How to Share a Credit Card with Your Spouse
[It was only recently, after a year and a half of marriage, that my husband and I got our first shared credit card. We’re still working out the kinks, and considering adding my husband as an authorized user to some of my frequently-used rewards cards as well. So I was over the moon when Joshua […] The post How to Share a Credit Card with Your Spouse appeared first on Poorer Than You.
[It was only recently, after a year and a half of marriage, that my husband and I got our first shared credit card. We’re still working out the kinks, and considering adding my husband as an authorized user to some of my frequently-used rewards cards as well. So I was over the moon when Joshua Heckathorn of Creditnet.com reached out and offered to write a guest post on the very subject. Take it away, Josh!] You probably share your home, bed, and maybe even your toothbrush from time to time with your spouse. But what about your credit cards? If you haven’t quite taken your financial relationship to this level yet, but feel like you’re finally ready to take the leap, follow these tips to make sure you do it right and avoid the most common mistakes. <img fetchpriority="high" decoding="async" class="aligncenter wp-image-1990" src="https://poorerthanyou.com/wp-content/uploads/2016/08/Share-a-Credit-Card-Spouse.jpg" alt="How to Share a Credit Card With Your Spouse" width="467" height="700" srcset="https://poorerthanyou.com/wp-content/uploads/2016/08/Share-a-Credit-Card-Spouse.jpg 735w, https://poorerthanyou.com/wp-content/uploads/2016/08/Share-a-Credit-Card-Spouse-200x300.jpg 200w, https://poorerthanyou.com/wp-content/uploads/2016/08/Share-a-Credit-Card-Spouse-683x1024.jpg 683w" sizes="(max-width: 467px) 100vw, 467px" /> Add Your Spouse as an Authorized User The easiest way to share your credit card with a new spouse is to call your credit card issuer and simply add your significant other as an authorized user. Your spouse will then receive a new credit card in his or her name, although you will both share access to the same account and the same credit limit. Before making the call to your credit issuer, it’s always wise to sit down and have a conversation with your spouse about what types of monthly expenses will be charged to the card and how much of the available credit limit you plan to use each month. In order to maximize each of your FICO credit scores, you’ll want to ideally keep your credit utilization ratio under 10 percent, so take the time to talk through the numbers before you both begin using the card. Don’t be afraid to communicate openly about spending habits and the importance of sticking to your outlined budget. Trusting each other’s spending habits is vital to the process, and if the trust just isn’t there yet then maybe you still need more time before taking the next step. Set Up Mobile Access and Text Alerts The biggest red flag to watch out for is an unexpected charge that doesn’t fall in line with the budget you previously discussed. However, the great thing about credit cards is it’s so convenient to track all spending on your account. Make sure you set up mobile access from your phones so you can check charges 24/7, and you may even be able to set up text alerts for any charges above a certain amount. If so, do it. This will allow you both to stay on top of your spending and immediately discuss anything that doesn’t seem to fall in line with your agreed upon budget. Review Accounts Together on a Monthly Basis Credit cards also make it extremely easy to review your spending on a monthly basis. So set aside 15 minutes each month to log on to your online account together, review charges, compare to your budget, and talk through how you did. Did you stick to your plan and stay within your budget? Awesome. Go out and celebrate by doing something inexpensive that you both love. Did you miss the mark for this month? Don’t be argumentative or point fingers at who made what mistake. Instead, make a new plan of action together and do a better job of tracking all charges during the following month. Understand that it can take some time to sync spending habits in a marriage, so don’t expect your spouse to change overnight. Communication is Key The biggest mistake couples make is failing to have a detailed discussion up front regarding monthly expenses and what types of things will be charged to the credit card. It seems simple enough, but many married couples just ignore this step, which often results in some fairly unpleasant conversations down the road. So do yourselves a favor and talk through your budget, set expectations, and track your monthly expenditures together. If you do so, sharing a credit card can be an excellent way to not only improve both of your credit scores but also enjoy earning some great credit card rewards along the way. Joshua Heckathorn runs Creditnet.com, a free resource to help consumers learn more about credit and compare credit cards online. He is a credit expert and has been featured on CNNMoney, FOX Business, Yahoo Finance, The Street, and many other national publications during the past ten years. Joshua resides in Seattle and holds an MBA and B.S. in finance. The post How to Share a Credit Card with Your Spouse appeared first on Poorer Than You.
Check Your Credit Score and Credit Report Today, for Free!
Updated as of April 2016 April is one of the months that I have designated to check my credit report. Since you’re allowed (by law) a free credit report annually from each of the 3 credit reporting agencies, that gives you an opportunity to check one report every four months. Here’s the schedule I recommend: […] The post Check Your Credit Score and Credit Report Today, for Free! appeared first on Poorer Than You.
Updated as of April 2016 April is one of the months that I have designated to check my credit report. Since you’re allowed (by law) a free credit report annually from each of the 3 credit reporting agencies, that gives you an opportunity to check one report every four months. Here’s the schedule I recommend: April (because everyone’s thinking about money anyways because of the tax deadline) August (four months after April) December (another four months later, and also the end of the year, another convenient time) So consider this your reminder for April to pull your credit report from one of the three agencies this month! You’ll need to assign one credit reporting agency to these months, to make it work, since you’re only allowed to pull each report once a year. So do something like this: April — Experian August — TransUnion December — Equifax Remember, despite what TV commercials starring singing characters might tell you, there’s only one authorized source for getting your federally-mandated free annual credit reports: AnnualCreditReport.com. You can verify this fact at the Federal Trade Commission’s website. Getting Your Credit Report, 100% Free Information You’ll Need to Have Handy When pulling one of your 3 credit reports from AnnualCreditReport.com, you’ll be asked a short series of questions to prove your identity (so that, in theory, no one else can pull your reports). You’ll need to know (or have handy to type in): Your full name Your Social Security Number Your current address Any addresses you’ve lived at in the last two years Once you hand over this info, you’ll be given the opportunity to request your report from any of the 3 credit rating agencies: Experian TransUnion Equifax If this is your first time pulling your report, it doesn’t really matter which one you pull. For simplicity’s sake, I recommend pulling Experian, as it always seems to be at the top of the list, so it will be easier to remember that it’s the one you pulled if you forget. Now’s the time to establish your April/August/December calendar for pulling each of these. Once you select a credit reporting agency to pull from, you will be asked a series of multiple-choice questions about your own credit history (or other things that might appear on your report, such as previous addresses and phone numbers, etc. etc.) to further prove your identity. Again, this is information you should already know or keep handy. You may also be prompted to buy some “up-sell” products, like your credit score. Ignore everything they offer here — even if you do want to buy your credit score, they’re not likely to offer you the best of their best deals at this point. Do your research on the cheapest ways to get the score you want (see below) first. Then, you should get access to your report! You should print a copy of both the receipt page (which you’ll get even though you didn’t pay anything) and your credit report itself. If you’re using Google Chrome or have a PDF printer installed (highly recommended!), you can print to PDF and save part of a tree – as long as your hard drive is secure and you do regular secure backups, of course. This is sensitive information that an identity thief would love to get their hands on! What am I Looking for When I Look at my Credit Report? Two things! #1 – Errors It’s a pain in the behind, but read your entire report and look for anything that’s inaccurate. You can dispute inaccuracies with the credit reporting agency to get them removed. Inaccuracies can hurt your credit score, prevent you from getting a loan, job, or insurance down the line, or just plain make it hard to get your report again in the future (thanks to those multiple-choice questions!). If you do find any errors, there should be instructions within the report itself (or back on your receipt or confirmation page) on how to dispute them. If not, do a quick Google search for “disputing errors [name of credit reporting agency that you picked].” Even if there aren’t any errors, there could still be bad stuff… #2 – Areas for Improvement While you’re reading your credit report, look out for anything you could be doing to improve your report. What can you do, exactly? Well, if you familiarize yourself with the 5 components of your credit score, you can identify ways to influence those components. Those 5 components are (in order from most influential on your score, to least): On-time payment history Debt-to-credit ratio Length of credit history Variety of credit used Recent “hard” credit inquiries Keep these things in mind while you look over the report. Just keep in mind that in most cases, there’s nothing you can do to “fix” what’s already on your report — you can only strive to do better in the future. For most people, most of the time, pulling your credit reports one at a time, three times a year, to check them for reports and areas to improve, is all you really need. But if you’re curious about your credit score, or if you’re going to be shopping for a big loan (like a mortgage) in the near future, you may decide that you want access to that score. How I Get My Credit Score for Free Before we get into how I get my credit score without forking over any cash, it’s important to establish that there are many different credit scores out there. You may actually have as many as 100 different credit scores floating out there for you. Scary thought, huh? Most people divide credit scores into two types: FICO – credit scores based on one your three reports using the Fair Isaac Corporation’s algorithm (aka the five criteria for a good score I outlined above) FAKO (pronounced “Fake-O”) — anything else A FICO score is what a lender, employer, rental authority, or insurance agent is most likely to look at when they pull your credit score, so ideally that’s the credit score you want if you’re pulling your score to find out exactly what such a person will see. Credit Card Perks A fairly new development over the last few years that makes me pretty happy: several credit card companies are giving their customers a free peek at one of their FICO scores. My American Express card gives me a free FICO score, as does my Pentagon Federal Credit Union account. I simply log into my existing online account and click one button, and get my true FICO score, for free! The catches: for one thing, you need to have or get a credit card with a company that provides this as a credit card perk. If you already have any credit cards, log into your online account(s) and poke around to see if there are any “Get your free FICO score!” links in your account. If none of your credit cards offer this, you’ll need to use one of the alternatives below to get your free score. The other catch is that this score may not update as often as you like. It looks like at least one of my free FICO scores via credit card only updates every 3 months. This is fine for just satisfying my normal curiosity, but if I were to be looking for the most up-to-date info to get a new loan in a few weeks, I’d want something more recent. Mint I already use Mint.com to track my transactions across all of my accounts, so it’s really convenient to have a free one-click credit score in there, too! Mint is run by the company Intuit, who I already trust with my financial information (they’re the folks who run TurboTax). The only problems with the Mint credit score are: #1) It’s a FAKO score, not a FICO score (this one based on your Equifax credit report), and #2) It only updates every few months. Still, it provides some insight into where the score is coming from (and what’s on your Equifax report), so it can be a good way to keep an eye on your Equifax data throughout the year. WalletHub It’s a FAKO score (your TransUnion VantageScore), but you can pull both the score and your TransUnion report daily – for free! And it’s a “soft pull” on your credit, so you’re not taking a “hard” hit to your score daily by checking (very important!). Signing up for WalletHub is quick and easy: very similar to getting your free credit reports from AnnualCreditReport.com, you’ll just need to put in some information and answer a security quiz to verify your identity. Credit Karma You get FAKO scores (VantageScore 3.0 scores from TransUnion and Equifax), but it’s free and you can request your scores from Credit Karma as often as daily without putting a “hard” inquiry on your credit report. You also get two more FAKO scores from TransUnion: your Auto Insurance Score and your Home Insurance Score, as well as some tips for improving your score and some savings offers. How accurate are these scores to your real TransUnion and Equifax FICO scores? Hard to say, unless you also pay for your FICO scores to compare. But, the real question is: does it really matter for your purposes? If the only reason you want to see your credit score is to satisfy curiosity, and to keep an eye on the changes of it over time, then the VantageScore will work just fine for that. Keep any eye on your score for any drastic changes, checking it at least as often as you pull your free reports (but monthly would be even better). Credit Sesame Another FAKO score, Credit Sesame is based on your Experian report. It’s also free with no credit card required to sign up, and you’ll get free advice on saving money and improving your credit, too. The catch? You can only get your score once a month- but if you’re just looking to see how your credit score is doing over time, do you really need it more often than that? No, ya don’t. This is a good addition to Credit Karma, since it diversifies your “score base” by giving you access to an Experian score vs. Credit Karma’s TransUnion-and-Equifax-based scores. Get a Loan This may seem counter-intuitive, but it can work! If you’re reasonably certain of your good credit score (by checking it on one of the other sources in this post, and checking your credit reports themselves), you can get your true FICO score for free while getting a loan. How? You just ask! When I bought my Camry in 2012, the dealership helped me apply for a loan at several different financial institutions. When the offers came back a few days later, the finance guy at the dealership showed me the credit reports and scores that had come back when the banks evaluated me. Now, I could have just jotted down those numbers quickly, but I did one better: I asked the dealership finance guy if I could have copies of all those papers! (It was definitely one of those it never hurts to ask moments.) He walked me back to their copier on the spot, giving me hard copies of my FICO and other credit scores from multiple agencies. Score! This will also work when applying for a Peer-to-Peer loan from either Lending Club or Prosper; Jonathan over at My Money Blog has a guide on how to interpret your score based on the information you get while applying for a loan at either of these places. The catch here is that your credit score will be a little dinged, since you’re doing what’s called a “hard inquiry” rather than the “soft inquiry” of checking you credit score just to check it. Oh, and you’re applying for a friggin loan, which you should never do unless you have a darn good reason, like needing to replace your dying car with an affordable, reliable, used one. FICO Score Estimator A few quick questions about your credit history, and myFICO’s FICO Score Estimator will spit out a fairly accurate guestimate range of where your credit score is. The catch being that it is, of course, only an estimate. Alternately, Just Bite the Bullet If you really, truly, actually need your FICO scores because you’re taking out a big loan soon (such as a mortgage), than the best thing to do is to just pay for your FICO scores. In the grand scheme of things, the $15 or so you spend now will reap much larger benefits down the road. You can use your FICO score to empower your search for the best loan with the lowest rate — but only if you know it! A FAKO score won’t cut it in this particular case, so it’s worth spending the cash when you are actually about to start shopping for a loan. Remember to shop around for your FICO scores, as well! There’s no need to pay more than you have to, and considering I’ve seen ranges between $14.95 and $89.95 to get your three FICO scores, it really is worth it to do a little research. Check the websites of all three credit rating agencies, as well as myFICO, to see what they’re offering. Don’t forget to Google for coupon codes to each one! Do you check your credit reports and credit scores as often as you should? Make a pledge to April/August/December in the comments! The post Check Your Credit Score and Credit Report Today, for Free! appeared first on Poorer Than You.
Jim Wang writes about personal finance and other money issues at his personal finance blog Wallet Hacks. Many of us have made money mistakes. Additionally, some of us have had financial disasters to contend with. In any case, once the debts start to pile up, and payments are missed, the damage to your credit can […] The post Rebuilding Your Credit appeared first on Poorer Than You.
Jim Wang writes about personal finance and other money issues at his personal finance blog Wallet Hacks. Many of us have made money mistakes. Additionally, some of us have had financial disasters to contend with. In any case, once the debts start to pile up, and payments are missed, the damage to your credit can be substantial. If you have tried to get a credit loan recently, and you have poor credit, you probably know that your credit report can result in being turned down for a loan. Even if you aren’t denied, you will have to pay a higher interest rate in order to offset the risk you represent to the lender. Even applying for insurance with poor credit can mean higher premiums. If you want to be considered for the best terms when it comes to loans, and if you want the best insurance rates, you need to consider repairing your credit. If you are serious about rebuilding your financial reputation, here are some steps you can take to make improved credit a reality: 1. Modify Your Habits If you have made money mistakes, you need to acknowledge them, and then work to change your financial habits. If your poor credit is the result of an unforeseen disaster, you need to change your money habits so that you are building up a good emergency fund to serve as a safety net. You might also need to change your mindset to help you get out of your current funk. Begin practicing the basics of personal finance: spending less than you earn; setting aside money for emergencies and for the future; and paying down debt. 2. Start Small Your next move is to try to obtain some small amount of credit. In some cases, you might be able to get approval for a credit card with a small credit limit of $250 or $500. In other cases, you might have no choice but to get a secured credit card. You have to be careful to ensure that your secured credit card is a true credit card, and that the issuer reports your regular payments to the credit bureaus. Be wary of fees, high interest rates and other costs. You should try to establish your credit so that you can move on from secured cards as soon as possible. 3. Show Responsibility In order to rebuild your credit, you need to show that you can handle your obligations. If you get a credit card, use it once or twice a month to make small purchases. Then, pay off the balance. Make all of your payments, from utilities to rent on time and in full. If you can make regular payments, on time, this is the single most important factor in whether or not you have good credit. Paying down debt is also an important part of showing your high level of fiscal responsibility. If you still have debt, figure out a payment plan to reduce what you owe, and get back on track with your finances. As you pay down debt, and make on time payments, your credit will improve. These days, whether it’s fair or not, your ability to handle credit is considered one of the most important characteristics to have. If your credit is poor, you need to do everything in your power to improve it. The post Rebuilding Your Credit appeared first on Poorer Than You.
5 Situations Where You Should Leave Your Credit Card in Your Wallet
This week’s guest post comes from Fred, personal finance writer at Credit Card Finder. He helps people to compare credit cards online. There are smart ways to use your credit card: you can keep your wages earning interest in a savings account while you spend on your credit card and pay it off at the […] The post 5 Situations Where You Should Leave Your Credit Card in Your Wallet appeared first on Poorer Than You.
This week’s guest post comes from Fred, personal finance writer at Credit Card Finder. He helps people to compare credit cards online. There are smart ways to use your credit card: you can keep your wages earning interest in a savings account while you spend on your credit card and pay it off at the end of the month, you can even accumulate meaningful points or take advantage of cash-back offers. However, there are times when using on your credit card is going to cost you more than the purchase could ever be worth. Here are five situations where you should not use your credit card: 1. Don’t take your credit card for a night on the town When you have a big date (or just a big night out with friends) planned, it can be easy to burn through your cash as you pay for drinks, dinner, dessert, or entrance fees, drinks, drinks, and drinks. But what happens when your money runs out at the end of dinner or after the second round of drinks and the night is still young — plus you have to be able get home? It can be tempting to lay down your credit card and start a tab, but you are going to end up with much more than a headache and a woozy stomach in the morning. You’re going to have a credit card hangover too, and those can’t be placated with a few aspirin and a greasy breakfast. Instead, think about the interest you will be paying on all those rounds, and all the rounds you shouted your ‘new friends’ in the excitement of the evening; is a monster hangover really worth a credit card hangover? 2. Don’t use credit to pay bills If you have lost your job or are just having trouble making ends meet, a credit card is not the answer. A credit card may solve your problems in the short term, but it is really only making things worse for you down the track. If you don’t have enough money coming in to keep your household running, then you need to find another way. A way that isn’t going to add another bill to the list at the end of the month, and one which will not charge you interest, making it harder for you to ever pay off your credit card debt. Instead, look at where you can cut back on your costs — can you live with just one car, can you cook at home more than eating out, can you cancel gym memberships and walk more? Then you can contact your bank, the electricity and water companies, and anyone else you owe money to and explain the situation. Chances are you can negotiate more time to pay your bills and even a payment plan for the long term to make things more affordable, without accumulating bad debt. 3. Don’t bet on credit Online gambling sites make it easy — not to mention fun, at the time — to simply enter your credit card details and try your luck. However, you can lose a lot more than just chips when you gamble with your credit card. On top of losing an online game of poker or roulette, you are losing someone else’s money — the bank’s, and they are going to want to be repaid, with interest. 4. Don’t start a marriage on credit If you are swept up in the romance of a proposal, you may not think twice about putting the perfect engagement ring on your credit card. However, you should be thinking twice (and three times!) about starting a marriage based on debt — just how long is it going to take you to pay off that ring? How much interest is that ring going to have accumulated before you can pay it off? Not to mention the other debts a young couple has to worry about — student loans, a mortgage, car loan… Instead, find a way to keep your credit card away from the engagement ring. You don’t want to scrimp on the one you love, but consider borrowing the money from your parents or even better, find out whether there is a family engagement ring which was destined for your fiancée’s finger anyway. Otherwise, explain to your girl that you don’t think it makes sense to start your life together in bad debt, and buy a smaller ring. You can upgrade the ring when you can afford it — have the original diamond reset with a larger one, or put in a more expensive setting. 5. Don’t pay for your taxes on credit It seems like a good way to earn some credit card rewards points for a bill you have to pay anyway! But paying your tax bill on your credit card can cost you more up front, on top of the interest if you don’t pay it off right away. This is because the IRS is prohibited from paying fees to credit card companies to process their transactions. When you use your credit card to pay for anything, the person you are paying is being charged merchant fees from your credit card company to process that transaction. Most businesses will absorb those fees as part of the cost of doing business so you won’t even notice. However, the IRS is prohibited under the Taxpayer Relief Act of 1997 from paying those merchant fees to the credit card companies, so they charge those fees to you. Therefore, on a $4,000 tax bill, you would actually pay $4,099.60 to cover the service charges. Does paying an extra $100 on your bill equate to enough rewards on your credit card scheme? As well as the service charges you will have to pay, think about the interest that will accumulate on your tax bill if you don’t pay it off within the interest-free days. It’s bad enough paying tax, do you want to keep paying for it month after month in credit card payments? The post 5 Situations Where You Should Leave Your Credit Card in Your Wallet appeared first on Poorer Than You.
College Students: Get a Credit Card RIGHT NOW
I’m a big advocate for college students having at least one credit card. Which is funny, because I got myself into a decent amount of trouble and credit card debt in college. But I do strongly believe that responsible credit card use in college is possible… and even necessary! But new government legislation is going […] The post College Students: Get a Credit Card RIGHT NOW appeared first on Poorer Than You.
I’m a big advocate for college students having at least one credit card. Which is funny, because I got myself into a decent amount of trouble and credit card debt in college. But I do strongly believe that responsible credit card use in college is possible… and even necessary! But new government legislation is going to make getting a credit card and building a credit history very difficult for some college students. If you’re one of them, you’ll want to get a credit card now, before the new laws take effect! You Need to Build a Credit History I just graduated from college this year. I’m starting to build my life and get all of the “adult” things that go along with that. Including some really dull things like “renters insurance” to protect my belongings in my new apartment. But when I got my renters insurance a few weeks ago, it came with a letter stating: Thank you for trusting us as your insurance company. We are committed to your satisfaction and providing you with a competitive rate. Many factors are taken into account to rate insurance, including a credit based insurance score. We recently accessed data from the consumer reporting agency… to price your policy. In part, based on the information provided, you did not receive our lowest rate… [emphasis added] In plain English: my credit history wasn’t long enough, and my credit score not high enough, to get the lowest rate they offer on renters insurance. And I’m no “credit spring chicken!” I’ve had student loans on my report for five years, and I have two credit cards, each with more than two years of history. Someone with no credit history at all would probably pay far more than I do for renters insurance. Why? Because no credit history is viewed as just as bad as a bad credit history! Unproven customers are scary to insurance agents and loan officers. Just like a 16-year-old with no driving record is charged a lot for car insurance, a new borrower with no credit history is going to be charged a lot for a loan. Need more examples? How about my friend who just bought a car, but didn’t get a low car loan rate because he’s only had one credit card for one year? Or how about the fact that in addition to loan officers and insurance companies, your credit history and score might be checked by landlords and employers. Yes, they two can decide whether to rent to you or hire you based on your credit history. Ouch. You Need to Act Now The CARD Act, passed by Congress and signed by President Obama in May of this year, will severely limit your ability to get a credit card if you’re under 21. The Congressional Research Service summarizes the relevant portion of the new law as this: Section 301 – Amends TILA to prohibit extensions of credit to consumers under age 21, unless the consumer has submitted a written application that meets specified requirements. Requires any such application to be signed by a cosigner, including the parent, legal guardian, spouse, or any other individual who has attained the age of 21 having a means to repay debts incurred by the consumer in connection with the account. In other words, you’ll need a parent to co-sign your credit card and take responsibility for it if you fail to pay. While this is a good idea in theory, it leaves out in the cold many college students who don’t have a good relationship with their parents (or anyone else over 21). This amendment is set to take effect in February of 2010, but (and this is a big but), a few members of Congress have requested that the new laws take effect December 1st, 2009! That’s good news for the many other consumer protections the CARD Act offers, but bad news for any college students who don’t yet have a credit card, and would have trouble convincing someone to co-sign for them. If that’s you, your time is limited — build credit now! Other ways to build credit: A credit card may not be right for you, or you may be reading this article too late to act before the CARD Act takes effect. Either way, MSN Money’s Liz Pulliam Weston has a great list of ways to build credit without credit cards. Any application for credit should be taken seriously — you don’t want to start doing these things willy-nilly. But a charge card or a small federal student loan may be worth it for the benefit to your credit history. The post College Students: Get a Credit Card RIGHT NOW appeared first on Poorer Than You.
How to Use Credit Cards Properly and Be a Deadbeat
This is a guest post from Mr Credit Card. He recently had me on his radio show. He is going to write about not to take advantage of credit cards and how not to get abused by them. You could apply for a credit card at this site. I just did a radio interview with […] The post How to Use Credit Cards Properly and Be a Deadbeat appeared first on Poorer Than You.
This is a guest post from Mr Credit Card. He recently had me on his radio show. He is going to write about not to take advantage of credit cards and how not to get abused by them. You could apply for a credit card at this site. I just did a radio interview with Stephanie and one of the topics we touched upon was how she got into credit card debt and how she managed to get out it. Today I would like to highlight how credit cards can be taken advantage of and how you can actually get sucked into it. The real key to making sure you never carry a balance in your credit card is actually to have a solid budget. Stephanie has talked a lot about it on her blog. In our radio show, she revealed that as part of her assignment in her personal finance class in college, she had to actually make a 1 year budget, and she has clearly spelled them out here. There are 2 things that I think are very important when you are making a budget for yourself. They are: budget for contingencies – things like a car breakdown, an unexpected out-of-pocket medical bills can wreck your budget budget for things you have a weakness for – I know that there are probably occasions when you should refrain from buying frivolous stuff. But each one of us has a hobby (some might call it weakness) like buying the latest sunglasses, collecting comics. There must be room in your budget for these stuff otherwise you might just go insane Understanding the purpose of your credit card – Obviously, credit cards offer consumers convenience of not carrying large amounts of cash. Furthermore, if you ever lose your card, just one phone call will stop all future transactions. In there is a merchant dispute, your credit card company will normally handle it for you. But different types of cards serve different purposes. Build a credit history – Credit cards are one of the simplest ways to build a credit history. And if you are in college, credit cards for college student is relatively easy and simple. However, if you want to build a credit history, then build a good one. That means always paying your bills on time and paying in full (PIF) every month. Over time, these good payment habits will result in a good credit score. Obviously, having a credit card is not the only way to build a credit history. If you have a mortgage, or a car payment, or a loan from the bank, your payments will be reported to the credit bureaus and you will build a credit history. Even your gym memberships can be reported to the bureaus. Late payments even in something as mundane as that can hurt you. Students or most recent grads are not likely to have a mortgage or a car loan so credit cards are the easiest way to start a credit history for yourself. The advantage of using a credit card to build a history is that if you pay in full, you are paying no interest. Contrast that to say an auto loan where you are actually charged an interest. Coupon Stacking, Savings and Rebates – Stephanie recently graduated and made a budget for living on her own herself. There are certain bills that you have to pay regardless and it makes sense to save as much on these. Groceries – One of the items that you always have to spend is on food. But it turns out that there are many ways to save on groceries and food. There most obvious way is to make use of coupons. You can get coupons from the newspapers, from online sites like this one. There are also tons of blogs like this and this that highlight the latest coupon deals. But aside from coupons, there are also manufacturer’s coupons. If you use your manufacturer’s coupon on top of your store coupons, the savings can be huge. You can even get some stuff for free. I recently went to the supermarket for a gallon of milk and because the value of the store coupon was more than the organic milk I bought, I actually got a rebate! (for buying milk). But if you are really savvy, you can add another stack on top of the coupons by using credit cards with cash back rewards. These cards typically give 1% rebates for every dollar that you spend on the card. But the best cash back credit cards will give you anywhere from 2% to 5% on things like groceries, gasoline, utilities etc. When you add up these savings on top of the store coupons and manufacturer’s coupon, the savings really add up. Gasoline – Depending on where you live, you may actually not have to drive. And living in the city and not having to drive can save you a lot of money (though that may be offset by higher rent!). You save on gasoline, insurance, parking, car payments and the occasional repairs. But if you do drive, you can save money by charging your gasoline to a gasoline credit card (ie one that pays rebates – more than 1% – on gas). That will also help you save lots of money. The other things that you can really save on is making sure you are using the right type of gasoline for your car. Most of you will know that there is regular, premium and super premium gas. If you can get a car that runs ok on regular gas, that will save you a lot of money in the long run. Many car manufacturers manual only “recommend” the type of gas that you can run on. Ask the dealer because though some car manuals recommend “premium” gas, they will do ok on “regular gas”. Utilities – We all have to pay our utilities. If you read other blogs, you will find advice on how to save money on your electric bills (like running your washer at off peak hours, insulating your windows better etc). But if you are a recent grad, chances are that you will be renting. Since, the bills are the bills, you might as well try to save some money on it. The most obvious way to save is to charge it to your credit card. Most utilities will allow you to do that. What I do is to charge it to my cash back card and at least I get a 1% rebate on them. What I also do is to set up an auto pay so that my bills are automatically paid. Using your company’s corporate card – If you are fortunate enough (in today’s tough economic environment) to work for a larger company, you may be given your company’s corporate card. This could come in very handy especially if you have to entertain clients a lot or even travel a lot. In my first job (which was sales related), I was given a corporate American Express Business Gold Card by my company. I flew at least 5 or 6 times a year and entertained clients a lot for dinner etc. I was fortunate in that the company paid for the bills on the corporate card (some companies require employees to pay!) and they allowed me to keep the reward points I earned on the card for myself. Hence, I racked up lots of reward points which I later redeemed for numerous airline tickets which me and my wife (fiancée back then) used for our vacation! (Very sweet.) Even if you company does not issue you one and you can get reimbursements, then you should definitely choose a card that can help you with either frequent flier miles or at least earn some cash rebates. Credit card companies fighting back If you follow the above advice (i.e. pay your bills on time, pay your bills in full, and maximize your reward earnings), credit card companies consider you a deadbeat. Which means you are the least profitable customer. You shouldn’t feel bad about it simply because they still make money off merchants when you use your card. But their most profitable customers are actually ones that pay late (and are charged a late fee), carry a balance (they make money from the interest payments) and sub-prime card holders (whom they charge lots of excess fees). Scaled Back Cash Back Rewards – One of the ways that credit card companies have been scaling back is by reducing the rewards especially in the cash rebate area. For just a couple of years ago, credit cards like the Citi Dividend Card and Chase Freedom offered 5% rebates on gas, groceries and drugstore purchases. They slowly reduced them to 3%, then 2% and now these cards are no longer offered. Questionable Practices for those who carry a balance – If you had one of those 5% cash rebate cards and you no longer have those perks, you lose out a little, but all is not lost. I have (and I guess Stephanie) always stressed that if you could avoid carrying a balance, that would be the best thing. And I think this has been validated by what credit card companies have been doing to those who carry a balance. The folks that have only made the bare minimum payments are feeling the brunt of this. Here are some examples of what is going on now. Credit card companies are increasing interest rates to high 20+% – this has the effect (in many cases) of doubling the interest payments for many folks. If you do not have a buffer in your budget, you could be in deep trouble. Cutting credit lines – here’s a typical story I get in my emails all the time. Person has $10,000 credit line but carries a $5,000 balance. They do not pay in full but instead pay the minimum or more than the minimum. Credit card company slashed credit line to just above $5,000. In some cases, they slash it to below the balance that the card holder is carrying and ding them with an over-the-limit fee. Increasing payments on balance transfer minimums – In her quest to reduce her debt, Stephanie got a credit card that offered 0% apr for 12 month on her balance transfers. Back then, she was paying the 2% minimum. Some credit card companies have recently raised their minimum payments from 2% to 5%. One again, if you have no room in your budget for emergencies like this and you are cutting it very close, then you will face a doubling of your credit card interests and bills. I get a lot of complaints from readers about Chase and Bank of America doing that. Now, doing a credit card balance transfer these days are less appealing than when Stephanie got hers because they now all come with balance transfer fees whereas back 2 years ago, there was no balance transfer fees.In fact, back a couple of years ago, the deadbeats abused the hell on these 0% deals by either 1. refinancing their home equity line of credit (by say $100,000) 2. Taking out a huge 0% balance transfer deal and putting the money in a savings account like an ING account and pocketing the difference in interest rates. Worst of all, cardholders just stopped using the card after the introductory period. Now, these were the real deadbeats. So the credit card issuers started charging a balance transfer fee, then removed the caps from the BT fees and finally reduced the introductory period from 12 months to 6 month. To the final nail to the coffin was to increase the minimum payment from 2% to 5%. Budgeting, being a deadbeat and not being taken advantage of – I guess the point that I’m trying to get across is that you should always be a “deadbeat” to credit card issuers. If you are, then you are either earning cash rebates (saving money), earning reward points (also saving money), getting one months credit if you pay in full. But if you do not have room in your budget for emergencies, you carry a balance and you pay the bare minimum payments, then you are susceptible to credit card companies yanking your credit lines from under you, increasing your interest rates or doubling your minimum payment. They key to making sure you never carry a balance is to have a detailed personal budget. Be a deadbeat to the credit card companies and there’s no way they can get you into trouble. The post How to Use Credit Cards Properly and Be a Deadbeat appeared first on Poorer Than You.
You have the right to check your credit report once each year, for free. And actually, there are three major credit reporting agencies, so you get three credit reports for free each year. But here’s a great idea: Spread your credit reports out throughout the year, so that you get better coverage, and a better […] The post It’s Time! Check Your Credit Report appeared first on Poorer Than You.
You have the right to check your credit report once each year, for free. And actually, there are three major credit reporting agencies, so you get three credit reports for free each year. But here’s a great idea: Spread your credit reports out throughout the year, so that you get better coverage, and a better understanding of your total financial picture. Here’s how I do it: I get one of my credit reports in January, another in May, and the third in September. Then the next January, I repeat! I happen to do them in this order: TransUnion, Experian, Equifax, but any order would do. It’s a good thing to monitor your credit at least once a year, but a lot can happen over the course of a year. Say I checked my credit reports all at once, and the next week, my identity is stolen by someone who uses my social security number to open a ton of accounts. I might not know about it until a full year later, when I checked my reports again. But if I pull one report every four months, I have a greater chance of catching an error (or a thief) in good time. So, if you don’t pull your credit reports on a rotating schedule, consider starting. If you already do, this is your reminder to pull your next credit report now! (Assuming you pulled the last one in May, like I did.) And remember, you should always get your free credit reports from http://www.annualcreditreport.com, which is the site set up by the Federal Trade Commission. Other sites claiming to give you your “free” credit report might have singing pirates, but they’ll also try to charge you a monthly fee. The post It’s Time! Check Your Credit Report appeared first on Poorer Than You.
Erasing Negative Credit History: 5 Strategies You May Not Have Heard About
Today’s article is a guest post graciously written for the site by Kelly Oakin. About the Author: Kelly Oakin is on a mission to help others get their credit back on track after a setback. She is a staff writer for FreeCreditTrio.com, a resource that provides your free credit score from the top 3 credit […] The post Erasing Negative Credit History: 5 Strategies You May Not Have Heard About appeared first on Poorer Than You.
Today’s article is a guest post graciously written for the site by Kelly Oakin. About the Author: Kelly Oakin is on a mission to help others get their credit back on track after a setback. She is a staff writer for FreeCreditTrio.com, a resource that provides your free credit score from the top 3 credit bureaus. <img decoding="async" class="size-medium wp-image-653 alignnone" title="Credit Risk" src="https://poorerthanyou.com/wp-content/uploads/2009/07/credit-trap-300x225.jpg" alt="Credit Risk" width="300" height="225" srcset="https://poorerthanyou.com/wp-content/uploads/2009/07/credit-trap-300x225.jpg 300w, https://poorerthanyou.com/wp-content/uploads/2009/07/credit-trap.jpg 400w" sizes="(max-width: 300px) 100vw, 300px" /> When I first moved out on my own, I figured that managing my finances would be pretty simple. After all, I didn’t have too many bills and my income seemed to cover everything — on paper. Though I didn’t give my parents the pleasure of telling them they were right until almost a decade later, they were right… It is tough to stay on budget with the income of an entry-level professional without getting into a financial mess with credit cards and loans and late fees. We go from having an open budget with no expenses to having rent, utilities, car payments, and other expenses that come with normal daily living. Then, there are extremely high college and university expenses that just keep rising. We inevitably make mistakes. In fact, the U.S. PIRG states that 25% of students had paid a late fee, 15% had paid fees for going over their limit, and 6% had their credit cards cancelled. These statistics aren’t shocking considering our age, but we have to learn something from our mistakes and actually fix them. If you’ve made a mistake, I have five strategies for cleaning up bad credit history that will make sure you aren’t punished for these innocent errors for seven years or more. Strategy #1: Proactive Repair It’s impossible not to notice your debt load mounting up. Therefore, as soon as you notice things get out of control, and you know you’re going to have issues, contact your financial institutions and see what they can do to help. Many of them will work with you to delay payments, lower interest rates, or wave fees to help you fix the issue. They may also agree to remove the negative mark on your credit when you follow through on arrangements to pay the amount still owed. This is even more of a possibility now that financial institutions are in trouble and are seeing a high number of borrowers default. Finally, make a smart financial plan that allows you to save as much money as possible. Strategy #2: Use Federal Law To Your Advantage According to federal law, you can fight any marks on your credit that cannot be verified, are false or inaccurate, or out of date. Therefore, so long as you monitor your credit report and credit scores right from the start, you’ll be able to fight troubling entries immediately before they become a serious issue. If you have difficulty getting this straightened out, seek out legal financial aid. Strategy #3: Battling Negative Credit Entries Involves Moving Past Them In many instances, you can’t eliminate a bad spot on your credit. But, what you can do is build your credit and prove that you’ve learned your lesson, fixed previous problems, and are willing and able to take responsibility. To do this, get a small loan or credit card (which may require a deposit) and use it wisely. With a credit card, for example, use it for your groceries or utilities and pay it off in full every month. This allows you to build credit easily without spending additional money. Having a major credit card in good standing also says a lot about your financial responsibility. Strategy #4: Use Free Resources To Help You Services such as the National Foundation for Credit Counseling are non-profit organizations that provide free credit counseling services to anyone who needs it. If you are having trouble working with a creditor on a false claim, or just need additional information to help you make the right choice, these nationwide organizations will put you in touch with someone who can provide you with the information you need. Strategy #5: Use Good Credit To Your Advantage If you have credit with companies who aren’t on your credit report such as department store cards or others, ask them to make a positive report for you. This helps to offset any negative marks that you can’t remove because it helps build your reliability and trustworthiness. Keep in mind, however, that these companies are not required to do so and will not make a false statement. The important thing is to ask and see. After all, the worst thing they can say is ‘no.’ In the end, the most important thing to remember when it comes to your credit is that it takes years to build it, and one mistake to ruin it. Educate yourself and don’t be afraid to seek help if you need it; you’ll benefit from your diligence for the rest of your life. The post Erasing Negative Credit History: 5 Strategies You May Not Have Heard About appeared first on Poorer Than You.
Parents Bamboozled by FreeCreditReport.com
Before I can tell you this story, a few things need to be mentioned. First of all, this is not an indictment of my parents in any way, or a mockery of them for being “stupid.” They were mislead by a clever advertising campaign, just as many other people were before them. Secondly, it is […] The post Parents Bamboozled by FreeCreditReport.com appeared first on Poorer Than You.
Before I can tell you this story, a few things need to be mentioned. First of all, this is not an indictment of my parents in any way, or a mockery of them for being “stupid.” They were mislead by a clever advertising campaign, just as many other people were before them. Secondly, it is impossible to talk about my parents in any coherent way without explaining my family situation: when I refer to my “parents,” I am talking about my mother and her partner of 14 years. Together they have raised me since I was nine years old. I call my mom’s partner my “stepmom,” because that is the word that comes nearest to describing our relationship. Saturday was my Graduation Day! As a treat for successfully completing my Bachelors, my parents took me out to eat, along with my older sister and my boyfriend. As usually happens when my sister and I are together, the conversation eventually turned toward personal finance. My mother chimed in to let us know that she and my stepmom had just pulled my stepmom’s credit report… via FreeCreditReport.com. Like many people, the web address “FreeCreditReport.com” had been drilled into my parents’ brains by a singing pirate/angry husband/subcompact car driver. Even I thought some of the commercials in the ad campaign were rather clever. But I’ve been getting my credit reports from AnnualCreditReport.com for over two years now, because I know that it’s only authorized source to get the three credit reports you’re guaranteed each year by the Federal Trade Commission. The problem is that my parents didn’t know that. How FreeCreditReport.com Gets Money Out of People The name is the extremely misleading part, but there’s one bit of their commercials that you should pay particular attention to: “Requires enrollment in Triple Advantage.” As you might suspect, Triple Advantage is the not-free part of FreeCreditReport.com. It’s a “credit monitoring service” which watches your credit reports from all three reporting agencies (Experian, Equifax, and TransUnion) and alerts you whenever there are changes. This service is actually run by one of those three agencies, Experian. When you sign up for FreeCreditReport.com, you get both your credit report and credit score from Experian, but you also sign up for Triple Advantage, which costs $14.95 per month. If you cancel your account with FreeCreditReport.com within a week your credit card will not be charged. This is how they can get away with calling it “Free.” But it also brings up an important point: you should not have to enter in credit card information to get your free credit report! The legitimately free credit report service, AnnualCreditReport.com, has other ways of verifying your identity, and does not ask for a credit card number. About the only advantages I can see for FreeCreditReport.com are: You get your Experian score, which you don’t get for free from AnnualCreditReport.com. But, you can get your TransUnion score for free from ad-supported CreditKarma. And with CreditKarma, you can get it for free as often as you like, whereas your free Experian score from FreeCreditReport.com is a one-time deal. If you actually want Triple Advantage, and you sign up knowing what you’re getting into, it’s not a bad deal. You could also get credit monitoring service from other companies, such as MyFICO, which I’ve used before and trust more than a company that engages in deceptive advertising. Cancelling FreeCreditReport.com If you’ve been tricked by the musical ad campaign as well, you’ll be happy to know that cancelling the service is fairly easy. And as I said before, if you cancel within a week of signing up, you shouldn’t be charged. Which is exactly what my stepmom did, the day after we talked. You have to call their Customer Care directly in order to cancel (1-888-829-6560). It’s actually extremely easy — I suspect they get a lot of cancellations! The first option in the “phone tree” was “Press 1 to cancel your service,” which connected us with a live operator, and the whole thing was over about a minute later. Spreading the Word About AnnualCreditReport.com One of the things my mom said during our conversation was that she’d never heard of AnnualCreditReport.com, or their ad campaign to counter FreeCreditReport.com and other sites claiming to be “free.” In other words, she’d never seen this commercial: Which is a shame, but let’s face it, the FTC isn’t going to spend as much money on an ad campaign as Experian does. So it’s up to those of us who know about AnnualCreditReport.com to spread the video around. So think about your parents, your relatives, and your friends: if they wanted to check their credit reports for free, would they know to use AnnualCreditReport.com, or would they too be bamboozled by a sleezy singing pirate? Spread the word! Send the FTC commercials about AnnualCreditReport.com around to your friends and family. And most importantly, if a commercial for FreeCreditReport.com comes on the television while you’re in the room, check with the people around you to see if they know the truth about the service. The post Parents Bamboozled by FreeCreditReport.com appeared first on Poorer Than You.
18-Year-Olds and Credit Cards: Discussion Continues
Earlier this week I brought up the proposal in the Senate-passed CARD Act (Credit Card Accountability, Responsibility and Disclosure Act) which would require adults under the age of 21 to get a cosigner in order to get a credit card (or prove significant income, whatever that means — don’t we have to do that anyway?). […] The post 18-Year-Olds and Credit Cards: Discussion Continues appeared first on Poorer Than You.
Earlier this week I brought up the proposal in the Senate-passed CARD Act (Credit Card Accountability, Responsibility and Disclosure Act) which would require adults under the age of 21 to get a cosigner in order to get a credit card (or prove significant income, whatever that means — don’t we have to do that anyway?). I’m not the only one who had an opinion on this particular feature of the new legislation. Here is a taste of what other people are saying about the proposal: Man Vs. Debt: 18 Year Olds Now Require Co-Signer To Obtain Credit Cards. Still Maintain Right To Catch Bullets With Their Face! Either you are a legal adult at 18 or you are not. If you are considered old enough to fight and die for this country, you should be considered old enough to not have to jump through a bunch of hoops to get a credit card. If you don’t think 18 is mature enough to obtain a credit card or even to consumer alcohol then we should be raising the legal adult age to 21, not placing a bunch of government restrictions, exemptions, and regulations. In addition, it appears card holders will need co-signer permission before increasing credit limit and making other changes. Mommy, Daddy, please let me get a credit card… please! Independent Beginnings: Attention Students: You are Gonna Need Permission to Open that Credit Card Traditionally, eighteen-year-old freshman college students have been immediately attacked by credit card offers as soon as they start school. Lacking education on how credit cards work, many of these students jump at the opportunity of opening one of these “magic” cards and end up falling further and further into debt. It will be interesting to see how this will change now that students under twenty-one have to get their parents to cosign with them (or another adult over twenty-one). Will this allow students more time to learn about how credit cards work before amassing huge amounts of debt on them? Or, will this have little effect whatsoever? I guess it would largely depend on the student’s parents’ views on credit card usage. No Debt Plan: Credit Card Act Passes Senate Then again it always makes me nervous when government gets involved with business affairs. Yes, the credit card industry has cost millions of Americans billions of dollars. The changes to the age limits makes me uncomfortable. I know that college students have been ignorant on credit card use, but what about the ones who are responsible? And why should the Bank of Mom and Dad have to foot the bill if the student is irresponsible? And what happened to building up a credit history as soon as possible? (Note: No Debt Plan’s article also has a nice explanation of the difference in the House version of the bill, which doesn’t have the same “under 21” restriction as the Senate version.) Bad Money Advice: Credit Cards and Our Nation of Children American laws are ambiguous about when adulthood starts. For many purposes, 18 is the magic number. At that at age you can vote, get married, join the armed forces, and, with the looming exception of credit cards, enter into binding contracts including a car loan or a mortgage… This inconsistency bothers me, but not as much as the worrying general trend of increasing the age at which we consider people to be grown-ups. And that is just part of an even larger trend, the growing reluctance to treat anybody as a grown-up. I highly encourage you to check out each of this articles, and pay special attention to the discussion going on in the comments for each. This is getting to be a hot topic, and I say “Good!” It’s about time we talked about young people and debt! I really hope that this under-21 restriction doesn’t make it into the final version of the bill, but I am somewhat glad that it was there to spur discussion. I’m not a big fan of protecting people from themselves. You know that bumper sticker that says “Let’s just remove all the safety labels in the world and let stupidity take its course?” Well, I’m not quite that harsh, but I think that people only need protection from the things they can’t protect themselves from. I can’t protect myself from a doctor while I’m under anesthesia, but that’s why we have laws and medical malpractice suits. I can’t protect myself from poisoned food and drugs, but that’s why we have the Food and Drug Administration. But I can protect myself from overspending and living outside my means. As I’ve said, I don’t have a problem with most of the measures in the CARD Act. There are some shady practices in there that are hard for people to protect themselves from, since the credit card companies make all the rules. So go ahead and regulate those things… but don’t tell me I’m suddenly an adult who can handle a credit card at 21 instead of 18. Sure, I’m a lot better about money and credit cards now, at age 22, than I was at 18 or 19. But that’s because I had the opportunity to screw up. I was 19 when I got that first credit card, and within six months I had run up a balance, because I was living outside my means. In my case, living outside my means meant “trying to go to an expensive film school” instead of “buying Playstations, HD TVs, and drinking every weekend,” but it was still living outside my means. But I dug myself out of that hole and now I use my credit card to earn rewards – paying off the full balance every month. The difference in those three years was experience and education, not some magic maturity that happened when I hit the legal drinking age. The post 18-Year-Olds and Credit Cards: Discussion Continues appeared first on Poorer Than You.