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Tag: Joint Account

Posted on March 4, 2021

Why Choosing the Right Checking Account for Your Lifestyle Matters

As you grow financially, your checking account should be keeping pace with your needs.

Feeling stuck in a checking account rut? Turns out the right checking account for your lifestyle in your 20s may not be a perfect match in your 30s or 40s.

“It can be a mistake to keep the same checking account over the years because things in your life change and you might be missing out on certain benefits by not switching accounts,” says David Bakke, a personal finance expert at financial education site Money Crashers.

According to a survey conducted for Bankrate and MONEY Magazine, the average American adult uses the same primary checking account for about 16 years. While sticking with the same account may make you a loyal customer, as you get older, you may need to change your checking account through life stages.

What is the right checking account for my life stage? These tips can help you find the answer:

Banking in your 20s: Think convenience and cost

In your 20s, the right checking account for your life stage may be one that offers the easiest access to your money.

Forty-seven percent of millennials, for example, use mobile banking to match their active lifestyles, according to a joint survey by Jumio, a company specializing in online mobile payments and identity verification, and Javelin Strategy & Research. But the survey also reveals that young adults don’t want mobile banking to be over-complicated.

If you're in your 20s, the right checking account for your life stage may include mobile features and no maintenance fees.

“Many banks now offer mobile services,” says Michael E. Diamond, senior vice president and general manager of payments at Mitek, a mobile deposit technology company. “The quality and functionality of these features can vary greatly, however. It’s important to compare the user experience and features of mobile services offered by different financial institutions when considering where to bank.”

Checking account fees may also be a factor when choosing the right checking account for your lifestyle in your 20s.

“Minimal fees should be the first consideration for any 20-something looking for a checking account,” says Eric Patrick, founder of Black Market Exchange, an investment education and entrepreneurship site for young adults. “Saving is extremely important in your 20s because the sooner you start, the better, but hefty bank fees can impede your savings growth.”

If fees are a priority when trying to find the right checking account for your life stage in your 20s, consider opening an account with no monthly fees for maintenance, like Discover Cashback Debit. This account also allows you to earn 1% cash back on up to $3,000 in debit card purchases each month,1 which is a nice perk if you’re a budget-conscious 20-something.

The average American adult uses the same primary checking account for about 16 years.

– Survey conducted for Bankrate and MONEY Magazine

Banking in your 30s: Focus on features

As you move into your 30s, planning your finances for your life stage may mean accounting for costs associated with new life events, like getting married, buying a home or growing your family.

“Getting married may cause you to want to have a joint checking account,” says Bakke, the personal finance expert from Money Crashers. “And if you’re going to start a family or buy a home, you might want to look for a checking account through a bank that offers financial and savings guidance for those goals.”

Kenneth Scott Perry, an aerospace project manager and baseball blogger, says major life changes have redefined what he needs most from a checking account.

In their early 30s, Perry and his wife bought their first home, purchased two new cars and had their first child, all of which had financial implications. With so many major financial considerations, he started focusing on checking account features like direct deposit for his paychecks, online bill pay services and overdraft protection. “These features, more so than in my 20s, are now very much what I consider to be necessary for the checking account I use at this stage in life.”

Banking in your 40s and 50s: Review your priorities

Planning your finances for your life stage means anticipating how your priorities will change as you get older. For instance, purchasing a second home, ramping up your retirement contributions or caring for aging parents may be on your radar during your 40s and 50s. The right checking account for your lifestyle is one that makes planning for these new scenarios as easy as possible.

When choosing the right checking account for your life stage in your 40s and 50s, you actually might want to consider what kind of savings products your bank offers to complement your checking account—and make sure that moving money into those accounts is both simple and secure. For example, you may want to be able to easily transfer money from your checking account to a savings account, certificate of deposit or IRA. When planning your finances for your life stage you can even explore setting up automatic transfers to different accounts so saving for your latest financial goals can happen on autopilot.

In your 40s and 50s, planning your finances for your life stage may mean finding a checking account that can be used with the right savings vehicles.

If providing care for your parents becomes a new component of planning your finances for your life stage, you may want to consider opening a joint checking account to help them with financial management and bill payment. You could also open a savings account that’s separate from your emergency fund to help cover any unexpected expenses associated with caregiving.

Don’t just set your checking account and forget it

Having the right checking account for your life stage means regularly assessing your financial needs and how well your checking account is meeting them.

“People tend to review their insurance coverage once each year,” says Diamond, from the mobile deposit technology company Mitek. “Checking account users might want to adopt a similar approach and review their banking options annually.”

If you reach a point where it’s necessary to switch your checking account through life stages, try to avoid costly mistakes.

“It can be a mistake to keep the same checking account over the years because things in your life change and you might be missing out on certain benefits by not switching accounts.”

– David Bakke, personal finance expert at Money Crashers

“When transitioning from an old account to a new one, make sure there isn’t a fee associated with the transfer,” Patrick says. “Make a point to get all the details before starting the process.”

If you find the right checking account for your lifestyle, give yourself time to move your checking account to a new bank. Remember to update your direct deposit information for your new account, as well as any recurring online bill payments or automatic transfers. And most importantly, take time to shop around and compare your options each time you assess your checking account through life stages to find the one that best suits your current banking needs.

1 ATM transactions, the purchase of money orders or other cash equivalents, cash over portions of point-of-sale transactions, Peer-to-Peer (P2P) payments (such as Apple Pay Cash), and loan payments or account funding made with your debit card are not eligible for cash back rewards. In addition, purchases made using third-party payment accounts (services such as Venmo® and PayPal™, who also provide P2P payments) may not be eligible for cash back rewards. Apple, the Apple logo and Apple Pay are trademarks of Apple Inc., registered in the U.S. and other countries.  

Source: discover.com

Posted on March 4, 2021

Divorce Happens: Planning Steps You Need to Know

There’s a lot of things people plan for in marriage. Buying a new home, joint finances, having kids and plenty of other minor plans you stick on your fridge. Divorce is never one of them.

With divorce rates now hovering around the 50% rate, I’d hate to ignore the unhappily married couples, as there are certainly unique planning circumstances they must address.

Lifelong Commitments in the COVID-19 Pandemonium

During the COVID-19 pandemic, the “in sickness and health” part of the vows has been subject to severe neglect never seen before.

The statistics are terrifying for a nation that had a 50% divorce rate before COVID. For one, the number of people seeking divorce was 34% higher from March through June 2020 compared to 2019. Data shows that 31% of surveyed couples admitted that lockdowns caused irreparable damage to their relationships.

If you find yourself to be one of those whose marriage survived the brunt of COVID-19 by a whisker, it may be time for you to consider planning for a divorce. Here are some tips that may help as you approach and/or become divorced.

Good Documentation Will Pull You Through

The importance of having good documentation throughout and in the tail-end of a marriage cannot be overstated. Money issues are oftentimes what kill marriages and haunt people long after they’re separated.

Keeping a good documentation of all your assets and all your debts is what will pull you through a divorce with your sanity intact. It is also highly advisable to have copies of the divorce decree and solid accounting that can be traced back to every single major asset purchase and sale to help with the division of assets.

Always Update Accounts and Notify Institutions

During a marriage, many partners find themselves making legal changes that are binding. These include changing names, addresses, credit cards, filing taxes and work benefits. All these changes and commitments unwind during those last days of marriage.

During your divorce, make sure to notify the necessary departments, such as employers and banks, of the changes or adjustments you are making. If you’re changing your name, a visit to your Social Security office is highly advisable. So is changing all your addresses if you plan to move out.

Moreover, in case you have any kids together when you are at the point of divorce, notify your soon-to-be ex-spouse’s employer in case you may be entitled to any benefits. Most importantly, if you have your ex-spouse as a beneficiary in any legal contract, you may want to change that at the point of divorce.

Joint Accounts May Be an Issue

The jury on whether couples should keep joint accounts is still out. However, this does not negate the reality that many couples find themselves in messy divorces with their finances and credit still intact. To keep your physical, mental and spiritual health intact, flee any joint account you’re in at the point of divorce or as you approach it.

In the common occurrence that you and your ex have names on bills, remove your name from the aforementioned bills to detach yourself from your ex’s ability to pay bills. Failure to do so may affect your credit if your ex-spouse stops paying their bills.

In a divorce, protecting your credit is of utmost importance. If you’re a non-working spouse, you will never go wrong with applying for a new credit card before the divorce. You can usually claim all the income in the marriage during the application process. However, if you’re divorced and have no real income, you may not qualify. Also, ensure that the credit card you have is in your name with you as the cardholder and not just the authorized user.

Assemble Your Team

Divorces are some of the most complex things people undergo in their lives. There are many cards in play involving different institutions, lawyers, accountants and tax experts. Don’t go through it alone.

The greatest gift you can give yourself during a divorce is to find and assemble a team to help you pull through. It goes a long way in ensuring health, wealth and happiness. You’ll be facing financial and tax-planning issues, among all the other things to consider. This will be an integral moment in understanding your newfound finances. 

The process is painful and unpleasant by its nature, so do your best to settle things quickly and with as little back and forth as possible.  

Your Take-Away

A happy marriage is not guaranteed, and happily ever after is elusive in many cases. Contrary to popular belief, divorce doesn’t always have to be an endless nightmare. With the right advice and planning, you can walk out of it with both your sanity and peace of mind intact. 

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

President, Partner and Financial Adviser, Diversified, LLC

In March 2010, Andrew Rosen joined Diversified Lifelong Advisors, bringing with him nine years of financial industry experience.  As a financial planner, Andrew forges lifelong relationships with clients, coaching them through all stages of life. He has obtained his Series 6, 7 and 63, along with property/casualty and health/life insurance licenses. 

Source: kiplinger.com

Posted on March 1, 2021

Plan an Exciting New Future: 4 Ways to Manage Your Finances After a Divorce

Learn how to get your finances in order and chart a new course after divorce.

Like so many single parents, Emma Johnson, 40, founder of WealthySingleMommy.com, worried about rebuilding financially after divorce and what the financial future would look like for her and her children, who were 2 and under 1 at the time.

“I was terrified that my kids and I would be living out of our car,” she says, “or that I would have to sell my home and move far from our community.”

Single father spending time with young son

Rather than continuing to see the prospect of managing finances after divorce as frightening, Johnson decided to use the life-changing 2010 event as an opportunity to re-evaluate her plans and create an exciting new future. She resumed working as a journalist and started her blog. This ultimately led to brand partnerships, speaking engagements and a book deal with Penguin Random House, not to mention new financial goals, including saving enough to retire by the time her children go to college.

“It is very scary to start out on life anew and without a partner,” she says. “Harness this fear to forge a new, exciting path that is free from an unhappy marriage. Your Plan B or C or Q can be far, far more fulfilling than you imagined.”

From separating joint bank accounts after divorce to revamping your financial plans, here are four things you can do to get your finances in order and chart a new course after divorce:

1. Update your budget

Getting divorced can come with financial costs and changes. From attorney’s fees to the tax consequences of selling assets, you may face some short-term financial expenses that could put a strain on your budget. For many people, managing finances after a divorce means spending less because you’ll only have your own income to draw on, and you might have to pay child support.

Jackie Pilossoph, 51, founder of Divorced Girl Smiling, got divorced in 2008 and found that getting a detailed understanding of what she was spending and what she was bringing in was critical. It helped her find places in her budget where she could cut back.

“I called all my utility companies and had the bills lowered, either through cutting plans or getting a better deal. I put a cap on Starbucks and allotted myself a weekly amount,” she says. “I also stopped buying bottled water, refinanced my home, stopped getting my nails done and basically didn’t buy myself a stitch of clothing for about two years.”

Mother and daughter baking together

Other ways to trim costs and manage finances after divorce might include finding opportunities to save on attorney’s fees or making budgetary changes like downsizing your home, eating at home more often or even scaling back your children’s extracurricular activities.

While these changes can be difficult to make, Johnson, of WealthySingleMommy, believes that you need to be open to a new lifestyle after a divorce in order to create a future on firm financial footing.

“Let go of trying to maintain the lifestyle you had while married,” she says. “You don’t need the stress associated with being over-leveraged on a home, living in debt, penny pinching or living paycheck to paycheck.”

“The good thing about divorce is that you are solely responsible for your financial future from this point forward. When you start seeing financial success from your own plan and your own job, there is no better feeling.”

– Jackie Pilossoph, founder of Divorced Girl Smiling

2. Evaluate your accounts

Just because you had certain kinds of banking and investment accounts as a couple doesn’t mean they’re necessarily right for you now as you rebuild financially after divorce.

“For both practical and emotional reasons, you need to evaluate every part of your financial picture during and after divorce,” Johnson says. “You now have to plan for a life without a spouse and invest appropriately based on your new lifestyle, goals and dreams.”

Woman deciding what do to with her joint bank accounts after divorce

She suggests asking your accountant about your new tax situation, your financial planner about college, emergency savings and retirement planning and your attorney about estate planning. You could even explore finding an investment adviser who specializes in managing finances after a divorce.

Take the time to understand the details of your various accounts, such as how much you’re paying per month in fees, how many no-fee transactions you get and how much you’re earning (or paying) in interest. Perhaps you don’t need the pricier checking account that includes so many transactions. Or maybe your bank requires a high minimum balance to waive the monthly fee on your savings account, and now you’re looking for an account that has no monthly fee for maintenance. Maybe you do need a new credit card since your old one was a joint account shared with your ex.

If you’re taking stock of your joint bank accounts after divorce and close any credit accounts, pull your credit report to make sure all joint accounts are closed. If you want to ensure that new credit accounts aren’t opened in your name, you could consider putting a credit freeze on your report by contacting the three national credit reporting agencies: Equifax, Experian or TransUnion.

When thinking about joint bank accounts after divorce, you may also consider removing your ex-spouse as a beneficiary on retirement accounts, life insurance policies and from your will.

Rebuilding financially after a divorce often starts with a budget

3. Define your goals and priorities

Just because you and your former spouse wanted to retire to Hawaii doesn’t mean that’s still your dream now.

“One of the saddest things about divorce that I hear from men and women is that the dream they always had is gone,” Pilossoph says, explaining that feeling is often only temporary. “What happens over time is that the dream just changes, and honestly, most of the time, it changes for the better.”

For Pilossoph, that’s meant that she’s developed dreams of retiring and moving to a warm Southern state, which she hopes to achieve alone or with a different partner.

She believes that rebuilding financially after divorce is a great time to rethink what you want to do professionally as well. Maybe you would rather stay home with your children, switch careers, find a better work-life balance or go back to school.

“Divorce is a great time for soul searching,” she says. “Divorce often makes people re-evaluate life and explore what is really going to make them happy.”

4. Sit down with a financial planner

Rebuilding financially after divorce and setting up a new financial plan can help you feel better prepared for life after your marriage ends. Although Pilossoph wanted to continue to stay at home with her children, who were 3 and 5 at the time, her financial planner helped her realize that wasn’t a good financial decision over the long term.

“It took a really good financial planner to get me to sit down and face reality. They forced me to look at what I was spending every month and what I was bringing in,” she says. “They made me see the deficit I was dealing with, and seeing the numbers on paper made me realize I had to make some changes.”

In addition to cutting back on expenses, she decided to return to work. She wrote a book, launched her blog and took a job with a newspaper.

A financial planner can be a critical resource when managing finances after a divorce, helping you turn your new short- and long-term financial goals into realities. They can clarify what you need to earn, how you need to save for retirement or your children’s futures and how your newly single status affects your taxes.

Divorcee meets with a financial planner to discuss his joint accounts after divorce

Stay focused on the positives

While divorce is undoubtedly an end to something important in your life, it is also a new beginning. If you look at it from that perspective, you may find it easier to focus your attention on rebuilding financially after divorce, rather than mourning the changes in your financial situation.

“The good thing about divorce is that you are solely responsible for your financial future from this point forward,” Pilossoph says. “When you start seeing financial success from your own plan and your own job, there is no better feeling. Looking in the mirror and being proud of your accomplishments and the way you live your life is very powerful.”

Source: discover.com

Posted on March 1, 2021

How Does Being An Authorized User Affect Your Credit Score?

Whether you’re looking to lengthen your credit history or increase your credit score, becoming an authorized user can help establish better personal credit. And anyone with a credit card may have an authorized user added to the account, making it an easy process.

father and son

However, several responsibilities come with being an authorized user, and they should not be taken lightly. If you’ve been asked to become an authorized user or you want to become one on someone else’s credit card account, it’s helpful to know the exact impact it could have on your credit score.

Definition of an Authorized User

An authorized user is a person who has access to someone else’s credit card but is not an actual owner of the account. You may be added as an authorized user on a credit card, checking account, or other financial accounts. This means you have access to the money or the credit card, but you aren’t liable for any payments.

If you’ve granted someone authorized user status to one of your accounts, your credit card issuer may allow you to limit the authorized user and how much of the money they have access to.

Other accounts may give them equal access to your funds. In either case, the primary account holder receives the bill and is required to make the payments regardless of who used the account.

Why Become an Authorized User

There are two basic reasons you might become an authorized user on someone else’s credit card account. The first reason is to gain access if the other person should need them to take over or obtain funds for some reason.

An example of this is when adult children are added to their parents’ financial accounts. If the parent becomes unable to use the account, either obtaining the funds or paying the bill, the adult child who is on the account is able to manage the account on their parent’s behalf.

Adding Your Teenager as an Authorized User

For parents with teen or young adult children, they may add them so they have access to funds in an emergency. This often happens when the child goes off to college.

The student may even be the owner of the account with the parents added as authorized users. This allows parents to add money as well as debit the account.

Building Credit

The second reason people become authorized users is to build credit. In the example where parents add their young adult child as an authorized user on their credit card, this account will show up on the child’s credit report.

For someone just starting out with no credit history, being added as an authorized user can give them an exceptional advantage. In fact, if the primary account holder has excellent credit, the authorized user will also have an excellent credit score without ever having had an account on their own. The credit card shows up from the original date it was opened with the parent, not when the child was added.

How Being Added as an Authorized User Can Benefit Your Credit Score

If you have no credit history at all or even a poor history, being added as an authorized user can help you build some positive information. The account will be listed on your credit report, showing on-time payments and a history of whatever time the account has been opened.

Any positive information helps to improve your credit score even if you’re only an authorized user. It also encourages other creditors to offer you a credit card. You may be able to get approved for your own card that you wouldn’t otherwise have access to.

This would enable you to continue building credit on your own. Just remember to always use credit cards responsibly, and never charge up more than you can afford to pay off.

How Being Added as an Authorized User Can Hurt Your Credit Score

Just as your credit score is affected by the primary user’s positive history, it’s also affected by any negative activity. For instance, if the primary account holder fails to make a payment, maxes out their credit limit, or otherwise engages in negative behavior, the authorized user’s credit score will also be affected.

While it will most likely hurt them more than you, it still damages your credit rating. If you’re trying to build or rebuild credit, you could potentially end up doing more harm than good.

Similarly, your actions in using the credit card also impact the account holder. If you charge a bunch of stuff to your credit card, they are ultimately the one responsible for paying the balance.

You may not even be aware of the balance or the impact of your credit card spending spree because the statement goes to the primary account holder rather than you as the authorized user.

Adding an Authorized User to a Credit Card Account

Anyone can become an authorized user as long as the primary account holder approves it and submits a request to the creditor.

Be careful who you allow to add you to their account. What they do has an impact on your credit, and it could strain your relationship as well. You want to know for sure that they make their payments on time, and they’re responsible enough not to do anything that causes damage to their credit score or your own.

Authorized Users vs. Joint Accounts

There are responsibilities and privileges for both. As an authorized user, you are allowed to use someone’s account.

As a joint account holder, you are equally responsible for the account as the other person. While this means you have more authority and abilities to make changes to the account, you are also held just as liable for payments.

Total Debt & Debt Utilization Ratios

One area where you can see the difference is in relation to total debt and debt ratios.

As an authorized user, the credit card account doesn’t count against you when lenders calculate how much debt you owe to be approved for a loan. With a joint account, the payments and balance count against you and could reduce the amount you’re approved for.

Credit Check

Another way the two are different is in the approval process. As an authorized user, the creditor won’t do a credit check or even require an application in most instances.

The account holder just needs to give a name and social security information for the person to be added. For a joint account, the person has to go through the complete approval process. It’s like the person is applying completely on their own.

Removing an Authorized User

If becoming an authorized user helps your credit score by giving you a new account with positive information, you may wonder what will happen if you are removed. Not surprisingly, this action also impacts a person’s credit score, but just how much depends on several factors.

Once you’re removed as an authorized user, the account will be cleared off your credit report. This will most likely result in a negative impact, but the result depends on other information on the credit report. The two areas it will bear the most impact are the length of credit history and debt utilization. Let’s take a look at some examples.

If you were added to an account as an authorized user several years ago and you just recently got your own first credit card, expect your credit history to drop by quite a bit. But overall, length of credit history only plays a small role in your credit score, so the change might not be dramatic if your other areas are strong.

Debt Utilization

A bigger impact is felt based on your debt utilization. If you have other credit cards and they are all maxed out, your debt utilization rises if the card didn’t carry a large balance. Creditors look at your total available credit against your balances to see how much you utilize your credit.

For example, say you have two credit cards with a credit limit of $1,000 each. You are an authorized user on another credit card with a limit of $1,000. Your two cards are completely maxed out but the other one has a zero balance.

Right now, you are using two-thirds or about 66% of your credit. Take away that card where you’re an authorized user and your utilization goes up to 100%. And your credit score takes a hit because credit utilization accounts for about a third of your credit rating.

What to Consider When Becoming an Authorized User

You should first consider your reasons for being an authorized user. If your goal is to build credit, you should work towards building your own credit and only use this as a stepping stone. Make sure you handle your own credit and that of the primary account holder responsibly.

Look at the account as temporary assistance rather than counting on it for the long term. It will have less of a negative impact when you’re removed if you have built up your own credit profile.

Make sure you know the person well and trust them before being added to their account. Set ground rules about your role. Are you responsible for making payments or will you be expected to pay off the balance as it comes due? Both of you should be on the same page as to how you will handle credit.

Becoming an authorized user on an account is one way to help a person begin to build their credit history. However, it is not without some risks and challenges. Be prepared to deal with these so that you can reap the benefits.

Posted on March 1, 2021

How to Cancel a Credit Card in 5 Steps

Whether you’re done with the perks or simply need a change of service, to cancel a credit card you need to pay off any balances present on the account. From here, you’ll want to make sure you obtain all rewards and perks associated with the card before completely calling it quits. This can be done by following a specific procedure — which consists of more than just taking scissors and cutting the card in two.

Here are the general steps to follow for the best way to cancel a credit card:

  1. Pay off any remaining balance on the card and ensure no further charges are incurred.
  2. Redeem any rewards associated with the account.
  3. Locate the credit card company’s number and call them to initiate the cancelation.
  4. Check your credit report to confirm cancellation.
  5. Dispose of your credit card.

When Should You Cancel Your Credit Card?

When dealing with finances, there are some situations when canceling a credit card is advised. Always check with your bank or financial advisor before assuming cancelation is the best option.

Canceling a credit card can be a good idea if you:

  • Are experiencing a significant personal finance shift
  • Have unfeasible fees associated with the account
  • Are struggling with compounding debt
  • Are an impulse buyer/have shopping addictions
  • Are going through a divorce and have a joint account with your spouse

Should You Cancel Unused Credit Cards?

There are both pros and cons to canceling unused credit cards. Generally, people with an established, healthy credit history have fewer issues when canceling an unused card.

Annual fees, identity theft fears, or personal financial shifts are all valid reasons for canceling an unused credit card. A credit score can take a small hit when a credit card is canceled, as this potentially lowers credit history and could increase credit utilization. If you are going to need your credit run in approximately the next six months, and there aren’t any major fees with the card, wait to close until after the loan or credit check goes through.

This is also the downside of canceling an unused credit card account. If you have poor credit, ending the service will dent your credit score further, and it will look suspicious to creditors. Instead of canceling, it may be best to use the card for a few charges over the period of several months before canceling.

The Best Way to Cancel a Credit Card

In the event you must cancel your account there is a procedure to follow to mitigate any issues with creditors down the line.

The best way to cancel a credit card is to first pay off any outstanding balance on the card. Once this has been paid off, be sure to redeem any rewards associated with your account — once you cancel, it’s highly unlikely you’ll have access to any previously available promotions.

After these two steps are completed, call the credit card company.

After you do this, cut your credit card into multiple pieces and discard them into a trash/recycling bin.

Finally, check your credit report to ensure the card is off of your record.

1. Pay Off Your Balance

Paying off your credit card account’s balance helps avoid accumulating interest and late fees that can be forgotten if the account is canceled. Credit card companies may not always warn you of an open balance, but are required to do so when you call them.

2. Redeem Any Rewards

Most credit card companies offer rewards for using their services. Once your account is closed, though, these perks can get cut off. Take advantage of building credit and use any rewards you’ve accumulated before closing the account for good.

3. Call the Credit Company and Cancel

After you have weighed the pros and cons of canceling and are sure you want to move forward with the cancellation, the next step is to call the card company. Have the agent verbally confirm the termination of the account and the date it will be shut down. If you would prefer further documentation, they should also be able to send you a letter at your request.

4. Check Your Credit Report

The best way to know your account has been canceled is to check your credit report. The card should not be present as an active account on this report. This can take a credit period to reflect.

5. Dispose of Your Credit Card

Completely dismantle your credit card once you have confirmed its cancellation. Cut or shred it into pieces to ensure someone could not use it again.

With more Americans than ever turning to cashless payments, it’s essential to know how to use credit cards responsibly. Knowing how many you should have and what to do with them is an essential part of good financial health.

When it’s time to cancel your card, though, it’s paramount to follow the appropriate steps to mitigate damage to your credit score. Above all, close your account and don’t cut corners to ensure your account has indeed been canceled to avoid an onslaught of fees and extra payments — not to mention credit score damage.

For more ways to boost your credit health and to pinpoint a card with the best benefits for you, compare credit cards with Mint.

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Source: mint.intuit.com

Posted on February 10, 2021

How To Read Your Credit Report

It’s important to know how to read your credit report and understand what types of information it contains. The items on your credit report directly contribute to your credit score.

reading credit report

And when you have good credit, it’s easy to qualify for financing when you need it, whether it’s a new car loan, a mortgage, or a credit card.

If you have bad credit, understanding your credit report can help you identify the problem areas and improve them. As the negative items on your credit report are replaced with positive ones, you’ll notice your credit score begin to increase.

The Three Major Credit Bureaus

Equifax, Experian, and TransUnion are the largest and most trusted credit bureaus in the nation. The majority of lenders use at least one, if not all, of them to check your credit history. While each credit bureau has subtle differences in how they report, most of the information on their credit reports is similar.

Each credit bureau’s credit report structure has several key categories of information that are deemed either positive, negative, or neutral.

These categories include your account summary information, account history, credit inquiries, public records, and consumer statements. Let’s take a look at each one so you know how to read your credit report, and more importantly, how to use it to your benefit.

How can you access your credit report?

Before you learn how to read your credit report, you first have to get a copy of it. You are entitled to a free credit report every 12 months. The quickest and easiest way to get your free credit report is to visit AnnualCreditReport.com. It’s the only website that is run by the three major credit bureaus.

Once you’re on the site, start by entering some basic information about yourself. You’ll then have to go through a separate identity verification process for each credit bureau.

If you’d like, you can begin by requesting just one or two credit reports and saving the others for later. This could be helpful if you want to track how the information on your credit report is changing over time.

Applying for a Loan?

But if you’re about to apply for a large loan, you might want to check all three credit reports at once to make sure your information is accurate and up to date.

Another consideration when you’re about to apply for new credit is the length of dispute time. When you get your credit report for free, the credit bureaus can take up to 45 days for an investigation. If you’re in a hurry, consider purchasing your credit reports because they only have 30 days to respond to disputes.

Confirming Your Identity

Once you decide which credit reports you want to request, you’ll be asked a series of personal questions only you should know the answer to.

This might include confirming previous legal names and addresses or answering financial questions, such as what credit cards you have or when a particular account was opened. From there, you can download your credit report and view it immediately.

If for some reason you don’t answer the questions correctly, you have the option to print out a form and request a copy of your credit report via regular mail. You can also use this option if you simply prefer paper copies over digital copies.

What information is on your credit report?

Now that you know how to get your credit reports from Equifax, Experian, and TransUnion, let’s take a look at the information you’ll find there. Some of it is basic and easy to understand, while other parts require a little more analysis. The good thing is, you only need to learn this information once.

After you figure it out, you’ll be able to quickly review your credit report and understand what is being reported with little effort going forward. This information can help you improve your credit score and contribute to making better informed financial decisions in the future. Reviewing your credit reports regularly will also allow you to recognize signs of potential identity theft.

Personal Information

This basic section of your credit report is easy to understand, but you’ll still want to check the details carefully for accuracy and consistency.

Here you’ll see information including your name, former legal names, current and past addresses, date of birth, social security number, employer, spouse information, and whether it’s a joint account report or not.

You may or may not have a lot of information in this section depending on how often you’ve applied for credit.

For example, your employer doesn’t report any information about you and this section isn’t meant to serve as a resume. Instead, a lender may report your employment information from a loan application you’ve submitted.

Any personal information shouldn’t affect your credit score but is instead used to verify your identity when needed. Check to make sure everything is accurate, but don’t stress, especially if you see something like a past job missing from your credit report.

Account Summary

Here you’ll find a summary of all of your debts and where you stand with each of them. For example, if you have a mortgage, you’ll see your balance, the original loan amount, and how many total balances you have.

You’ll see your total balance owed for all cards, how much credit you currently have available, your credit limit, debt to credit ratio, monthly payment amount, and the number of accounts with a balance.

One thing to note about your credit card balance is that depending on when the credit report is pulled, you could still have a balance even if you pay all of your cards in full each month.

That’s because credit reports are essentially a snapshot in time. So if your credit report (or your credit score) is pulled after a billing cycle is complete, but before you’ve made your payment, then that full balance is shown.

To avoid this from happening, consider paying your credit card bill bi-weekly or even weekly. That way, you never have more than one or two weeks worth of charges listed on your credit report. Alternatively, if you reserve your credit card usage for major purchases, pay it off as quickly as possible rather than waiting until your next statement’s due date.

If you’re in the middle of a loan application and need to boost your credit score by a few points or lower your debt to income ratio in order to qualify, ask your lender to perform a rapid rescore once you’ve settled your balances.

This service quickly updates your credit report with the most recent information and just takes a few business days to complete, rather than the typical month or two.

Account History

credit history

Depending on the length of your credit history, this section can be pretty long, but it’s also extremely important. Don’t let the length deter you from reviewing these entries with a fine-tooth comb.

Why? Your account history shows years of individual payments you’ve made month by month on each of your credit accounts, from loans to credit cards.

And your payment history accounts for 35% of your credit score, which is the largest contributing factor. It’s crucial that you perform your due diligence and make sure everything is accurate in this section.

Here’s exactly what you’ll find under your account history section. Again, the details may vary among the three credit bureaus, but the general idea is the same for each one.

Current Accounts

First, you’ll see an entry for each of your current open accounts. Perhaps the most important piece of information here is the current payment status. Ideally, you’ll want the payment status to be “Pays As Agreed” because it means that you’re up to date on all of your payments.

However, depending on your payment history, you might see codes indicating any of the following:

  • the account is now current but was 30, 60, 90, or 120 days past-due at some point
  • the account is now current but was previously in collections
  • it’s currently in collections
  • it had a paid collection
  • or it is a charged off account

There are many other possibilities, so look for a chart with explanations of the code given if you’re unsure what your specific payment status indicates.

Type of Account & Payment History

Under each account, you’ll also see an overview with information such as the type of account, the highest level of credit you’ve had, term duration, date opened, current balance, scheduled payment amount, and your actual payment amount.

From there, you’ll see a month-by-month listing of your payment history on the loan or credit card. Each account will be categorized as Open, Negative, or Closed.

Most negative accounts generally fall off of your credit reports after seven to ten years. However, closed accounts in good standing can remain on your credit reports indefinitely.

Credit Inquiries

A credit inquiry refers to an entry on your credit report indicating you have applied for new credit, insurance, or financing. Each of these actions triggers a company to pull your credit, and your credit score then dips a few points every time.

If you have just one or two hard inquiries listed, it will not have a major effect on your credit score. However, if you have several inquiries listed, the damage could really start to add up.

Plus, you might scare off potential lenders by making it look like you’re scrambling for credit. So it’s wise to be careful with the amount of credit card and loan applications you submit.

However, when you’re rate shopping, you can get a bit of leeway on inquiries, specifically for installment loans. Say you’re comparing auto loan offers. As long as you apply with multiple lenders within a few weeks, all of those hard inquiries on your credit report will only affect your credit score as a single credit check.

Hard inquiries only stay on your credit report for two years, and luckily, they only impact your credit score for one year. Still, check for accuracy in this section. In the instance you find an inquiry for a loan product you don’t remember applying for, you can lobby to have the item removed from your credit report.

You will also see soft inquiries listed in your credit report. These inquiries don’t affect your credit scores at all.

Consumer Statement

You should recognize any information contained in the consumer statement section because it comes directly from you. Whenever you file a dispute with one of the credit bureaus and the subsequent investigation doesn’t resolve anything, you may submit a statement explaining your side of the situation.

Typically you’re allowed 100 words. This gives you the chance to provide lenders with more information; however, make sure not to overdo it with consumer statements. Too many can raise a red flag even if you feel like the case (or cases) didn’t end fairly.

Public Records

The public records section deals with any judgments, tax liens, bankruptcies, or other public records available about you at the county, state, and federal levels. You’re likely to be very familiar with these particulars because they often involve court appearances, lawyers, paperwork, bureaucracy, and other headaches.

Any of these items will have an enormous impact on your credit and stay on your credit report for seven years or more. Make sure that all the information here is correct. Otherwise, you’ll have unnecessary damage done to your credit.

What information ISN’T on your credit report?

One of the most important things to realize about your credit report is that it does NOT contain your credit score.

It is your right and responsibility to review and potentially dispute any incorrect information on your credit report. However, credit scores typically need to be purchased separately, although you can sometimes view yours for free through a promotion from one of your credit cards or bank accounts.

Your FICO Score

The FICO score is the most common credit scoring model used by lenders. But, Experian, TransUnion, and Equifax have created an increasingly popular credit scoring model called the VantageScore to compete with FICO.

The most recent version of this is VantageScore 3.0. Many websites offer free educational credit scores, but the algorithms aren’t the same as the mainstream models. For this reason, the credit scores can vary greatly from the one your lender actually uses.

Remember that your credit report directly affects your credit score, but the two are separate items. Start by reviewing your credit report and making sure all of the information there is accurate.

Then, when you’re ready, consider purchasing your credit score to see where you stand. By then, you should have a good idea of what factors are hurting or helping your credit score the most and which ones you need to continue working on to improve.

Posted on February 2, 2021

Prenup vs Postnup: What is the Difference?

They’re certainly not as romantic to discuss as your dream house or your honeymoon, but prenups and postnups can be a financial lifesaver in the event your marriage does come to an end.

Both prenups and postnups are about figuring out who gets what if you and your spouse get divorced.

But these two types of agreements have some important distinctions, and circumstances may make one better suited to your relationship than the other.

Here are some key things it can be helpful to understand about prenups vs. postnups, plus how to decide if you and your significant other might benefit from getting one.

What is a Prenup?

Short for “prenuptial agreement,” a prenup is a legally binding document set up before a couple gets married — hence the “pre” suffix.

These contracts typically list each party’s assets, including property and wealth, as well as any debts either soon-to-be-spouse might carry.

It then details how these assets will be divided in case the marriage comes to an end, either through a divorce or the death of a spouse.

Who Needs a Prenup?

Prenups may also be known as “antenuptial agreements” or “premarital agreements,” but the bottom line is, they’re contracts drafted before vows are made.

Couples who are getting married for the first time and are bringing little to no assets into the marriage may not need to bother with drawing up a prenup.

However, a prenup can be particularly useful if one spouse is coming into the marriage with children from a previous partnership, or if one partner has a large inheritance or a significant estate, or is expecting to receive a large inheritance or distribution from a family trust.

debt the other spouse brought into the marriage.

What is a Postnup?

A postnup, or postnuptial agreement, is almost identical to a prenup — except that it’s drafted after a marriage has been established.

They may not be as well known as prenups, but postnups have grown increasingly common in recent years, with nearly all 50 U.S. states now allowing them.

A postup may be created soon after the wedding, if the couple meant to do so but simply didn’t get around to it before the big day, or well afterwards, especially if some significant financial change has taken place in the family.

Either way, a postnup, much like a prenup, does the job of outlining exactly how assets will be allocated if the partnership comes to an end.

Who Needs a Postnup?

Along with being drafted whole cloth, a postnup can be used to amend an existing prenuptial agreement if there have been big changes that mean the initial contract is now outdated.

And although it’s not fun to think about, if a couple feels they’ll soon be facing divorce, a postnup can help simplify one important part of the process before the rest of the legal proceedings take place.

A postnup, like a prenup, can help separate out assets that would otherwise be considered shared, “marital property,” which can be important if one partner obtains an inheritance, trust, piece of real estate, or other possession they want to maintain full ownership over.

Postnups can also be part of a renewed effort for a couple to commit to a marriage that may be facing some obstacles and challenges.

Prenup vs. Postnup: Which is Right for Your Relationship?

While it may be a difficult conversation to face with your fiance or spouse, creating a prenup or postnup can be an important step to help you avoid both headache and heartache later on.

If you don’t make a pre- or post-nup, your state’s laws determine who owns the assets that you acquire in your marriage, as well as what happens to that property in the event of divorce or death. State law may also determine what happens to some of the assets you owned before marriage.

While almost any couple can benefit from a frank discussion of who gets what in the worst-case scenario, here are the situations in which you might specifically want to consider a prenup vs. postnup.

Prenup:

•   If one or both partners have existing children from a previous partnership, to whom they want to lay out specific inheritances in case of death.
•   If one partner has a larger estate or net worth (i.e., if one spouse is significantly wealthier than the other).
•   If one or both partners want to protect earnings made and possessions acquired during the marriage from “shared ownership.”

Postnup:

•   If you intended to create a prenup but ran out of time or otherwise didn’t do so before the wedding.
•   If significant financial changes have made it necessary to change an existing prenup or draft a new postnup.
•   If divorce is looking likely or inevitable, and the couple wishes to streamline the process of dividing marital assets before undergoing the rest of the process.

In all cases, prenuptial and postnuptial agreements can help simplify the division of assets in the case of either death or divorce—and in either of those extremely emotionally charged scenarios, every little bit of simplification can help.

However, prenups are sometimes considered more straightforward, since they’re made before assets are combined to become marital property.

Prenups may be more likely to be enforceable than postnups should one partner attempt to dispute it after a divorce.

How to Get a Prenup or Postnup

For a prenup or postnup agreement to be considered valid by judge, it must be clear, legally sound and fair.

Couples looking to save money may be able to use a template to create a prenup or postnup themselves.

It may still be a good idea, however, for each partner to at least have separate attorneys review the document before either one signs.

If your estate is more complex, you may want to consider hiring an attorney to draft the agreement.

Either way, having an attorney review the document will help protect your interests and also help ensure that a judge will deem the agreement is valid.

Reducing the Odds You’ll Ever Need to Use that Prenup or Postnup

While creating a prenup or postnup can be a smart move for even the most hopeful and romantic of couples, the ideal scenario is a happily-ever-after that leaves those contracts to gather dust.

Fighting about money is one of the top causes of strife among couples, and one of the main reasons married couples land in divorce court.

retirement account, can help partners feel empowered and able to focus on other important relationship goals.

Financial transparency, starting before and/or early in marriage, can also help mitigate marital tension over money.

To achieve more transparency, some couples may want to consider opening up a joint bank account, either after they tie the knot or before if they are living together and sharing household expenses.

While there are pros and cons to having a shared account, merging at least some of your money can help make it easier to track spending and stick to a household budget, while also fostering openness and teamwork.

For couples who’d rather not share every penny (or explain every purchase), having two separate accounts along with one joint account can be a good solution that helps keep money from becoming a source of tension in a marriage.

The Takeaway

Prenuptial and postnuptial agreements are both legal documents that address what will happen to marital assets if a married couple divorces or one of them dies.

A prenup is drafted before marriage, while a postnup can be drafted soon after or many years into marriage.

Both agreements can make divorce or the death of a partner significantly less traumatic.

These agreements can be particularly useful if one spouse has children from a previous marriage, has significant assets, and/or expects to receive a large inheritance or distribution from a family trust during the marriage.

It can be helpful to use an attorney to draw up or look over one of these agreements to make sure it’s legally sound.

For couples who are ready to integrate their finances, SoFi Money® makes it easy to create a joint account that gives couples shared access to their money.

Prefer to keep some (or all) of your finances separate? The SoFi Money app makes splitting bills and expenses easy by allowing you to send money directly from the app. If your partner is also a member of SoFi Money, he or she will get the money instantly.

Learn more about SoFi Money today.


SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Source: sofi.com

Posted on January 30, 2021

What Is Piggybacking Credit? – Lexington Law

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Piggybacking credit, otherwise known as becoming an authorized user, allows you to be added to another’s credit card account in order to improve your credit standing. There are a number of reasons why you may need more positive exposure on your credit report—you could be looking to buy a car, get a loan or secure the best rates on a new line of credit, to name a few. 

There are some risks associated with piggybacking credit, so it should only be used as a temporary solution.

So what is piggybacking credit, really? Below we’ve outlined everything you need to know about this credit-boosting method.

How Piggybacking Credit Works 

If someone with good credit adds you as an authorized user to one of their credit cards, that credit card account and payment history become part of your own credit report. Piggybacking credit is not the same thing as becoming a joint account holder.

The difference is that the authorized user is not responsible for the charges made on the credit card, and a joint account holder is. 

When piggybacking credit, the authorized user gets the cardholder's full account history reflected on their own credit report, which can have a positive effect on their score.

Simply put, the authorized user gets the cardholder’s full account history reflected on their own credit report, which can have a positive effect on their score.

However, if you piggyback credit with someone who does not have a positive credit history (frequent late payments, low score, multiple hard inquiries, etc.) or even credit history at all, you run the risk of getting points shaved from your own credit score. 

While piggybacking credit may be beneficial for the authorized user, on the other hand, the primary cardholder who has added the authorized user could see their credit score lower if the authorized user has a poor credit history. 

About 1 in 4 consumers first acquire their credit history from an account for which others were also responsible.

Ways to Piggyback Credit 

To piggyback credit, you can get a close family member, spouse or friend to share their credit rating and history with you.

Person-to-Person:

This method of piggybacking involves a family member, friend or significant other with a good credit score adding you as an authorized user, in order to share their credit reputation with you. To do this, the cardholder contacts their credit card issuer and adds you as an authorized user. You then will be able to choose to get a card for the account or not. 

If you end up getting access to your own card on the account, you may be offered privileges—like being able to make charges and payments. However, it’s likely you won’t be able to increase the line of credit or request lower rates. This method is commonly used by teenagers who are added to their parents’ credit card account as authorized users, for example.

This can be a great way to get the boost of credit you need before applying for your own credit cards, loans or anything else that may require a higher credit score to secure the best offers and interest rates. 

For-Profit: 

Some people—who may not have a close relative or friend they can piggyback credit with on a person-to-person basis—also choose to rent a position as an authorized user on a stranger’s account for a fee.

In this scenario, you can turn to tradeline credit repair companies that will match you with a cardholder with great credit, for a fee. With this method, the cardholder ends up getting a percentage of the fee that you pay, and you will not receive an actual credit card or obtain card privileges. 

Keep in mind that for-profit piggybacking is a short-term solution and you’ll only be an authorized user for a limited time. Once your term ends, the account will then be removed from your credit report, which puts your credit scores at risk of dropping again. If you do consider this approach, be very careful—some people offer for-profit credit piggybacking as a scheme. 

If you do decide to pursue this method, we recommend that you do so through trustworthy sources.

Is Piggybacking Credit Legal?

Yes, piggybacking credit is legal, however it is not a well-known credit-boosting method, as many people are unaware that it’s an option. Piggybacking became a method to boost credit after The Equal Credit Opportunity Act was enacted in 1974; which made it illegal for a creditor to discriminate against any applicant. 

Piggybacking became a method to boost credit after The Equal Opportunity Act was enacted in 1974, allowing previously disadvantaged groups to gain their own credit histories.

Piggybacking credit was used as a strategy designed to help combat the obstacles women faced prior to The Equal Credit Opportunity Act, allowing them to get their own credit cards or establish independent credit histories after they were added as an authorized user to their husbands’ accounts.  

However, since then, people have discovered loopholes to use The Equal Credit Opportunity Act to help them establish their own credit, or even rent it to others. When adding an authorized user to an account, cardholders do not need to indicate whether that new user is a spouse of the cardholder or not.

This means that an authorized user can be a friend, family member or stranger when it comes to for-profit credit repair organizations. 

Does Piggybacking Help or Hurt Your Credit? 

While piggybacking credit may be beneficial for some, we recommend that you approach it cautiously. It’s important to keep in mind that not all account holders or credit lenders can be helpful, or ensure that you get your intended credit results.

If you become an authorized user and your relationship suffers, or the primary cardholder ends up getting into financial trouble or starts missing payments, your credit history and score may also suffer. Piggybacking credit requires a great deal of trust between the account owner and the authorized user. 

How to Improve Your Credit Without Piggybacking 

You may consider piggybacking credit as a way to boost your credit reputation, but remember that it’s not a sustainable long-term solution. The best way to boost your credit score is to establish good financial and credit habits. Below are a few other ways to build your credit on your own and keep it healthy in the long run. 

  • Pay down debt
  • Lower your credit utilization ratio
  • Dispute errors on your credit report
  • Increase your credit limit
  • Limit hard inquiries on your credit report
  • Make payments on time

Whether you’re the cardholder or the authorized user, it’s important to know both the pros and cons of piggybacking credit. If you’re building credit for the first time, consider taking your own steps to build your credit reputation before piggybacking off of someone else’s credit, as it can be risky. If you have any questions about piggybacking, or want to learn about alternative ways to build your credit, consider signing up for credit repair services online to help you reach your financial goals.

Reviewed by Kenton Arbon, an Associate Attorney at Lexington Law Firm. Written by Lexington Law.

Kenton Arbon is an Associate Attorney in the Arizona office. Mr. Arbon was born in Bakersfield, California, and grew up in the Northwest. He earned his B.A. in Business Administration, Human Resources Management, while working as an Oregon State Trooper. His interest in the law lead him to relocate to Arizona, attend law school, and graduate from Arizona State College of Law in 2017. Since graduating from law school, Mr. Arbon has worked in multiple compliance domains including anti-money laundering, Medicare Part D, contracts, and debt negotiation. Mr. Arbon is licensed to practice law in Arizona. He is located in the Phoenix office.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

Posted on January 24, 2021

5 Online Banking Myths Debunked

Put your online banking knowledge to the test and see if you’ve fallen for one of these common myths.

When’s the last time you made an appearance at a bank branch? With the latest digital technology, there’s almost no reason to step inside a physical bank: Nearly three-quarters of Americans bank primarily online or from their mobile device, according to the American Bankers Association.

But you might still like the idea of having a checking account at a bank with a branch nearby. Why? Maybe you think online banks aren’t as convenient as stopping by your neighborhood branch to get cash (free coffee aside), the perks aren’t as good as with traditional banks or that online banks aren’t insured. Actually, these are three of several big myths about online banking.

Not being able to deposit checks or get cash easily are common myths about online checking accounts.

“People who say online bank accounts are inconvenient may not know how they work,” says Monica Lam, founder of money-saving blog Lucky Mojito. “I can mobile deposit a check into my account at any time without having to drive to the bank and wait in line.”

Lam wishes she hadn’t fallen for common online banking myths and took the benefits of online checking accounts more seriously sooner. “If someone had told me I could avoid using gas or spending time going to the bank to deposit my checks,” Lam says, “I would have switched a long time ago.”

By now you’re probably wondering, “What are the most common myths about online banking?” We reveal them—and debunk them—so you can understand why opening an online checking account might be right for you.

Myth 1: They’re inconvenient

Don’t just take Lam’s word that inconvenience is an online banking myth. Patricia Russell, a certified financial planner at FinanceMarvel, agrees. “Some online accounts offer 24/7 access to many features of the bank. You can open your account, view your balance, deposit checks, apply for loans and pay bills—all from the convenience of the mobile app or website,” Russell says.

Nearly three-quarters of Americans bank primarily online or from their mobile device.

– American Bankers Association

In fact, some online banks make it easy and convenient to open an account. “Online accounts are extremely easy to open,” says Miguel A. Suro, founder of the financial blog The Rich Miser. “All you have to do is go to the website or download the app and follow the simple prompts.”

If convenience is on your mind, you may also worry about the ability to access cash without a physical bank branch, but online banks may have a large network of ATMs that you can use, Russell says. For instance, with Discover’s online checking account, called Cashback Debit, you can use your debit card at over 60,000 no-fee ATMs. How’s that for debunking myths about online checking?

Myth 2: The perks aren’t as good as with traditional banks

If you believe this, you’ve fallen for one of the most common myths about online banking.

Suro thinks one reason you may be able to score benefits from some online banks is that low overhead often means incentives can be passed down to the consumer.

One such incentive that disproves this myth about online checking is that many online banks charge low or no fees.

“You may be able to pay no fees for routine banking,” Suro says, “such as just having an account, ordering checks, ATM access and most money transfers.”

Discover Cashback Debit, for example, charges no fees. Period. That means you won’t be charged an account fee on your online checking account.1 Imagine, a host of potential fee-carrying features you no longer have to worry about!

Why should credit cards have all the fun?

Now you can earn cash back with your debit card.

Another perk on the online checking account scene—discrediting this myth about online checking—is cash back rewards, which have more traditionally been associated with credit cards. With Discover Cashback Debit, you can earn 1% cash back on up to $3,000 in debit card purchases monthly.2 That means your monthly cash back earnings could yield $360 in total rewards each year. This perk could be covering a good portion of your coffee habit!

You may also find this online banking myth refuted with the fact that some online checking accounts offer higher yields compared to traditional banks, Lam says, which means you can potentially make some cash while your funds are stashed.

Myth 3: You have to be tech savvy to use online accounts

While you need to have a computer, tablet or smartphone to use an online bank and access an online checking account, one of the top myths about online banking is that you have to be a techie.

“There is no need to know a lot about technology to have an online account,” Russell says. “Some banks know the importance of easy-to-use websites and mobile apps, so they often have a design that is simple and straightforward—even for those claiming not to be tech savvy.”

Lam, who recently opened a new online bank account, also challenges this myth about online banking. “I went online and filled out a simple form and instantly had access to my account,” she says.

Suro has had an online bank account for 10 years and has not found the technology to be challenging, debunking this myth about online checking. “If you can manage your traditional bank’s account online via its website or app, you can manage an online-only account,” Suro says. “It’s the same basic experience.”

“If you can manage your traditional bank’s account online via its website or app, you can manage an online-only account. It’s the same basic experience.”

– Miguel A. Suro, founder of financial blog The Rich Miser

Myth 4: You won’t be able to talk to a human if there’s a problem

Another online banking myth is that you won’t be able to access good customer service for your online checking account because you can’t walk into a branch to talk to someone. Not so fast.

Some online banks have customer service representatives that you can call, and some may even have this service available around the clock (no need to even leave the comfort of your home if you have a question). For instance, Discover’s customer service is available 24/7.

“You no longer have to make it to the bank before it closes, you can actually contact the bank in the evening and get an answer,” Russell says.

If you're worried an online bank will provide bad customer service, you should know that's another online banking myth.

If you’re all about communication from your favorite device, note that some online banks offer digital customer service through the bank’s website or app, calling into question this myth about online checking. “Many online banks offer [live] chat,” Russell says. You may also be able to contact an online bank’s customer service through social media.

Despite the face-to-face opportunity, Suro doesn’t think bank branches are necessarily better at providing customer service. He once needed to send a wire transfer and easily figured out how to do it online. When his relative went into a branch to do the same thing, he got held up. “The whole thing turned into an ordeal that took over 45 minutes,” Suro says.

Myth 5: Online checking isn’t insured

One final online banking myth is that deposited money isn’t insured.

Online banks can be members of the FDIC, which means they insure your money up to $250,000 or the maximum allowed by law, Lam says. Before you open an account, you’ll want to make sure that the online bank is FDIC-insured. One way to do this is to call the FDIC’s toll-free number at 1-877-ASK FDIC (1-877-275-3342) and ask a deposit insurance specialist to confirm that the online bank in question is FDIC-insured. The FDIC’s online tool BankFind also allows you to search banks by name and informs you of their FDIC number and status, among other information. Banks often include language on their websites and in marketing materials noting if they are members of the FDIC, so be sure to look for that as well.

The belief that online checking accounts aren't safe or secure is one of the many myths about online banking.

No myths about online banking—only a new reality

“Despite the benefits of online banks, many people don’t open accounts because of all these misconceptions,” Russell says.

Now that some of the common online banking myths have been challenged, you can more easily see the simplicity of online accounts and the time saved by banking online—two key reasons Suro is a huge proponent.

“That’s why banking online is one of my core strategies for effortlessly saving money and moving through life more efficiently,” he adds.

1 Outgoing wire transfers are subject to a service charge. You may be charged a fee by a non-Discover ATM if it is not part of the 60,000+ ATMs in our no-fee network.

2 ATM transactions, the purchase of money orders or other cash equivalents, cash over portions of point-of-sale transactions, Peer-to-Peer (P2P) payments (such as Apple Pay Cash), and loan payments or account funding made with your debit card are not eligible for cash back rewards. In addition, purchases made using third-party payment accounts (services such as Venmo® and PayPalTM, who also provide P2P payments) may not be eligible for cash back rewards. Apple, the Apple logo and Apple Pay are trademarks of Apple Inc., registered in the U.S. and other countries.

Discover Bank, Member FDIC

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Source: discover.com

Posted on January 24, 2021

Help, I Need to Get the Cosigner Off My Car Loan!

November 28, 2018 &• 4 min read by Credit.com Comments 6 Comments

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We’ve had many readers write in after a divorce and ask how to split their assets with an ex-spouse. One of the most common questions is how to remove an ex or another cosigner from a car loan and title. Here’s how to go about it.

What’s the Role of a Cosigner?

It can be challenging to remove a cosigner from a loan. To gain a better understanding of why, let’s look at why a cosigner is used at all. Essentially, a cosigner is needed when the borrowers own credit and/or income isn’t enough to qualify for the loan by himself or herself. The cosigner, presumably, has stronger credit and income, and is required by the lender or creditor to help guarantee that the loan will be repaid.

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Loans involving a cosigner include a cosigners notice. The notice asks that the cosigner guarantee the debt. This means that if the original borrower fails to make payments on the debt, then the cosigner becomes responsible for the balance. The cosigner then is obligated to make payments until the debt is paid when the borrower can’t.

Co-signing a loan is risky for the cosigner, because it can affect the cosigner’s credit if the borrower doesn’t satisfy the debt and the cosigner has to take over. The debt can ultimately affect the cosigner’s credit scores and access to revolving credit, such as credit cards.

Before co-signing a loan, a cosigner should be sure that he/she is able to comfortably take on the monthly payments if it comes to that. The cosigner should also make sure he/she doesn’t need to get a loan of his/her own over the course of the cosigned loans terms.  Cosigning on the borrower’s debt will affect the cosigner’s overall credit utilization and ability to secure other credit opportunities in the meantime.

Now that you know the role of a co-signer let’s look at what you can do to remove them from a car loan if needed.

Refinance the Car Loan to Get the Cosigner Off

You may be able to refinance a car loan in your own name to get your cosigner off the loan. In essence, you’ll buy the car from your ex-spouse and go through the car buying process again.

The spouse who is responsible for the car loan payments, the primary signer, should ideally assume credit liability for the loan. It’s a also good idea to go through this process right away, regardless of what your divorce decree states.

Divorce decrees (or court orders) don’t release either person from his/her obligations under the original contract of the loan. That means that if you and your ex-spouse have a joint account, like a car loan, and if the spouse who is supposed to pay doesn’t, the negative credit history will end up on both of your credit reports, and those late payments will damage both of your credit ratings. In fact, the other person may not know about the unpaid account until a collection agency calls.

Removing your ex from the car’s title, if the car already paid for, is similar and requires working with the Department of Motor Vehicles (DMV). You’ll both need to sign a change of title/vehicle ownership form and return it for processing. You can check online or call your state’s DMV for details and forms.

In some states you can file a transfer of title between family members, if the divorce has not been finalized yet. A transfer of title lets you avoid getting any needed inspections or certifications and paying taxes on the vehicle based on the purchase price. (If you live in the state of California, for example, research changing vehicle ownership versus transferring a car title.)

See if You Have a Cosigner Release Option

Some car loans include conditions that remove the cosigner’s obligation after a specified number of on-time payments are made by the primary borrower.

If you’re unsure if this is an option, talk to the lender and check any loan documents you have. The cosigner release option is probably one of the easiest methods of taking a co-signers name off a car loan.

Pay Off the Loan

Another option to get a cosigner off a car loan is to pay off the loan either directly or by selling the car. If you sell the car, you can use the money to pay off the loan. With luck, the sale value of the car will be sufficient to cover the remainder of the loan.

Be aware that if you are the cosigner, and the primary borrower fails to make payments, you can likely seize the asset and sell it.

This article was originally published February 20, 2013, and has since been updated by another author.

Image: iStockphoto


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