'll cherish for a lifetime. At the very least, they make it possible to travel farther, participate in more activities, and stay longer once you're there. (See also: <a href="http://www.wisebread.com/5-steps-to-getting-a-free-or-close-to-free-vacation-in-9-months-or-less-with-credit-cards?ref=seealso" target="_blank">How to Earn a Free Vacation in 9 Months With Credit Card Rewards</a>)</p> <h2>3. Donate rewards to a worthy cause</h2> <p>Even if you aren't remotely interested in spending rewards, you can make a difference. Some <a href="http://www.wisebread.com/best-credit-cards-that-give-back-to-charity?ref=internal" target="_blank">credit cards give rewards directly to charities</a>. Other credit card programs let you donate your points to charity, letting you turn your regular spending into a boon for someone else.</p> <p>While each credit card rewards program works differently, most make it possible to donate your rewards to causes you believe in. And if you don't want to donate through your issuer's official program, you can always simply give the cash back you earn to your favorite charity.</p> <h2>4. Use rewards to pay down debt and save money on interest</h2> <p>If you have credit card debt, you shouldn't be chasing credit card rewards. But if you have other debt that you'd like to pay off sooner, like a car loan, you can rack up cash rewards and make an extra payment each year. This will help you reduce interest on that debt as well as pay it off sooner.</p> <h2>5. Avoid a high-interest loan</h2> <p>If you have a huge expense coming up and need to take out a loan, you can avoid interest payments and earn rewards in one fell swoop. With a credit card that offers <a href="http://www.wisebread.com/5-best-credit-cards-with-0-apr-for-purchases?ref=internal" target="_blank">0% APR on new purchases</a> you essentially get an interest-free loan for a limited time.</p> <p>For example, let's say you plan to finance a roomful of furniture to the tune of $5,000. You want to pay it off over a year or so, and hope to avoid huge interest payments. You can get a card that offers 0% APR for the first 15 months, allowing you to pay off that $5,000 interest free. Remember though that you have to stay committed to your plan to pay off that amount during that period. Rewards cards typically charge higher interest rates. If you don't think you'll be able to pay off your balance, you'll want instead to look into <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?ref=internal" target="_blank">low interest credit cards</a> to keep a handle on your debt. Before you pursue rewards, make sure you're prepared to use credit responsibly.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/holly-johnson">Holly Johnson</a> of <a href="http://www.wisebread.com/5-ways-to-turn-credit-card-rewards-into-real-wealth">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-reasons-cash-back-is-better-than-travel-rewards">6 Reasons Cash Back Is Better Than Travel Rewards</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-things-you-should-never-do-with-your-travel-rewards-credit-cards">7 Things You Should Never Do With Your Travel Rewards Credit Cards</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-ways-to-use-travel-rewards-cards-to-get-free-trips">How to Use Travel Rewards Cards to Get Free Trips</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-save-frequent-flyer-miles-that-are-about-to-expire">How to Save Frequent Flyer Miles That Are About to Expire</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-ways-to-use-miles-and-points-for-holiday-gifts">9 Ways to Use Miles and Points for Holiday Gifts</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards cash back charity experiences interest loans miles rewards travel wealth building Mon, 22 May 2017 08:30:16 +0000 Holly Johnson 1946267 at http://www.wisebread.com 4 Things You Need to Know About Deferring Student Loans http://www.wisebread.com/4-things-you-need-to-know-about-deferring-student-loans <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-things-you-need-to-know-about-deferring-student-loans" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-528499384.jpg" alt="Man learning about deferring student loans" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>Finding a way to pause your student loan payment can be a lifesaver when your financial life goes sideways. And trust me, this can happen to anyone at any time.</p> <p>For me, the financial roller coaster ride started in June 2010. I was expecting our first child when my husband accepted a job in another state. I'd had to quit my teaching job when we moved, and I knew I was not going to be bringing in a paycheck for at least a year.</p> <p>On top of this reduction in income, we bought a house in our new city, but it took nearly a year to sell our old house. We were stuck paying two mortgages for 11 months.</p> <p>Between the two of us, my husband and I also had about $35,000 in outstanding federal student loan debt. To help get a better handle on our monthly budget, we decided to explore the option of deferment until our financial situation became more stable.</p> <h2>What is deferment?</h2> <p>Deferment allows you to pause the monthly payments on your federal student loans for a set period of time. For subsidized loans (these include Federal Perkins loans, Direct Subsidized loans, and Subsidized Federal Stafford loans), interest will not accrue on your loans while they are deferred. Unsubsidized loans, on the other hand, do accrue interest during the deferment period. If you have an unsubsidized loan that you plan to defer, you are allowed to pay the interest to keep it from being capitalized and added to your principal, but it is not a requirement for your deferment.</p> <p>Deferment can make a huge difference in your bottom line, but it is not necessarily a cure-all to your financial problems. Here is what you need to know about deferring your student loans.</p> <h2>1. You might not be eligible for deferment</h2> <p>When we applied for a deferment of our student loan payments, our first big surprise was the discovery that we were not eligible. Borrowers are eligible for, and have the right to take, deferment in the following circumstances:</p> <ul> <li>During at least half-time enrollment in postsecondary school;<br /> &nbsp;</li> <li>During full-time enrollment in an approved graduate program;<br /> &nbsp;</li> <li>During enrollment in an approved rehabilitation training program if you are disabled;<br /> &nbsp;</li> <li>During a period of unemployment (limited to three years);<br /> &nbsp;</li> <li>During active duty with the military, or within 13 months of when your active duty occurred;<br /> &nbsp;</li> <li>During periods of economic hardship, as defined by federal regulations (also limited to three years).</li> </ul> <p>My husband and I had assumed that going from two family members to three, from two paychecks to one, and from one mortgage to two, was sufficient enough to meet the economic hardship requirements. But federal regulations only allow for <a href="http://www.studentloanborrowerassistance.org/wp-content/uploads/2013/05/self-help-EconomicHardshipDeferment.pdf" target="_blank">economic hardship deferment</a> if you are either on public assistance, or the salary from your full-time employment is no more than 150 percent of the federal poverty guideline for your family size and state. His salary was too high to qualify.</p> <p>Instead of deferment, we had to apply for a discretionary forbearance, which is the option available to borrowers who aren't eligible for a deferment.</p> <h3>What's the difference between deferment and forbearance?</h3> <p>The biggest difference between the two processes is that interest will accrue on your loans if they go into forbearance, even if your loans are subsidized. This means that unless you pay the interest during the forbearance period, the accrued interest will be capitalized (added to your principal).</p> <p>In addition, deferments are granted in six-month increments, and you may keep applying for the next six-month increment of deferment as long as you qualify for it. Forbearance, on the other hand, is granted in 12-month increments, and you may only apply for it three times over the life of your loan.</p> <p>In some situations, forbearance is mandatory, which means your loan servicer must offer forbearance to you. You can receive mandatory forbearance in any of the following situations:</p> <ul> <li>During a medical or dental internship or residency program;<br /> &nbsp;</li> <li>During economic hardship wherein your total monthly student loan payment is 20 percent or more of your total monthly gross income;<br /> &nbsp;</li> <li>During service in a national service program, such as AmeriCorps;<br /> &nbsp;</li> <li>You are a teacher who is eligible for teacher loan forgiveness;<br /> &nbsp;</li> <li>You meet the eligibility requirements for the U.S. Department of Defense Student Loan Repayment Program;<br /> &nbsp;</li> <li>You are a National Guard member who has been activated by a governor, but who is not eligible for a military deferment.</li> </ul> <p>For student loan borrowers who do not meet any of the eligibility requirements for a mandatory forbearance, the only other option is applying for a discretionary forbearance. As the name implies, these are granted to borrowers at their lender's discretion, and generally borrowers apply for them because of financial hardship or illness.</p> <p>In 2010, my husband and I were granted a discretionary financial hardship forbearance. My unemployment was nominally my choice &mdash; although I was actually unemployed because of my baby's insistence on a Virgo birthday that coincided with the beginning of the school year. If I had been unable to find full-time work, that would have potentially made us eligible for a deferment, rather than a discretionary forbearance.</p> <h2>2. Accrued interest can pack a mean punch</h2> <p>Unless you are lucky enough to be eligible to defer a subsidized loan, you are likely going to deal with accrued interest. The problem with accrued interest is that it's like the inverse of compound interest: The interest that you accrue on your student loan is capitalized, which generates even more interest.</p> <p>For instance, between the two of us, my husband and I paid about 4.5 percent interest on our outstanding $35,000 student loan debt. By putting our loans into forbearance and not paying the accrued interest, we added over $1,600 to the $35,000 principal over 12 months.</p> <p>Not only does capitalized interest increase the total amount you owe, but it can also potentially increase either your monthly payment or your repayment term.</p> <h2>3. Be prepared for paperwork</h2> <p>Neither deferment nor forbearance is an automatic process, even when they are &quot;mandatory.&quot; You will always have to apply for either deferment or forbearance.</p> <p>If you are applying for deferment, you will need to submit a request to your loan servicer. For deferments while you are enrolled in school at least half-time, you will need to contact your school's financial aid office as well as your loan servicer. This process is relatively simple, but you will need to go through it every six months to maintain your deferment.</p> <p>For forbearance requests, the paperwork can be a little more onerous. Like deferment, you will need to submit your request to your loan servicer. In some cases, you will need to submit documentation to support your request, especially if you are requesting a discretionary forbearance. For instance, my husband and I were required to prove we were paying two mortgages at once to be granted our forbearance.</p> <h2>4. You must continue paying until your request is granted</h2> <p>After you have made your request for deferment or forbearance, you are required to continue making your monthly payments until your lender informs you that the request has been granted. Generally, this process takes about 10 business days, but it can take as many as 30.</p> <p>Not making payments during this time can be serious. If you skip a month after submitting your request, and your request is denied, then your lender will consider you delinquent and you risk defaulting.</p> <p>Both the paperwork and the necessity of continuing payments means that deferment and forbearance are options you have to plan ahead for. If you have a sudden financial downturn with no emergency fund, then you might be scrambling to request a deferment or forbearance, which may not be immediately granted.</p> <h2>Postponing your student loan payments doesn't erase them</h2> <p>Anyone can fall into an untenable financial situation. Your student loan servicer wants to work with you to help you stay afloat, but deferment and forbearance are not instantaneous processes nor are they a given. Putting your student loan payments on hold can help you get back on your feet financially, but you need to be prepared to handle the costs and be ready to get back to paying off your loans as soon as you can.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/4-things-you-need-to-know-about-deferring-student-loans">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-is-student-loan-forbearance-anyway">What Is Student Loan Forbearance, Anyway?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-really-happens-when-you-dont-pay-your-student-loans">What Really Happens When You Don&#039;t Pay Your Student Loans</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-pay-off-your-student-debt-faster">5 Ways to Pay Off Your Student Debt Faster</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-valuable-rights-you-might-lose-when-you-refinance-student-loans">8 Valuable Rights You Might Lose When You Refinance Student Loans</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-10-most-common-financial-aid-mistakes-and-how-to-avoid-them">The 10 Most Common Financial Aid Mistakes — And How To Avoid Them</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Education & Training capitalized deferment financial aid forbearance interest monthly payments student loans subsidized loans Mon, 24 Apr 2017 08:30:13 +0000 Emily Guy Birken 1932491 at http://www.wisebread.com 8 Signs You're Paying Too Much for Your Mortgage http://www.wisebread.com/8-signs-youre-paying-too-much-for-your-mortgage <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-signs-youre-paying-too-much-for-your-mortgage" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-495980844.jpg" alt="Learning signs that you&#039;re paying too much for your mortgage" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Buying a home can be a great step along the path to financial freedom, but it can also become a burden if you're not careful. A mortgage can be a heavy weight on your finances if you either buy a house you can't afford, or get locked into unfavorable loan terms.</p> <p>Here's how to tell if your mortgage is too expensive.</p> <h2>1. You Are Having Trouble Making Ends Meet</h2> <p>No matter what you do, you feel like you're struggling to get ahead financially. It always seems like there's only a small amount leftover at the end of each month to pay bills or place into savings. It could be that your house is weighing you down. If you're working too hard to get ahead with your money, it may be time to <a href="http://www.wisebread.com/refi-shy-how-to-determine-if-now-is-the-time-to-refinance?ref=internal" target="_blank">refinance your mortgage</a> or move into a less expensive home.</p> <h2>2. It's Eating Up More Than 30% of Your Income</h2> <p>The federal government advises that homeowners should avoid paying more than 30% of their income on housing. The theory behind this number is that for most people, keeping payments below this level will leave them with enough to pay for other non-discretionary spending. Keep in mind that many lenders will approve prospective homeowners for a loan even if their payments would be above that 30% threshold. Lenders will often instead refer to a person's &quot;debt-to-income&quot; ratio, and will lend if that ratio is as high as 43% &mdash; and banks went even higher during the housing bubble.</p> <p>Even if you are comfortably able to make your mortgage payments, it's wise to try and get under the 30% threshold. After all, more money in your pocket means more money to take care of your other financial obligations, invest for the future, or simply enjoy life.</p> <h2>3. Your Interest Rate Is Higher Than Everyone Else's</h2> <p>It's very easy to get a fixed-rate mortgage, make the payments, and not concern yourself with how interest rates are going up and down. But you never want to be locked into a higher rate than necessary. If you bought your home more than a decade ago, chances are your interest rate is higher than what's available now. The rate on a 30-year fixed rate mortgage is a little over 4% right now. If your rate is considerably higher, look to refinance and see what you can save.</p> <h2>4. You Are Barely Making a Dent in the Loan Principal</h2> <p>You've been making mortgage payments for years, but every time you look at your account statement, it seems like the principal balance barely budges. What gives? It's normal to pay mostly interest when you first get a loan, but over time your money should increasingly go toward paying off principal. If you find that you're not paying down the loan as quickly as you want, it could be because your interest rate is too high or your term is too long (or both.)</p> <h2>5. Your Income Has Gone Up</h2> <p>When you bought your house, your interest rate was based at least partially on your household income. But if you've received multiple pay raises since, you might qualify for a lower rate. Or, you may be able to refinance into a shorter loan term, thus saving you money in interest over time.</p> <h2>6. Your Credit Score Has Improved</h2> <p>A mortgage interest rate is also partially based on a homeowner's credit score when they apply for a loan. If your credit score was mediocre back then, there's a chance you got stuck with a high rate. If you've worked hard to be financially responsible ever since, your credit score may be much higher. Thus, you may be able to refinance your mortgage into a lower rate. According to FICO, a person with a credit score of 650 might pay as much as $100 more per month on a $200,000, 30-year fixed loan than someone with a score of 800. That could add up to tens of thousands of dollars over the course of a loan. (See also: <a href="http://www.wisebread.com/7-easy-ways-to-raise-your-credit-score-this-year?ref=seealso" target="_blank">7 Easy Ways to Raise Your Credit Score This Year</a>)</p> <h2>7. Your ARM Just Adjusted</h2> <p>During the housing bubble, many homeowners were lured into adjustable rate mortgages that offered low interest rates initially and then jumped after a certain number of years. (In 2005, these loans made up nearly 40% of the mortgage market.) Many families saw their payments increase sharply and beyond what they could afford. If you currently have an adjustable rate mortgage, make sure you are prepared to make payments once the interest rate adjusts upward. Otherwise, consider refinancing to a fixed mortgage with a low rate.</p> <h2>8. You Are Paying for Mortgage Insurance</h2> <p>Many lenders require borrowers to pay <a href="http://www.wisebread.com/what-is-private-mortgage-insurance-anyway?ref=internal" target="_blank">private mortgage insurance</a> (PMI) if they put less than 20% down on a home. This is to protect the lender if a home ends up in foreclosure. Mortgage insurance essentially adds to your cost of homeownership, often to the tune of hundreds of dollars annually. This requirement goes away once your principal balance drops below 78%. Ideally, you want to avoid paying PMI altogether by putting more than 20% down. This also means you're borrowing less overall and will save money in the long run. But if you can't quite save that much up front, work aggressively toward paying off your loan so you can get rid of the PMI requirement sooner.</p> <div class="bankrateWidget" app="ratetables" kind="tabbed" template="standard" pkey="yxx5914ebb" tabs="mortgage" rowsperpage="4" fontfamily="Overpass" mtgheadertext="Best Mortgage Loan Rates" mtgloanamount="$200,000" mtgdefaultloantype="refinance" pid="kawb">&nbsp;</div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/8-signs-youre-paying-too-much-for-your-mortgage">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-8"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-what-to-do-if-you-cant-afford-your-mortgage-payment">Here&#039;s What to Do If You Can&#039;t Afford Your Mortgage Payment</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-equity-in-your-home">How to Build Equity in Your Home</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-is-private-mortgage-insurance-anyway">What Is Private Mortgage Insurance, Anyway?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-qualify-for-a-mortgage-with-a-small-downpayment">5 Ways to Qualify for a Mortgage With a Small Downpayment</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/do-you-really-need-a-20-percent-down-payment-for-a-house">Do You Really Need a 20 Percent Down Payment for a House?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing adjustable rate down payment fixed rate interest loans mortgage pmi private mortgage insurance saving Fri, 10 Mar 2017 10:00:23 +0000 Tim Lemke 1902766 at http://www.wisebread.com 10 Surprising Ways Real Estate Cuts Your Taxes http://www.wisebread.com/10-surprising-ways-real-estate-cuts-your-taxes <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-surprising-ways-real-estate-cuts-your-taxes" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-121277252.jpg" alt="Learning surprising ways real estate cuts taxes" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Once you own property, you may be eligible for a long list of tax breaks, whether you use it as your primary home, for rental income, or sell it for profit. Let's run through familiar benefits, such as the mortgage interest deduction, and also the various (stunning!) tax breaks real estate investors, landlords, and homeowners enjoy.</p> <h2>1. Mortgage Interest<strong> </strong></h2> <p>This is the most familiar of all deductions and one of the very few times that you can use the interest that you're paying to reduce your tax bill. Besides deducting mortgage interest that you're paying for the purchase of your primary residence, you can also deduct mortgage interest from a second mortgage or a home equity line of credit (HELOC).</p> <p>You can deduct up to $500,000 ($1 million if married filing jointly) in all mortgage interest used to buy, construct, or make substantial improvements in your first home (and second, if applicable). You can't, however, deduct any mortgage interest for purchases on a third home and so on. You can also deduct up to $50,000 ($100,000 if married filing jointly) from all home equity debt for reasons other than to buy, build, or substantially improve your first or second home.</p> <h2>2. Mortgage Interest Credit</h2> <p>Recipients of a mortgage credit certificate (MCC) by a state or local government under a qualified mortgage credit certificate program could be eligible for a federal income tax credit of up to 20% of their annual mortgage interest. Figure this credit on Form 8396. The best part is that the remaining 80% of your mortgage interest is still eligible as a deduction!</p> <h2>3. Points</h2> <p>Charges paid by a borrower to secure a mortgage (also known as origination fees, maximum loan charges, or discount points) can generally be deducted. However, if you were to pay points to refinance an existing mortgage, you would amortize the points over the life of the mortgage. When you refinance a loan, your lender will send you a Form 1098 listing the points that you paid, but in the event that they don't, look for your points in your HUD-1 settlement sheet.</p> <p>Page 6 of <a href="https://www.irs.gov/pub/irs-pdf/p936.pdf" target="_blank">IRS Publication, 936 Home Mortgage Interest Deduction</a> provides a useful diagram to determine whether or not your points are fully deductible for this year.</p> <h2>4. Real Estate Taxes</h2> <p>You can deduct real estate taxes, including state, local, or foreign, you paid on real estate you own that wasn't used for business. Tally only taxes paid to government institutions and don't include itemized tax charges for services to specific property or people, such as a gardener or trash collection service. If you were to sell your property and receive a refund or rebate of real estate taxes, you would reduce your deduction by the amount of the refund or rebate.</p> <h2>5. Mortgage Insurance Premiums</h2> <p>You can deduct eligible mortgage insurance premiums provided by government authorities, including the Department of Veterans Affairs, the Federal Housing Administration, and the Rural Housing Service, as well as private mortgage insurance (PMI) issuers on loans issued after December 31, 2006. (See also: <a href="http://www.wisebread.com/what-is-private-mortgage-insurance-anyway?ref=seealso" target="_blank">What Is Private Mortgage Insurance, Anyway?</a>)</p> <p>In 2017, you can't deduct your mortgage insurance premiums if your adjusted gross income is more than $54,500 ($109,000 if married filing jointly). If your adjusted gross income falls between $50,000 and $54,500 ($100,000 and $109,000 if married filing jointly), your deduction is limited and you must use the Mortgage Insurance Premiums Deduction Worksheet to figure your deduction.</p> <h2>6. Capital Gains Exemption</h2> <p>Eventually, you may sell your real home. Depending on several factors, such as years of ownership, substantial improvements, and neighborhood developments, your home may have appreciated by several thousands of dollars. To lessen the tax hit on taxable capital gains from the sale of your property, the IRS may exempt up to $250,000 ($500,00 if married filing jointly) of that gain from your income.</p> <p>In general, you qualify for a capital gains exemption as long as you have owned and used your home as your main home for a period aggregating at least two years out of the five years before its date of sale. Consult <a href="https://www.irs.gov/publications/p523/index.html" target="_blank">Publication 523, Selling Your Home</a> for more details. The beauty of this tax break is that there is no restriction as to how many times you can use it!</p> <h2>7. Investment Interest</h2> <p>Real estate investors also get a tax break on interest paid on money they borrowed that is allocable to property held for investment. Such investors need to use Form 4952 to figure out their investment interest expense deduction.</p> <p>Despite its name, this investment interest deduction doesn't cover interest gained from passive-income activities or securities that generate tax-exempt income.</p> <h2>8. Expenses for Business Use of Homes</h2> <p>Freelancers, independent contractors, and small business owners can deduct expenses for business use of their homes. With Form 8829, you can claim the area used regularly and exclusively for business to allocate a deductible portion from a wide range of expenses, including utilities and depreciation.</p> <p>If your deductions for home business are greater than the current year's limit, you can carry over the excess to 2017! This carry-over will be subject to the deduction limit for that year, whether or not you live in the same home during that year.</p> <h2>9. Tax Credits for &quot;Green&quot; Improvements</h2> <p>To encourage more energy efficient home improvements, the IRS provides tax credits for qualifying expenses. Here are two examples:</p> <ul> <li>Windows, doors, and skylights that met the ENERGY STAR program requirements and were installed between January 1, 2012 and December 31, 2016 at the homeowner's primary residence may grant you up to $500 in energy efficiency tax credits.<br /> &nbsp;</li> <li>Solar energy systems provide a tax credit of 30% of cost with no upper limit through December 31, 2019. The credit will decrease to 26% in 2020, drop to 22% in 2021, and goes away in 2022.</li> </ul> <p>To learn about other tax credit opportunities from energy efficient home improvements, visit&nbsp;<a href="http://www.energystar.gov" target="_blank">EnergyStar.gov</a>.</p> <h2>10. Deductions From Rental Income Activities</h2> <p>Rental real estate provides several tax breaks to landlords. For example, landlords could potentially deduct:</p> <ul> <li>Local transportation expenses to collect rental income or to manage, conserve, or maintain rental property;<br /> &nbsp;</li> <li>Expenses for managing, conserving, or maintaining rental property from the time it was made available for rent;<br /> &nbsp;</li> <li>Depreciation expenses for the wear and tear of rental property;<br /> &nbsp;</li> <li>Local benefit taxes for maintaining, repairing, or paying interest charges for the benefits;<br /> &nbsp;</li> <li>Legal and professional fees directly related to operating expenses; and<br /> &nbsp;</li> <li>Prepaid insurance premiums.</li> </ul> <p>To learn the full list of rental expenses and guidelines for deduction, consult <a href="https://www.irs.gov/publications/p527/ch01.html#en_US_2016_publink1000218979" target="_blank">Publication 527, Residential Rental Property</a>. If you use some of your rental properties for personal purposes throughout the year, then you should hire a tax pro to appropriately deduct expenses for rental income. Hiring an accountant to report income from your rental activities is itself an eligible deduction, after all! (See also: <a href="http://www.wisebread.com/4-times-you-should-splurge-and-hire-a-pro?ref=seealso" target="_blank">4 Times You Should Splurge and Hire a Pro</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/10-surprising-ways-real-estate-cuts-your-taxes">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-9"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-tax-deductions-new-homeowners-shouldnt-skip">4 Tax Deductions New Homeowners Shouldn&#039;t Skip</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-faster-for-mortgage-payoff-100-month-extra-or-1-payment-year-extra">What&#039;s Faster for Mortgage Payoff: $100/Month Extra or 1 Payment/Year Extra?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-worst-reasons-to-buy-a-house">4 Worst Reasons to Buy a House</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-equity-in-your-home">How to Build Equity in Your Home</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-a-30-year-mortgage-is-a-smart-financial-choice">Here&#039;s Why a 30-Year Mortgage Is a Smart Financial Choice</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing Taxes business owners capital gains credits deductions energy efficient homeowners interest landlords mortgages rental properties Fri, 24 Feb 2017 10:00:13 +0000 Damian Davila 1897585 at http://www.wisebread.com 3 Sources of Fast Cash Besides Your 401K http://www.wisebread.com/3-sources-of-fast-cash-besides-your-401k <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-sources-of-fast-cash-besides-your-401k" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/handling_cash_780905671.jpg" alt="Finding sources of fast cash outside of 401K" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You're in the middle of a remodeling project, and due to unforeseen circumstances, your money runs out early. You can't live with a half-completed kitchen, but you can't pay for it to be finished right now. And while you have plenty of equity in your home and a healthy retirement account, there's nothing in the bank.</p> <p>Once you've decided to take out a loan, what is the best source of funds? Are 401K loans or borrowing against home equity ever a good idea?</p> <p>&quot;The best option is of course is your parents,&quot; says financial planner Bob Goldman. But if you can't tap the bank of mom and dad for an interest-free loan, your other best options are probably a cash-out refinance, a secondary mortgage, a home equity line of credit, or a 401K loan. Deciding which one to use requires some number crunching and a hard look at your personal situation, including your job security, your repayment timeline, and your will power.</p> <h2>Cash-Out Refinance</h2> <p>Mortgage interest rates are at historic lows, making now a good time to think about refinancing. When you refinance your home, you are replacing your current loan with a brand-new one, preferably at a better interest rate. Depending on how much equity you have in your home, you may have the option of borrowing cash at the time of the refinance &mdash; so that once all the paperwork is done, you'll have a lump sum in your bank account, which you will pay back as part of your regular mortgage payments.</p> <h2>Cash-Out Refinance Pros</h2> <p>A cash-out refinance has a lot going for it.</p> <h3>1. Low Rate</h3> <p>A mortgage often offers the lowest interest rate you can get, outside of promotional offers. And because rates are near historic lows, a lot of people feel that locking in a low rate now for a long loan term is a good call.</p> <h3>2. Low Payments</h3> <p>Because the payback period will be long &mdash; generally 30 years &mdash; a cash-out refi can ease the month-to-month strain of repayment, especially if you are able to lower the interest rate. If you are paying, say, 5% interest on your mortgage and you are able to refinance to 3.77%, you could add $50,000 to your loan principal while only adding about $100 a month to your payment.</p> <h3>3. No Surprises</h3> <p>As long as you take out a fixed-rate mortgage, you know what your payment will be for the life of the loan.</p> <h3>4. Tax Benefit</h3> <p>The interest you pay on your refinanced mortgage will be tax deductible. According to this <a href="http://www.calcxml.com/do/hom09">mortgage tax savings calculator</a>, if you add $50,000 to a $200,000 mortgage, you could save about $10,000 in taxes over the life of the loan, more or less depending on your tax bracket and the interest rate.</p> <h2>Cash-Out Refinance Cons</h2> <p>As great as a cash-out refinance is, it's not free money.</p> <h3>1. Risk</h3> <p>Your home is on the line. For most people, your house is your biggest asset, and putting it even at slight risk isn't a decision to take lightly. Far too many homeowners ended up losing their homes during the financial crisis when they overborrowed against their homes' value.</p> <h3>2. Fees</h3> <p>You have to pay closing costs, which average about $1,800 on a $200,000 loan.</p> <h3>3. Qualifying</h3> <p>You need good credit, especially for the best rates.</p> <h3>4. Starting Over</h3> <p>One thing people often overlook when refinancing, Goldman says, is that taking out a new 30-year loan pushes out the date when you'll be done paying off your mortgage. &quot;You reset the clock on your mortgage,&quot; Goldman says. &quot;You're back to Day One, where you're paying mostly interest.&quot;</p> <h2>What's the Total Cost of a Cash-Out Refinance?</h2> <p>Getting $50,000 this way would cost a typical borrower about $30,000 in interest and fees over the course of 30 years at current interest rates. I calculated this using a mortgage calculator to compare the lifetime cost of borrowing $200,000 versus $250,000, keeping in mind that getting cash out usually increases your interest rate by about ⅛ percent. I added $2,000 in closing costs and subtracted $10,000 in tax savings.</p> <h2>Home Equity Loan</h2> <p>A home-equity loan is so much like a mortgage that it's also known as a &quot;second mortgage.&quot; The only difference between this and a cash-out refinance is that instead of replacing your original mortgage with a new one, you're adding a second loan also using your home as collateral. But everything else &mdash; the fact that you're taking a fixed amount of money, usually at a set rate, and paying it back over time &mdash; remains the same.</p> <h2>Home Equity Loan Pros</h2> <p>A second mortgage is a lot like a cash out refi, but with some wrinkles.</p> <h3>1. Simplicity</h3> <p>If you have a great mortgage rate on your home and don't want to change it, this is a way to borrow money while leaving your original mortgage untouched.</p> <h3>2. Shorter Time</h3> <p>If you have a 30-year mortgage but only want to borrow money for five to 15 years, you can do that with a home-equity loan.</p> <h3>3. Tax Benefit</h3> <p>Like a regular mortgage, your interest is usually tax deductible.</p> <h2>Home Equity Loan Cons</h2> <p>You'll need to be sure you understand the downsides of this kind of loan.</p> <h3>1. Interest Rate</h3> <p>Data from Bankrate shows home equity loans averaging at least a percentage point higher than mortgage rates.</p> <h3>2. Qualifying</h3> <p>You need good credit, especially for the best rates.</p> <h2>What's the Total Cost of a home-equity loan?</h2> <p>About $11,000 in interest and fees to borrow $50,000 for 10 years.</p> <p>If you borrow $50,000 for 10 years through a second mortgage, you would pay about $13,000 interest over the life of the loan. Closing costs would be similar to a mortgage refinance, about $2,000. During that time, the mortgage interest deduction could save you about $4,000 in taxes.</p> <h2>Home Equity Line of Credit</h2> <p>Like a home-equity loan, a Home Equity Line of Credit (HELOC) is a secondary loan that piggybacks on your original loan. As with both types of loans discussed above, your home is still the collateral. The big difference is that while you can get cash out of a first or second mortgage only once, a HELOC is a revolving credit line, meaning that you don't need to know upfront exactly how much you'll need over the life of the loan. You can borrow $10,000 this month for a new furnace, and then $5,000 another month for landscaping.</p> <h2>HELOC Pros</h2> <p>The key advantage of a HELOC is its flexibility, but there are others to consider, too.</p> <h3>1. Borrowing Flexibility</h3> <p>Experts recommend these loans for ongoing expenses such as college tuition, rather than a home repair that you might pay for in a lump sum. If you do a refinance and then realize you'll need to borrow more money, you would need to pay closing costs all over again and might not be able to lock in the same rate.</p> <h3>2. Tax Benefit</h3> <p>Like the above loans, the interest paid on a HELOC is usually tax deductible.</p> <h3>3. Payment Flexibility</h3> <p>Your loan may allow you to pay interest-only for a certain amount of time.</p> <h2>HELOC Cons</h2> <p>As with the other home loans discussed, a HELOC carries some costs.</p> <h3>1. Risk</h3> <p>Like both the above loans, your home is on the line.</p> <h3>2. Rate Uncertainty</h3> <p>Since HELOCs often have <a href="https://www.consumer.ftc.gov/articles/0227-home-equity-loans-and-credit-lines#lines">variable interest rates</a>, and rates are currently at historic lows, they will probably rise in the future. By law, how much the rates go up is capped &mdash; the lender must tell you the maximum potential rate when you take out the loan. The average HELOC rate at the moment is similar to home equity rates, or around a point above 30-year-mortgage rates.</p> <h3>3. Balloon Payments</h3> <p>Many HELOCs start out requiring only interest payments, then expect the borrower to pay the whole principal at the end. If you can't, Goldman said, you'll probably end up refinancing the debt into a much longer, more expensive loan.</p> <h3>4. Temptation</h3> <p>As with credit cards, having a line of credit to draw on can encourage overspending. &quot;It's one thing to be on a diet when the refrigerator is empty. It's another thing to be on a diet when the freezer is full of ice cream,&quot; Goldman said. &quot;You'll have this money available to you, so it will require a great deal of discipline to manage it.&quot;</p> <h3>5. Qualifying</h3> <p>You need good credit to qualify, especially for the best rates.</p> <h3>6. Fees</h3> <p>You may or may not have to pay closing costs, and may be charged ongoing fees such as annual maintenance fees and transaction fees.</p> <h2>What's the Total Cost of a HELOC?</h2> <p>Rough estimate: $9,500. It's more difficult to predict the lifetime cost of a HELOC if the rate is adjustable and the amount you owe on it varies, but this <a href="http://www.calcxml.com/calculators/adjustable-rate-mortgage-calculator">adjustable mortgage calculator</a> figures that with steady, modest interest increases, a 10-year, $50,000 HELOC could cost $14,000 in interest. Fees vary, but if your bank charges a $50 annual fee, that adds $500 to the cost. Subtract an estimated $5,000 in tax savings.</p> <h2>Borrowing From Your 401K</h2> <p>If you have a 401K retirement account through your employer, you might have the option of &quot;borrowing&quot; from its balance. This is not a true loan, since the money in your 401K already belongs to you. In reality, what you're doing is getting an exemption from early withdrawal penalties and taxation, as long as you promise to put the money back and pay yourself an interest rate &mdash; generally one to two percentage points above the prime rate.</p> <p>Despite all those articles out there warning you to avoid borrowing from your 401K, Goldman says this can be a good option if conditions are right.</p> <p>&quot;If I had my choice, I would definitely borrow from a 401K,&quot; he said. Although neither borrowing against your home or borrowing against your retirement are without risk, at least if you fail to pay back your 401K loan, you're not out on the street.</p> <h2>401K Loan Pros</h2> <p>This type of loan may be the easiest of all to get &mdash; it's your money, after all!</p> <h3>1. Qualifying</h3> <p>You don't need good credit to qualify for a good rate, making this an attractive option for folks who wouldn't qualify for a regular loan.</p> <h3>2. Risk</h3> <p>If you fail to pay it back, it won't affect your credit score or send collection agents after you. You also don't risk having your home repossessed.</p> <h3>3. No Bank</h3> <p>You pay the interest to yourself, which is sort of like not paying interest at all.</p> <h2>401K Loan Cons</h2> <p>There are not too many downsides to borrowing from your 401K &mdash; but there's a big one you should think very carefully about.</p> <h3>1. Risk to Your Retirement Savings</h3> <p>Failure to pay back this loan could cause great harm to your retirement account. For instance, if your employment ends for any reason, the loan becomes due immediately. If you can't pay it, it's converted to a distribution, which means that you pay taxes and (if you are under age 59 &frac12;, a 10% penalty). So you're basically stuck at your job while you have a 401K loan out; you might end up turning down a new job offer if you don't have the cash to pay the loan. Worse, if you get fired and can't pay it, you could be out of a lot of money in addition to having no job.</p> <h3>2. Double Taxation</h3> <p>The disadvantage that people often don't consider with 401K loans is that while you filled your account with pretax dollars, you repay the loan with post-tax dollars &mdash; but you'll have to pay tax again on the money when you eventually withdraw it in retirement. How much you can get: While home loans let you borrow a percentage of your home equity, 401K loans are capped at $50,000 or half your balance, whichever is less.</p> <h2>What's the Total Cost of Borrowing From Your 401K?</h2> <p>It would vary greatly depending on how close you are to retirement and how well the market does during your loan. Using <a href="http://www.calcxml.com/calculators/impact-of-borrowing-from-my-retirement-plan">this calculator</a>, I came up with an estimated cost of $25,000 in lost investment and tax benefits to borrow $50,000 for five years. That assumes your retirement account would have $10,246 less in it at the time of retirement, and that you lost out on $15,000 worth of tax benefits.</p> <h2>Bottom Line</h2> <p>By these calculations, home equity loans tend to be less costly than mortgage refis or 401K loans. You should run the numbers using your own circumstances before making that determination for yourself.</p> <p>Cost is not the only thing to consider when deciding how to borrow. There's also the degree of risk involved, and the amount of time you have to pay the money back. Again, personal circumstances will dictate your choice: If you only need the money for a short time, for instance, until your stock options vest next year, a 401K loan might be the best choice. If you can't afford to pay the loan off in the near-term, the refinance gives you the most time.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="http://www.wisebread.com/3-sources-of-fast-cash-besides-your-401k">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-10"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-is-the-difference-between-a-loan-and-a-line-of-credit">This Is the Difference Between a Loan and a Line of Credit</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-pay-off-high-interest-credit-card-debt">5 Ways to Pay Off High Interest Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-surprising-ways-bad-credit-can-hurt-you">15 Surprising Ways Bad Credit Can Hurt You</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-equity-in-your-home">How to Build Equity in Your Home</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-liabilities-that-will-ruin-your-net-worth">7 Liabilities That Will Ruin Your Net Worth</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance 401k borrowing HELOC home equity line of credit interest loans mortgages refinance second mortgage Wed, 02 Nov 2016 10:00:10 +0000 Carrie Kirby 1825229 at http://www.wisebread.com