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Apache is functioning normally

May 28, 2023 by Brett Tams

The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

The deadline for the U.S. to raise the debt ceiling is looming. If the U.S. defaults, it’s likely to impact many Americans in some capacity. Even if we manage to escape this economic crisis, though, another one is likely on the horizon.

Whether it’s a nationwide recession, worldwide crisis or a personal event, it’s a good idea to start thinking about how to stabilize your finances now so they can be a safety net in your time of need.

How the U.S. debt ceiling crisis could impact your finances

“We’ve never had this type of default before,” says Jean Ross, a senior fellow of economic policy at the Center for American Progress. A lot depends on whether the default period is short term or more protracted.

Things that could happen include:

A decrease in household wealth: This would especially be the case among those who have retirement portfolios and stock holdings. A stock market spiral could impact retirees who are pulling from their retirement funds, as well as workers on the brink of retirement who might now have to reconsider their plans.

Rising interest rates: Rates on credit cards and adjustable-rate mortgages would increase, and with it, the debt load of many Americans — which also could negatively affect their credit scores.

Delayed paychecks: This would impact federal employees and businesses with federal government contracts. Those affected could include everyone from cleaning contractors to graphic designers and people who serve lunch in federal buildings, according to Ross.

A disruption in some federal or state government benefits: Programs like Supplemental Nutrition Assistance Program, Medicaid, Social Security and veterans benefits could be affected.

How to make your budget resilient

You can’t always control how much time you have to prepare for a financial crisis. The key is to work strategically with the time and resources you have to safeguard your budget as best you can.

Here are some tips for how to brace your budget for a major financial disruption.

1. Make or fine-tune your budget

To prepare for an emergency, isolate your necessary expenses so you know what your bare minimum budget should be. A 50/30/20 budget framework is a good way to start thinking about what’s necessary and what you can cut if needed.

“When it comes to expenses, we usually don’t go back far enough,” says Kia McCallister-Young, the director of America Saves, a nonprofit organization and an initiative of the Consumer Federation of America. Only looking at your last few statements can cause you to leave out annual expenses. McCallister-Young recommends going back a full year and examining all your statements, including those from your bank and other bill pay apps.

If you’re in a crisis now: Make a list of expenses you can cut — things like cable or streaming subscriptions, meal services, eating out and shopping. Contact these providers to cancel immediately.

2. Create or bulk up your emergency fund

Ideally, you should have or be working toward an emergency fund that holds three to six months of necessary expenses. However, “three to six months in expenses is very overwhelming, and for some people unattainable as well, especially if you’re not earning a living wage,” says McCallister-Young.

She recommends starting with an attainable goal and automating your savings, either through direct deposit or through your bank. Even $10 a week is a good starting point. “Saving is a habit, not a destination,” says McCallister-Young.

Storing your emergency fund in a high-yield savings account is a good idea because it’s easy to access and also will be earning interest with each passing month, helping you reach your goal faster.

If you’re in a crisis now: It can feel scary to pull money from your emergency fund, but don’t be afraid. “You don’t have to feel bad about the fact that you are using the savings that you have created,” says McCallister-Young. “It’s supposed to be there to help you.” If you don’t have an emergency fund, though, reach out to your community resources.

3. Research assistance in your area

Knowing where to turn in a financial crisis can be a challenge because you might be feeling panic or shame. McCallister-Young recommends finding a “community of support that can lift you up and can tell you where you should go” in a time of need.

Plugging into these community resources ahead of an emergency can be helpful. Consider joining online neighborhood groups, following the social media pages of local nonprofits and identifying food banks in your area.

If you’re in a crisis now: Start your internet search with 211.org for confidential help from experts on everything from finding food to mental health assistance. From there, reach out to your community of support to find local food banks or identify community groups or nonprofits that can help pay your bills.

4. Pay down your debt

One of the ways you can set yourself up to survive a financial crisis is to have as little debt as possible. Big disruptions are likely to make it harder to pay your bills, and accruing interest will only make digging out of your circumstance harder.

To prepare for an emergency, start paying down credit card and other debt now. If it’s a recession you’re worried about, focus on paying down debt with the highest interest rates.

If you’re in a crisis now: Contact lenders to discuss payment options. For example, a lender might be able to put you on a payment plan to spread out costs into more manageable chunks or temporarily lower your interest rate.

5. Bolster your credit score

The best way to protect your credit during a financial disruption is to make on-time payments and keep your credit utilization as low as possible. However, this might be difficult, especially if you’re operating off of a reduced income and need your credit cards to supplement your monthly expenses.

You have some options when it comes to handling your debts, explains Melinda Opperman, chief external affairs officer at Credit.org. If you have time to prepare, “call your lender to ask if they offer a concession like a lower interest rate or a deferred payment,” she says. The only risk, according to Opperman, is that your lender might lower your credit limit, causing your credit utilization ratio to increase. This could harm your score until you are able to pay down the balance.

You also might consider using a balance transfer or 0% APR credit card to take some of the pressure off. Just pay attention to the fine print, especially when it comes to transfer fees and repayment terms, which are typically around 18 months, says Opperman.

If you’re in a crisis now: One way to weather a financial storm is to make on-time payments, but consider only paying the minimum balance, says Opperman. While it will temporarily increase your debt load, especially if you’re used to paying your balance in full each month, paying the minimum for a short time can help you get through a tough time while recording on-time payments, which is a huge factor in calculating your credit score.

The thing to note about your credit score is that it’s not typically directly impacted by a recession or personal financial crisis.

“A credit score doesn’t reflect your income, wealth or current financial situation,” says Opperman. “It’s a measure of how you handle your debts.”

Source: nerdwallet.com

Apache is functioning normally

May 27, 2023 by Brett Tams

Both 10-year fixed and 15-year fixed refinances saw their mean rates climb sharply this week. The average rate on 30-year fixed refinances also made gains.

Amid its ongoing battle to fight inflation, the Federal Reserve announced a 0.25% hike to its target federal funds rate on May 3. Refinance rates, like mortgage rates, fluctuate on a daily basis and could see further movement in response, or they could stay generally the same.

“The market has already built in the expectations for a 25-basis-point hike in May and then no further hikes after that,” says Scott Haymore, head of capital markets and mortgage pricing at TD Bank.

With inflation falling steadily from its peak last summer, the Fed has signaled that the end of the current rate hiking cycle may be in sight. Depending on incoming inflation data, the Fed may hold rates where they are — but not cut them — until inflation reaches its 2% goal.

“Ultimately, more certainty about the Fed’s actions will help to smooth out some of the volatility we have seen with mortgage rates,” says Odeta Kushi, deputy chief economist at First American Financial Corporation.

As the Fed aggressively ratcheted up its federal funds rate in 2022, refinance rates spiked, but we’re seeing signs that rates may be slowly starting to level out as inflation eases.

For the first three meetings of 2023, the Fed has adopted smaller rate increases — 25 basis points as compared with the 75- and 50-basis-point increases common last year — as it waits to see the cumulative effects of policy changes on inflation.

Looking at average mortgage rate data for the past year, mortgage rates hit a peak in late 2022 and have been trending down since then. We’re still a long way from the record-low refinance rates of 2020 and 2021, but borrowers may see rates fall in 2023.

“With the backdrop of easing inflation pressures, we should see more consistent declines in mortgage rates as the year progresses, particularly if the economy and labor market slow noticeably,” says Greg McBride, CFA and chief financial analyst at Bankrate. (Bankrate, like CNET Money, is owned by Red Ventures.) He expects 30-year fixed mortgage rates to end the year near 5.25%.

Regardless of where rates are headed, homeowners shouldn’t focus on timing the market, and should instead decide if refinancing makes sense for their financial situation. As long as you can get a lower interest rate than your current rate, refinancing will likely save you money. Do the math to see if it makes sense for your current finances and goals. If you do decide to refinance, make sure you compare rates, fees, and the annual percentage rate — which shows the total cost of borrowing — from different lenders to find the best deal.

30-year fixed-rate refinance

For 30-year fixed refinances, the average rate is currently at 7.21%, an increase of 12 basis points compared to one week ago. (A basis point is equivalent to 0.01%.) One reason to refinance to a 30-year fixed loan from a shorter loan term is to lower your monthly payment. This makes 30-year refinances good for people who are having difficulties making their monthly payments or simply want a bit more breathing room. Be aware, though, that interest rates will typically be higher compared to a 10- or 15-year refinance, and you’ll pay off your loan at a slower rate.

15-year fixed-rate refinance

The current average interest rate for 15-year refinances is 6.62%, an increase of 24 basis points from what we saw the previous week. A 15-year fixed refinance will most likely raise your monthly payment compared to a 30-year loan. On the other hand, you’ll save money on interest, since you’ll pay off the loan sooner. Interest rates for a 15-year refinance also tend to be lower than that of a 30-year refinance, so you’ll save even more in the long run.

10-year fixed-rate refinance

The current average interest rate for a 10-year refinance is 6.71%, an increase of 23 basis points compared to one week ago. Compared to a 15- or 30-year refinance, a 10-year refinance will usually have a lower interest rate but higher monthly payment. A 10-year refinance can help you pay off your house much faster and save on interest in the long run. Just be sure to carefully consider your budget and current financial situation to make sure that you can afford a higher monthly payment.

Where rates are headed

At the start of the pandemic, refinance interest rates hit a historic low. But in early 2022, the Fed started hiking interest rates in an effort to curb runaway inflation. While the Fed doesn’t directly set mortgage rates, the Fed rate hikes led to an increased cost of borrowing among most consumer loan products, including mortgages and refinances. Mortgage rates hit a 20-year high in late 2022.

Recent data shows that overall inflation has been falling slowly but steadily since it peaked in June 2022, but it still remains well above the Fed’s 2% inflation goal. After raising rates by 25 basis points in March, the Fed has indicated (PDF) it plans to slow — but not stop — the pace of its rate hikes throughout 2023. Both of these factors are likely to contribute to a gradual pull-back of mortgage and refinance rates this year, although consumers shouldn’t expect a sharp drop or a return to pandemic-era lows.

We track refinance rate trends using information collected by Bankrate. Here’s a table with the average refinance rates provided by lenders across the country:

Average refinance interest rates

Product	Rate	A week ago	Change
30-year fixed refi	7.21%	7.09%	+0.12
15-year fixed refi	6.62%	6.38%	+0.24
10-year fixed refi	6.71%	6.48%	+0.23

Rates as of May 26, 2023.

How to find personalized refinance rates

It’s important to understand that the rates advertised online often require specific conditions for eligibility. Your interest rate will be influenced by market conditions as well as your specific credit history, financial profile and application.

Having a high credit score, a low credit utilization ratio and a history of consistent and on-time payments will generally help you get the best interest rates. You can get a good feel for average interest rates online, but make sure to speak with a mortgage professional in order to see the specific rates you qualify for. To get the best refinance rates, you’ll first want to make your application as strong as possible. The best way to improve your credit ratings is to get your finances in order, use credit responsibly and monitor your credit regularly. Don’t forget to speak with multiple lenders and shop around.

Refinancing can be a great move if you get a good rate or can pay off your loan sooner — but consider carefully whether it’s the right choice for you at the moment.

When to consider a mortgage refinance

Most people refinance because the market interest rates are lower than their current rates or because they want to change their loan term. When deciding whether to refinance, be sure to take into account other factors besides market interest rates, including how long you plan to stay in your current home, the length of your loan term and the amount of your monthly payment. And don’t forget about fees and closing costs, which can add up.

As interest rates increased throughout 2022, the pool of refinancing applicants contracted. If you bought your house when interest rates were lower than they are today, there may not be a financial benefit in refinancing your mortgage.

Source: cnet.com

Apache is functioning normally

May 27, 2023 by Brett Tams

If you don’t pay your credit card bill, you could face more severe consequences than you might think. Though it will depend on your credit card issuer, you can generally expect to be charged a late fee as well as a penalty interest rate which is higher than the regular purchase APR.

Life happens, and, from time to time, payments are missed, especially if you’re dealing with emergencies such as losing a job or a family crisis. In the event you have skipped a credit card payment, it’s crucial you understand what can happen. That way, you can take steps to reduce the odds of it having a major impact on your financial health.

Here, you’ll learn more about this topic, including:

• What happens if you don’t pay your credit card bills?

• What if you miss one credit card payment?

• What happens if you only can make minimum payments?

• How can you pay off credit cards?

What Happens If You Don’t Pay Your Credit Card?

Consequences for missed credit card payments could include being changed late fees and possibly losing your grace period. It may also negatively affect your credit score since issuers report your payment activity to the credit bureaus — in most cases after 30 days.

There may be other consequences depending on how late your payment is and whether it’s your first time missing a payment.

Accruing Interest

When you don’t pay your credit card, interest will accrue and will continue to do so as long as you have a balance on your card. In essence, you are paying more for your initial purchase thanks to that interest.

The longer you go without paying your credit card, the more you risk your rate going up. Your credit card issuer may start imposing a penalty annual percentage rate (APR), which tends to be higher than your regular purchase APR. If this happens, you’ll end up paying more in interest charges. The penalty APR may apply to all subsequent transactions until a certain period of time, such as for six billing cycles.

Collections

Depending on your credit card issuer, your missed payments may go into collections if it goes unpaid for a period of time. You’ll still continue to receive notices about missed payments until this point.

More specifically, if you don’t pay your credit card after 120 to 180 days, the issuer may charge off your account. This means that your credit card issuer wrote off your account as a loss, and the debt is transferred over to a collection agency or a debt buyer who will try to collect the debt.

Once this happens, you now owe the third-party debt buyer or collections agency. Your credit card issuer will also report your account status to the major credit bureaus — Experian, TransUnion, and Equifax. This negative information could stay on your credit report for up to seven years.

It’s hard to tell what third-party debt collectors will do to try and collect your debt. Yes, they may send letters, call, and otherwise attempt to obtain the money due.

Some collections agencies may even try to file a lawsuit after the statute of limitations expires. In rare cases, a court may award a judgment against you. This means the collections agency may have the right to garnish your wages or even place a lien against your house.

If your credit card bill ends up going to collections, take the time to understand what your rights are and seek help resolving the situation. Low- or no-cost debt counseling is available through organizations like the National Foundation for Credit Counseling (NFCC).

Bankruptcy

You may find that you have to declare bankruptcy if you still aren’t able to pay your high credit card debt and other financial obligations. This kind of major decision shouldn’t be taken lightly. You will most likely need to see legal counsel to determine whether you’re eligible.

If you do file bankruptcy, an automatic stay can come into effect, which protects you from collection agencies trying to get what you owe them. If successfully declare bankruptcy, then your credit card debt will most likely be discharged, though there may be exceptions. Seek legal counsel to see what your rights and financial obligations are once you’ve filed for bankruptcy.

Making Minimum Payments

A minimum payment is typically found in your credit card statement and outlines the smallest payment you need to make by the due date. Making the minimum payment ensures you are making on-time payments even if you don’t pay off your credit card balance. Any balance you do carry over to the next billing cycle will be charged interest. You can also avoid late fees and any other related charges by making a minimum payment vs. not paying at all.

What Happens if You Miss a Payment

If you can’t pay your credit card for whatever reason, it’s best to contact your issuer right away to minimize the impact. Let them know why you can’t make your payment, such as if you experienced a job loss or simply forgot. For the latter, pay at least the minimum amount owed as soon as you can (ideally before the penalty or higher APR kicks in).

If this is your first time missing a payment but otherwise paid on time, you can try talking to the credit card company to see if they can waive the late fee.

Some credit card issuers may offer financial hardship programs to those who qualify, such as waiving interest rates, extending the due date, or putting a pause on payments (though interest may still accrue) until you’re back on your feet.

15/3 Rule for Paying Off Credit Cards

The 15/3 payment method can help you keep on top of payments and lower your credit utilization — the percentage of the credit limit you’re using on revolving credit accounts — which can impact your score.

Instead of making one payment when you receive our monthly statement, you pay twice — one 15 days before the payment due date, and the other three days beforehand. This plan is useful if you want to help build your credit history and pay on time.

The Takeaway

Missing your credit card payment may not be a massive deal if it just happens once or twice, but it can turn into one if you continue to ignore your bill. While it’s not exactly fun to have to pay a late fee, you may be able to negotiate with the credit card issuer to waive it if you are otherwise a responsible user. Even if not, it’s better than being bumped up to the penalty APR or, worse still, having your account go to collections.

Are you looking for your first or a new credit card? Consider the SoFi Credit Card. With perks like cash back rewards on all purchases, no foreign transaction fees, and Mastercard ID Theft Protection, it may be just the right choice for your personal and financial goals.

The SoFi Credit Card: The smarter way to spend.

FAQ

How long can a credit card go unpaid?

The statute of limitations, or how long a creditor can try to collect the debt owed, varies from state to state, which can be decades or more.

What happens if you never pay your credit card bill?

If you never pay your credit card bill, the unpaid portion will eventually go into collections. You could also be sued for the debt. If the judge sides with the creditor, they can collect the debt by garnishing your wages or putting a lien on your property.

Is it true that after 7 years your credit is clear?

After seven years, most negative remarks on your credit report, such as accounts going to collections, are generally removed.

Photo credit: iStock/MStudioImages
The SoFi Credit Card is issued by The Bank of Missouri (TBOM) (“Issuer”) pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
¹See Rewards Details at SoFi.com/card/rewards.
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.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
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Source: sofi.com

Apache is functioning normally

May 25, 2023 by Brett Tams

Monitoring your credit score sounds about as appealing as writing a term paper.

But having good credit is crucial for everything from getting a loan to getting an apartment. Which means if your credit score is on the lower end, you’ll need to be proactive — not just by monitoring it, but by actively working to improve it.

The problem? There’s a lot of conflicting info out there about what you should do to improve your credit score. Which tactics will actually make a difference, versus the ones that just sound like they’ll work?

Here’s what you really need to know about improving your FICO score, which holds the key to so many financial dreams.

What’s Ahead:

1. Target Collections Accounts First

“If your credit history includes unpaid bills that are in collections, work to pay those off [first] if possible,” says Kelley Long, a member of the National CPA FinLit Commission at the AICPA.

Letting an account get so late it goes to a collections agency is never a good thing for your credit, but the good news is the credit scoring algorithms will reward you for paying these accounts in full.

With collections accounts, the key is to get everything in writing. Request a letter stating that they received your payment in full and that they will update your credit report to show this.

In some cases, a collections agency may be willing to negotiate and settle your debt for less than the full amount. Again, you’ll want to get something in writing showing that the debt was settled and the account closed. But keep in mind this kind of arrangement may appear on your credit report as a settlement, which could be less positive than if you paid in full.

Read more: When Does an Account Go to Collections, and How To Avoid It

2. Pay Off Debts That Are Close to the Credit Limit

Even if you pay your credit card bill on time, it’s never a good idea to hold a balance near the maximum limit. The magic ratio is 35%, says Kevin Gallegos, vice president of Phoenix operations with Freedom Financial Network.

“If you have a credit card with a limit of $10,000 and you owe $3,500 on it, that’s 35% utilization,” he notes. “Anything over 35% is considered high and can [negatively] impact credit scores. Over 50% will have a definite negative impact on a credit score, and a maxed-out card will very negatively impact the score.”

Read more: What’s Your Credit Utilization Ratio?

3. Get a Higher Credit Limit (If You Can)

Believe it or not, requesting a higher credit line with an existing account can actually help your credit score, says Gail Cunningham, a spokeswoman with the non-profit National Foundation for Credit Counseling (NFCC).

“Or, open a new line of credit. The idea is that you’ll owe the same amount of money but it’s against a higher credit line, thus the ratio of credit-to-debt improves,” she explains.

“This option may not help you if you’re already having credit problems, however, because it takes good credit to get more credit. If, however, your credit score is in the high 600s or low 700s and you want to improve it even more, you may be able to find a credit card that offers a good chance of approval for your credit score range.”

She adds, “I’d caution, however, that this strategy only works for a person who’s very disciplined — and knows they won’t charge more simply because they have access to a higher credit line.”

In other words, take it easy at the mall with that credit line increase.

Read more: What Credit Score Do You Need to Get Approved for a Credit Card?

4. Look for Non-Credit Accounts That Will Report Payments to the Credit Bureaus

John Ganotis, Founder of CreditCardInsider.com, makes this remarkable point: “Rebuilding your credit doesn’t always have to involve a line of credit.”

One way is to put a utility service in your name.

“Call your providers to find who reports to the credit bureaus.”

You don’t even need to go direct to the providers if you don’t want to. Experian Boost is a free service that credits you for on-time utility payments — think cellphone, internet, cable, heating, electricity, water, etc. You just connect your bank account and let Experian do the rest.

Another is to report your living expenses to the credit bureaus, including your rent.

“Experian and TransUnion now include rent payments [in assessing FICO scores] when reported through online third party services.”

Read more: Build Credit By Paying Rent

5. Avoid For-Profit “Credit Repair” Companies

Some businesses charge a hefty sum to “repair” your credit, but they can actually do more harm than good, says Carl Robins, Vice President and Mortgage Banker with PrivatePlus Mortgage in Atlanta.

“What they don’t tell the consumer is that they’re signing up for a service to improve their scores that lenders — and current underwriting guidelines for mortgage transactions — won’t accept if there are still unresolved credit disputes on their credit report.”

He adds, “They also don’t explain the cumbersome process to have unresolved disputes removed from credit reports to qualify for a home purchase or refinance their current mortgage.”

If you feel like you need help managing your credit, look towards non-profit counseling options like the NFCC.

How to Get Approved for a Credit Line with a Less-than-Perfect Credit Score

If you follow the steps above and continue to pay all your bills on time, your credit score will improve.

Unfortunately, however, it takes time. Improving your credit score from below average (mid 600s or less) to good (720 or better) may take a couple of years. If you’re hoping to buy a home or take out other new credit in the meantime, it may be a challenge.

Here are some things to keep in mind:

1. Don’t Apply for New Credit Recklessly

The credit bureaus take note every time you apply for credit, and doing it too often will further hinder your efforts to improve your credit score.

Keep in mind that there are factors other than just your FICO score that are taken into account when you apply for a credit card, such as your income and credit utilization ratio.

Avoid applying for new credit unless you absolutely need it or are confident you will be approved.

Read more: Why You Could Be Denied a Credit Card Despite Your Excellent Score

2. Work with a Community Bank or Credit Union

If your credit score isn’t what it should be, a relationship with a community bank or credit union can really come in handy.

“A banker who knows you can perhaps look behind the poor credit history,” says Charlie Crawford, President and CEO of Private Bank of Buckhead in Atlanta. “They’ll look at the big picture rather than just a score or some other stand-alone piece of information.”

Best of all, a community banker can be straight with you and let you know your chances of being approved before you actually apply. Waiting as little as a couple months while you make some tweaks to your credit usage or budget may mean the difference between being approved or denied for a mortgage, and a knowledgable banker can tell you that.

Read more: Credit Unions vs. Banks: Think Local, Save Money?

3. Consider Secured Credit

“Establishing some cash-secured credit is one way to demonstrate your ability to pay while not putting a new bank loan at risk,” says Crawford.

If your credit score is in the low 600s, you may consider a secured credit card to help you establish a new credit line and have timely payments reported to the bureaus.

A secured credit card works just like a regular credit card except you first have to deposit money in a savings account to “secure” your credit line. Most secured credit cards can be converted to traditional credit cards (and you get your security deposit back) after a period of responsible use.

Read more: When To Consider a Secured Credit Card

The Bottom Line

The road to improving your credit isn’t always easy, but it’s well worth it. Consumers with good credit scores pay thousands less in interest over their lifetime and avoid hassles when getting jobs, apartments and, of course, loans.

Featured image: Nataliealien/Shutterstock.com

Source: moneyunder30.com

Apache is functioning normally

May 25, 2023 by Brett Tams

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Rewards: None

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If you’re building or rebuilding your credit, you’re probably looking into a secured credit card like the U.S. Bank Secured Visa® Card. And as a potentially useful bridge to a more rewarding card, it’s one of the better secured credit cards on the market.

Like all secured credit cards, U.S. Bank Secured Visa requires a security deposit before you can begin using it. Don’t worry: You get it back when you pay off your balance and close or upgrade the account. And in the meantime, you build credit — as long as you use the card responsibly.

U.S. Bank Secured Visa isn’t perfect, though. Before you rush out to apply, understand its ins and outs.

What Is the U.S. Bank Secured Visa Card?

The U.S. Bank Secured Visa Card is a secured credit card with no annual fee. Once you make the initial security deposit, you use the card as you would any other, paying off your monthly statement or carrying a balance with interest.

The U.S. Bank Secured Visa Card has no notable incentives, such as a rewards program or sign-up bonus. It’s not meant for long-term use but rather for building or improving your credit until you’re in a position to apply for a more generous cash-back credit card.

What Sets the U.S. Bank Secured Visa Card Apart?

The U.S. Bank Secured Visa Card shares a lot in common with other secured credit cards and has no unique features of note. To the extent that it stands out at all, it’s because it has:

No annual fee. Without an annual fee, you don’t have to worry about losing money each year you keep it.
No preset credit limit. Your credit limit is always equal to your security deposit, but U.S. Bank doesn’t set a minimum or maximum. If you have the means to make a big deposit, you enjoy greater spending power than with competing cards that set low initial limits.
No need for a FICO score. U.S. Bank considers your credit history if you have one, but you don’t have to have a FICO score to apply. So this card could work as your very first.

Key Features of the U.S. Bank Secured Visa Card

The U.S. Bank Secured Visa Card is very straightforward. The most important things to know about it are the rules around security deposits, credit limits, and credit reporting.

Security Deposit

Before you can begin using this card, you must make a security deposit into a special FDIC-insured bank account controlled by U.S. Bank.

Your deposit remains locked up until you upgrade to an unsecured card or pay off your balance and close the account. You make monthly payments from your regular bank account, not your security account.

If you stop making at least the minimum payment on your account, U.S. Bank may use your security deposit to cover the shortfall. If that happens, U.S. Bank closes your account and you get a serious black mark on your credit report.

Credit Limit

Your credit limit is always equal to your security deposit. You can charge up to your limit, but you can’t exceed it without first paying off previous charges.

Credit Reporting & Monitoring

U.S. Bank reports your payment history and credit utilization to the three major credit reporting bureaus: TransUnion, Equifax, and Experian. You have access to your FICO credit score in your online account dashboard, so you can track how these reports affect your credit score (hopefully for the better) as time goes on.

Overdraft Protection

You don’t need a U.S. Bank checking account to qualify for this card, but if you have one, you can use your U.S. Bank Secured Visa Card as a backup to cover negative balances in that account. U.S. Bank charges the negative amount to your credit card to make your bank account whole.

There’s no additional fee for this service, but overdraft protection charges begin accruing interest right away. You should pay them off as soon as you can to reduce your net cost.

Important Fees

This card has no annual fee. Foreign transaction fees cost 3% of the transaction amount. Balance transfers cost the greater of 3% or $5.

Ongoing APR

There’s no introductory promotion. The APR for purchases and balance transfers is 28.99% from day one.

Credit Required

If you have enough credit history to have a FICO score, you need fair or better credit to qualify for this card. You probably won’t qualify with a recent bankruptcy on your record.

But if you have no credit history at all, U.S. Bank may consider noncredit factors like income and assets when assessing your application. You don’t absolutely need a FICO score to qualify.

Advantages

The U.S. Bank Secured Visa Card’s biggest advantages concern its relaxed underwriting standards, flexible credit limit, and credit-building capabilities. It doesn’t hurt that it has no annual fee either.

No annual fee. This card has no annual fee. Many other secured cards charge recurring fees, so this is a notable and positive feature.
Relaxed standards. You can qualify for this card with fair or better credit. Some secured credit cards have surprisingly strict standards, requiring FICO scores close to 700.
May qualify with limited or no credit. If you don’t have a FICO score due to limited credit history, you may still qualify for this card based on noncredit factors like income and occupation. That’s another advantage over some competing secured cards that strictly require FICO scores.
Deposit sits in an FDIC-insured account. Your security deposit is safe in an FDIC-insured account until you close your credit card account. You’d expect this from a major bank, but it’s still nice to have the peace of mind.
You can control your credit limit. Your credit limit depends on the size of your initial deposit, which means you can boost your spending power if you’re willing to lock away more cash upfront.
Comes with free credit monitoring tools. With this card, you always know where your credit stands. That’s a nice perk if you don’t already have a credit monitoring service.
May offer a path to unsecured status. After several months of responsible use, you may qualify for an unsecured credit card from U.S. Bank. U.S. Bank is vague about how long that takes and how it determines who’s eligible, but it’s something to aspire to nonetheless.

Disadvantages

This card’s downsides revolve around its total lack of cardholder incentives. That isn’t surprising for a basic secured credit card, but it’s disappointing nonetheless.

No sign-up bonus. This card has no sign-up bonus for new cardholders who hit an early spending target. Such an incentive would be nice right out of the gate.
No APR promotion. The U.S. Bank Secured Visa doesn’t have a 0% intro APR promotion. This feature is uncommon in the secured credit card space, but it’s increasingly popular on unsecured entry-level credit cards for people with fair or limited credit.
Few perks. This card has few extra benefits to speak of. If you can qualify for a card with more perks, don’t waste your time with this one.
No rewards program. This card has no ongoing rewards program. While it’s still not necessarily common in the space, some competing secured credit cards do, including a few without annual fees. Look into those if you qualify.

How the U.S. Bank Secured Visa Card Stacks Up

The U.S. Bank Secured Visa Card isn’t the only no-annual-fee secured credit card from a major U.S. financial institution. Before you apply, see how it compares to another popular option: the Citi Secured Mastercard.

	U.S. Bank Secured Visa	Citi Secured Mastercard
Annual Fee	$0	$0
Credit Limit	Depends on deposit	Up to $2,500
Rewards	None	None
Sign-up Bonus	None	None
FICO Score	Yes	Yes

Final Word

The U.S. Bank Secured Visa® Card has a lot of advantages relative to other secured credit cards. It has no annual fee, which is relatively rare, and it doesn’t require a FICO score to qualify. The credit limit is flexible too — based on your initial deposit.

But it’s not perfect by any means. With few extra perks, it offers little in the way of incentives for cardholders. It’s best used as a stepping stone to better credit, which is probably your plan, anyhow.

The Verdict

Our rating

U.S. Bank Secured Visa® Card

Annual Fee: $0
Security Deposit: Yes, required
Initial Credit Limit: Depends on deposit amount
Sign-Up Bonus: None
Rewards: None

Editorial Note:
The editorial content on this page is not provided by any bank, credit card issuer, airline, or hotel chain, and has not been reviewed, approved, or otherwise endorsed by any of these entities. Opinions expressed here are the author’s alone, not those of the bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he’s not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.

Source: moneycrashers.com

Apache is functioning normally

May 24, 2023 by Brett Tams

When you swipe a credit card or take out a loan to make a purchase, you probably don’t think of the experience as a test of your personal integrity or reliability. You’re more interested in how you’ll feel behind the wheel of your new car, walking through your new home’s kitchen, or sitting in front of your new flat-screen TV.

But your creditors don’t care about how your purchasing habits improve your personal happiness or quality of life. They just want to recover the money they lent you — with interest. And they know from experience that it’s more difficult to recover said money (and interest!) from some borrowers than others.

The risk that you won’t repay your loans is known as your credit risk. Lenders assess credit risk using three-digit personal credit scores. The lower your credit score, the more trouble you’ll have qualifying for a credit card, mortgage, and many other types of credit.

There are also many less well known consequences of a low credit score. Find out what they are and how they can affect your life in unpredictable, unwelcome ways.

How Your Credit Score Works

Your personal credit score is based on the information in your credit report, which is a comprehensive look at your recent financial history.

Credit reports include data on:

Past loan payments, including late or delinquent payments
Credit utilization (how much you borrow as a percentage of your approved credit lines)
Recent credit applications, generally stretching back two years
The different types of credit accounts you have, like credit cards, personal loans, auto loans, home loans, and more — with information about the credit limit, lender, and other details for each
Recent adverse financial events, like bankruptcies and foreclosures

In the United States, most consumer credit reports are issued by the three major credit reporting bureaus: Experian, TransUnion, and Equifax. Keep in mind that although your credit score is derived from the information in your credit report and history, your credit score is not your credit report.

Your credit score is a number that summarizes your credit risk. Consumer credit scores generally follow a scale ranging from 300 (riskiest) to 850 (least risky), although there are exceptions. The most popular credit scoring methodology was devised by FICO and is known as your “FICO score.”

Lenders often segment credit score ranges into quality classifications, such as “A,” “B,” and “C.” They may use qualitative descriptors, like “Good,” “Very Good,” and “Excellent.” They may also draw a line separating “prime” and “subprime” borrowers at a particular score — usually somewhere in the 600s, depending on the lender.

Because each bureau’s report contains slightly different information at any given time, a credit score based on your one report is likely to vary a bit from the score based on another. That said, all three bureaus are considered reliable sources of credit-related information, and your score shouldn’t vary more than a couple dozen points at any given time.

The Possible Costs of a Bad Credit Score

Your credit score and, by extension, your overall credit profile don’t just affect your personal finances. Your credit influences many aspects of your personal and public life, including plenty that don’t involve borrowing.

This list covers seven well-known and not-so-well-known consequences of bad credit, such as difficulty getting approved for a loan, higher rates and terms on approved loans, costlier insurance, and difficulty qualifying for a traditional cellphone contract.

1. Getting Approved for a Loan Can Be Difficult

You probably know already that your credit score directly affects your likelihood of securing approval for a new loan or credit application. The lower your score, the less likely you are to find a willing lender. Many lenders simply don’t make loans to subprime borrowers or those who fall below a particular quality level or numeric score.

This can feel unfair because practically speaking, a credit score of 698 isn’t much different from a credit score of 702. But 700 is an important level to many lenders, which means those four points often make a real difference — with real-world consequences for your ability to invest in your future.

2. Higher Rates and More Restrictive Terms on Approved Loans

Getting approved for a loan counts as a victory. But if your loan comes with an unfavorable interest rate or restrictive terms, it could soon feel like a hollow one.

Every lender is different, and for competitive reasons, most are reluctant to disclose exactly how they set interest rates. But most are upfront about the fact that lower credit scores mean higher interest rates. According to Bank of America, one of the biggest lenders in the United States: “A higher credit score may help you qualify for better mortgage interest rates … and some lenders may lower their down payment requirement for a new home loan.”

The impact of higher rates and more restrictive terms can be enormous. An interest rate difference of a single percentage point can add tens of thousands of dollars to the total cost of a mortgage, depending on how the loan is structured. I used a free mortgage calculator to find the lifetime interest cost difference for a 30-year, $400,000 mortgage at 6% vs. 7% interest:

Total Interest at 6%	Total Interest at 7%	30-Year Difference
$463,352.76	$558,035.59	$94,682.83

A single percentage point higher and you pay nearly $100,000 more over the 30-year life of the loan. Astounding! And although the numbers aren’t quite as large, the same effect applies to auto loans, home improvement loans, personal loans, and credit cards.

In many cases, the difference between a good credit score and a not-so-good credit score is less obvious for inexperienced borrowers. For example, if you’re a first-time homebuyer with a 615 credit score, your only realistic chance at getting a mortgage might be to a FHA home loan. But FHA loans take longer to close than conventional mortgages, which can scare off sellers. They also come with expensive mortgage insurance requirements that may last the entire life of the loan, adding hundreds to your monthly payment.

3. Trouble Renting an Apartment

If you’re applying for an apartment lease and local laws don’t explicitly prevent them from doing so, the landlord is likely to run your credit. Which makes sense. Like it or not, applicants with lower credit scores are statistically less likely to make timely rent payments. Landlords are especially wary of applicants with patterns of late payments, delinquencies, foreclosures, and bankruptcies in their credit reports.

But if you’re an applicant, this arrangement may not feel fair — and it can have a major impact on where you end up living. Landlords who own well-kept, modern properties in desirable neighborhoods typically hold renters to higher credit standards because high demand for their properties affords them the luxury of picking and choosing who they rent to. I’ll never forget one of my ex-landlords telling me that he wouldn’t rent his best properties to anyone whose credit score came in below 640, but that he was more lenient about places on what he called “the wrong side of town.”

He’s not the only one. Small-time landlords like him and bigger management companies alike follow the same general pattern. So if your credit score is below prime, you could find yourself in a shabby rental in a neighborhood you’re not crazy about.

4. Trouble Getting a Job or Security Clearance

According to a study cited by the Association of Psychological Science (APS), there’s little if any correlation between employee credit and job performance. Worse, APS found that credit checks during the hiring process appeared to reinforce racial disparities in employment by disproportionately disadvantaging Black applicants.

But that doesn’t stop employers from checking applicants’ credit during the hiring process. In fact, unless you live in one of the handful of states where the practice is banned or severely restricted, you should expect to have your credit checked when applying for a job. According to a survey by Demos — a think tank that focuses on consumer finance issues — one in four job applicants have had their credit run, and one in seven has been advised that they were denied a job due to poor credit (such disclosures are required in some jurisdictions).

Applicant credit checks are especially common in government and the financial industry. And the credit check process can rear its head even after you’re hired. Government agencies and contractors may run credit checks when you apply for a promotion that requires a new or higher-level security clearance, which means your boss could pass you over for reasons that have nothing to do with your job performance.

5. Trouble Getting a Cellphone Contract

Getting a cellphone contract sounds trivial when you’re worried about finding a job or place to live. But these days, living without a cellphone isn’t really an option. Do you even have a landline anymore?

Unfortunately, cellphone carriers pay close attention to new customers’ credit when determining whether to approve a new contract. As in rental housing, they know that higher-risk customers are less likely to make timely payments or have enough money in their account on the auto-debit date. Even if you’re only interested in a month-to-month phone plan, your carrier is still likely to run your credit because they know how easy it is to rack up excessive data, roaming, and international calling charges in a single month.

If you’re disqualified for a traditional cellphone contract due to a bad credit score, you still have options. They’re just likely to be costly or inconvenient.

Some carriers accept security deposits in an arrangement similar to a secured credit card. If you make timely payments, you generally get your deposit back after a year or two.

A prepaid phone plan is another option. The catch is that you often have to pay out of pocket for your new phone or find yourself choosing from older, less fun models. Prepaid plans are more likely to have restrictions on talk and data usage, though these aren’t as common as in the past.

6. Higher Insurance Premiums

The federal Fair Credit Reporting Act allows auto and homeowners insurance companies to pull consumers’ credit reports when making underwriting decisions. Most states further govern this practice, though few outlaw or severely restrict it.

Timely payment histories and outstanding debt levels are particularly important to insurers. If you don’t stack up well on these metrics, you’re likely to pay higher premiums than someone with better credit on an otherwise identical policy.

7. Potential Strain on Personal Relationships

Your credit score and overall credit profile can put tremendous strain on your personal life, especially the relationships that matter most to you. Although your credit profile doesn’t actually merge with your spouse’s after marriage, their credit can affect your ability to qualify for or afford new loans that you’re applying for together, such as auto or home loans.

Say you have excellent credit and your spouse’s is just so-so. When you apply for a mortgage, the lender looks at both profiles and assesses your household’s overall credit risk as the riskier of the two (your spouse’s). So even if your risk is low enough to meet the lender’s qualification standards, you’re likely to pay a higher interest rate or larger down payment together than you would were it just you applying for the loan.

To take another example, if you and your spouse jointly apply for a credit card with you as the primary user and they as the authorized user, their card usage and payment history (or lack thereof) can affect your credit. Should they fall behind on payments or rack up irresponsible charges, both of your credit profiles suffer the consequences.

Situations like these can lead to tension at home — possibly threatening the relationship’s very existence.

Bad Credit Score FAQs

Still have questions about what your credit score means for your finances, career, and personal life? See our answers to some common questions about bad credit — and what to do about it.

What Counts as a Bad Credit Score?

It depends how you define “bad credit score.”

The lowest FICO credit score considered “prime” by U.S.-based lenders is 660. Scores between 620 and 659 are considered “near-prime.” On the qualitative scale, near-prime scores are considered “fair” or “average.”

Verge below 620 and you’re getting into bad credit territory. Precise cutoffs vary, and many lenders prefer “bad” to poor, but suffice to say that if your credit score is below 600, it needs work.

Can You Get Insurance If You Have a Bad Credit Score?

Yes, you can get insurance if you have a bad credit score. But you’ll probably have to pay more for it via higher premiums.

To find the best possible deal, follow the age-old rule of buying insurance and shop around. It takes only a few minutes to get multiple quotes using an online insurance broker, and you could save hundreds per year on big-ticket auto or home policies.

Can You Lose Your Job Due to a Bad Credit Score?

No, you’re unlikely to be fired from your job due to a bad credit score alone. It’s more likely that you won’t get the job in the first place or that you’ll be denied a promotion that requires a higher security clearance. Not that those outcomes are much better.

Can You Get Evicted If You Have a Bad Credit Score?

No, you probably won’t get evicted from your apartment just because you have a bad credit score, or because your credit score drops due to a missed loan payment.

But you certainly can get evicted from your apartment for missing multiple rent payments, which is statistically more likely for folks with bad credit.

This is why many landlords avoid renting to people with low credit scores and why you’ll likely have to work harder to find a place if your credit isn’t where you’d like it to be.

Does Your Spouse’s Credit Score Affect Yours?

Not exactly. Your spouse’s credit score has no direct bearing on yours, but their actions can affect your credit and vice versa. For example:

You take out a joint loan (like a mortgage) and your spouse stops paying their share. Eventually, you default on the loan, damaging your credit.
You cosign your spouse’s loan application and they stop making payments at some point down the road. Your credit score drops along with theirs (unless you step in to make payments for them).
You make your spouse an authorized user on your credit card and they rack up a ton of charges they can’t pay back. You know the drill by now.

Trust is always important in a relationship, but so are boundaries. If you don’t trust your spouse to make financial decisions in your own best interest, think carefully before merging your finances completely.

How Long Does It Take to Improve Your Credit?

It depends on your starting point and on the details of your credit profile. It’s often easier and faster to build credit from the ground up than to recover after a major financial setback, like bankruptcy.

Final Word

It’s hard to overstate the importance of your personal credit. At the same time, it’s not the end of the world if your credit score isn’t exactly where you want it to be at the moment.

With such an incredible range of online credit-tracking resources, it’s easy to monitor your credit and learn how to improve it. Tracking your credit is also a great way to boost your financial self-confidence. Every incremental credit score improvement due to a timely payment or reduction in credit utilization is a minor cause for celebration. And the sooner you begin, the sooner you can start racking up those little wins.

Source: moneycrashers.com

Apache is functioning normally

May 24, 2023 by Brett Tams

Getting your first credit card can be an exciting milestone. You start to picture all the responsible things you’ll do with it, like putting your bills on autopay, getting extended warranties on vital electronics like laptops and cellphones, and collecting and cashing in all those sweet, sweet rewards points.

But sometimes, your credit history doesn’t meet the requirements for approval. Fortunately, there are options available to help you secure a credit card and start building your credit.

Two common approaches are having a co-signer or becoming an authorized user on someone else’s account. However, these credit relationships are more complex than they appear at first glance. It’s essential to explore the differences between co-signers and authorized users before you even ask someone.

Co-Signer vs. Authorized User: What’s the Difference?

Co-signing involves you having your own credit card, whereas an authorized user is something you become. Both could give you access to a credit card and improve your credit history, but both roles also have credit implications and unique responsibilities.

What Is a Co-Signer?

A co-signer essentially lends their creditworthiness to support your credit application.

If you don’t meet the issuer’s requirements, such as having insufficient income or a problematic credit history, you can find someone who has good enough credit to act as a co-signer. And even if you do qualify, having a co-signer with better credit might get you more favorable terms, such as a lower interest rate.

The credit card company checks both your credit before deciding to issue you a credit card. And by co-signing, they become just as legally obligated for the debt as you are.

So expect your co-signer to want to stay informed about the account’s activity and take measures to ensure timely payments. They have a personal stake in your financial responsibility. That’s why co-signers are typically trusted family members or close friends.

Co-signing a credit card can have a significant credit score impact, both on you and your co-signer. The account activity, including payment history and credit utilization, shows up on both parties’ credit reports.

Any late or skipped payments, high balances, or defaults can negatively affect the credit scores of both individuals. That’s because co-signed debt appears on the co-signer’s credit report just like any other financial obligation, potentially impacting their ability to take on new credit or loans of their own.

And if you don’t pay up, the co-signer has to pay the entire debt, including any accrued fees or interest. If they don’t, you could both face lawsuits, wage garnishments, and severe credit score damage.

On the plus side, responsible credit management on your part can benefit both parties and help improve both your credit profiles.

Unfortunately, it can sometimes be difficult for them to get removed as a co-signer. Check the card agreement for a co-signer release option. Even if there is one, for them to get released, you must have a good payment history so the lender feels confident relieving them of co-signer responsibilities.

And if things go south, it can strain your relationship and have long-term financial consequences if you aren’t careful.

If you’re not 100% sure you can use the credit card responsibly, it’s probably best to seek out other options. It’s not worth destroying a relationship over.

What Is an Authorized User?

An authorized user is someone the primary borrower adds to their credit card.

An authorized user shares no legal responsibility for the debt, meaning they don’t necessarily make payments. They just have permission to make purchases on the account. But if you’re just trying to build your credit history, it can help to have someone add you to a card that reports on authorized users’ credit too (which is most of them).

When the primary account holder adds you to their account, you receive a card with your own name on it. The primary account holder retains control over the account and can monitor your spending activity. So it’s crucial to discuss upfront whether there are any guidelines they’d like you to follow.

For example, they may ask you to limit purchase totals to a certain amount, use the card only at certain locations or for specific reasons, or only use it if you can pay them back. They can swiftly cancel your card if you violate any of the rules.

It’s most common to become an authorized user on the cards of family members or trusted individuals. They may be willing to grant access to the account for various reasons, such as building credit, convenience, or sharing expenses.

Being an authorized user can have both positive and negative impacts on your credit. The account’s history, including payment behavior and credit utilization, is typically reported on your credit report as well. If both you and the primary account holder demonstrate responsible credit management, such as making timely payments and maintaining low balances, it can have a positive influence on your credit score.

But if the primary account holder has a history of late payments, high balances, or defaults, it can negatively affect your credit profile. You can also negatively impact their credit rating by charging too much or failing to pay them as agreed so they can afford the monthly payment.

As an authorized user, you don’t have the same level of control or decision-making power as the primary account holder. That means they can cancel the account, revoke your access, or make unexpectedly bad decisions that negatively affect your credit.

You’re not legally responsible for the debt incurred on the account, but you are ethically responsible if you agreed to pay. And there’s nothing to stop them from suing you if you don’t hold up your end of the agreement.

Additionally, pretty much everyone else involved is going to act like the account holder is doing you a favor — probably because they are. So you’re unable to access certain account features or make changes to the account.

It’s essential to establish clear communication with the primary account holder to understand any restrictions or guidelines associated with your authorized user status. And if your primary goal is improving your credit score, it’s critical that you become an authorized user with someone who has good or excellent credit on a card that reports on the authorized user’s credit.

Key Differences Between Co-Signers & Authorized Users

Co-signers and authorized users are pretty much opposite in terms of their rights and responsibilities. The only thing they have in common is how it affects their credit score.

	Co-Signer	Authorized User
Definition	Personally guarantees repayment	Granted permission to use someone else’s credit card
Role	Repays debt if you don’t	Authorized to make purchases
Credit Check	Yes	No
Credit Impact	Activity affects credit reports of both parties	Activity may or may not impact the credit report of authorized user
Financial Risk	Obligated to repay the debt if the borrower defaults	No legal obligation for the debt
Control	Has access to account information and decision-making	Account control remains with the primary cardholder
Relationship	Typically trusted family members or close friends	Often family members or individuals with shared needs
Easy to Remove	Only once you meet co-signer release threshold	Yes

Should You Use a Co-Signer or Become an Authorized User?

You may find a credit card co-signer is the best option if you have credit or income issues. But you should only do it if you have no other option for getting credit. And consider whether you can just wait a bit and improve your income or credit score enough to qualify alone.

And you need someone willing to take on the risk as your co-signer. They should know you well enough to trust that you’ll pay your card on time, and you should also feel confident you can. The co-signer also needs to have good enough credit to qualify.

Using a co-signer can cause awkward situations and disagreements, so if you want to maintain a good relationship, think twice. After all, the person puts their finances and credit on the line for you. Running up charges or missing a payment can easily cause issues.

When deciding whether to add an authorized user, consider whether you trust the person to spend responsibly and pay you back as agreed. Even when they use the card, you’re the one stuck with the debt. So, you can easily end up with financial strains and a dinged credit score.

While you might intend to help a loved one build their credit as an authorized user, don’t disregard how it could affect your relationship. Arguments can happen if the person runs up your balance or doesn’t pay you back. This makes a usage agreement with the person crucial.

If you have any doubts about letting the person access your credit card, it’s safer to just not agree to make them an authorized user. Instead, you could help them create a budget and find other ways to build a credit history. That way, they can eventually get credit on their own.

How to Add a Co-Signer or Authorized User to Your Account

If you want to add a co-signer to a credit card application, first ensure your prospective creditor allows it. Unfortunately, most major banks no longer allow the practice. However, you may have better luck going through a smaller bank or credit union.

Depending on the creditor, you may have options to apply online, by phone, by mail, or even in person. In all cases, you must supply personal and financial information for yourself and the co-signer. Exactly how that works depends on how you apply.

Online: You both digitally sign and submit the application.
Phone: The creditor may need to speak with the co-signer in addition to the borrower.
Mail: You must both fill out and sign the application, then mail it to the listed address.
In Person: You must both fill out and sign the application, then you must both go to a branch in person.

The creditor runs both your credit files. Then depending on how you applied, you may find out instantly whether you’re approved or have to wait for an email or even a letter.

If you want to add an authorized user, you’ll have better luck since most card companies allow it. You can either do it when you fill out your application or after you’ve opened the account. Either way, the process is straightforward, and you can do it online, by phone, by mail or in person

When applying, there’s a step to add authorized users. If it’s an existing account, you can log into your online portal, contact customer service, or if it’s at your bank, just walk in.

The creditor won’t run a credit check, but they do need some information about the user. Common information requested includes the authorized user’s full name, birth date, Social Security number, address, and relationship to you. The user should receive their card upon approval.

Final Word

Becoming or adding a co-signer or authorized user is not a decision you should take lightly. Both parties must feel comfortable with the responsibility and trust they’ll act in each other’s best interest. Otherwise, you risk a messy situation in which both parties’ finances and relationships are at risk.

Communication and financial planning is key. If you use a co-signer, budget for your monthly payment and don’t carry a high balance that can harm you both. And if you add an authorized user, set limits with them and don’t hesitate to revoke their access if needed.

If your finances or relationships are too big a risk, other options exist for those who struggle to qualify for regular credit cards. Backed by a security deposit, a secured credit card involves a much easier approval process and can help with building credit for easier borrowing experiences later.

Heather Barnett has been an editor and writer for over 20 years, with over a decade committed to the financial services industry. She joined the Money Crashers team in 2020, covering banking and credit content for banking- and credit-weary readers. In her off time, she enjoys baking, binge-watching crime dramas, and doting on her beloved pets.

Source: moneycrashers.com

Apache is functioning normally

May 23, 2023 by Brett Tams

I like to think I know more about credit cards than the average person. I’ve written dozens of credit card reviews for Money Crashers and personally tried out more credit cards than I’d like to admit.

So I was surprised and a little embarrassed to learn for the first time recently that the IRS permits taxpayers to make federal tax payments by credit card.

Virtually all individual filers are eligible to pay their year-end taxes by credit card. And freelancers and independent entrepreneurs responsible for quarterly estimated tax payments can pay those with plastic too. With some important caveats, particularly around withholding taxes, business owners are also eligible to pay tax bills on credit. But it’s not as simple as calling up the IRS and giving them your credit card number. There are a few things you need to know first.

Paying Taxes With a Credit Card: Approved Vendors & Costs

Paying your federal taxes by credit card isn’t rocket science. An IRS primer outlines what you need to know about the process.

In virtually every state that collects them, you can pay state income taxes with a credit card as well. Check this nifty cheat sheet from Mastercard for details about individual and business payment portals for state income taxes.

Before we go any further, we should clarify that paying your taxes and paying tax preparation fees are two different things. Tax payments go to the IRS or state tax collectors. Tax preparation fees go to the accountant or service you retain to prepare your taxes. Since taxpayers frequently make these distinct payments simultaneously, it’s understandable when novices get them confused.

IRS-Approved Tax Payment Processing Vendors

Taxpayers willing to file paper returns and forms can choose from three IRS-approved payment processing vendors:

Pay1040.com: 1.87% of the total tax paid or $2.50 minimum (same fees and minimums for debit card payments)
PayUSATax.com: 1.85% of the total tax paid or $2.69 minimum ($2.20 minimum for debit card transactions)
ACI Payments: 1.98% of the total tax paid or $2.50 minimum ($2.20 minimum for debit card transactions)

Note that you don’t need to turn in paper vouchers for quarterly estimated tax payments you make by credit card. All three vendors accept Visa, Mastercard, and American Express plus popular mobile wallet providers.

Taxpayers who prefer to e-file their returns can chose from the same three IRS-approved processors for end-of-year payments, extension payments, and other types of tax payments accompanied by IRS forms.

Check the IRS Frequency Limit Table by Type of Tax Payment for more information on when and how often you can make various types of tax payments.

Paying Taxes With Your Credit Card: Things to Keep in Mind

Note these items before scheduling a credit card tax payment:

Payment Cancellation. Under ordinary circumstances, you can’t cancel credit card tax payments. Check with the IRS for more details and potential loopholes.
New Card Sign-Up Bonuses. Before paying your taxes, consider applying for a new credit card with an attractive sign-up bonus offer. The best sign-up bonus cards on the market have bonuses worth $400, $500, even $1,000. The catch: You have to meet a hefty spending threshold within a preset time frame, usually three months from your account opening date. Paying end-of-year or estimated taxes is a great way to accelerate your progress toward the threshold without spending on stuff you don’t really need.
Federal Tax Liens. If you’re subject to a federal tax lien arising from an unpaid tax liability, tax payments made by credit card won’t automatically release the lien. Speak with the IRS and a tax professional for guidance.
Paying in Full. Unless you qualify for a 0% APR introductory rate on a new credit card, it’s best to pay off your credit card balance in full by your statement due date. Balances carried from month to month accrue interest at an impressive clip: typically, anywhere from 10% APR to 30% APR or more, depending on your card, creditworthiness, prevailing rates, and other factors. If you use your credit card for lots of other purchases already and suspect you’ll have trouble accommodating the added burden of a three- or four-figure tax payment multiple times per year, look for an alternative tax payment method.

Should You Pay Your Taxes on an Installment Plan?

If you can’t afford to pay your full tax liability right away, but aren’t sure that paying by credit card is the best choice, consider an installment plan instead.

The IRS offers immediate, short-term, and long-term online payment plans. An immediate payment plan is just another term for “pay in full.” Short-term payment plans must be paid off within 180 days of the start date. Long-term payment plans are more open-ended, with monthly payments on an agreed-upon schedule.

You can apply online for a short-term payment plan if you owe less than $100,000 in combined tax, penalties, and interest. You can apply online for a long-term plan if you owe less than $50,000 in combined tax, penalties, and interest, and have filed all relevant tax returns. If you don’t meet these criteria, you may need to apply by mail, phone, or in person.

Setup is free for immediate and short-term plans, and payments cost nothing when you elect to direct-debit payments from a linked bank account. Long-term plans cost $31 to set up with direct debit or $130 to set up with manual payment, plus accrued penalties and fees until the balance is paid off in full.

This sounds pricey, but it’s probably cheaper than putting your entire tax bill on a credit card and paying it off (with interest) over a similar timeframe.

Advantages of Paying Your Taxes With a Credit Card

Key advantages of paying taxes with a credit card include cash flow benefits, the potential to build credit, and eliminating extension form requirements.

Helps With Cash Flow

Like other large outlays, tax payments are financially disruptive. If money is tight throughout the year, sending off hundreds or thousands of dollars to the IRS probably doesn’t help matters.

Putting periodic tax payments on your credit card eases the crunch for weeks or months. Scheduling payments for the beginning of your card’s statement period provides up to four weeks of breathing room.

Taking advantage of a long 0% APR introductory financing offer is even better. Some introductory offers last as long as 21 months.

Potential to Build Credit and Raise Your Credit Score

If your near-term goal is rebuilding your credit after an adverse event, such as bankruptcy, consider applying for a secured credit card and using it as a vehicle for your tax payments.

For ideas, check out our list of the best secured credit cards on the market from top credit card issuers like Citi and Capital One.

Fees May Be Tax-Deductible

If you itemize deductions, you may be able to deduct the convenience fees charged by your chosen credit card payment processor. That’s not trivial: On a $3,000 estimated tax payment, a 2% convenience fee adds up to $60.

The convenience fee deduction isn’t guaranteed, so check with a tax professional before assuming you qualify.

Can Set Your Payment Date Well in Advance

If you tend to file your taxes early, you can delay your payment date for weeks or months when you choose to pay with a credit card. This is another cash flow benefit to paying taxes with a credit card.

Estimated Tax Payments Can Boost Spending Power

Estimated tax payments can dramatically boost your credit card spending power, bringing high-dollar sign-up bonus spend requirements within reach.

These one-time spend thresholds, usually set at three months from the account opening date, frequently reach $4,000 or $5,000. Unless you’ve miscalculated your projected income or experienced an unexpected windfall during the tax year, you probably won’t owe that much when you file. But your quarterly estimated taxes could certainly approach or exceed those figures.

Some travel credit cards have even higher spend thresholds for coveted travel loyalty program windfalls. For suggestions, see our list of the best credit cards to pay your taxes.

Partial Payments Negate Extension Form Requirements

When you partially pay your end-of-year taxes with a credit card, you automatically earn an extension without any additional paperwork required. When you opt for another form of payment, you may be required to file IRS Form 4868. The extension deadline is usually six months after the filing deadline: October 15 or thereabouts.

Disadvantages of Paying Your Taxes With a Credit Card

Paying taxes with a credit card does have some drawbacks, including processing fees, higher credit card balances and credit utilization ratios, and higher fees for integrated e-file and e-pay providers.

Carries a Processing Fee of at Least 1.85%

Every IRS-approved credit card payment processor charges a convenience fee. As of the 2022 tax year, the lowest possible fee is 1.87% with PayUSATax, or $2.50 flat (for smaller payments only) with ACI Payments and Pay1040.com.

These fees are high enough to eat up, and potentially exceed, earnings from most cash-back credit cards, whose returns on general spending typically top out around 2% outside sign-up bonus periods.

Paper check and EFT remain the cheapest tax payment methods for cardholders who don’t expect tax payments to trigger point or mile windfalls via sign-up bonuses or ongoing spending thresholds.

Can Substantially Increase Credit Card Balances and Utilization Ratio

Credit utilization is one of several factors used to calculate your credit score. Your credit utilization ratio is your total aggregate credit balance divided by your total aggregate credit limit.

All other things being equal, a high ratio can adversely impact your score. If your aggregate credit limit (available credit) is on the low side, a large end-of-year or estimated tax payment could spike your credit utilization ratio. In turn, this could temporarily affect your ability to secure new loans or lines of credit on favorable terms.

May Result in Hefty Interest Charges

There’s a good chance you won’t be able to pay off your entire tax bill in a single month. Which means the balance generated by your tax payment will accrue interest unless you’re within a 0% APR introductory period.

Your credit card interest rate will almost certainly be higher than the IRS’s interest rate on unpaid tax balances. On larger balances, this could end up costing you more than setting up an installment plan.

Higher Fees for Integrated e-File and e-Pay Providers

E-filing is faster and more convenient than submitting a paper return. Unfortunately, it’s also more expensive. Returns filed using the IRS’s integrated e-file and e-pay function carry convenience charges that are almost certain to exceed your rewards credit card’s cash-back or point-earning rate.

Employers Can’t Make Federal Tax Deposits

The IRS requires employers that withhold employment taxes to deposit federal tax collections once or twice a month using the Electronic Federal Tax Payment System®. They can’t make these deposits with a credit card.

Though this doesn’t affect individual filers directly, you need to plan accordingly if you own a small business with traditional employees.

When Should You Pay Your Taxes With a Credit Card?

Paying your taxes with a credit card can sometimes work in your favor, but it’s not always the right move. See when you should and shouldn’t do it.

When to Pay Your Taxes With a Credit Card

Paying income taxes with a credit card makes sense in these situations:

You’re in the qualification period for a new card sign-up bonus. If you owe a significant amount in taxes when you file, or you pay quarterly estimated taxes anyway, your payment could account for a big chunk of the spend required to earn a new card sign-up bonus. Maybe the whole thing.
You qualify for a 0% intro APR promotion on purchases. If your credit card has a 0% APR promotion, you can carry the resultant balance for many months without paying any interest on it. Just be sure to zero it out before the promotion ends, or you could wind up paying deferred interest.
You can pay off the charge in full before any interest accrues. Even if you’re not eligible for a 0% APR promotion, you can avoid interest by paying off your charge in full during the grace period. This is more feasible when your tax bill is small and the value of rewards earned on the payment is greater than the processing fee.
You have no plans to apply for new credit in the near future. Charging a big tax payment to your credit card can spike your credit utilization ratio and temporarily push down your credit score. Both could make it harder to qualify for a mortgage, auto loan, or new credit card.

When Not to Pay Your Taxes With a Credit Card

You shouldn’t pay income taxes with a credit card in these circumstances:

You aren’t eligible for a sign-up bonus or 0% intro APR offer. If neither incentive applies, the benefit of paying your taxes with a credit card is marginal at best. There’s a good chance you’ll lose money on the transaction, even if you avoid interest.
You can’t afford to pay off the charge in full before interest accrues. If you can’t avoid interest on the charge, you definitely shouldn’t put your tax payment on a credit card. You’ll end up paying a lot more than you owe.
You qualify for an IRS installment plan. For bigger tax bills, an installment plan should be your first choice if you qualify. It’s cheaper in the long run than carrying a balance with interest.
Your tax bill is small enough to pay out of pocket. If your tax bill is manageable enough to pay out of cash on hand — without dipping into your emergency fund or long-term savings — then that’s the way to go. It won’t cost you anything extra.

Your tax bill is big enough for the processing fee to offset a sign-up bonus. On the other hand, if your tax bill is huge, the processing fee could be bigger than any sign-up bonus it qualifies you for. The line depends on the expected bonus value, but as an example, a 1.85% processing fee on a $10,000 tax payment is $185, so you’d need to earn at least that much as a bonus for the payment to pencil out.

Final Word

If you don’t expect to have a major year-end or quarterly estimated tax liability this year, don’t worry. There are plenty of other ways to earn your new credit card’s sign-up bonus offer: making major travel or home improvement purchases in advance, for instance.

Just remember that credit card use is a privilege, not a right. Don’t put yourself in an uncomfortable — and avoidable — financial pickle just to earn a few extra cash back dollars or summit the final hill in your sign-up bonus climb. You could find yourself stuck with the consequences for years to come.

Source: moneycrashers.com

Apache is functioning normally

May 23, 2023 by Brett Tams

If you’ve been using your debit card for all your purchases for years — carefully tracking your checking account balance and not spending more than what you have in the bank — shifting your spending to a credit card can be a big change.

I used to be one of those people who pay for everything with their debit card because they’re afraid of racking up debt. I thought debit cards were the safe spending option since you can’t spend more money than what you have in your account. I thought that was what financial responsibility looked like. But my perspective changed as my interest in travel grew and I learned that I could earn big rewards by signing up for and using credit cards.

Related: Credit vs. debit cards: Which is the smarter choice?

Maybe you already have a rewards credit card or two but are hesitant to shift all of your spending to credit cards. You’ve possibly signed up for a credit card and charged enough to meet the minimum spending requirement for a bonus, but after that, you always return to using your debit card. If you’ve been on the fence about switching your spending from debit to credit, here are a few tips to help you make the change.

Adjust your mindset

When I first decided to shift my spending to credit cards, I knew I wanted to be a responsible credit card user. I didn’t view a credit card as free money or a long-term loan to pay back over time through minimum payments. I didn’t want to pay interest, which meant not charging more than I could pay back each month.

Related: The best way to pay your credit card bills

One thing that helped me is that I treated my credit card just like my debit card. That meant not spending more than I had in the bank. Even though my credit card did not withdraw directly from my checking account for every purchase (as my debit card did), I acted as it did.

Maybe you made only minimum payments on credit cards in the past. If so, paying it in full will require adjusting your mindset. View your credit card just like a debit card. Don’t spend more than you can pay back every month.

Related: TPG’s 10 commandments of credit cards

Know your credit limit

You’ll want to avoid accidentally exceeding your credit limit on a lower-limit card. If you do, transactions may be declined, or you may be charged fees. But you also shouldn’t view cards with high limits as available money for maxing out.

Keeping your balance within a reasonable limit of your available credit can boost your credit score. Your credit utilization ratio makes up 30% of your FICO score, so keeping your balance in check is important.

Start with just one card

Maximizing your points- and miles-earning often involves strategizing which cards to use for different purchases. As many cards come with category bonuses — bonus points for different types of spending, such as restaurants or gas stations — it can be quite lucrative to use different cards for different purchase categories. That might mean using an American Express® Gold Card for 4 points per dollar at restaurants and U.S. supermarkets (on up to $25,000 in purchases per calendar year, then 1 point per dollar) and switching to the Citi Premier® Card for 3 points per dollar when filling up your gas tank.

However, remembering which card to use for each purchase can feel overwhelming if you’re new to travel rewards and using your credit card for everything.

Related: 4 ways to manage your spending on multiple credit card accounts

A good way to maximize points earned using only one card at a time is through new card sign-up bonuses. Open a new credit card and use only that card until you meet the minimum spending requirement (which is required for earning the welcome bonus), being sure to pay off your balance in full every month.

Once that’s complete, apply for another card and shift all your spending to that card. You’re generating lots of points by receiving sign-up bonuses, even though you may not utilize all of the bonus categories you could maximize by juggling multiple cards. But remember that some issuers — including American Express, Chase and Bank of America — limit the number of cards you can be approved for.

Related: The ultimate guide to credit card application restrictions

Once you’re comfortable with consistently paying your balance off in full every month, you can add more complexity, like switching your spending to different cards to take advantage of category bonuses.

Shift any automatic payments

Automatic payments make life easier by knocking one more thing off the to-do list. If you have automatic transactions using your checking account or debit card and use your credit card for other purchases, tracking your finances can complicate your finances. There’s more to manage. Keep it simple by shifting as many automatic payments as possible to your credit card.

You likely can’t use your credit card to autopay everything. Your mortgage and car payment are good examples. Thus, you’ll still have to track those in your checking account. Yes, some services will accept your credit card for a fee and send a check to your loan company or other merchants, but you’ll have to weigh whether the fee is worth it for you.

For your other bills — such as cellphone, utilities, fitness club membership, streaming services — it should only take a few minutes to update your payment online, then you’ll start earning rewards for those purchases.

Review your transactions

Whether you check your credit card account daily or monthly, it’s important to take the time to ensure all your transactions post correctly. You’re not just reviewing transactions for the correct amounts, but you should review your points earned to verify you’ve earned the correct amount of points. And check for any statement credits you expect to receive, such as from Chase Offers or Amex Offers.

Set up autopay or schedule manual payments

You don’t want to forget a payment, thus incurring late fees and interest. While some card issuers may waive late charges and interest as a one-time courtesy, you shouldn’t get in the habit of paying late.

Determine a payment schedule that works best for you. Some people pay weekly; others pay monthly. If you’re afraid of overspending and not having the money in your checking account to pay the bill, don’t wait until the due date. You can make multiple payments, even paying off balances daily or weekly.

You should set up autopay for your full balance (ideal) or the minimum balance by the due date if you’re concerned you may forget to pay your bill.

Bottom line

I’m a long-time travel rewards enthusiast, and I spend significant time and energy learning how to maximize my spending and earn rewards. However, it can feel like everyone is signing up for new credit cards (and spending thousands of dollars on them) to generate points for first-class flight redemptions and luxury hotel stays.

But that’s not the case. Even still, I’m still surprised when a friend or family member pulls out a debit card to pay for a purchase. Even though they may be interested in travel rewards, moving from a debit to a credit can be nerve-wracking, and I understand that.

Switching from debit to credit is one of my best money moves. My only regret is not doing so sooner.

Additional reporting by Ryan Smith.

Source: thepointsguy.com

Apache is functioning normally

May 23, 2023 by Brett Tams

Save more, spend smarter, and make your money go further

So far in our home buying series, we’ve covered some of the basics that you need to know if you want to buy a home. In Chapter 2, we went over important resources for first time home buyers. In this third chapter, we’ll go over the basics of how to save for a house.

Buying a home can be a long and arduous journey, but having a stable place to live that’s all yours will make it all worth it. But before you can make an offer on a house, you need to learn how to start saving for a house.

When you buy a home, you’re making an investment in yourself and your future. You’re building financial stability, equity, and experience. You have a place to call your own and you can customize the space just how you want. Yet, you might be wondering how to get to that point

This is why saving up is so important.

There are some upfront costs to owning a home—primarily making a down payment. Find out how much you should budget using a home loan affordability calculator and figure out how to save the amount you need. After all, the best way to save for a house is to formulate a budget that helps you work towards your saving goals step by step. Soon enough, you’ll be turning the key and stepping into a home you love.

Step 1: Calculate Your Down Payment and Timeline

When figuring out how to save for a house, you may already have a savings goal and deadline in mind. For instance, you may want to save 20 percent of your home jumbo loan cost by the end of the year. If you haven’t given this much thought, sit down and crunch the numbers. Ask yourself the following questions:

What is your ideal home cost?
What percentage would you like to contribute as a down payment?
What are your ideal monthly payments?
When would you like to purchase your home?
How long would you like your mortgage term to be?

Asking yourself these questions will reveal a realistic budget, timeline, and savings goal to work towards. For instance, say you want to buy a $250,000 house with a 20 percent down payment at a 30-year loan term length. You would need to save $50,000 as a down payment and, at a 3.5 percent interest rate, your monthly payments would come out to be $898.

How much you need to save also depends on the type of loan that you use to purchase your home. For example, conventional loans and FHA loans require you to make a down payment, but some government sponsored loans do not. Before you can buy a house, it’s important to educate yourself on the differences between FHA vs. conventional loans. FHA loan requirements are different from conventional loan requirements, so you need to figure out which is a better option for you.

Step 2: Budget for the Extra Expenses

Just like a new rental, your home will have fees, taxes, and utilities that need to be budgeted for. Homeowners insurance, closing costs, and property taxes are a few examples of cash expenses. Not to mention the cost of utilities, repairs, renovation work, and furniture. Here are a few more expenses you may have to save for:

Appraisal costs: Appraisals assess the home’s value and are usually ordered by your mortgage lender. They can cost anywhere from $312 to $405 for a single-family home.
Home inspection: A home inspection typically costs $279 to $399 for a single-family home. Prices vary depending on what you need inspected and how thorough you want the report to be. For instance, if you want an expert to look at your foundation, there will likely be an additional cost.
Realtor fees: In some states, the realtor fee is 5.45 percent of the home’s purchase price. Depending on the market, the seller might pay for your realtor fee. In other places, it might be more common to contract a lawyer to look over your purchase agreement, which is usually cheaper than a realtor.
Closing costs: Closing costs are typically about 3% to 6% of the house’s price. Some closing costs may be negotiable with the seller but others will fall solely on your shoulders as the buyer.

Step 3: Maximize Your Savings Contributions

Saving for a new home is easier said than done. To stay on track, consider creating a savings account that has a high yield if possible. Then, check in on your monthly savings goal to set up automatic contributions. By setting up automatic savings payments, you may treat this payment as a regular monthly expense.

In addition to saving more, spend less. Evaluate your budget to see what areas you could cut down or live without. For instance, creating your own workout studio at home could save you $200 a month on a gym class membership.

Step 4: Work Hard for a Raise

One of the simplest ways to boost your savings is to increase your earnings. If you already have a job you love, put in the extra time and effort to earn a raise. Learning new skills by attending in-person or virtual training seminars or learning a new language could increase your earning potential. Not only could you land a raise, but you could add these skills to your resume.

Sometimes, putting in the extra effort doesn’t always land you a raise, and that’s okay! When getting a raise is out of the question, consider looking at other opportunities. Figure out which industry suits you and your skillset and start applying. You may end up finding your dream job, along with your desired pay.

Step 5: Create More Streams of Income

Establishing different income streams could help your house savings budget. If one source of income unexpectedly goes dry, having other sources to cut the slack is helpful. You won’t have to worry about the sudden income change when paying your monthly mortgage.

For example, creating an online course as a passive income project may earn you only $5 this month. As traffic picks up, your monthly earnings from this project could surpass your regular monthly income. To create an abundant financial portfolio, there are a few different steps you can take:

Create an online course: Write about something you’re passionate about and share your skills online. Sell your digital products on Etsy or Shopify to earn supplemental income.
Grow a YouTube channel: Start a YouTube channel and share your skills to help others within your industry of expertise. For instance, “How to start a YouTube channel” could be its own hit.
Explore low-risk investments: From CD’s to money market funds, there are a few types of investments that could grow your cash with minimal risk.

Step 6: Pay Off Your Biggest Debts

Another way that you can start saving for a home is by paying off your debts. Before taking on more debt like a mortgage, it’s important to free up your credit usage. Credit utilization is the percentage of available credit you have open compared to what you have used. If you have $200 in debt, but $1,000 available on your credit card, you’re only using 20 percent of your credit utilization.

A higher credit utilization could potentially hinder your credit score over time. Not only can paying off debt feel satisfying, but it could also increase your credit score and prepare you for this next big purchase.

To pay off your debts, create an action plan. Write out all your debt accounts, how much you still owe, and their payment due dates. From there, consider increasing your payments on your smallest debt. Once you pay off your smallest debt in full, you may feel more motivated to pay off your next debt account.

Keep up with these good habits as you take on your mortgage account.

Another factor that mortgage lenders will look at when determining your eligibility for a loan is your debt-to-income ratio. Your debt-to-income ratio measures your gross monthly income compared to your total monthly debt payments. This number will affect how lenders determine how much house you can afford because it will tell them whether you have enough income to cover your new mortgage payments and any existing debts.

So before you consider buying a home, make sure you calculate your debt-to-income ratio.

In addition to your debt-to-income ratio, lenders will also look at your residential mortgage credit report, which is a comprehensive study of all your credit reports. You should look at your credit report before you apply for a mortgage so you can figure out if you need to increase your credit score.

Step 7: Don’t Be Afraid to Ask for Help

Whether you’re touring homes or want help adjusting your budget, don’t hesitate to ask for help. If you’re trying to figure out what your budget should look like, research budgeting apps like Mint to build a successful financial plan.

If you’re curious about additional mortgage expenses, your budget, or investment opportunities, reach out to a trusted professional or utilize government resources. Not only are they able to help you prepare for your next big step, but they could also help you and your finances in the long term.

Getting help, whether it’s from a realtor or a financial professional, can help you secure your dream home at a price you’re comfortable with. Realtors can help with everything from finding you a home to negotiating the price of the home, so don’t be afraid to ask for help. You probably need it more than you think.

Saving for a house can be an intimidating process, so you also shouldn’t be afraid to ask questions. There are many important questions to ask your mortgage lender, like the difference between pre-qualified and pre-approved or the credit score you need to buy a house. Asking the right questions could end up saving you thousands of dollars with your mortgage, so go ahead and ask away.

Step 8: Store Your Savings in a High Yield Saving Account

While you may have a perfect budget and a home savings goal, it’s time to make every dollar count. Before you add to your account, research different savings accounts and their monthly yields. The higher the yield, the more your savings could grow as long as your account is open.

Also consider the effects of inflation on home prices, home appreciation, and interest rates. As inflation rises, so do home prices. This means it’s even more important to have a sufficient amount of money saved up so you can manage a bigger down payment and pay less in interest over time.

In Summary: Set Your Goals and Get Started

When saving for a house, you may want to consider having a plan in place. By following the above tips for saving for a house, you can be more prepared to buy your dream home. To summarize, here are some of the key elements to remember when it comes to saving for a home:

First, set a savings goal to match your estimated down payment and mortgage monthly payments. Then consider adding your contributions to a high yield savings account to grow your money over time.
Don’t forget to budget for extra mortgage expenses like appraisal costs, home inspections, realtor fees, or closing costs. Keep in mind, your monthly utilities and fees may also be more expensive than your current living situation.
Prepare for the additional costs by increasing your earning potential and optimizing additional income stream opportunities.
Free up your credit utilization by paying off as much debt as possible before buying a house. Keep up these good habits throughout the length of your mortgage term.

When you purchase a home, you’re building a piggy bank for your future. Every month you pay your mortgage, you pay part of it to yourself because you own the home. Instead of paying rent to someone else, you reap your own investment when you sell. Most importantly, though, you’ll have a place that’s truly your own.

So now that we’ve covered various tips for saving for a house, you hopefully feel more prepared going into your home buying journey. In this series, we’ll be going over first time home buying resources, steps to buying a house, and more. If you’re interested in learning more about the home buying process, continue reading on to Chapter 4 in the series, which covers what credit score is needed to buy a house.

Sources: HomeAdvisor 1 | HomeAdvisor 2 | Clever | Rocket Mortgage | USA.gov

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