Debit Card or Credit Card

For the average American credit and debit cards are a necessity, both allow an individual to make purchases at a variety of stores and online. There are many similarities between the two types of cards, but also some key differences. For the young fiscally responsible consumer it is important to understand these differences, to ensure that you have the best card for your own preferences and lifestyle.

credit card
Credit card or debit card?

Debit cards directly withdraw money from an your checking account while Credit cards are based on a credit system. An individual who uses their credit card is essentially taking a loan from their credit card company that they will pay back at a later date.

The biggest advantage of a debit card is somewhat obvious, by using a debit card you can never over extend your credit. Since the money used comes directly from your account, you will never be able to use more money than you actually have. Another perk of a debit card is that it can be used to withdraw cash from an ATM. Essentially the debit card acts as a more transportable mode of cash. A debit card can be used as a good tool to teach yourself about budgeting and monitoring your expenses.

The advantages of debit are also its weaknesses. Debit cards are often less protected than credit cards. Because debit cards have direct access to your account a thief has an easy way to quickly remove your money. Many debit cards do have fraud protection policies, which are always important to ask about. However, if your card is stolen and is used fraudulently the money is removed directly from your account. This means that you could be left without money for days or weeks before your bank acts on the problem and reimburses you.

Credit cards offer more protection than debit cards. Because credit cards loan you money instead of directly withdrawing money from your account fraudulent charges will not actually take away your money if you or your credit card company notices the charges in time. However, this system also has problems. Because credit cards loan you money you can easily use more money than you actually have. This may cause you to build up debt. Another aspect of credits cards that adds to the accumulation of debt is how the credit card bill is set up. Credit card bills do not have to be paid in full; it is possible to make a minimum payment on your credit card bills. Essentially this allows an individual to pay enough to keep the card active, but they will still need to pay off the rest of their debt at a later time. While this might be helpful during a time period when you need to stretch your money a little further, it is a dangerous cycle to get involved in, and it often does not end well for the credit card owner.

Debit cards and credit cards are both useful monetary tools. They both offer advantages and disadvantages. Debit cards offer more protection from yourself than credit cards do; however, credit cards more effectively protect you from the ill will of others. Depending on what type of a spender you are, and how much protection you want for your money you can easily decide the type of card that best suits you.

 

How do I Improve My Credit Score?

When it comes to the importance of improving your credit score, it is almost as important as losing weight!
Credit Score
Whether your credit is bad or relatively okay, you need to know your current position before you try to improve your credit score. Free credit reports can be obtained one every calendar year. If you haven’t gotten yours yet, now is the time to do so. Before proceeding with anything, make certain there are no mistakes on your credit report. If you find something fishy, be sure to report it, have it investigated and maybe even have it removed from your report.

If you want to improve your credit score, like we all do, then here are a few steps that will help you quickly improve your credit score:

1. Pay Down Your Current Cards – While it may not be at the top of your list, it is important to pay down your current credit cards. When you go into a bank for a loan, lenders want to see a significant difference between your available credit and the credit that you’ve used – or are currently using. Balances under 30% of your credit limit are great, but lower than 10% is fantastic! Start with the highest-rate credit card or the credit card that is closest to be being paid off.

2. Get a Credit Card – If you don’t already have a credit card or just have one, apply for a new credit card. You can build your credit by using your credit and then paying off the balance. If your credit happens to be too poor, get a secured credit card. These are similar to that of a pre-paid debit card, as you load money onto the card and that is your credit limit, except that these report to the credit bureaus. Make sure to get a secured card that reports to all three of the major credit bureaus in order to benefit the most.

3. Get an Installment Loan – Revolving, which is considered a credit card, and installment, which is a student loan, a mortgage and a personal loan, are known to be the best types of credit to improve your credit history and your credit score. Get an installment loan if you can – even if it’s a small personal loan.

4. Don’t Max Out Your Cards – There’s no reason to max out every single one of your credit cards. Regardless of whether you pay it back quickly or not, your credit score will not benefit from maxed out credit cards.

Most delinquencies will appear on your credit history for as many as seven years, so you can’t expect to rebuild your credit history and improve your credit score overnight. It is possible to improve your score, though, and it is worth the time and effort to do so. Follow the four steps above and you’ll be well on your way to improving your credit score!

Budgeting College Style

Every college student knows that money does not exactly grow on trees. Sometimes you have to make choices about what you do or buy based on how much money you have. This is called budgeting and it is an important skill to have, especially in today’s economy.

college saving

The summer is an especially hard time to budget because of all the fun stuff to do and the free time to do it, but the more you save now the more you will have come the fall, and the start of the school year.

A few tips to help budget and save money are:

1. Limit how many times you go out to eat, each time you go out you are typically paying for food at a higher price than you need to. For lunch it is easy to buy cold cuts and make sandwiches instead of going to a deli to buy them. Not only will it be cheaper, but cold cuts can last for several meals making the cost even less.

2. Try to find free or cheaper things to go to. Look around your area for free activities such as concerts, fairs or even just going to the park or the beach. It is easy to find fun things to do that are free or inexpensive if you just spend sometime looking for them.

3. Keep track of your spending. If you keep a record of what you spend your money on, you not only will see how much you money you have and how much you are spending, but you can also see what you do not need to buy, and places where you can save a little extra money.

My First Certificate of Deposit

Certificate of deposits are basically similar to a savings account that earns interest. The interest rates are only fixed interest rates. These types of accounts can only be set up through a commercial bank. When a person gets a CD, they will generally have it for only 1 month to 5 years. CD accounts benefits anyone who gets it, because you cannot withdraw any funds from that CD account. If you do, you will have to incur a penalty.

CD

If you want to setup one of these accounts you will have to visit a bank branch. Some banks even let you open these CD accounts up online. For example, if you open up a CD account with Chase, you will have to choose from a 6 month account, and up. These accounts require a $1,000 opening balance. If you have that, you will be on your way to go. Some banks require a opening balance of $5,000, or more to get started with them. The same rules will apply if you visit the branch in person, as far as the opening balance and information needed.

You will need information as far as your social security number, driver’s license or state identification, and checking, savings, or brokerage account and routing number to make your initial deposit. Some of these banks let you pick a term for as long as 10 years, but as stated before, it depends what bank you open it through.

Depending on the length of the CD term that you choose, that will determine the interest rate. The higher the term, the higher the interest rate will be. It doesn’t matter which term you choose, the opening amount will still be the same. All you would have to do after you have all the required information, is fill out the application, whether online or in person. These applications will not take much of your time. The entire process is simple, and before you know it, your CD account will be open in no time. They are good accounts to have, if you are looking to save some money with interest. You will just need to make sure that you have that opening balance already so that you won’t have to worry about anything else. Let the interest start building.

How Does a Credit Score Work?

A credit score is a number that is arrived at after an individual’s credit files or reports have been statistically analyzed based on particular criterion that are used to determine that person’s creditworthiness, or the risk involved in extending that person further credit. Unknown to a lot of people is the fact that this score is not only determined by how faithfully you keep to repayment deadlines or fulfill your debt obligations but also how often you successfully apply for credit services and fulfill their obligations.
credit card

Legally, credit bureaus are mandated to collect this information. Companies then involved in extending credit seek this information from credit bureaus and are furnished with it. It is against this information that the decision to extend an individual credit is made.

Credit scores have several functions as a financial tool within an economy, both at micro and macro-economic levels. They help credit and financial institutions decide the credit worthiness of an individual or a firm, and the risk involved in extending them credit, thereby allowing them to make informed, calculated decisions. They also act as a form of control, helping individuals monitor their own credit performance or worthiness while at the same time letting them know that any indiscreet behavior will be noted. Credit scores can also help at a fiscal policy level in determining whether measures and tools in place to govern the credit provision industry are actually effective, or working, and to actually inform fiscal decision makers what credit levels the economy is operating at.

Typically banks and credit card companies use this information but several other firms, like government departments, utility companies, mobile phone companies, landlords and the hotel and leisure industries all source this information from credit bureaus.

The calculation of credit scores varies from bureau to bureau but some general rules of thumb exist, and a typical simplified format is outlined below:

35 – Payment History
30 – Credit to Debt Ratio
15 – Credit History
10 – New Credit
10 – Credit Types in Use

Thus the credit score or credit rating is calculated as a percentage of 100. The break-down above implies that if you excel in one area and lack in another, only fixing the areas which you lack are going to improve your score.

The advantages of having a good credit score are about as obvious as the ones resulting from having a bad credit score. With a good credit score, it is easier to get credit extended to you, at lower interest rates, and with simpler terms. Bad credit scores often imply that requests for credit are either ignored or end up having credit extended at high interest rates with additional built-in costs like insurance and stringent terms to guard against bad debt.

Different scoring systems are used, but in the United States, the most commonly utilized system was designed by a company called the Fair Isaac Company and runs under the acronym FICO; a resultant score derived when using this system is called a FICO score. FICO controls the greatest percentage of the credit score market in the United States and Canada although there are several other competing firms that collectively share a very small percentage of the market as well. In the US, FICO scores range from 300-850, with 723 being a median score as of 2010. This figure reflects the likelihood that a consumer will go 90 days past due or more in the subsequent 24 months after the score has been calculated. The higher the consumer’s score, the less likely he or she will go 90 days past the due date in those subsequent 24 months.

It is important to note that different services recognize different limits of scores below which they are not willing to operate, depending on the economic situation and their own financial situation. The risk, indeed, varies from credit service (mortgage, credit cards) to companies as well.

Free Electric Tax Filing

The process of filing for taxes is one considered tedious and somewhat inconvenient. As such, the opportunity to do it remotely is a welcome one for most individuals and businesses. It is with this in mind the Internal Revenue Service provides an opportunity for one to file their taxes electronically. There also other avenues to do this that are affiliated with the Internal Revenue Service.

The advantages, apart from convenience, are two other important aspects: the filing process safe, and free. There are also significant reductions in the time that one needs to wait for a tax refund, with the period being cut in half in some cases. Another often quoted advantage is that if you have arrears or back payments owed to the Internal Revenue Service, the electronic filing process provides you with more options through which you can remedy this problem.

Within the Internal Revenue Service, the process is of filing taxes called the IRS e-file. It has been available since 1990.

The option that is provides for one to file their tax returns freely is called Free File. Free File is open to individuals with an annual income below $57,000 and there are a number of ways a person interested in this facility can access it only through the Internal Revenue Service website, www.irs.gov.

For those wishing to file for their taxes electronically that are open to any income bracket, one can use by forms that are called Free File Fillable Forms. These forms support simple mathematical formulae and can’t be used for the more complicated state tax returns.

There are some tax software companies that can provide you with support software that can be used to file state tax returns. These are also found in the Internal Revenue Service website www.irs.gov. and as such can be trusted with your tax information since they go through a verification process of sorts.

You can also decide to handle the process yourself, especially if you have a working knowledge of how to file your taxes and the calculations involved. E-file software is commercially available and once you have processed the information, you can then send it through the secure channels available through the Internal Revenue Service website.

Yet another method is to use a tax preparer. The law requires that these tax filing professionals be well-versed with the e-filing process and it also makes practical sense for them to be familiar with it. This will certainly help one enjoy the benefits of e-filing while also leaving the process in the hands of experienced professionals.

The Internal Revenue Service provides you with various directions and steps that can help you select which form of electronic tax filing-works for you, making the process conveniently user-friendly.

How to Find Low Cost Banking

Nowadays, our credit defines us. Our credit is often what determines whether we get a checking account free of charge, for a nominal fee, or for an outrageous charge. So many banks are making us pay more to get less. If you want to get the best checking account for the absolute ideal amount of money – you know, the best bang for your buck – check out these tips:
Low cost banking

1. Better prices may be found in smaller places – While large branches will have more branches and ATM’s, they offer convenience, which means higher prices. However, smaller banks will have less branches and ATM’s so the convenience won’t be there, but they price is much more affordable. So, if convenience isn’t an issue for you, then you can find low cost banking easily at smaller branches in your area.

2. Always maintain the required minimum balance – A number of banks will require that you maintain a certain minimum balance in order to have free checking. For example, so long as you don’t dip your account balance under $500.00, your checking account is free; otherwise, you have to pay, say, $10.00 per month for the account services. If your bank requires a minimum balance, find out if it an average balance over a certain period of time or if it is a daily minimum balance, so that you can make sure you are up to code.

3. Get overdraft protection, but don’t bounce checks – As difficult as it may be to not write that check to buy that hip new shirt at the local clothing store, it will save you money in the long run not to write it. Sure, you may have overdraft protection, but writing that check and having it accepted is going to cost you a decent chunk of change. In fact, banks are constantly raising their prices on how much a returned check costs. Then, just think if you have exceeded your overdraft protection limit, you are going to be out even more. Not only will you be paying for the returned check fee at your bank, but you will pay for the same fee at the store that you wrote the check. As a general rule, this is a $30+ charge each time, at each location.

4. Purchase your own checks – Believe it or not, you can save a ton of money by buying your own checks from a third-party source rather than from the bank itself. Sometimes, you can save as much as 50 percent! And, more than likely, you’ll have a much wider selection of excellent check designs than you would have at your financial institution.

The above-mentioned four tips will help you ensure that you get more of what you want and need out of a checking account from a low cost bank for an affordable price that won’t break the bank!

What is a Pension?

A pension plan is a specific type of retirement plan in which the employer will make a contribution to funds that have been put aside for the employee’s future benefit. This money is then invested on behalf of the employee permitting benefits to be received at retirement. As a general rule, a pension plan is tax exempt, is built up over numerous years, and consists of money that was contributed by both the employer and the employee.

retirement

How Do I Get a Pension Plan?

A pension plan comes with the job. All you have to do is show up to work and work. When you become an employee, you are enrolled in the pension plan with your employer automatically. However, some companies do require that you are employed for a full year before you are officially enrolled in the pension. And just because the pension is yours does not mean that you have any say so in the investment decisions.

When Can I Have Access to My Pension?

You cannot obtain early access to your pension plan. You will be unable to gain access to the funds from your pension until you have retired from the company. As a general rule, retirement age is 65; however, some companies may allow you to begin payments at 55 for early retirement. If you choose to begin receiving early retirement benefits from your pension, you won’t receive as large of a monthly payment as you would if you were at full retirement age.

Upon retirement, you will begin receiving monthly installments of the same amount each month until the funds have been depleted. The payout will generally depend on your length of time with the company as well as your salary.

What to Know About Pension Payouts

When you do begin receiving payments from your pension plan, you will be responsible for paying taxes on the funds received throughout the tax year. Because of this, a pension plan is considered as a form of a retirement plan.

Now, while most individuals opt for the monthly installments, those with a pension plan do have the option to choose a lump sum payment upon retirement. However, by choosing the lump sum option, you are given all the funds at once meaning that taxes must be paid on the entire amount at the end of the tax year. In addition, you could leave yourself with no money in the long-term by spending too much upfront. The wiser option is the monthly installments; however, the choice is ultimately yours to make.

Don’t Rely on a Pension Alone

When it comes to planning your retirement, you should never rely on one individual retirement plan to carry you through your retirement years. This is extremely true with pension plans since a pension is not going to be enough to carry you through.

How to Avoid Home Foreclosure

Foreclosure is a potentially devastating problem that faces homeowners. When a homeowner is not able to pay the mortgage loan, the bank will reclaim the mortgage property. This is the beginning of a foreclosure proceeding. Foreclosure can occur suddenly. If the financial situation of the homeowner changes, he could be facing the real danger of losing his property.

Before foreclosure happens, it is important that the homeowner takes steps to avoid this problem. Here are some steps to prevent this from occurring:

1. Get a fixed interest rate.

A variable interest rate on your mortgage is highly unstable. If changes in the economy occur, the rates could shoot up in an instant especially during economic recession. When this occurs, the monthly payments that the homeowner has to pay will rise drastically to the extent that the he could no longer afford it.

To avert this potential disaster, it is a good idea to get a fixed rate on the mortgage loan. A fixed rate will remain the same even if market situation changes. This means you know exactly how much monthly premium you need to pay each and every month. And, you need not worry about fluctuations in the economy because your interest rates on loans will be unchanged.

2. Dialogue with lender.

If you lose your job and you think you cannot make monthly payments anymore, it is good to arrange a dialogue with the lender or bank before the problem becomes full-blown. Talk to the creditor about your financial situation. And give him a satisfactory and valid reason explaining why you cannot pay monthly premiums. The lender might take into consideration your reason and give you a grace period, enough time for you to secure the money for payment.

3. Debt forgiveness.

This is one option that a debtor may resort to if he has a very considerate lender. A lender might waive your missed payments once he hears your reason. This is called debt forgiveness which seldom happens but it is a possible solution. However, you must agree to pay the monthly premium after the missed payments are waived.

4. Loan repayment plan.

This is another option that a homeowner can request from a lender. In this plan, the payments that the homeowner missed will be divided into easy to pay monthly plan. This way, he can catch up with the monthly premium payments.

5. Loan modification.

This is another option available for homeowners to evade foreclosure. In this process, the homeowner will negotiate with the bank for lower interest rates or lower monthly premiums. This will make the payments more affordable for the homeowner who is in a temporary financial bind.

6. Short sale.

The house is sold before reaching the point of foreclosure. This way, the homeowner is able to pay the debt in full. Sometimes, the sale price of the home could be lower than the actual mortgage. It is good to discuss this with the bank. The bank might accept the amount and forgive the unpaid balance.

7. Foreclosure mediation.

An arbitrator acts as the mediator between the homeowner and the bank. The meeting between the debtor and lender will focus on the reduction of principal or interest or issuing deed-in-lieu of foreclosure.