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Apache is functioning normally

September 23, 2023 by Brett Tams

Getting a credit card is like taking a step toward financial adulthood. It brings you into the world of building credit and paying bills, which almost everyone has to deal with at some point, so it can help to get started as soon as possible.

But the “firsts” of adulthood aren’t always easy, and that includes getting your first credit card. A Credit.com reader recently asked where to start:

Hi, I am 18 years of age, I have no credit history, and I have low income. I’m wanting to get my own place, and would love some help finding a good credit card to build my credit that will accept my low income.

There are three main things that will affect whether or not someone like our commenter could get a credit card: the person’s age, the fact that they have no credit and the amount of money they make.

1. Can You Get a Credit Card at 18?

Let’s start with age. Per the Credit CARD Act of 2009, consumers younger than 21 must have proof of independent income or a co-signer in order to get a credit card. It makes sense: If you’re going to get a credit card, you need to be able to show that you can pay your balance.

Why Would I Want to Have a Credit Card at 18?

Having a credit card at 18 can help you to start building your credit early. It also allows you to make purchases that may require a credit card, such as a car rental.

2. Do You Make Enough Money?

That brings us to income. Since this commenter referenced wanting to live independently, it seems unlikely that they’d opt for a co-signer. That means this person would need to provide proof of their income. We don’t know exactly what our commenter means by “my low income” — even if it’s not a lot, it isn’t necessarily a credit card deal-breaker. You could always try to ask a credit card issuer what sort of income they’re looking for among card applicants, but you may not get an adequate answer, given that there’s more that goes into getting approved for a credit card than income.

3. Consider Becoming an Authorized User

If you’re wondering how to get a credit card at 18, becoming an authorized user may be your best solution. An authorized user has permission from the cardholder to use their account to make credit card purchases. Typically, you receive a credit card with your name on it, but there might be limitations as to how much you can spend.

If the credit card company reports authorized users to the credit bureaus and the cardholder makes on-time payments, this option could help boost your credit. As an authorized user, you’re not directly responsible for making monthly credit card payments. Instead, you should make a payment agreement with the cardholder to ensure your bills are paid on time.

4. Get a Secured Credit Card

At 18, it’s likely you have little to no credit history. This factor could prevent you from obtaining a traditional credit card. Despite your lack of credit history, you could qualify for a secured credit card. This type of card requires you to pay a cash security deposit to open the account.

For example, you might need to pay a cash security deposit of $500 to open a credit card with a $500 credit limit. With secured credit cards, monthly payments are typically reported to credit reporting agencies. In many cases, you can increase your credit limit without an additional cash security deposit after several months of making on-time payments.

Get a Student Credit Card

If you’re a college student, you may qualify for a student credit card. These cards are specifically for full- and part-time students at higher education colleges or universities. Credit requirements are typically lower for student credit cards, especially when it comes to the length of credit history.

If you have little to no credit, you may have a better chance of securing a student credit card than a traditional credit card. Keep in mind that credit card companies must still adhere to the regulations of the Credit CARD Act of 2009. So, you still need to have a cosigner, have proof of income or meet other requirements for a student credit card.

5. Ask Someone to Cosign for You

Another option for obtaining a credit card at 18 is asking someone you trust to be a cosigner on the account. This method can help if your cosigner has a good credit score. Both you and the cosigner are responsible for making payments.

How to apply for a credit card at 18 with a cosigner? Unfortunately, none of the major credit card companies allow for cosigners. If you can’t find a credit card you like that allows for a cosigner, you could opt for a joint credit card account. With this type of account, both parties remain responsible for making payments, but it’s likely your cosigner will be listed as the primary cardholder on the account.

Tips to Help You Manage Your Card

Obtaining your first credit card can be exciting, but it also comes with great responsibility. How you handle your credit card purchases and payments can impact your credit score for years to come. It’s important to set up good practices now to protect your future finances.

Set Up Automatic Payments

Setting up automatic payments is a great way to ensure your bills are paid on time. You can use your credit card to pay your bills and then pay your credit card bill by the due date. This process can help you build a strong payment history, which accounts for 35% of your credit score.

Build a Budget

The best way to avoid overspending is to build a budget. Start by tracking your spending for a month and use that information to develop an accurate budget. Be sure to set some money aside each month in a savings account in case of an emergency.

Pay More Than the Minimum Payment Every Month

One of the most important things when it comes to having a credit card is to be sure you’re making at least the minimum payment every month. If possible, you can pay more than the minimum balance to avoid paying interest.

Only Buy Things You Know You Can Pay Off

When you have a credit card, it can be tempting to make large purchases that you might not be able to afford without the credit card. Avoid this temptation. If you buy things you can’t afford, you run the risk of not being able to make your monthly payments.

Late payments can have a negative impact on your credit score. Using up all of your available credit can also reduce your credit score.

Be on Top of Your Statements

It’s crucial that you take having a credit card seriously. Just as you do with your bank account, be sure to check your credit card statements carefully. Take note of how much available credit you have left to avoid going over your credit limit. You also want to make sure you make all your monthly payments on time.

Other Ways to Build Credit

There are several things you can do right now to start the path to building your credit.

Student loans: Student loans can do more than just help you pay college tuition. They can also help you build credit. The important thing is to make sure you start paying on these loans as soon as you’re required to do so.
Emergency fund: You’re never too young to start an emergency fund. Be sure to put a portion of your earnings into a savings account. This strategy can help you in the event of a financial emergency.
Track your credit score: Whether you’re 18 or 80, it’s important to frequently track your credit score. Credit.com offers free credit scores from Experian that are updated every 2 weeks.
Get a job: The easiest way to secure a credit card when you’re only 18 is to maintain a job. If you’re able to prove you can financially handle having a credit card, it’s easier to obtain approval.

Source: credit.com

Apache is functioning normally

September 22, 2023 by Brett Tams

Do you have bill collectors contacting you about unpaid debt? If so, it’s important to understand your rights. Even if you have debt that’s still unpaid, your creditors only have a certain amount of time to take legal action against you.

So, before you think about talking to a bill collector or agreeing to a new payment arrangement, it’s important to know what the statutes of limitations are in your state. It’s these statutes that can help you determine your next step.

Keep reading to learn more about what statutes of limitations on debt collection are and how they work.

In This Piece

What Is a Statute of Limitations on Collections?

The statute of limitations on collections is the amount of time a creditor or debt collector has to file a lawsuit to collect unpaid debt. These statutes vary by state, type of debt and terms of the contract, if there is one.

Occasionally, creditors and debt collectors may try to file a lawsuit after the statute of limitations has ended. So, it’s your responsibility to provide the courts with proof that it’s past the statute of limitations. So, be sure to save any payments made or communications you had with any creditor or collections agency.

When the clock for the statute of limitations on debt begins varies from state to state. It either starts when you miss your first payment or when you have the last communication with the creditor or debt collector.

Can a Debt Collector Restart the Clock on My Old Debt?

There’s a chance that communication with a debt collector could restart the clock on the statute of limitations. For example, if you agree to any new payment arrangement or make a payment, this act could restart the clock.

Effect of Statute of Limitations on Your Credit Report

If you’re looking for ways to repair your credit, the statute of limitations has no impact. It’s important to understand that the statute of limitations doesn’t affect how long a debt can remain on your credit report. These are two different policies.

In most cases, a debt can remain on your credit report for up to seven years. This is the case even if the statute of limitations has ended. This means that while creditors may no longer be able to take you to court, your debt could still impact your credit score.

What Is the Statute of Limitations on Debt Collections by State?

Statutes of limitations on collections vary by state and by type of credit account. There are four basic types of debt:

Written debt. Written debt occurs when there’s a signed contract that details the terms of the loan. This doesn’t have to be a formal contract. It can simply be written on a piece of paper.
Oral debt. Oral debt is a verbal agreement made between two people that details the terms of the debt.
Promissory notes. Promissory notes are written agreements where you agree to make a set number of payments over a set number of years. While it is also a form of written debt, promissory notes normally include a promise to repay as well as a repayment schedule. This makes them more legally binding than a written debt or IOU. Common types of promissory notes include home mortgages and student loans.
Open-ended credit. Open-ended credit includes any type of revolving credit account, such as credit cards.

Below is a look at the statute of limitations on collection by state, broken down by debt type.

State	Written Contract	Oral Contract	Promissory	Open-Ended
Alabama	6	6	6	3
Alaska	3	3	3	3
Arizona	6	3	6	6
Arkansas	5	3	5	5
California	4	2	4	4
Colorado	6	6	6	6
Connecticut	6	3	6	6
Delaware	3	3	3	4
Florida	5	4	5	5
Georgia	6	4	6	6
Hawaii	6	6	6	6
Idaho	5	4	5	4
Illinois	10	5	10	5
Indiana	10	5	10	6
Iowa	10	5	10	6
Kansas	5	3	5	3
Kentucky	10	5	15	10
Louisiana	10	10	10	3
Maine	6	6	20	6
Maryland	3	3	6	3
Massachusetts	6	6	6	6
Michigan	6	6	6	6
Minnesota	6	6	6	6
Mississippi	3	3	3	3
Missouri	10	5	10	5
Montana	8	5	8	5
Nebraska	5	4	5	4
Nevada	6	4	3	4
New Hampshire	3	3	6	3
New Jersey	6	6	6	6
New Mexico	6	4	6	4
New York	6	6	6	6
North Carolina	3	3	5	3
North Dakota	6	6	6	6
Ohio	6	6	6	6
Oklahoma	5	3	6	3
Oregon	6	6	6	6
Pennsylvania	4	4	4	4
Rhode Island	10	10	10	10
South Carolina	3	3	3	3
South Dakota	6	6	6	6
Tennessee	6	6	6	6
Texas	4	4	4	4
Utah	6	4	6	4
Vermont	6	6	6	6
Virginia	5	3	6	3
Washington	6	3	6	6
West Virginia	10	5	6	5
Wisconsin	6	6	10	6
Wyoming	10	8	10	8

Source: The Balance

How Long Can You Legally Be Chased for a Debt?

Just because the statute of limitations has ended doesn’t mean you don’t still owe the debt. It only means that creditors and debt collectors can no longer sue you in court to collect the money due. Technically, you still owe the debt. So, debt collectors and creditors can still try to collect this money.

This means you still might receive calls from debt collectors. It’s important to understand that if you make a new payment agreement regarding an old debt, it can restart the statute of limitations for collections clock. At that point, the debt collector could sue you in court no matter how old the debt is.

Get Help Repairing Your Credit

If you’re working to repair your credit, you may want to pay your debt off even if the statute of limitations has ended. For example, if you live in a state that has a 3-year statute of limitations on credit card debt, this debt may still show up on your credit report for up to seven years.

Paying this debt may be the only way to repair your credit before the end of the 7-year period by possibly reducing the impact of this debt by paying it off. If this is the case, the credit card company may work out a deal with you for a lower amount. Sometimes, these companies agree to remove some of the interest accrued to receive some money. This can be a good option for low-income families looking to repair their credit.

Sign up for Credit.com today and take the first step toward understanding your credit and what factors are impacting your credit health.

Source: credit.com

Apache is functioning normally

August 29, 2023 by Brett Tams

After three-and-a-half years of an interest-free payment pause, you’re thinking about your federal student loans again. Or maybe you’re a recent grad thinking about your student debt for the first time. There are important steps to take and decisions to make. But where do you begin?

Time is running out to delay dealing with your student loans. For all borrowers, at least some action is required before student loan payments resume in October.

Set aside an hour or two, and use NerdWallet’s timeline, step-by-step checklist and reading list to help you get organized before your first bill arrives.

Key 2023 action dates

Aug. 22. New income-driven repayment plan SAVE officially launches. Applications take about four weeks to process; move quickly if you want to be enrolled before billing starts.
Aug. 31. Last day to request a student loan refund for payments made during the pandemic (that you’ll have to pay back).
Sept. 1. Interest starts accruing again. If you plan to make a lump-sum payment, prioritize doing so before September to minimize interest costs.
October. First round of bills due (exact date varies by person).
Dec. 31. Last day to consolidate your commercially held FFELP, Health Education Assistance Loan (HEAL) Program or Perkins loans to qualify for the income-driven repayment (IDR) account adjustment. This adjustment is automatic for all other borrowers.

Step-by-step checklist

Log into your FSA account. On StudentAid.gov, you can check your Federal Student Aid (FSA) ID and reset your password if you’ve forgotten it. After signing in, you can check how much you owe and who your student loan servicer is. Nearly half of borrowers had their servicer changed during the pandemic — and they may not even know it.
Use the Federal Student Aid office’s online loan simulator. The loan simulator can help you estimate your monthly payments, total amount paid and more. Keep in mind that not all benefits of the new IDR plan (more on that below) are built into the simulator yet.
Log into your student loan servicer account. If you’ve forgotten your username or password, you can reset it. Check that your loan information matches what’s on your FSA account.
Update your contact information. Have you moved at any point since March 2020? If so, you’ll need to update your contact information on both your FSA and servicer account. Even if you didn’t move, double-check that your contact info is accurate. This is essential to receive bills, reminders and other communications.
Sign up for autopay again. If you had autopay set up before the payment pause, you’ll need to set it up again. This may involve reentering your banking information.
Check the due date of your first bill. If the due date on your servicer account doesn’t match what’s on your FSA account, reach out to your servicer to confirm when exactly you need to make a payment in October.
Choose a repayment plan. If you don’t choose a plan, you’ll be automatically placed into the standard 10-year repayment plan, but other options like the new income-driven SAVE plan could save you money.
Call your servicer with any questions. Your student loan servicer can guide you through different repayment options and help you with any questions or concerns. Brace for long call waiting times, which tend to be lengthiest at the start of the week and in the mornings.
If you have Perkins, HEAL or certain FFELP loans, consolidate them. You won’t qualify for the IDR account adjustment otherwise, which could help you get loan forgiveness much faster. Avoid scrambling: Start the consolidation process well ahead of the Dec. 31 deadline.

Essential reading list

The new IDR plan SAVE could cut payments in half for most borrowers, forgive remaining debt faster and much more. It’s being touted as the most generous repayment plan yet. You can sign up now, but some key SAVE benefits won’t be available until July 2024.

Borrowers who had their federal student loans in default before the pandemic should sign up for the Fresh Start program. Among other benefits, it will put their loans back into good standing.

A one-time IDR account adjustment will move most borrowers closer to IDR student loan forgiveness or forgive the debt of some longtime borrowers altogether. Certain borrowers must consolidate their federal loan to benefit, but it’s automatic for most.

If you requested a refund for payments made since mid-March 2020, the refund amount has been added back to your balance. Here’s how to manage paying back your student loan refund.

Wondering whether student loan refinancing is right for you? If you have some private student loans, there’s minimal downside if you can qualify for a lower interest rate. If you have federal loans, only refinance if you’re sure you won’t qualify for government forgiveness programs or need borrower protections such as IDR plans.

Source: nerdwallet.com

Apache is functioning normally

August 18, 2023 by Brett Tams

Taking on debt is a common way to finance a business, but it can be risky. If you can’t repay your small-business loan, it may fall into default. A business loan default can have a range of negative consequences, from losing your personal assets to bankruptcy.

Here, we’ll review what happens when you default on a business loan and offer tips on how to avoid the situation altogether.

How Much Do You Need?

with Fundera by NerdWallet

What is a business loan default?

A business loan goes into default when you repeatedly violate the legal terms of your loan agreement. When you default on your loan, you’ve continuously missed and failed to make payments — and have not reached a resolution with your lender. At this point, your lender has determined that you will not repay your debt.

Business loan default vs. delinquency

Before your business loan falls into default, it will be considered delinquent. Generally, your loan will be considered delinquent after you miss a payment — although this can vary based on your lender and specific business loan agreement.

Your lender may charge you a late fee once you’ve missed a payment, or it may offer a grace period — which could be a few days or a few weeks — and you can avoid the late fee if you make a payment during this time.

If you’re able to make a payment, this will bring your loan out of delinquency. If you continue to miss payments, on the other hand, your loan will likely fall into default.

What happens when you default on a small-business loan?

Once you start to miss your business loan payments, the lender will likely contact you to inform you of the delinquency and try to reach a resolution.

If you fail to respond and your loan falls into default, the lender will make every attempt to collect on the debt. This process may include consequences such as:

You lose your collateral

If you default on a secured business loan, your lender can reclaim your collateral to recoup its losses. For example, if you took out an equipment loan to buy a new tractor and the tractor served as collateral on the loan, your lender could seize this equipment to recover its money in the case of default.

Although unsecured business loans don’t require you to provide specific collateral, many lenders take out a Uniform Commercial Code lien on your business assets. In this case, the lender can still use your business assets to recover their losses if you default on the loan.

You lose your personal assets

Most lenders require you to sign a personal guarantee when taking out a business loan. A personal guarantee gives the lender the right to seize your personal assets to repay debt in the case of default.

When you default on an unsecured business loan, your lender will likely use this method to recover its losses (or a lien, if one is in place). With a secured loan, on the other hand, lenders will start with your pledged collateral and only turn to additional methods if your debt isn’t completely repaid.

Your lender sues you

If you can’t or refuse to use your business/personal assets to repay your debts, your lender can take legal action against you. When your lender sues you, you’ll be responsible for paying your outstanding loan balance as well as interest, fees and additional penalties. You may also have to pay court costs and attorney fees.

Through this legal process, the court will determine the appropriate course of repayment, which may include allowing the lender to garnish your wages, tax refunds or personal bank account to cover what you owe.

You damage your credit

Defaulting on a business loan can have a significant impact on your business (and sometimes personal) credit scores.

Your lender may report late payments, collections and judgments (the result of a lawsuit in which your lender had to sue you to recover debt) to the commercial credit bureaus — all of which can damage your business credit score.

Collections and judgments remain on your report for just under seven years, and while most personal accounts don’t report late payments until 30 days past due, business accounts are reported when payment is just one day late.

It’s important to note that even if your lender typically only reports to the commercial credit bureaus, it may report a default to the consumer credit bureaus as well. This type of damage to your business and/or personal credit can make it harder to qualify for financing.

How to avoid business loan default

It can be difficult to financially recover from a business loan default. If you’re falling behind on payments or anticipate that you won’t be able to repay your loan, here are some strategies you might consider:

Review your business finances

By reviewing your finances, you may be able to identify solutions that will allow you to continue making payments on your loan. For example, you might look through your cash flow statements to see whether you have enough funds at any given time to make your loan payments.

If your cash flow isn’t sufficient, you may reevaluate your expenses to determine whether there are areas where you can cut costs.

On the other hand, if multiple loans with high interest rates are negatively affecting your cash flow, you might consider business debt consolidation to combine these loans into one new loan — ideally, with a lower interest rate and better terms.

Talk to your lender

At the end of the day, the lender wants you to repay your debt. So, if you’re having trouble making payments, talk to your small-business lender before you reach the point of default.

If you contact your lender and you’re upfront and honest about your difficulties, they’ll likely be more willing to work out a resolution, such as:

Deferring your payments for a period of time.
Adjusting your loan terms to make payments more manageable.
Lowering your interest rate.
Allowing you to just pay interest on the loan for a period of time.

Work with a professional

If you’re struggling with your finances, it might be useful to work with a business professional, like a certified public accountant or an attorney. These experts can review your situation and offer personalized recommendations on how to manage your payments and avoid default.

A business attorney can also help you negotiate a resolution with your lender or a debt collection agency as well as assist you through legal proceedings (if necessary).

To find access to low- or no-cost financial and legal advice, you can reach out to your local Small Business Development Center or similar business service organizations, like SCORE.

Frequently asked questions

What percentage of small-business loans default?

According to the most recent Equifax Small Business Default Index, the business loan default rate is 2.56%.

What happens to a small-business loan if my business fails?

If your business fails, you’re still responsible for repaying your loan. As in the case of default, if you can’t repay, your lender may seize your collateral and/or personal assets to recover its losses.

What happens in a business loan default with a personal guarantee?

If you’ve signed a personal guarantee and then default on that business loan, your lender has the right to claim your personal assets to repay the debt you owe. If you don’t have enough assets to cover the debt or refuse to cooperate with your lender, they can also sue you for a judgment in court.

Source: nerdwallet.com

Apache is functioning normally

August 13, 2023 by Brett Tams

Banking today has a lot of one-click convenience, and you may hear the terms EFT and ACH used interchangeably. There is, however, a key difference between these two acronyms: ACH is one kind of EFT.

To understand this better, first know your definitions. Automated Clearing House (ACH) is a national network linking U.S. financial institutions. This electronic system allows them to debit money from one account and then credit it to another. ACH payments are one variety of EFT, or electronic funds transfer. The term EFT includes additional methods of moving money electronically, such as wire transfers.

So all ACH transactions are considered EFT, but not all EFTs are ACH.

Keep reading to learn more including:

• Which payments are considered ACH?

• What are some other EFT payment methods?

• How do EFT vs. ACH vs. wire transfers compare?

ACH Transfers

ACH stands for Automated Clearing House, a network governed by Nacha (National Automated Clearing House Association). The first ACH association appeared in 1972 in California; by 1974, multiple regional networks joined together to form Nacha, which has since overseen the ACH network nationally.

But what is ACH? Put simply, ACH is a type of electronic fund transfer (EFT) that allows individuals, corporations, and even the government to electronically move money from one bank account to another. It can be thought of as a hub that keeps funds flowing.

ACH payments work domestically; that is, among banks and credit unions within the United States. You may be able to send money via international ACH transfers, but other countries will have their own networks and governing bodies. Some countries do not have an equivalent network at all.

Funds first go to the Automated Clearing House, which then reviews the payments and releases them in batches throughout the day. For this reason, ACH transfers are not immediate. How long ACH transfers take can vary: Traditional ACH transfers can take one to two business days, but in recent years, Nacha has enabled same-day transfers for eligible transactions.

How Do ACH Transfers Work?

ACH transfers work thanks to a data file that includes information about a prospective payment. The file goes to the payor’s bank to the clearing house and then on to the payee’s bank, with details on the transaction. The funds get moved into the intended location, and the process is completed, transferring money from one account to another.

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How Is ACH Used?

Consumers and businesses can use ACH for a variety of purposes. For example, employers often use the ACH network for direct deposit. This enables them to deposit paychecks directly into employees’ bank accounts. When an entity, like an employer or the government, initiates the ACH process to send funds, this is classified as an ACH credit.

Individuals can provide bank account information to businesses, such as mortgage lenders and utility companies, to enable ACH debit transactions as part of their electronic banking. This means those companies are able to directly debit funds from the individual account using ACH as a form of electronic bill payment. Businesses and individuals may utilize ACH debit for autopay (recurring payments) or for one-time payments.

Even peer-to-peer (P2P) payment methods like PayPal and Venmo can utilize the Automated Clearing House network for electronic transfers. (When such services offer instant payments, they may charge a fee and use your credit card instead, so proceed carefully in these situations.)

Typically, the employer or merchant enabling ACH payments is the one to pay ACH fees.

Recommended: ACH Payments vs. a Check

What Is EFT?

Electronic fund transfers (EFTs) refer to a much broader range of electronic payments. ACH is a type of EFT, but EFT can also include payments like wire transfers, debit card payments, credit card payments, local bank transfers, instant P2P payments, and even ATM transfers. Electronic fund transfers can be domestic or international in scope.

The Consumer Finance Protection Bureau refers to electronic fund transfers as “any transfer of funds that is initiated through an electronic terminal, telephone, computer, or magnetic tape.”

Note: Another common term in finance is ETF (exchange-traded fund). The acronyms are similar, so it’s important to recognize that an ETF is an investment security, not a payment method.

How Do EFT Payments Work?

EFT payments may use the ACH network, or they may not. An example of a transaction that doesn’t use ACH is tapping or swiping your debit card to make a payment. It’s an instantaneous transfer of funds, without banking information being exchanged. The money is moved from your account to the store’s without any verification other than your PIN.

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Types of EFT Payments

EFT payment is a broad category, including common transfers like ACH and wire transfers. Here is just a short list of payment methods that can be classified as EFT:

• ACH transfers

• Wire transfers

• Peer-to-peer payments (often done through ACH)

• Debit card transactions (in person or online)

• Credit card transactions (in person or online)

• ATM transfers

• E-checks

• Telephone orders

Do EFT Payments Have Fees?

Typically, a merchant will pay a small percentage of a transaction’s amount for the privilege of using an EFT method. In some situations, you, the consumer, may be assessed a fee for using these methods. For instance, some merchants may add a surcharge for credit card vs. cash or debit card payments. Or if you pay by phone, there may be a surcharge. You should be alerted to these add-on costs, however, in advance, so you can decide if you want to proceed or not.

What Is the Difference Between ACH and EFT?

We’ve established that the key difference between ACH and EFT is that an ACH is a type of EFT. This table further breaks down the distinction:

	ACH	EFT
Availability	Traditional ACH is available domestically (in the U.S.).	Various types of EFTs can be used internationally.
Security	Transfers pass through the ACH, which provides an added level of security over paper checks and debit card transactions.	While ACH and wire transfers are less prone to fraud, other forms of EFTs (like debit and credit cards) can be susceptible.
Speed	Can be same-day but never instant; may take multiple days.	Can be instant.

ACH vs EFT vs Wire Transfers

When banking, you’re likely to hear about different ways to move money, including ACH, EFT, and wire transfers. Here’s a closer look: ACH is a type of EFT, but another common type of EFT is a wire transfer, which can be used to send money to someone’s bank account.

Wires can be both domestic and international and often have a fee for both the sender and the receiver, depending on the banks or transfer service agencies (like Western Union) involved. Wire transfers allow you to make an electronic payment “by wire,” such as through SWIFT, the Clearing House Interbank Payments System, or the Federal Reserve Wire Network. Wire transfers can take up to two days to fully process; international ones might take longer.

Should You Use Electronic Transfers?

Electronic transfers are common in modern banking. It is likely that you already utilize some form of electronic transfer, whether you receive a direct deposit from your employer like 96% of American workers, have your utility bills on autopay, pay for groceries with a debit card, or use peer-to-peer transfer apps to split the dinner bill or pay a friend for concert tickets. When you buy a house, the mortgage company may even ask you to wire funds in time for the closing.

The Takeaway

Automated clearing house (ACH) transfers are a type of electronic funds transfer (EFT), which allows for the direct debiting and crediting of funds from one bank account to another. Common examples of ACH include direct deposit from an employer into your bank account or an automatic bill payment debited from your account.

ACH is only one type of EFT, however; other types include wire transfers and debit and credit card payments, among others. These kinds of payments are commonly used today to keep funds flowing quickly and securely and play an important role in your banking life.

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Better banking is here with up to 4.50% APY on SoFi Checking and Savings.

FAQ

Is EFT the same as direct deposit?

EFT stands for electronic funds transfer. Direct deposit is one example of EFT.

Is ACH a wire transfer?

While ACH and wire transfers are similar transactions, they operate on different timelines and according to different rules. Wire transfers (especially domestic ones) can occur almost immediately, while ACH transactions can take a couple or a few business days.

What is the difference between ACH and autopay?

ACH is a method for electronically transferring funds between accounts. Autopay involves your setting up recurring payments of bills with a vendor. It typically uses the ACH network to complete those transactions.

Is ACH the same as direct deposit?

Direct deposit is one kind of ACH payment, but other kinds of ACH transactions are possible as well.

What is the best EFT payment method?

The best EFT method will depend upon various factors, such as timing and the technology you can most easily access or are most comfortable using.

Photo credit: iStock/Cecilie_Arcurs

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Source: sofi.com

Apache is functioning normally

August 4, 2023 by Brett Tams

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.

A cashier’s check is a guaranteed payment method issued by a bank on behalf of an account holder. It ensures the funds are available and provides added security against fraud or insufficient funds.

If you’re about to spend a significant sum of money—say for a down payment on a new car or your closing costs on your first house—there’s a chance you’ll be required to provide a cashier’s check.

If you’ve never heard of or used a cashier’s check, you may wonder why you can’t just write a check from your personal checking account to handle the transaction. After all, they’ve already approved you for this transaction, so what gives?

In this comprehensive guide, we’ll explore the concept of a cashier’s check, its importance in different situations, how to obtain one, associated costs, alternatives, and much more. Let’s dig in.

In This Piece:

What Is a Cashier’s Check?
Why Would I Need a Cashier’s Check?
Pros and Cons of Cashier’s Checks
Where to Get a Cashier’s Check
How to Get a Cashier’s Check
How Much Does a Cashier’s Check Cost?
Can I Buy a Cashier’s Check with My Credit Card?
How Long Is a Cashier’s Check Good For?
Cashier’s Check Alternatives
Cashier’s Check vs. Money Order vs. Certified Check
What Happens If I Lose My Cashier’s Check?

What Is a Cashier’s Check?

A cashier’s check is a check written by your bank or another bank on your behalf and is guaranteed by the bank. It offers the advantage of guaranteed funds and additional security features, making it a preferred choice for large transactions. Unlike personal checks, you cannot return cashier’s checks for insufficient funds.

How does the cashier’s check work? First, the bank removes the funds from your account or accepts cash or a personal check. The bank then writes a check for the same amount to the recipient of your choice. The bank typically charges a small fee for providing a cashier’s check. These checks also have extra security features, like watermarks, color-shifting ink, and security thread, that make them difficult to counterfeit or commit fraud against and protect personal information.

Why Would I Need a Cashier’s Check?

Cashier’s checks are essential in many situations where guaranteed funds are required. For example, when making a large purchase, such as a car or a house, sellers often prefer cashier’s checks to ensure the payment is valid and secure. Cashier’s checks are also commonly used in real estate transactions, debt settlements, and other scenarios where trust and security are essential.

Pros and Cons of Cashier’s Checks

Cashier checks offer several advantages, including guaranteed funds, increased security, and broader acceptance. They are widely recognized and trusted by institutions. However, there are also some drawbacks to consider, such as associated fees and the need to visit a bank in person to obtain one.

Let’s look at the pros and cons of cashier’s checks.

Pros of Cashier’s Checks:

Guaranteed funds: Offer more assurance than personal checks since the bank backs them. The funds are guaranteed, ensuring that the recipient will receive the payment.
Enhanced security: Typically come with additional security features, such as watermarks, holograms, or special paper, making them difficult to counterfeit, which provides an added layer of protection against fraud.
Widely received: Commonly accepted by individuals, businesses, and institutions, preferably for transactions involving large amounts of money, such as real estate purchases or vehicle sales.
Faster processing: Usually processed more quickly than personal checks since they are already verified and guaranteed by the bank. This can be beneficial when time is of the essence in completing a transaction.
Record of payment: They provide a clear paper trail and proof of payment, which can be useful for record-keeping purposes or in case of any disputes or legal matters.

Cons of Cashier’s Checks:

Cost: One of the main drawbacks of cashier’s checks is the associated cost. Banks typically charge a fee for issuing a cashier’s check, ranging from a few dollars to a percentage of the check amount. This fee adds to the overall expense of the transaction.
Inconvenience: Obtaining a cashier’s check may require visiting the bank during business hours, which can be inconvenient, especially if the bank is not easily accessible. This can be a drawback for individuals who prefer more convenient digital payment methods.
Loss: Like any physical document, it can be lost or stolen. If a cashier’s check goes missing, replacing it can be time-consuming and may involve additional fees or requirements from the issuing bank.
Limitation: While cashier’s checks are suitable for large transactions, they may limit the maximum amount you can write on them. This can be a disadvantage if you need to make a payment exceeding the limit set by the issuing bank.
Inflexible: Once a cashier’s check is issued, it is generally non-negotiable. Unlike personal checks, they cannot be canceled or modified. This lack of flexibility can be a disadvantage if any changes or adjustments need to be made to the payment after the check is issued.

Considering these pros and cons is essential when deciding whether to use a cashier’s check for a specific transaction. Assess your needs, the transaction’s requirements, and the associated costs to make an informed decision.

Where to Get a Cashier’s Check

Obtaining a cashier’s check is relatively straightforward. Nearly every banking institution offers this service. You can inquire with your bank whether you can request a cashier’s check by phone or if you need to visit your local branch.

Generally, you can purchase a cashier’s check directly from a branch office. Inform the teller of the desired amount, and they will confirm the availability of funds in your account. The check amount may be frozen in your account until it clears or withdrawn immediately.

How to Get a Cashier’s Check

Typically, obtaining a cashier’s check requires you to physically go to the bank. You’ll also need to show your ID and give them the name of the person or company to whom you want to write a check. Some banks may also require a payee address or phone number, so either call ahead to confirm or have that information on hand before going to the banks.

Follow these steps and tips to get a cashier’s check:

Contact your bank and gather the required documents

Start by contacting your bank to inquire about their process for obtaining a cashier’s check. You can call their customer service or visit the bank’s website to find out if they offer cashier’s checks and if you need to visit a branch in person.

In most cases, you’ll need to go to your local bank branch to purchase a cashier’s check. Bringing all the necessary documents and information with you is a good idea to make the process smoother.

When you arrive at the bank branch, approach the teller and tell them you need a cashier’s check. Provide them with the recipient’s name and the amount you want the check to be issued.

Confirm sufficient funds and pay the required fee

The teller will verify that you have sufficient funds in your account to cover the amount of the cashier’s check. They may ask you to deposit the necessary funds into your account if you haven’t already done so.

A fee is usually associated with obtaining a cashier’s check, which varies from bank to bank. The teller will inform you of the fee amount and request payment. Be prepared to pay the fee in cash or deduct it from your account.

In some cases, the teller may ask for additional information, such as the purpose of the cashier’s check or any special instructions you have for the recipient. Provide these details as requested.

Receive the cashier’s check

Once you complete all the necessary steps, the teller will generate the cashier’s check. Double-check the details on the check, including the recipient’s name, the amount, and any additional information.

Keeping the receipt is recommendable. The teller may provide you with a receipt for the transaction. Keeping this receipt for your records is essential, as it serves as proof of purchase and can be helpful if any issues arise.

The specific steps and requirements for obtaining a cashier’s check may vary slightly depending on the bank or financial institution you’re dealing with. It’s always a good idea to check with your bank for their specific process and any additional instructions they may have.

Remember, having all the necessary documents, identification, and funds is crucial to ensure a smooth and hassle-free experience when obtaining a cashier’s check.

How Much Does a Cashier’s Check Cost?

The cost of a cashier’s check varies from tens of dollars to a percentage of the check amount, depending on the bank. Typically, banks charge a small fee for providing this service. It is advisable to check with your bank beforehand to understand the exact cost of obtaining a cashier’s check.

Can I Buy a Cashier’s Check with My Credit Card?

Typically, you can’t buy a cashier’s check directly with a credit card. However, suppose you don’t have sufficient funds in your checking or savings account. Then, you can consider taking a cash advance on your credit card, depositing those funds into your bank account, and purchasing a cashier’s check.

Remember that cash advances often come with higher-than-usual interest rates, so promptly paying off the balance is essential to avoid accruing excessive interest.

How Long Is a Cashier’s Check Good For?

Cashier’s checks typically do not expire, but the issuing bank may have its policies regarding the validity period. As previously noted, checking with your bank for specific procedures, like how long their cashier’s checks are valid, is always a good idea.

Cashier’s Check Alternatives

What if you can’t get a cashier’s check? If obtaining a cashier’s check is not feasible for your situation, alternative payment methods are available. Here’s a list of alternative approaches:

Money orders are prepaid instruments issued by various organizations such as post offices, banks, and retail stores.
Certified checks are personal checks verified and guaranteed by the issuing bank. The bank sets aside the funds in the account and ensures that the check will clear when presented for payment.
Wire transfers allow you to transfer funds from one bank account to another electronically. You can use this method for larger transactions and international transfers.
Online payment services, such as PayPal, Venmo, and Zelle, offer a convenient way to send money electronically. These services allow you to transfer funds directly from your bank account or credit card to the recipient.
Electronic Funds Transfer (EFT) is a secure and efficient way to transfer funds between bank accounts. You can use it for recurring payments, such as direct deposits or automatic bill payments.
Personal checks are a good alternative, especially for smaller transactions. However, they may not provide the same level of assurance to the recipient since they rely on the funds being available in the payer’s account.
Cash may be an acceptable alternative for smaller amounts and transactions between trusted parties.

Remember, it’s essential to assess the specific requirements of your transaction and consider the level of security and acceptance needed before choosing an alternative to a cashier’s check.

Cashier’s Check vs. Money Order vs. Certified Check

Money orders and certified checks are the alternatives to cashier’s checks with more similarities and popularity. They are constantly compared to each other and often bring confusion due to their resemblances. Let’s look at how they compare so you can make informed decisions in the future.

Money orders have typically limited funds, often up to only a few thousand dollars. On the other hand, cashier’s checks can be written for larger sums, making them suitable for high-value transactions. Additionally, cashier’s checks provide an added layer of security as a specific bank guarantees them.

Certified checks are personal checks the bank has verified, marking them “certified.” Cashier’s checks, on the other hand, are written by the bank on your behalf. Both checks offer a guaranteed level, but cashier’s checks are often preferred for more significant transactions due to their wider acceptance and added security.

What Happens If I Lose My Cashier’s Check?

If you lose your cashier’s check before it gets to its rightful recipient, the issuing bank could require that you be bonded for the amount of the lost check before they cut another. This bond, known as an indemnity bond, essentially means that you are liable for the replacement check.

In conclusion, cashier’s checks are a reliable and secure payment method for various transactions. Their guaranteed funds and additional security features provide peace of mind to both buyers and sellers. If you need to make a large payment, consider obtaining a cashier’s check from your bank to ensure a smooth and trustworthy transaction.

For more information on how cashier’s checks work or if you need help finding the right credit card to improve your financial well-being, contact experts.

Source: credit.com

Apache is functioning normally

August 1, 2023 by Brett Tams

Have you ever considered taking out a personal loan to invest? If so, you aren’t alone.

When you hear about the ability to make money in the stock market, it can be tempting to find a way to start investing today. This is true even if you don’t have any available cash.

Want to invest, but don’t have cash? Find a personal loan with Fiona

If you’re trying to get ahead, it may seem tempting to take shortcuts to get there faster. Unfortunately, some alternatives are a very bad idea. This includes taking out a personal loan to invest in the stock market in the vast majority of cases.

There may be a very rare time when it makes sense to take out a personal loan to invest. However, I don’t think I would ever do it. Here’s what you need to know.

What’s Ahead:

How personal loans work

Personal loans have a couple of key characteristics that are important to understand.

Personal loans are unsecured debt

First, they are unsecured loans. This means the lender can’t foreclose on your home or repossess your car if you don’t make payments.

Unsecured loans, such as personal loans, have higher interest rates than secured loans. This makes sense because there is nothing the lender can directly seize if you default on your loan. It is riskier for the lender.

Personal loans have a fixed term

Next, personal loans are fixed-term loans. This means you have a set number of months or years to repay the loan after you take it out.

Based on your balance, interest rate, and term, you’ll have to make a payment each month that results in paying off the loan at the end of the term.

This is unlike a credit card where you can carry a balance from month to month and make minimum payments.

This is important if you’re considering investing the money. It means you have to make a fairly decent monthly payment each month. You can’t pay the minimum and pay the rest off at the end of the loan.

Can I use a personal loan to invest?

Unless your lender specifies otherwise, a personal loan can be used for anything you want. This includes investing in the stock market.

That said, some lenders will offer you lower personal loan interest rates if you use the money for certain purposes. That’s because some uses may result in a lower risk to the lender than others.

For instance, personal loans for debt consolidation may require the funds to be disbursed directly to the loans you’re consolidating. Read the terms of your loan to understand if there are any restrictions on the money.

Why would someone take out a loan to invest?

A person may be tempted to take out a personal loan to invest if they see an opportunity to make money. If a person could earn higher returns investing the money they borrow than they pay in interest, they could come out ahead.

This can be very tempting after a stock market crashes and then starts rebounding. In some cases, you may see sharp gains for a few days or weeks that would exceed the costs of some personal loans over a year.

When would this be worth it?

Taking out a personal loan to invest only makes sense when you’re very confident your investment gains will exceed the costs of the loan.

For instance, let’s say you can take out a personal loan with an 11.99% interest rate. It would only make sense to use this money to invest if your returns could exceed that 11.99% cost.

Investing is volatile, though. Nothing is guaranteed. It probably wouldn’t make sense to take out an 11.99% personal loan to earn 12% by investing. Due to taxes and the minimal amount you’d gain, you wouldn’t come out ahead.

In order for the risk to be worth it, you’d likely have to get returns that greatly exceed the interest rate you pay on your personal loan.

There are other types of investments other than the stock market. Some of these investments may make more sense to use a personal loan for.

For instance, let’s say you have the opportunity to invest in your small company that has a huge profit margin. Unfortunately, you can’t get access to cash any other way than a personal loan for whatever reason.

If you put in $10,000 but could earn $20,000 from that investment in three years, it may make sense to take out a personal loan to invest.

Why it may be a good idea to take out a personal loan to invest in the stock market

Taking out a personal loan to invest in anything, including the stock market, only makes sense in one scenario. This scenario is when you know with a relative degree of certainty that your returns will exceed your costs.

Investing in the stock market at any rate of return is far from certain. I personally do not believe it is ever a good idea to take out a personal loan to invest in the stock market.

Why it may not be a good idea to take out a personal loan to invest in the stock market

There are several reasons why taking out a personal loan to invest in the stock market is a bad idea.

Personal loans have fixed terms

First, personal loans have fixed terms that are usually relatively short. Personal loan terms typically don’t exceed seven years, although they can be longer in some cases.

Short terms are a problem because most investments vary in returns greatly from year to year. The returns average out over the long run, but the short-term returns are very unpredictable.

While seven years seems like a long time, it isn’t in the grand scheme of the stock market.

High interest rates

Personal loans don’t offer low interest rates like car loans and mortgages do. While you may see low personal loan rates advertised, such as 5.99% APR, people rarely qualify for them.

These low rates are usually for funds for a specific use, such as debt consolidation. Additionally, they’re typically for the shortest term loan, such as 24 months. Finally, you normally have to have impeccable credit to qualify for these rates.

To make matters worse, the longer the loan term is, the higher your interest rate will be, too. In order for you to invest for a long enough period to have investment returns be less volatile, it would cost you even more in interest payments. This could cut down on your potential profit.

You have to make monthly payments on your loan

Personal loans require you to make equal monthly payments. When you’re invested, you don’t want to have to sell portions of your investment to make payments.

Doing so would lower your return. It could also cause you to sell when your investment is performing poorly, resulting in locking in a loss.

Other types of investments that have greater returns may not be as liquid. This means you can only sell them at certain times. If you can’t get your money out to make your monthly payment, you could default on your loan.

Who should consider taking out a personal loan to invest?

In my opinion, only people with investments that have guaranteed returns and very little to no risk should take out a personal loan to invest. These investments rarely exist.

The risk isn’t worth the relatively low amount you’ll earn over the interest costs of the loan in the vast majority of cases.

This means most people should avoid taking out a personal loan to invest.

It’s about risk and return – here’s an example

Let’s say you take out a five-year personal loan for $10,000 to invest in the stock market. There is no origination fee, so you get the full $10,000 upfront. Interest rates from these loans vary, but you get an 11.99% APR for the purposes of this example.

Your investment has a break out period and you get an incredible 15% return on your investment each year. In this case, it might make sense to take out a personal loan to invest. Unfortunately, you’d only know this after the fact.

At the same time, your interest is not tax-deductible. You would have to pay income taxes on the gains on your investments. This would reduce your profits.

Even without taxes, you’d only theoretically earn a 3.01% difference between the loan APR and the return from the investment.

Once you consider the fact that you’d have to make a monthly payment of about $222, things get trickier. You’d have to have cash on hand to make this monthly payment or you’d have to sell some of your investment each month to make your payments.

If your investment varies in price, you may end up having to sell low to make your monthly payment. This could reduce your future returns below the 15% per year the investment would have returned if you left the money in the investment the entire time.

Let’s now look at an example with a more reasonable rate of return for the stock market. Let’s assume you earn an 8% return each year.

In this case, you’d be paying 3.99% per year to invest. This makes no sense. You wouldn’t take out a personal loan to invest because it’d cost you money to do so.

Personal loan providers you may want to consider

If you happen to have an investment opportunity that would likely result in a higher return than the cost of the loan, here are a few lenders you may want to consider.

Fiona

Fiona doesn’t directly offer personal loans, but they do help you find a personal loan lender. Once you pick the type of loan you want, you input a few details about your situation. In the case of personal loans, you input your credit score range, zip code, loan purpose, and the amount of the loan you’re requesting.

Based on this information, Fiona will display several lenders that may match your needs. They show you estimated terms, APRs, and monthly payments. If you find an offer you like, click continue. You’ll be directed to input information to get personalized loan offers for your situation.

Find a personal loan lender with Fiona.

Monevo

Monevo is another personal loan aggregator website. You’ll just some basic information about yourself and the purpose of your loan to get quotes from more than 30 different lenders. The process won’t affect your credit score, and you’re under no obligation to accept any of the offers.

If you want to get a feel for the lenders and rates being offered, you can browse a list before you even start the quote process. Loans are available in amounts up to $100,000, with rates range between 1.99% – 35.99% APR. If you like one of the offers, you’ll then progress to the full application.

By shopping multiple lenders at once, you’ll save time and increase your chances of getting great rates. Whether you go with one of the quotes offered or not, you’ll get a great idea of the rates and terms you can expect.

Get personal loan rate quotes from Monevo.

Credible

Credible is another personal loan aggregator. They allow you to check your personal loan rates without impacting your credit. Since it doesn’t hurt your credit, it doesn’t hurt to check to see if they have any offers the other aggregator sites don’t that may offer you a better rate.

Credible is so confident in their ability to offer the best rates that they’ll give you $200 if you find a lower rate. Of course, terms apply so look at the details of the offer. See Terms*. Even with this guarantee, it still makes sense to shop around to ensure you’re getting the best rate.

Get personal loan quotes from Credible.

Credible Credit Disclosure – Requesting prequalified rates on Credible is free and doesn’t affect your credit score. However, applying for or closing a loan will involve a hard credit pull that impacts your credit score and closing a loan will result in costs to you.

Places to consider investing if you decide the potential returns are worth the risk

If you decide to take out a personal loan to invest, here are a few of the options you may consider.

Robo-advisors

Robo-advisors manage your money on your behalf by using technology instead of human financial advisors. Based on your risk tolerance, robo-advisors generally set up a well-diversified portfolio.

Robo-advisors usually charge a fee for their service, which will cut into your returns. Since robo-advisors typically take a diversified approach, you aren’t likely to hit a home run and get amazing returns.

Self-directed brokerage accounts

Self-directed brokerage accounts allow you to pick what you want to invest in. You could invest in several options including individual stocks, mutual funds and ETFs.

Self-directed brokerage accounts allow you to have a better chance of getting returns that exceed a personal loan’s interest rate. At the same time, they can also result in a larger loss.

ETFs

Exchange-traded funds (ETFs) are a basket of investments that help you diversify. When you buy an ETF, you’re normally purchasing several investments. Some ETFs are as large as the S&P 500 index while other ETFs only follow a small sector or industry.

If you want to bet on a particular industry with an ETF, there is a chance your returns could be high enough in the short term. If you bet wrong, your losses could also be massive.

Mutual funds

Mutual funds also allow you to invest in a basket of investments. Rather than trading live throughout the day, mutual funds settle all trades and reprice once per day after the markets close.

Like ETFs, you can use mutual funds to purchase a very diversified basket of investments or a small portion of investments such as a certain industry.

Real estate crowdfunding

Real estate crowdfunding is a much talked about investment option. Here are two companies that may offer investments you could be interested in.

Roofstock

Roofstock currently offers two main services. The first allows you to buy rental properties from around the country. Personal loans normally won’t provide enough cash to invest in most of these properties, so it isn’t really an option to invest personal loan proceeds.

What may be an option is Roofstock’s Roofstock One offering. This allows you to buy shares of a rental property rather than the whole thing. Only accredited investors can invest in Roofstock One, though. Most people taking out a personal loan to invest don’t likely fall into this category.

Learn more about Roofstock.

Fundrise

Fundrise is a real estate crowdfunding option that doesn’t require you to be an accredited investor. Rather than let you invest in individual properties, you invest in a portfolio of properties Fundrise sets up. They have a starter portfolio as well as three other portfolios you can choose from depending on your goals.

Unfortunately, Fundrise displays its historical annual returns (8.7% to 12.4%) on the front page of its website. These returns aren’t high enough to allow significant profit after taking out a personal loan, so it isn’t a good idea in most cases.

Learn more about Fundrise.

This is a testimonial in partnership with Fundrise. We earn a commission from partner links on MoneyUnder30. All opinions are our own.

Summary

Ultimately, it almost never makes sense to take out a personal loan to invest in the stock market. In rare cases, it may turn out to be profitable if you get lucky.

Even so, the profit probably won’t be very large compared to the risk you’re taking.

Source: moneyunder30.com

Apache is functioning normally

July 30, 2023 by Brett Tams

Because I recently eliminated all of my non-mortgage debt, I have a significant positive cash flow. The $1,000 per month I was putting toward debt can now be used for investing. I’m making maximum contributions to my Roth IRA, of course, but that still leaves several hundred dollars each month available for other purposes. This has forced me to evaluate my financial goals.

Mortgage Prepayment Options

For the past year, Kris and I have discussed making accelerated payments on our mortgage. I’ve written about this choice several times at Get Rich Slowly, and it seems clear that mathematically it makes more sense to invest the money. However, it’s also clear that eliminating a mortgage offers a tremendous psychological boost. I’ve never heard anyone say they regret owning their home outright.

I’ve researched a variety of mortgage acceleration schemes:

Refinancing from a 30-year to a 15-year mortgage is appealing, but the interest rate drop (from 6.25%) isn’t enough to make this worthwhile.
I could sign up for my bank’s bi-weekly payment program, but I don’t like the enrollment fee, and I don’t like the increase in paperwork.
We could make an extra payment every year, or pay an extra $100 per month. But I feel like we could do more.

Ultimately, we decided to use the method described by Charles Givens in his 1988 best-seller Wealth Without Risk:

You can pay off your 30-year mortgage in half the time without refinancing by making extra principal payments. On the first of the month when you write your regular mortgage check, write a second check for the “principal only” portion of the next month’s payment.

Wealth Without Risk

For most of homeowners, the principal portion of a mortgage payment is quite small. For example, our February mortgage bill was $1681.79. Of this, $1119.16 was designated for interest, $295.19 for escrow (taxes and insurance), but only $267.44 for principal.

Using Givens’ plan, if I include an extra $267.44 with my payment, I’ll also knock off the next month’s payment from my mortgage. That $267.44 accomplishes the same thing $1681.79 usually does, but at 16% of the normal monthly cost. That’s a bargain.

The advantages this method are:

It has a sliding degree of difficulty. At first, the extra principal payments are lower. But as we pay down the mortgage, these extra payments increase. We have time to “grow into” these increased payments.
It’s easy for us to back out. If we decide our money is better used elsewhere, we can simply stop making extra principal payments.
Every time we make a payment, we’re essentially making two payments, cutting the term of our mortgage in half.

After discussing the pros and cons, Kris and I have agreed to follow a modified version of Givens’ plan. To make things simple, we’re using round numbers. During 2008, for example, we’re going to pay $2,000 toward our mortgage each month, which gives us an additional $318.21 against the principal.

Every January, we’ll adjust how much extra we’re paying. If our budget gets too tight, we can cut back at any time.

The Drawbacks

To be fair, Givens doesn’t recommend this method for low-interest mortgages like ours. He clearly states, “Never pay off low interest mortgages — those under 9%. Instead, use the extra money in a better investment.” He wouldn’t advocate using this method on a 6.25% mortgage.

The March 2008 issue of Consumer Reports has a brief exploration of this topic. Their conclusion?

Many people find peace of mind in paying off their mortgages and owning their homes outright, especially as they approach retirement. That can make an investment in your mortgage a worthy choice, psychologically if not financially.

Still, the bottom line, according to our Money Lab, is this: Although there are exceptions, chances are you’ll be better off putting extra money into a good mutual fund, not into prepaying your mortgage.

“Did you see this article?” Kris asked me, after she finished reading it.

“Yes,” I said. “What do you think?”

“I don’t care” she said. “I want to do both. I want to invest and prepay the mortgage.”

“So do I,” I said.

Financial Freedom

If we have a substantial emergency fund, if we’re fully-funding our retirement plans, and if we’re saving for other goals, I believe that paying down the mortgage makes sense for us. We understand that we’re sacrificing some theoretical (and probable) future investment returns, but we’re also working to create a financial situation that’s easier for us to maintain in the long run.

If we have no mortgage, that’s $1400 less each month that we have to pay in expenses (we’ll still need to pay taxes and insurance). Since we split the payment, that’s $700 less per month that I have to pay. Without a mortgage, my fixed expenses would be about $600/month. My total expenses would be about $950/month. This would provide tremendous freedom, granting me an opportunity to try things that I might not otherwise be able to do.

Another Form of Diversification

Every investment book I’ve read says that a smart investor diversifies his portfolio, putting some of his money into each of several different types of investments. I view prepaying the mortgage as diversification. Sure, the stock market will probably beat the 6.25% I’ll earn by doing this, but it’s guaranteed money. To me, it’s better to put my money into my mortgage than into bonds, certificate of deposit or a high-yield savings account. Especially if we’re entering a recession.

Source: getrichslowly.org

Apache is functioning normally

July 17, 2023 by Brett Tams

Owning a house is everyone’s dream. We all work hard in our lives to achieve our dreams. However, it is not easy today to buy a house in metro cities. Prices of residential real estate units have gone up like anything. It is nearly impossible to pay the full price of the house unless one has huge savings already. For a middle-income earner, the only visible choice is taking a home loan and paying it back over the years. Applying for a home loan has its own set of rules and requirements.

In this article, we are going to discuss all you need to know about joint home loans. As the name simply suggests, a joint home loan is a loan which is taken jointly with another person, usually spouse or parents. There are multiple reasons as to why people apply for joint loans rather than individual loans, some reasons are:

Increased loan eligibility: When two people apply for a home loan together, their combined income is used to calculate the loan amount. This can lead to a higher loan amount being approved, which can be helpful if you are looking to buy a more expensive home.

Creditworthiness: This applies to all types of loans, the lenders always check your credit score before deciding the eligibility in terms of loan amount, tenure, and interest rate. It is easy to avail the loan if you have a strong credit history in terms of timely repayment.

However, if your credit history is not very strong, a co-applicant can be added to the loan proposal so that bank can have additional comfort about the loan proposal and there would be two people involved in repaying the loan rather than single person exposure.

Shared responsibility: When you take a home loan jointly, both borrowers are equally responsible for repaying the loan. This means that if one borrower is unable to make a payment, the other borrower is still obligated to do so. This can be a good option for couples or other partners who want to share the responsibility of owning a home.

Lower interest rate: Some lenders offer lower interest rates on joint home loans. This is because they are considered to be lower-risk loans, as there are two borrowers who are responsible for repaying the loan.

Tax benefits: As per the income tax regulations, joint home loans allow both co-borrowers to claim tax benefits under Section 80C as well as Section 24.

Section 80C: Amount of principal repayment can be claimed under this section up to Rs. 1.5 lakhs per annum by each of the co-borrowers.
Section 24: Amount of interest paid as a component of EMI can be claimed under this section up to Rs. 2 lakhs per annum by each of the co-borrowers.

There are also multiple disadvantages of having joint home loan, some of these are:

Default by a co-borrower: If one borrower defaults on the loan, the other borrower may be held liable for the entire amount. Additionally, the credit score is affected negatively for both the borrowers even when another co-borrower has been paying on time.

Separation: Usually the joint home loans are availed by married couples. This can raise all sorts of legal problems if the co-borrowers are married to each other and get separated by divorce even as the home loan remains to be repaid. To further complicate the issue, If the property is registered in the name of one co-borrower, then after the loan has been fully repaid, he/she will become the rightful owner even if the other co-borrower has also paid their share of the EMIs.

Credit score: Default by any one of the co-borrowers affects the credit score of all the borrowers. This impairs the ability of a genuine borrower to borrow in future.

Few things that should be kept in mind before applying for a joint home loan:

Do not apply for a joint loan just for the formality. Usually, banks ask for a co-borrower just to reduce their risk. However, if your credit score is decent and your income eligibility allows for a required loan amount then you should not involve a co-borrower unnecessarily just for the sake of formality.
Do not apply for a joint loan just for the sake of tax deduction. Dual tax deduction might sound tempting but in case of separation or disputes, it could affect the title of property and make it difficult to sell due to legal complications.
Do not apply for a higher loan amount just because you can do it with the help of a co-borrower. Always keep in mind that the EMI amount should be well within a reasonable limit that can be paid out in due course. Once you borrow money from a bank, there is no turning back.

Rohit Gyanchandani is Managing Director at Nandi Nivesh Private Limited

As per RBI data, home loans grew 8.4% between March and October, faster than the preceding six month period during which there were no hikes.

First Published: 15 Jul 2023, 11:07 AM IST

Source: mintgenie.livemint.com

Apache is functioning normally

July 16, 2023 by Brett Tams

When my husband started using a virtual wallet, I was concerned. We share a joint credit card and I was bothered about the security side of carrying around credit card information on a cell phone. In my mind, paying for things with your cell phone seemed too easy and a bit dangerous.

Through a combination of reassurance from my husband and a significant number of Google searches on “are virtual wallets safe,” I began to feel more comfortable with the idea.

I know I’m not alone when it comes to questions about the safety of virtual wallets. So, let’s talk about it. What are virtual wallets and, most importantly, are they safe?

What’s Ahead:

What are virtual wallets?

A virtual wallet, sometimes referred to as an e-wallet, is an electronic wallet that lives on your mobile device. Virtual wallets can store all of your payment-related information including credit cards, debit cards, rewards cards, membership cards, and coupons, allowing you to pay for things electronically. No more trucking around your bulky wallet or disorganized purse.

Depending on the type of mobile device you use, you may have a virtual wallet already installed on your phone. For instance, iPhone users will have access to Apple Wallet. Other virtual wallets can be obtained by downloading an app onto your mobile device.

Virtual wallets vs. mobile wallets

The terms virtual wallets and mobile wallets are often used interchangeably. However, there is a difference. A mobile wallet is a type of virtual wallet that can be accessed by downloading an app on a mobile device like a smartphone or wearable watch.

A popular example of a virtual wallet is PayPal. However, when PayPal is used on a mobile device it can function as a mobile wallet.

Popular examples of mobile wallets include Apple Pay, Samsung Pay, and Android Pay.

Banks like Chase, even offer digital wallets. With Chase accounts, you can get Chase Pay®, which allows you to simply and securely use your phone to make payments.

What are the most popular virtual wallets?

There are a variety of virtual wallets available for you to choose from. Some of the most popular virtual wallets include:

Samsung Pay.
Apple Pay.
Android Pay.
Chase Pay.
PayPal.
Google Wallet.
Venmo.
Zelle.

You can also check out wearables that offer mobile payment options like Garmin Pay and Fitbit Pay.

From a global perspective, virtual wallets like Alipay and WeChat Pay which are both based in China, service millions and millions of users.

How do I use a virtual wallet to make a payment?

While each virtual wallet will vary, there are some general steps associated with using an e-wallet.

The first thing you’ll need to do is launch or install a virtual wallet app. Next, you will have to add a new credit card or debit card. To do this you can take a picture of your card or enter the details manually.

When you’re ready to make a payment, you will launch the app and then choose the credit or debit card you want to use.

When it comes to actually making the payment, most smartphones use a technology called near field communication (NFP). NFP allows you to simply hold your phone above the payment pad or tap the payment pad to pay for your purchase.

However, not all mobile devices are equipped with NFP. In this case, you can use a mobile wallet like PayPal. Instead of tapping your phone onto the pay pad, you use your mobile phone number and a pin to make your payment.

Are virtual wallets safe?

When I heard about virtual wallets my first question was, are they safe? It seemed a bit risky to be carrying around all of my payment information on my phone. I mean, what if I lost my phone? Then what? Could someone hack in and access my virtual wallet?

It was this fear and lack of trust that prevented me from using a virtual wallet for a long time. However, virtual wallets are arguably even safer to use than your regular plastic credit or debit cards.

First, digital wallets eliminate the potential to expose important information like your credit card number, your pin, or the CVV number on your credit card. When you pay for something with your digital wallet it uses a process called “tokenization.” This means that your sensitive info (like credit card numbers) is removed and replaced with a one-time-use number that is generated by an algorithm. So, none of your sensitive data is ever made public in any way. Unlike when you swipe or tap a credit card.

Second, all of your payment information is encrypted. When you add a new debit card or credit card to your virtual wallet the information is encrypted and stored in the cloud. Even if someone steals your phone they would need your fingerprint or your passcode to access your virtual wallet.

On the other hand, if you drop your wallet somewhere or get pickpocketed, your credit cards can be easily used and the information can be stolen.

Is it easier for hackers to access your virtual wallet vs. your credit/debit card?

While no payment option is 100% hacker-proof, a physical credit card is much more susceptible to being hacked than a card in your virtual wallet. As I mentioned above, digital wallets provide multiple layers of security that aren’t present when it comes to your plastic credit card.

A physical credit card presents more opportunities for thieves or hackers to get your information. If someone steals your credit card they can easily make a purchase online, or even in a store as many merchants don’t confirm that you are the actual cardholder.

A virtual wallet requires a more intense authentication process that involves a password or proof from a biometric marker (fingerprint, retinal scan). Not to mention that you have to be able to unlock the phone before you can even gain access to the virtual wallet. There are simply more security steps involved.

If you believe that your virtual wallet has been compromised or you’ve lost your phone, it’s easy to suspend all payments. For instance, with Apple Pay, if you put your phone into lost mode, it will automatically suspend all of your payment cards. This is much easier than having to call up each bank or financial institution to cancel your cards if you lose your physical wallet.

Additionally, when you use a virtual wallet on your phone you also have the option of installing apps that will help you to locate your phone. So, if it is stolen the thief will have to figure out how to open your phone, won’t be able to authenticate, and you will be able to track their location.

Is the money in your virtual wallet FDIC insured?

The Federal Deposit Insurance Corporation (FDIC) has been around since the 1930s. It’s their job to ensure stability and public confidence in the financial system. The FDIC insured all deposit accounts including checking, saving, money market deposit accounts, and certificates of deposit up to a standard amount of $250,000 per depositor, per insured bank.

When it comes to whether or not your virtual wallet is FDIC insured the answer is a bit murky. However, as a rule of thumb, if your money is stored within a non-banking institution then the money is not insured. For instance, PayPal and Venmo are not considered banking institutions, so any money stored in these apps is not FDIC insured. There are some exceptions including Google Wallet. According to Yahoo Finance!, as of 2015 money stored in Google Wallet became FDIC insured.

Before you assume that any funds stored in your mobile wallet are FDIC insured, make sure you thoroughly investigate.

The pros and cons of virtual wallets

Pros:

Security. Despite my initial reservations about the security of virtual wallets, security is actually one of it’s biggest benefits. Because virtual wallets eliminate the need to use credit card numbers, CVVs, or pins, it makes them impervious to hacking.
Convenience. With a virtual wallet, you no longer have to carry around a wallet or a purse. You will also never have to worry about forgetting a particular credit card or rewards card at home because they are all nicely organized on your phone.
Time-saving. Paying with a virtual wallet can also save you time. No more waiting for a salesperson to swipe your card or enter your number.
Contactless payment. Many virtual wallets eliminate the need to touch the germy buttons on a debit machine or pass your credit card from your hand to the merchant. It makes for a clean and touchless payment experience.

Cons:

Not universally accepted. One of the main challenges associated with using virtual wallets is that they aren’t accepted by all retailers.
Compatibility. Not all virtual wallets will accept all credit cards. While most mobile wallets are accepted by the big banks, some business credit cards might not be accepted. You can check with your bank or log onto the mobile wallet website to confirm which cards are accepted.
Trust. As I admitted, a lack of trust was the reason I put off using a virtual wallet. And, I know I’m not alone. While virtual wallets offer additional security over a credit card this is not necessarily the shared perception among all Americans.
Battery. Unlike a conventional purse or wallet, your phone requires battery power to be used. If your phone runs out of batteries while you’re shopping, you can’t make a purchase until you recharge.
Variability. Not all virtual wallets will allow you to store all of your card information. For instance, some e-wallets will permit debit and credit cards only while others will permit everything from credit cards to reward cards and airline tickets.

Who should use a virtual wallet?

Virtual wallets are available to anyone with a desktop or mobile device. However, when it comes to whether or not you should use a virtual wallet there are a few questions you can ask yourself to decide if it’s right for you.

Do you want to increase your security?

Virtual wallets provide additional security features that just aren’t available for plastic debit or credit cards. If you want encryption and multiple steps of authentication, then perhaps a virtual wallet is the right choice.

Do you value time savings and convenience?

If you enjoy online shopping, virtual wallets can save you a lot of time when it comes to paying for your purchases. No more time wasted on manually entering your credit card number, expiration date, and CVV code. I mean, we’re not talking days or weeks in time savings, but a few minutes here and there adds up over the long haul.

Are you always looking for your credit card?

A virtual wallet provides a single organized location for all of your payment information. So, if you’re someone who is constantly leaving your credit card in your coat pocket or forgetting to bring your rewards cards when you go shopping, a virtual wallet could help to keep you more organized.

Who shouldn’t use a virtual wallet?

While virtual wallets offer a number of perks, they aren’t necessarily the right payment tool for everyone. Here are a few additional questions to ask yourself to see if perhaps a regular old wallet or purse is a better option for you.

Do you feel comfortable with a virtual wallet?

While virtual wallets are growing in use, there is still a segment of Americans that don’t trust them. If you feel uncomfortable or unsafe using a virtual wallet then you shouldn’t. While virtual wallets are arguably safer than using a physical credit card or debit card, you should stick to using what you feel most comfortable with.

Are you very concerned with your privacy?

While a virtual wallet can add some additional security over a plastic credit or debit card, it also introduces some new privacy concerns. When you use your virtual wallet, retailers and financial institutions can potentially collect data on the types of purchases you are making. This can then be used to help retailers develop targeted marketing. I mean, this is already happening if you are using social media, but it’s something to be aware of.

Do you continually forget to charge your mobile device?

If you are notorious for walking around with a dead smartphone then maybe you should skip the virtual wallet. Bottom line, if your phone is dead you can’t pay for things.

Summary

Like any technology available for use, virtual wallets come with pros and cons. You will have to decide if the added security features and convenience outweigh any trust or privacy concerns that you might have.

It took me some time to become comfortable with the idea of using a virtual wallet. I was not one of the early adopters. I’m an old Millennial and I’ve been using physical debit and credit cards for decades. As a result, it took a lot of research and just trying it before I saw the perks. For me, the benefits outweigh the risks. But, it’s up to you to decide if a virtual wallet is right for you.

Source: moneyunder30.com