Last year congress passed a bill that empowered the Fed to cap the fees large banks charge retailers for debit card transactions.  As a result, big banks have lost a significant source of revenue and have responded by increasing the fees they charge their customers.

By now you have probably heard all the commotion caused by Bank of America’s announcement that they will begin charging a $5 monthly fee to all their debit card customers.   The fee will go into effect in the new year and it’s reported that other big banks will soon follow.  While changing banks is one way to avoid the newly imposed fee, there is nothing preventing your new bank from adding a debit card fee, too.

So here are a few ways you can guarantee you won’t be hit with a debit card fee:

Cash

One way to beat the fee is to adopt a cash only policy.  This method of money management has been around since the beginning of time and some think it’s the best way to manage your money.  The financial guru’s we know and love like Suze Orman and Dave Ramsey both have stated time and time again that using cash is better than using any sort of plastic.  There are no interest charges and sometimes just seeing your money leave your wallet is enough to keep your spending in check.

Credit Cards

While some think credit cards are just plain evil, there are may perks to paying for your purchases with a credit card.   For one, you can avoid the Bank of America fee and you can also save yourself some money if you use a cash back credit card.  Getting the most out of your card requires being responsible with your spending habits and always paying your balance off each month.  You can also build your credit with a credit card and many cards offer warranty programs to protect your purchases.

Prepaid Cards

Prepaid cards tend to get a bad wrap.  They have a reputation of catering to people with bad credit and those who can’t obtain a traditional bank account.  It appears the times are changing and now people of all credit ranges are using prepaid cards as a way to manage their spending.  Prepaid cards require the user to load money to the card before making a purchase.  As a result, the account can’t be over-drafted because you can only spend the amount on the card.  Some of the best prepaid cards come with no or limited fees.  And because prepaid cards were excluded from the Fed’s action on debit cards, it’s unlikely that banks will starting increasing the fees on these cards.

Credit Union

Some people swear by Credit Union’s because frequently they offer lower rates and have a tendency to give more personable service than the big banks.  Credit Unions are also able to avoid some of the red tape with their long time customers which makes borrowing a much simpler process.   They provide many of the same services banks provide, but often with no fees or significantly lower fees.

This is a guest post from Michal who is a senior editor at Dough Roller and Credit Card Offers IQ.

The post How To Avoid Debit Card Fees appeared first on Smart On Money and was written by Contributor.

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They’re called convenience checks for a reason. You open up your mailbox and there sits an envelope from your credit card company telling you that you have to open it right away. There’s an exciting offer is inside!

When you open the envelope you find a bunch of blank checks with a well written letter telling you that this special offer allows you to write a check for purchases instead of using your credit card.

But that’s where the convenience ends. It’s easy but using those checks is not in your best financial interest for a number of reasons. Let’s take a look at why those credit card convenience checks need to take a one way trip to your shredder.

High Interest Rate

There’s a reason that you both love and hate your credit card and that’s because of the interest rate. Your credit card may act as the bridge between paychecks but at sometimes more than 20% interest, you’re flushing more money down the drain than you realize.

If you thought the interest rate on your credit card was bad, take a look at what you’ll pay for those convenience checks. Convenience checks have the same interest rate as a cash advance on your card and it’s often quite a bit higher than your normal rate.

No Grace Period

What grace period? With your credit card, you have a grace period where you aren’t charged interest providing you pay the balance in full when the statement arrives. After that, interest starts to add up. With convenience checks, the interest kicks in as soon as you use the check.  No grace period here which means there is no sound financial reason to use these checks.

Fees For Using Them

If the lack of grace period and high interest rate wasn’t enough, you’re probably going to be charged a three to four percent fee for using them. The credit card company will call it a convenience fee but it’s actually the normal fee that a merchant would pay if you used your card.

Identity Theft

If you thought it was easy for thieves to get a hold of your credit card, those convenience checks that come in the mail are even easier. Before you even know they came in the mail, thieves can take them and use them leaving you with a mess that will take a lot of time to clean up.

Refused For Any Reason

Another little known fact is that the credit card company can often refuse to honor the convenience check for any reason. Take for example this story of a gentleman who used the check to put a $1000 down payment on a Toyota Prius.  The credit card company refused the check shortly thereafter simply because they felt he was overutilizing his credit.

Conclusion

Although the arguments might be flimsy, using a credit card, in some cases, makes financial sense. If you are the type of person who can pay the full balance at the end of every month, you can build up some healthy rewards points.  With credit card convenience checks, however, there is no responsible reason to use them unless a true financial emergency exists.

When you get these checks in the mail, take them directly to the shredder or tear them up in to small pieces before throwing them away. Remember that convenience checks are everything but convenient.

Have you ever used convenience checks? 

The post Here’s Why You Should Shred Those Credit Card Convenience Checks appeared first on Smart On Money and was written by Contributor.

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When it comes to the debit card vs. credit card vs. cash debate, there often isn’t a clear winner. We all have our preferences. However, for maximum security when you travel, it’s often a good idea to bring your credit card along. (Yes, debit cards claim to have the same protections, but some issuers have different time limits that need to be met in order to reduce your liability.)

If you plan properly, your credit card can help you protect your money when it comes to lost or stolen wallets. Additionally, you can rack up the rewards points with your credit card. Before you go, though, here are some things to keep in mind:

Make Sure You Have the Cash Available to Pay Off the Balance

The first thing you need to do is realize that using a credit card for your vacation is not an excuse for reckless spending. While it’s true that some transactions are better suited for credit cards, it doesn’t mean that you should just pile on the charges. Save up for your vacation, and keep the cash in a high-yield account. When you get back, you can pay off the balance. You avoid interest — and debt — while still enjoying the advantages of earning reward points and other solid advantages. But it only works if you pay off the balance as quickly as possible. Otherwise, the interest you pay more than offsets your rewards, and your summer vacation becomes even more expensive.

Let Your Issuer Know Your Plans

When I went on spring break with my son, we took the credit card, and left the debit card at home. Our adventure also included some time in Las Vegas. From the standpoint of the credit card issuer, it appeared that someone had taken our credit card, and then used it for a Vegas vacation. The issuer called our home phone number (the number on the account), and talked to my husband about the charges. It was actually rather comforting to know that the issuer was staying on top of the situation. But it also illustrated the point that you should let your issuer know what is going on. If you plan to cross state lines and make several purchases, and especially if you plan to take your credit card abroad, you should tell your credit issuer what is going on. I was lucky that my issuer chose to call before denying purchases. If your issuer denies charges and asks questions later, though, it can make for a disappointing vacation.

Keep the Account Information in a Separate Place

As you travel, you want to make sure that you keep the account information in a separate place. Write down the account number, and the customer service number of the credit card issuer, and then lock it up. Keep it in the room safe at your hotel. Or, you can leave it with someone you trust. My husband doesn’t like travel, so he often stays home (and does fun things with his friends) when my son and I head out. As a result, all I need to do is make a phone call to him, and he can get the information from a safe place at home. You want that information separate from your credit card, and accessible, so that you can use it quickly in the event that your card is lost or stolen.

Do you have other tips for using your credit card while you travel?

The post Traveling This Summer? Don’t Forget Your Credit Card! appeared first on Smart On Money and was written by Miranda Marquit.

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You probably know that if you plan to borrow money, you’ll only get the best terms if you have good credit. If you want to save money on interest, and enjoy the best possible terms, you need to show the lender that you are responsible, and that there is a good chance that you will repay your debts. But what if you have been avoiding debt?

There many people who save up to make purchases. They save up for car purchases to avoid auto loans. There are those who prefer to invest their money instead of getting a mortgage. Or, if you already have mortgage, you might not see the sense in the need to borrow for anything else. Cash often works just fine when making most purchases. Why do you need to worry about your credit when you won’t be borrowing?

Whether or not you agree with the trend, the truth is that lenders aren’t the only people interested in looking at your credit situation. You need good credit if you expect to save money in other ways, or have access to opportunities that may not necessarily be directly connected with getting a loan.

Insurance, Renting, Cell Phones, and Jobs

Your financial habits are of immense interest to a number of people that you might not realize. Some banks check your credit before allowing you to open certain types of accounts. Even if a full credit check isn’t done, a ChexSystems check might be used to look at some of your consumer behavior. You can be denied a bank account based on what’s in certain consumer reports.

Additionally, one of the biggest impacts come when insurers occasionally check your credit score. I am actually receiving a discount on my bundled home-aut0-life policy because of my credit score. A poor credit score means that you can miss out on monthly savings in the form of lower insurance premiums. Over a lifetime, a savings of $10, $20, or $30 a month can make a real difference.

Others want to check your credit to determine what kind of deposit you will have to pay. Landlords sometimes adjust the security deposit you are required to pay based on your credit history. A poor credit history can result in a higher deposit, since there are indications that you could skip town without paying your rent. Cell phone, Internet, and TV providers sometimes run credit inquiries as well. The inquiry might only be a “soft” check, but it still emphasizes that these service providers want to know if you are reliable. In some cases, the company might require that you pay for your first month of service up front, rather than waiting until you have actually used it.

Finally, some employers run background checks that include pulling your credit report. Credit bureaus offer special credit reports geared toward employers for this purpose. Employers aren’t supposed to have access to your credit score, but seeing some of your credit history can still help them get a feel for your habits — as well as whether or not you might represent a risk in sensitive situations.

In the end, more and more decision makers are relying on your credit. It’s an easy indicator, and it’s easy to access. So, even if you aren’t borrowing anymore, and even if your debt levels are low, it makes sense to ensure that your credit history looks good.

The post Avoiding Debt? You Still Need Good Credit appeared first on Smart On Money and was written by Miranda Marquit.

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Lately, my mailbox has been stuffed full of credit card offers. To be honest, I haven’t done anything about it because I’m actually in the market for a shiny new credit card. Hopefully one with a fat signup bonus, and a decent rewards program. So I’m ok with the credit card offers.

What I’m not happy about is the constant stream of solicitations for refinancing my home loan, switching my car insurance company, and changing my TV service. At some point, it needs to stop. Not only because it’s annoying and wasteful, but also because it can be a bit of an identity theft risk.

Cutting Off The Junk Mail Stream

At some point, I’ll probably cut off the credit card offers. And I’ll also want to stop the flow of other junk mail. The good news is that it’s possible to do this — do it fairly easily. You have to online stops to make:

1. DMAchoice: Use this site to opt out of direct marketing campaigns. While you probably won’t stop everything forever, this site can really help you slow the trickle.
2. OptOutPrecreen: This site is all about opting out of prescreened credit card offers. If you want to stop receiving offers for loans and credit cards, you can use this site to reduce your junk mail from that quarter.

Even though it seems as though the junk mail industry is one of the few things helping the USPS stay even remotely in the game, that doesn’t mean I want to keep receiving that stuff. It’s frustrating to have to wade through it all, and shred it. As result, I’ll soon be heading them off.

Protecting Your Identity

While there is no completely full proof way to avoid having your identity stolen, you do need to do what you can to prevent identity theft. One of the ways to do that is by reducing the amount of information about you floating around. Stopping junk mail can also help.

When you have your name taken off marketing lists, you are in fewer databases that can be hacked. On top of that, there is still a risk when it comes to the way that identity thieves sometimes get your information — from marketing mail. Some unscrupulous could use the offers to pretend to be you, and get a credit card in your name. All it takes is a little extra information, and an address change, and the card goes elsewhere. (It’s a good idea to keep on top of your credit by checking for these fraudulent accounts on your credit report.)

These days, it’s all about information. Restricting your information can be one of the ways that you can reduce the chances of being a victim of identity theft. When you do receive marketing mail — especially if you are receiving prescreened credit offers — be sure to shred them. You don’t want to throw out something that someone else can use to pretend to be you.

If you are tired of receiving junk mail, and if you want to do your part to live a greener lifestyle, you can put a stop to a lot of what appears in your mailbox. And it just might help you protect your identity as well.

The post Tired Of Credit Card Offers? Take Your Name Off the Marketing Lists appeared first on Smart On Money and was written by Miranda Marquit.

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Your credit history matters a great deal. From loan rates to getting some jobs, what’s in your credit report can make a difference in your finances and in your life. If there is a mistake on your credit history, you could be impacted rather surprisingly. An erroneous negative item can bring down your score, and that means you could pay more in interest when you get a loan, or that you could end up losing out on some other financial opportunity, such as a better insurance rate.

Regularly check your credit report for errors, and fix mistakes that you find. That way, you stand a better chance of having an accurate score that lenders are impressed with.

Check Your Credit Report Regularly

You can get access to your free credit report at AnnualCreditReport.com. You are entitled to one free report each year from each of the three major credit bureaus, as well as reports from some of the other credit reporting agencies. Get your free report, and check it over. Look for discrepancies in your payment history (very important since this is the weightiest factor), as well as other inaccuracies, such as who closed an account, and personal information. Also, make sure that all of the loans reported are actually loans you applied for. An unexpected loan that you didn’t apply for could be a tip off that your identity has been stolen.

Fix Mistakes on Your Credit Report

If you find mistakes on your credit report, you need to fix them. Negative items can impact your score to an alarming degree — especially if there are multiple mistakes, or if the mistake is a major one. Here are the steps you need to take to fix a mistake on your credit report:

1. Contact the credit bureau in writing: Write a letter to the credit bureau, including your personal information, and the information that is inaccurate. Include a statement about what the accurate information should be. Some consumers like to enclose a copy of their report, with the offending item(s) circled in order to make it clear. If you have documentation, enclose copies (never originals) to back up your claim. Send the letter via certified mail so you can verify that the credit bureau received it.
2. Contact the reporting creditor: If you want to speed things along, you can do so by contacting the creditor and talking about the mistake. You can contact by phone, but sending a letter, using the same info you sent to the credit reporting agency, can help, too.
3. Wait for word: By law, credit reporting agencies have to investigate your dispute in a reasonable time period. Usually, the decision is made within 30 days. Wait to find out the outcome of the situation.
4. Take action: If you don’t agree with the action, you can appeal the decision. Or, you are allowed to include a note of explanation on your credit file so that others can see your side of the story. If the credit bureau says that you are right, and agrees to change the information, double check after a couple of weeks to make sure that your credit report is now accurate.

Don’t let mistakes remain in your credit report. You want to make sure that everything is properly sorted before you apply for major loans. Otherwise, you might find that you have problems with your financial transactions. Check your credit report, and fix errors, and you’ll have a better chance at smooth sailing.

The post How To Check Your Credit Report For Errors — And Get Mistakes Fixed appeared first on Smart On Money and was written by Miranda Marquit.

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Technology has been rapidly developing to the point that it’s possible to do almost anything with the help of a smart phone. You can get directions, pay your bills, and save coupons with the help of your smart phone. And, increasingly, your mobile device is getting to the point where it can be used as a credit card.

Electronic Wallets

There are different companies, from Visa to Google, developing electronic wallets. You can store information about your credit cards and other payment methods in your smart phone, and then use them to pay for items at the store — without the need for a huge physical wallet in your back pocket. In some cases, these wallets are even developing the ability for you to wave your phone in front of a terminal to complete the transaction. (Right now, a lot of these wallets work mostly on loyalty programs and gym memberships, since you only need to scan a barcode.)

The technology that would be used by cell phones in this manner is called near-field communications (NFC). However, many stores don’t have NFC capabilities with their card readers. The result is that, until more stores adopt this technology, you need to store your payment information attached to a barcode, or use some other method (Home Depot, for example, allows you to access your PayPal information and pay with PayPal at its terminals).

Some credit card issuers are starting to get around this, though. Consumer Reports Money Adviser points out that some issuers, particularly Citi, are sending PayPass stickers that you can place on your cell phone. These stickers use the RFID PayPass technology that many retailers have incorporated. This is where you tap the terminal with your card, and the frequency is used. No need to swipe the magnetic strip. These stickers are one way to convert a cell phone into a credit card without the need for NFC technology to be adopted.

Can You Protect Your Electronic Wallet?

What you really want to do, though, is make sure that your electronic wallet is well protected. If you have information saved on your smart phone, make sure you have a lock-down app. These apps allow you to lock the phone so that if it is lost or stolen you can prevent someone from getting in and using your personal information. There are also apps that allow you to remotely wipe the cell phone, turning it into an expensive paperweight.

With the sticker, though, you have to be more careful. If you lose your phone, or have it stolen, you can’t exactly disable that sticker without calling and canceling your credit card. Additionally, you have to make sure that the sticker doesn’t fall off your phone, leaving a random RFID sticker for someone to use. If you don’t notice the sticker is gone, it could be hours or days before you begin to rectify the problem.

In the end, technology is likely to continue changing the way we interact with money. This isn’t necessarily a bad thing. However, it’s important that you understand the challenges and prepare to boost your security, even as you enjoy the benefits.

The post Should You Use Your Cell Phone As A Credit Card? appeared first on Smart On Money and was written by Miranda Marquit.

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Approximately 15 million people a year are victims of identity scams. The financial toll from these victimizations is near $50 billion. Identity theft is a growing epidemic around the world, and people need to learn how to protect themselves before they become victims without even knowing it.

CBS published an article about a retired Connecticut US Army soldier named John Harrison.  A few years prior to his retirement a man named Jerry Wayne Phillips stole his military I.D. and went on a shopping spree. He shopped at major home repair stores, bought high ticket electronics and even purchased new cars.  Over 65 different accounts were created in Harrison’s name.

Within just four months Phillips had run up a tab of around $265,000 under Harrison’s name. Today Harrison still has $140,000 in debt he cannot clear which prevents him from personal purchasing, borrowing, and even opening a checking account.

Protecting Yourself From Identity Theft

As overwhelming as it may seem, there are some simple things you can do to protect yourself from identity theft. One thing you can do is to put a fraud alert or credit freeze on your credit cards with all three major credit bureaus. There are three different types of fraud alerts that can be used to warn your creditors of potential crimes against your identity.

• 90 day fraud alert.
• Extended fraud alert.
• Active military duty alert.

With a credit freeze you can control who can have access to your credit report and when, which allows you to block potential thieves from gaining access to it.

Contacting The 3 Credit Bureaus

You can contact the 3 credit agencies to put a freeze on your account at the numbers or websites below.

• Equifax: 800-525-6285 or www.equifax.com
• Experian: 888-397-3742 or www.experian.com
• TransUnion: 800-680-7289 or www.transunion.com

You can also ask to add a victim’s statement to each of your credit bureau reports asking creditors to call you personally to verify all credit applications made in your name.

Use Third Party Services To Protect Yourself

Another smart thing you can do is to work with professional services like LexisNexis identity management. They have the tools, staff, and expertise to work with credit services and watch your accounts. They also help by preventing fraudulent payments, and work with government agencies to reduce abuse.

Identity theft insurance is also now available to help with prevention and protection for consumers. Because these are fairly new services however, it is warned that customers take the time to make sure the insurance being offered will appropriately cover the type of loss you may have as a customer. You may also want to check with your existing insurance agencies as they may already have some kind of policy in place as a part of your current agreement.

Others Dealing With ID Theft

Identity theft can affect you in many ways, just like it did Malcolm Byrd:

• I.D. was stolen by a drug dealer with a record.
• Pulled over, handcuffed by police.
• Lost his part-time and full-time jobs for not having disclosed a criminal record (which wasn’t his).
• Denied unemployment because of criminal record.
• His driver’s license was suspended for not paying fines (racked up by thief).
• Loaned niece his car- she was pulled over and questioned.
• Arrested at his home and jailed for 2 days.

Identity theft is a crime that can cripple you for life. It can have a ripple affect with your finances and personal identification that can cause you endless problems. Take the time and make sure your take some of these simple steps to protect yourself and your I.D.

Have you ever had to deal with identity theft?  Tell us about it in the comments!

The post The Real Cost Of Identity Theft appeared first on Smart On Money and was written by Contributor.

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One of the ways that you can stay on top of your finances is to track your credit score. While a credit score isn’t the be-all and end-all of your financial snapshot, it can still be rather helpful as you keep tabs on your overall financial situation.

While it might cost you money to access a more “official” credit score, there are plenty of ways that you can get a general idea of how you are doing when you use some of the free resources available for credit scores.

Free Credit Scores

There are ways to get free credit scores, including having a loan rejected. However, if you don’t want to apply for credit just to see where you stand in terms of your credit, there are sites where you can see your free credit score. Some of them include:

• Quizzle: Get your Experian score for free on this site.
  
• Credit Sesame: Credit score, basic financial info, and more on tracking your financial situation.
• Credit Karma: TransUnion score, as well as your VantageScore and even your insurance score.
• eCredable: You won’t get a consumer credit score like you’re used to, but you will get an idea of where you might stand with the help of the credit rating simulator.

It’s important to note that these free credit scores aren’t “official.” It’s not what lenders see when they pull your credit. And they aren’t scores that you would get if you paid for your score at myFICO.com. However, these free scores can give you a good idea of whether or not you are making progress with your finances.

Track Your Financial Progress

For the most part, free resources are best used to keep tabs on your general situation. You can use these resources to see whether or not you have good credit in general, as well as see where you could improve. Additionally, if you notice a sudden drop in your score on one of these sites, it could be an indication that there is something very wrong with your credit (including identity theft). Monitoring your situation can alert you to possible problems that you might need to address quickly.

If you think that the issue might be identity theft, you should check your credit report as soon as possible. If you haven’t checked in the last 12 months, you should log on to annualcreditreport.com to get a report from each of the three major bureaus for free. Even if you aren’t eligible for a free report right now, it is still worth it to pay to access your report if you think that your identity might be at risk.

Keep an eye on your situation, and you can watch it improve. Many of these sites offer insights into where you stand in comparison to others, as well as providing tips for improving your credit situation. If you are looking to take control of your financial situation, these free resources can actually be quite helpful. Get an idea of where your finances are going, and you’ll be in a better position to improve your situation.

Do you know of any other free resources to keep tabs on your credit?  Tell us in the comments.

The post Using Free Resources To Keep Tabs On Your Credit Score appeared first on Smart On Money and was written by Miranda Marquit.

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Recently, my husband and I refinanced our home. During the process, we were rather surprised to find that, on my credit report, our mortgage loan was duplicated.

That’s right: It looked as though we had two mortgages, instead of one. When figuring out our debt-to-income ratio, things could have been ugly, since it the credit report made it look like we were spending close to $3,000 a month in mortgage payments. We might not have qualified for the refinance — let alone got the best mortgage rate offered at the time.

Duplicate accounts have long been a problem on my credit report, as well as my husband’s. When we first bought our home, my husband’s report showed duplicate student loans accounts, and a duplicate credit card account. Once again, only the loan officer’s attention to detail and a note to the underwriting department allowed us to qualify for the best possible mortgage rate.

Could Credit Report Errors Be Costing You?

My husband and I aren’t alone with credit reporting errors. About 5% of consumers who check their credit reports have found major errors, according to the Federal Trade Commission. These are major errors that could result in less favorable terms for loans. Other findings from the FTC study include:

• 25% of consumers have errors that might affect their credit scores.
• 10% of consumers who had their reports fixed saw changes to their credit scores.

While it is clear that most consumers aren’t going to see negative effects from the information in their credit reports, it’s still worth paying attention, since your report could be among those affected.

Indeed, the FTC study found that about 1 in 20 consumers had their scores affected by more than 25 points as a result of the errors in their credit reports. It’s rarer to find those who see a change of 100 or more points due to credit reporting errors, but about 1 in 250 consumers are affected.

Fix Errors on Your Credit Report

Checking your credit report for errors is an important part of making sure that your finances are kept in tip-top shape. You should use AnnualCreditReport.com to access your credit report for free. You are entitled — by law — to a free report from each bureau every 12 months. You can also look for other ways to access your credit information to keep on top of the situation.

However, you should check each report annually at minimum in order to correct errors. And, even if you have already checked your free report, you should pay for a non-free version if you are getting ready to use a mortgage to purchase a house. It’s important that you fix potentially damaging errors before you apply for credit (unless you want to throw yourself on the mercy of the loan officer and the underwriters).

Once you find mistakes, you can dispute them with the credit reporting agency. If there is a real mistake, the agency has to fix the error. Once the error is corrected, your credit report will reflect better on you. And, if the error was serious enough, it might even mean a higher credit score.

The post Are Credit Report Errors Costing You? appeared first on Smart On Money and was written by Miranda Marquit.

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Building good credit is a years-long process, while destroying credit only takes a few bad decisions. With this in mind, it’s important for new credit users to avoid the many mistakes which lead to bad credit scores. Too often it seems inexperienced credit cardholders underestimate the ease through which bad credit can be acquired.

For these folks – the young ones especially – we thought it necessary to highlight the five best ways to avoid a bad credit score:

Maintain A Healthy Debt-To-Income Ratio

Credit score criteria includes something called the debt-to-income ratio. Basically it’s all your monthly debt payments added up and compared to your gross monthly income. If the former makes up more than 25% of the latter, then credit scores are sure to plummet.

Monitor your finances monthly to always know your debt-to-income ratio. That way you won’t let yourself accidentally fall into a ratio which looks unfavorable to creditors and lenders.

Adhere To Due Dates

Okay, we’ll start off by sharing a dirty little secret: one or two credit card payments paid a day or two late typically won’t result in a bad mark appearing on your credit report. But don’t risk it.

Companies that don’t immediately report your late payments to credit monitoring agencies can still do so at anytime, so never, ever neglect the due dates, even if your credit card company has been lenient in the past. Though somewhat hard to incur, one late payment mark on your credit report is enough to knock your score down several points.

Use Regularly, But Also Responsibly

This is probably the trickiest way to both build good credit and avoid destroying it at the same time. Creditors don’t want someone who hoards lines of credit and never uses them as much as they don’t want someone who maxes out their cards and never pays. They want customers who actively use their services responsibly. This is why your score can drop when you don’t use the credit you have. Online credit repair services typically tweet valuable tips and tricks for maintaining and managing responsible credit. Give them a look for some ideas on how to keep a good balance between credit use and paying off debt.

Appreciate The Interest Rate

The annual percentage rate of credit cards is often and unfortunately one of the last things new cardholders consider before accepting an offer for a card.

New credit card users are unlikely to see interest rates below 15% and are probably looking at something closer to 20%. So just think about that. If you spend $1500 with credit and take a year paying it off at $137/month, by the end of the year you’ll have paid around $145 in interest if your APR is 17%. That may not seem like much, but considering the average credit card debt in America is around $16,000 for a one-card household, it’s easy to see how credit card companies make their money and how credit card users can find themselves with a less than impressive credit score.

Increase Your Monthly Payment

The minimum payment imposed by credit card companies is designed to have you paying off your debt for as long as possible. The longer such a situation is allowed to continue the more likely it is you’ll continue to rack up debt without paying it off at the appropriate rate for a responsible debt-to-income ratio. The best way to combat this is to always opt for more than the minimum monthly payment. You’ll beat the interest rate and pay off the debt faster, which both contribute to keeping your credit score strong.

The unfortunate nature of new credit card use is that inexperience with money and spending breeds bad financial decision making. This is turn leads to bad credit, which initiates a vicious cycle of struggle which is difficult to get out of. Avoid it altogether by making sure you do what’s necessary to always maintain a good credit score.

The post How To Avoid Falling Into A Bad Credit Score appeared first on Smart On Money and was written by Contributor.

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Many consumers are aware that a credit score is an important part of their finances.

In recent years, a credit score has become an indicator of your financial wellbeing and reputation. Even companies that aren’t lending you money might be interested in your credit score.

As a result, it’s important to keep tabs on your credit score, and understand what is likely to impact your score.

Unfortunately, there is some confusion over what is likely to affect your credit score. A recent survey from TransUnion indicates that there are some major points of confusion for many consumers when it comes to their credit score.

Are You Confused About What Affects Your Credit Score?

The TransUnion survey identified some common points of confusion for many consumers and strives to clarify some of the confusion. Here are some of the main misconceptions that consumers have when it comes to credit scoring:

Cell Phone and Rent Payments Affect Your Credit Score: According to the survey, 45 percent of respondents thought that rent directly affected their credit scores. At the same time, 47 percent thought that cell phone payments directly affect scores.

The reality is that, while some credit bureaus and even FICO are toying with the idea of including some non-traditional information in their models, right now credit scores aren’t directly affected by these payments. If you miss payments, your account can be turned over to collections, and that will drag your score down, but right now positive payments aren’t often reported and used to figure your credit score.

Income Matters for your Credit Score: It would be nice to think that, as your income improves, so does your credit score. In fact, 48 percent of respondents to the TransUnion survey assumed that a pay raise would help credit scores.

However, this isn’t the case. Your income is not considered a factor in determining your credit score. How much debt you carry relative to your available credit matters, but your income isn’t a factor. You’re better off making sure that you pay on time and keep your debt low — no matter how much you make — than hoping that a pay increase will save your credit score.

Credit Inquiries and Your Credit Score: Many consumers are also confused about how credit inquiries affect their scores. About 40 percent don’t understand the connection, and some believe that checking their own scores will cause a problem.

If you apply for credit, your score could be impacted. However, if you check your own credit score, nothing will change about your score. There is confusion about other inquiries as well, though. Sometimes telecom companies and others look at your score, and they way the look might have different impacts. It’s best to ask before you agree to an inquiry.

In the end, understanding how your credit score is figured can be a big help to you as you plan ahead. Before making a major purchase that requires a loan, such as a home, you need to make sure that you have good credit. Staying on top of the situation can benefit you later.

The post Do You Know What REALLY Affects Your Credit Score? appeared first on Smart On Money and was written by Miranda Marquit.

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If you want to stay on top of your credit like I do, you have quite a few options that you can take advantage of in order to monitor your credit.  With the passage of the Fair Credit Reporting Act legislation the federal government gave consumers the ability to pull their credit reports from each of the three agencies, TransUnion, Equifax and Experian, once a year.  AnnualCreditReport.com is the government site where you can go to get your 3 free credit reports each year.  I like to stagger them every 3 months or so, to get the most impact froom checking my reports throughout the year.

While you can get your credit report for free through the government site, if you want to find your credit score you'll have to pay an extra fee when pulling your credit report.  But nowadays there are also a handful of sites out there that are offering your credit score for free , in exchange for using their sites – usually which offers deals on credit, loans and other financial products.

Credit Sesame is one of those sites, and they're offering you a free credit score – with no obligations, credit cards or other strings.   Today I thought I'd do a quick look at the site.

Free Experian Credit Score At Credit Sesame

Credit Sesame has gotten quite a bit of buzz in the blogosphere recently.  Why?  Because they offer a free Experian credit score, without having to enter a credit card like some sites require.

I just signed up for Credit Sesame a couple of weeks ago after reading about the service on Twitter.  I had just learned about Credit Karma and how you could get a free TransUnion credit score from them, and someone told me that the same thing was possible with Credit Sesame.    So I decided to give it a go.

The Sign-up Process

Getting going with Credit Sesame was actually easier than I thought it would be.  Basically they'll ask you for some basic personal info, a home address and then ask whether you  are a homeowner or if you rent.    Then in the next step it will ask for your social security number so it can pull your Experian credit file. If you're not sure about giving that info out, you may  not want to proceed.  The site is secure, however, and I'm ok with doing that.   Once you enter your social, it will ask you to verify some information credit file information so that it knows you are who you say you are.

Getting Your Credit Score

After you signup you'll be taken to your Credit Sesame overview page where it takes a look at your current situation. Right there on the homepage under the “My Finances” heading, they'll show you your free credit score from Experian.  What you're seeing is  Experian's “National Equivalency Score”. Please note that each of the agencies has their own score, and this is different from your FICO score, which should be similar- but is different.

My score came up as a 789, which is comparable to the 780 that I got with Credit Karma/TransUnion.  Not too shabby!  How could I do better?  Maybe actually use some of the credit that I have? (Do you see the “0% credit usage” in the graphic above?)

Finding Better Loan Options

For those who signed up as homeowners at the beginning of the process, Credit Sesame will also give you some further data including an estimated home value via  eppraisal.com, a goals section where they show you how you can improve,  and if you have outstanding loans, they'll give you some examples of how you can improve your current situation. They'll only show you loan options that you're likely to qualify for after running your credit profile and score, so there won't be a whole lot of bait and switch with rates and fees. What you see should be essentially what you get.

Their home loan technology is now actually integrated with Mint.com as that website's “home loan finder”, so you know it will be easy to use and effective – like mint.com

When I ran Credit Sesame against my situation they were able to offer me a few options our our only current debt – our home mortgage.  They found us several  lower rates on mortgages, but the closing costs associated with the deals made them somewhat a non-starter since by the time we would have them paid back through lower payments, we'll probably already be thinking about moving again.   But for most people who are planning on staying put for a while, you'll probably be able to find some decent deals.

What's To Like About Credit Sesame

Credit Sesame has a lot of good stuff going for it.  Here are a few things I like about the service.

• It's a free service – and a free credit score! What's not to like about getting a free credit score without having to provide a credit card number? You might even find a better deal on a home or other loan.
  
• Regularly updated credit scores: Your credit score is updated every month, so you can stay on top of your credit for drastic score swings -to tip you off that there might be a problem.  Use it as part of a home-grown ID theft plan!
  
• Save on home loans and other credit: Credit Sesame will show you if your current loan is a good deal, and if they can find a better deal they'll give you all the details up front about closing costs, break even time for refinancing, total savings and more.

Conclusion

Signing up for Credit Sesame was easy, painless and only took a minute.  What it offers is well worth it. They give you your Experian credit score for free, when normally you'd have to pay to see it, or sign up for a free trial offer of some sort.  They also give you some good options when it comes to refinancing your home mortgage if you have one, giving you the chance to save a ton of money on your mortgage.

Credit Sesame is now becoming a part of my homegrown credit monitoring plan where I'll be using it in conjunction with Credit Karma, AnnualCreditReport.com and Quizzle. All of these services will give you a free credit report or free credit score. You don't have to pay a ton to stay on top of your credit, just use the freely available services like Credit Sesame to keep tabs!

Credit Sesame is free to use and there is no obligation to continue using it if you don't want to, so you've really got nothing to lose. Head on over today, sign up and see where your credit score is!

Sign Up For Your Free No Obligation Credit Sesame Account

The post Credit Sesame Will Give You A Free Credit Score (And Help You Find Better Loan Options) appeared first on Smart On Money and was written by Mr. Money.

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For my first real post on this personal finance blog I thought it would be appropriate to talk about one of the people who have influenced my financial life the most, Dave Ramsey.

For those of you who don't know, Dave Ramsey is a personal finance guru who has a daily radio and TV show, in addition to personal finance seminar called Financial Peace University.

Dave Ramsey is extremely popular, and most of his radio and TV shows focus on helping people who have gotten themselves deep into debt, and need help in finding a way out.    One of the biggest ways they end up getting out of debt is by following his 7 Baby Steps plan.

Dave Ramsey’s 7 Baby Steps

Here's a quick look at Dave Ramsey‘s 7 Baby Steps plan for getting out of debt.

• Step 1 – $1,000 to start an Emergency Fund: The first step asks you to save up a bit of “just in case” money – in other words – some money for just in case the unexpected happens.   What kind of unexpected things?   Things like flat tires, doctor bills, and a furnace going out in the dead of winter will be covered by this small emergency fund.
• Step 2 – Pay off all debt using the Debt Snowball:  List your debts from smallest to largest.   Pay the minimums on all of the debts.  With money left over after you pay the minimums, you pay extra on your smallest debt – until it is paid off completely.   Once you pay off the smallest debt, you then start paying on the next smallest debt.
• Step 3 – 3 to 6 months of expenses in savings:  Save up money to cover bigger emergencies, layoffs and big illnesses or other eventualities.
• Step 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement:  Save money for your old age and retirement.
• Step 5 – College funding for children: Save up some money for your kids education.  I don't think you should pay for all of it, but some is good.
• Step 6 – Pay off home early:  Make some extra mortgage payments to pay down the principal and own your house faster!
• Step 7 – Build wealth and give! (Invest in mutual funds and real estate):  Continue building wealth through mutual funds and real estate, and more importantly give til you can't give  no more!

When you write it down it seems like it would be so simple to get out of debt and start building wealth, but Ramsey is the first to tell you that it takes a lot of hard work and “gazelle intensity” in order to find your way out of the depths of debt.

I know personally that his plan can work as my wife and I have used it to get out of debt.  Is it a perfect plan for absolutely every situation?  Maybe not.  But it does work for a majority of those who try it and stick to it.

Over the coming days and weeks I'm going to do a series of posts talking about Dave Ramsey's 7 Baby Steps, one by one.  I hope that in talking about it I can give some hope to some of you out there who are looking for a way out.

What do you think of the 7 baby steps?   Have you used the plan?  Would you recommend it to others?  Tell me what you think in the comments and welcome!

The post Dave Ramsey’s 7 Baby Steps To Getting Out Of Debt appeared first on Smart On Money and was written by Mr. Money.

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In my last post in the 7 Baby Steps series, we looked at Baby Step 1, saving up an emergency fund of $1000.

You save up that baby emergency fund in order to insure yourself against the risk of life's little emergencies that have a way of popping up at the least opportune time.   If you don't save up that money as an insurance policy, you can be assured that your plan to get out of debt will be set back many times over by many little “emergencies”.

If you have an emergency fund saved, no new debt is created, and you just take the time to re-stock that emergency fund in case of further expenses.

Today we will look at Baby Step 2, paying off all debt using the debt snowball.

Pay Off Your Debt Using The Debt Snowball

Now that you’ve got your $1000 emergency fund saved,  it's time to get intense about paying off all your debt.  Dave Ramsey likes to call this getting “gazelle intense”, in reference to the bursts of speed and intensity a gazelle will use in order to get away from a cheetah (or in our case, debt).

For many people this step is the longest in your 7 baby steps.

If you’ve  built up a lot of debt over the years in the form of student loans, auto loans, credit card debt and other things, it probably took you a long time to get so far in the hole, and it will take quite a while to dig your way back out.  But you CAN get back out!

If you're not so far in the hole, getting out of debt can happen a lot quicker, and you can get on to the next steps of building up a larger emergency fund, paying off your home early, building wealth and giving more.

If you've gotten this far and you haven't done a budget yet, now would be the time to get started.

Figure out where you are in regards to your income, expenses and your debt obligations.  Do a zero based budget and make sure that every dollar is accounted for – because every extra dollar is now going to be going to debt reduction.

Once you’ve got all of your income, expenses and debt listed, follow these steps to get rid of your non-mortgage debt. (Mortgage debt is paid off separately in another baby step, so exclude it for now)

The Debt Snowball

Here is a rundown of the debt snowball plan.

• Put all your debts in order from the smallest balance to the largest balance.
• After you have paid for food, clothing, transportation and a roof over your head (the necessities), pay the minimum payments on all of your debts.
• Put any extra money left over towards paying off the smallest debt first.
• Pay off your smallest debt, and then “snowball” the money you were paying on that debt over to the next largest debt.
• Continue paying off the next largest debt, and when that one is complete, roll it all over to the next largest debt until you are completed.

That's not too hard, right?  Just pay off your debts from smallest to largest until they are all paid off!

Other Methods Besides The Debt Snowball

If you read the personal finance blogs you'll read a lot of posts talking about how Dave Ramsey is bad at math, or how he is not giving people the right advice because his debt snowball plan isn't technically the most mathematically sound way to get out of debt.

Those people say that in order to do it the best way, you would need to list your debts from the highest interest first, to the lowest interest, and pay them off in that order.   Once they’re in order you pay the minimums, and put any extra money towards the highest interest debt first.   Some have called this the debt avalanche.

Mathematically the debt avalanche IS best way to get out of debt.

Ramsey has even said on his radio program that the debt snowball isn’t the best way to get out of debt if all you're paying attention to is the numbers.  But he believes it is the best way to get out of debt because it does a better job of taking the psychology of debt reduction into account.

When you pay off  the smaller debts first you get what he calls “quick wins” that give you that psychological boost that help to keep you motivated and keep you on the road to debt reduction.

With other methods, too often you’ll end up burning out and giving up on debt reduction.  In his eyes, after working with thousands of people to get out of debt, he has found the debt snowball to be the most sustainable debt reduction method.

When it comes down to it, however, I don't think you can go wrong with either method. As long as you're disciplined, and are determined to get out of debt, do the one that works best for you – or do a hybrid of the two!

As Dave Ramsey says, “You can’t go wrong getting out of debt“.

No New Debt, And A Commitment To Paying Off The Old Debt

If your plan for debt reduction is going to work, you need to make sure that you're doing a budget, that you've committed to creating no new debt, and that you work HARD towards paying off your old debt.

Here are a few things you can do to help make your debt snowball much more effective.

1. No new debt in the form of loans, credit cards, mortgages or anything else!
2. Try being credit card free. It isn't what our society would suggest, but it can be very freeing to pay cash, not not use credit cards.
3. Sell stuff.  If you're like most families you probably have a lot of extra stuff laying around the house.  Sell as much of it as you can on ebay, craigslist, and via garage sales.
4. Take on an extra part time job.A lot of people will take on a temporary side job in order to aid their quick destruction of debt.

Work  hard, sell things, get extra jobs, and just get intense about your debt reduction plan and you’ll have your debts paid off in no time!

What’s your opinion of the debt snowball?  Have you used it, or the debt avalanche – or another system – to get out of debt?  Tell us about it in the comments.

The post Dave Ramsey’s 7 Baby Steps: Step 2 – Pay Off All Debt Using The Debt Snowball appeared first on Smart On Money and was written by Mr. Money.

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For years you’ve been saddled with credit card debt.

Now, after months of sacrifice and diligence, you’ve paid off one of your credit cards.  Yay! 

Perhaps you still have a few more cards to pay off, so you turn your attention to tackling those. But you may wonder what you should do with the paid off credit card. 

Should you close your credit card once you pay it off?

While many experts recommend that you immediately close the card, leaving it open is the more prudent move in most cases.        

Why You Shouldn’t Close Your Credit Card Account

There are two important reasons why you should not close your credit card account:

Reduces Your Debt To Credit Ratio

One important factor in your overall credit score is your credit utilization ratio. 

If you have a credit limit of $25,000 spread over three cards, and you owe $15,000, your credit utilization ration is 60%. 

However, if you pay off one of the cards with a $6,000 credit limit and choose to close that card, you now have a credit limit of $19,000, but you still have $15,000 in debt, meaning your credit utilization has now jumped to 79%.  This will negatively affect your credit score.

Reduces The Length Of Your Credit History

Another factor in your overall credit score is the length of time you’ve had your credit. 

If you’ve had your credit card for 10 years and then you close it, you’ve likely shortened the total amount of time you’ve had open credit.  This will also negatively affect your credit score.

Keep The Card But Don’t Use It

Because of the negative credit score repercussions, many people chose to keep all of their credit cards open but vow not to use them. 

While this is admirable, be advised that if you don’t use your credit card, at least sporadically, some companies will close the credit account for you after a few years of inactivity.

To avoid this, perhaps have one or two monthly payments set up to auto pay from your credit card such as your monthly Netflix bill.

When You Should Close Your Credit Card Account

There are a few situations when it’s prudent to close the account.

You’re Charged An Annual Fee

If you’re charged an annual fee on your credit card, you may want to close that account. 

Why pay a fee for a card you aren’t going to use or will only use sporadically? 

Before you close the card, though, try calling the credit card company to see if they will waive the annual fee for you. Surprisingly, quite a few credit card companies are willing to do this.

You’re Irresponsible With Credit Cards

If you know that you can’t be trusted with credit cards, you have two options.  You can either close the account entirely, or call the credit card company and ask them to reduce your credit line.

From a credit score perspective, neither of these options is optimal, but going deep into credit card debt again isn’t optimal either.

Some people who struggle with using cards close all of them except one in case they need the card for a car rental or travel abroad.

If you’ve paid off your credit card, congratulations!  You may wonder, should you close your credit card once it’s paid off?  In general, the answer is no unless you’re charged an annual fee or you have absolutely no self-control with credit cards. 

Keep the card open to continue to reap the benefits of an improved credit utilization ratio and length of credit history, both of which are important components to a strong credit score.

What do you recommend if a person pays off their credit card?  Close the account or keep it open?  Why?

The post Should You Close Your Credit Card Once You Pay It Off? appeared first on Smart On Money and was written by Melissa.

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