Many lines have been written on the importance of cleanliness and household chores (remember that iconic speech by U.S. Admiral McRaven, urging us all to make our beds in the morning?) and the role they play in maintaining our mental and physical health. And since we now see ourselves in a position to spend far […] More
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Source: moneycrashers.com
When you find yourself in a difficult financial situation, sometimes a small, short-term loan can be all you need to get back on track. But this can be more challenging if you have bad credit.…
The post 5 Best Small Loans for Bad Credit of 2021 appeared first on Crediful.
A payday loan is a short-term loan with a high annual percentage rate. Also known as cash advance and check advance loans, payday loans are designed to cover you until payday and there are very few issues if you repay the loan in full before the payment date. Fail to do so, however, and you […]
What is a Payday Loan? is a post from Pocket Your Dollars.
How long does it take to buy a house? The answer is: it depends. You can buy a house in a matter of weeks or it can take you anywhere from 4 to 6 months. The question is how ready are you? It can take a long time, and that’s just learning about various mortgage …
Continue reading “How Long Does It Take To Buy A House?”
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Karen, our editor at Quick and Dirty Tips, has a friend named Heather who listens to the Money Girl podcast and has a money question. She thought it would be a great podcast topic and sent it to me.
Heather says:
I had a financial crisis and ended up with a $2,500 balance on my new credit card, which had a no-interest promotion for 18 months when I got it. That promotional rate is going to expire in a couple of months. I have good credit, and I keep getting offers from other card companies for zero-interest balance transfer promotions. Would it be a good idea to apply for another card and transfer my balance so I don't have to pay any interest? Are there any downsides that I should watch out for?
Thanks, Karen and Heather! That's a terrific question. I'm sure many podcast listeners and readers also wonder if it's a good idea to transfer a balance multiple times.
This article will explain balance transfer credit cards, how they make paying off high-interest debt easier, and tips to handle them the right way. You'll learn some pros and cons of doing multiple balance transfers and mistakes to avoid.
A balance transfer credit card is also known as a no-interest or zero-interest credit card. It's a card feature that includes an offer for you to transfer balances from other accounts and save money for a limited period.
You typically pay an annual percentage rate (APR) of 0% during a promotional period ranging from 6 to 18 months. In general, you'll need good credit to qualify for the best transfer deals.
Every transfer offer is different because it depends on the issuer and your financial situation; however, the longer the promotional period, the better. You don't accrue one penny of interest until the promotion expires.
However, you typically must pay a one-time transfer fee in the range of 2% to 5%. For example, if you transfer $1,000 to a card with a 2% transfer fee, you'll be charged $20, which increases your debt to $1,020. So, choose a transfer card with the lowest transfer fee and no annual fee, when possible.
When you get approved for a new balance transfer card, you get a credit limit, just like you do with other credit cards. You can only transfer amounts up to that limit.
Missing a payment means your sweet 0% APR could end and that you could get charged a default APR as high as 29.99%!
You can use a transfer card for just about any type of debt, such as credit cards, auto loans, and personal loans. The issuer may give you the option to have funds deposited into your bank account so that you can send it to the creditor of your choice. Or you might be asked to complete an online form indicating who to pay, the account number, and the amount so that the transfer card company can pay it on your behalf.
Once the transfer is complete, the debt balance moves over to your transfer card account, and any transfer fee gets added. But even though no interest accrues to your account, you must still make monthly minimum payments throughout the promotional period.
Missing a payment means your sweet 0% APR could end and that you could get charged a default APR as high as 29.99%! That could easily wipe out any benefits you hoped to gain by doing a balance transfer in the first place.
A common question about balance transfers is how they affect your credit. One of the most significant factors in your credit scores is your credit utilization ratio. It's the amount of debt you owe on revolving accounts (such as credit cards and lines of credit) compared to your available credit limits.
For example, if you have $2,000 on a credit card and $8,000 in available credit, you're using one-quarter of your limit and have a 25% credit utilization ratio. This ratio gets calculated for each of your revolving accounts and as a total on all of them.
Getting a new balance transfer credit card (or an additional limit on an existing card) instantly raises your available credit, while your debt level remains the same. That causes your credit utilization ratio to plummet, boosting your scores.
I recommend using no more than 20% of your available credit to build or maintain optimal credit scores. Having a low utilization shows that you can use credit responsibly without maxing out your accounts.
Getting a new balance transfer credit card (or an additional limit on an existing card) instantly raises your available credit, while your debt level remains the same. That causes your credit utilization ratio to plummet, boosting your scores.
Likewise, the opposite is true when you close a credit card or a line of credit. So, if you transfer a card balance and close the old account, it reduces your available credit, which spikes your utilization ratio and causes your credit scores to drop.
Only cancel a paid-off card if you're prepared to see your credit scores take a dip.
So, only cancel a paid-off card if you're prepared to see your scores take a dip. A better decision may be to file away a card or use it sparingly for purchases you pay off in full each month.
Another factor that plays a small role in your credit scores is the number of recent inquiries for new credit. Applying for a new transfer card typically causes a slight, short-term dip in your credit. Having a temporary ding on your credit usually isn't a problem, unless you have plans to finance a big purchase, such as a house or car, within the next six months.
The takeaway is that if you don't close a credit card after transferring a balance to a new account, and you don't apply for other new credit accounts around the same time, the net effect should raise your credit scores, not hurt them.
RELATED: When to Cancel a Credit Card? 10 Dos and Don’ts to Follow
I've done many zero-interest balance transfers because they save money when used correctly. It's a good strategy if you can pay off the balance before the offer's expiration date.
Let's say you're having a good year and expect to receive a bonus within a few months that you can use to pay off a credit card balance. Instead of waiting for the bonus to hit your bank account, you could use a no-interest transfer card. That will cut the amount of interest you must pay during the card's promotional period.
But what if you're like Heather and won't pay off a no-interest promotional offer before it ends? Carrying a balance after the promotion means your interest rate goes back up to the standard rate, which could be higher than what you paid before the transfer. So, doing another transfer to defer interest for an additional promotional period can make sense.
If you make a second or third balance transfer but aren't making any progress toward paying down your debt, it can become a shell game.
However, it may only be possible if you're like Heather and have good credit to qualify. Balance transfer cards and promotions are typically only offered to consumers with good or excellent credit.
If you make a second or third balance transfer but aren't making any progress toward paying down your debt, it can become a shell game. And don't forget about the transfer fee you typically must pay that gets added to your outstanding balance. While avoiding interest is a good move, creating a solid plan to pay down your debt is even better.
If you have a goal to pay off your card balance and find reasonable transfer offers, there's no harm in using a balance transfer to cut interest while you regroup.
Here are several advantages of using a balance transfer credit card.
Here are some cons for doing a balance transfer.
The best way to use a balance transfer is to have a realistic plan to pay off the balance before the promotion expires.
The best way to use a balance transfer is to have a realistic plan to pay off the balance before the promotion expires. Or be sure that the interest rate will be reasonable after the promotion ends.
Shifting a high-interest debt to a no-interest transfer account is a smart way to save money. It doesn't make your debt disappear, but it does make it less expensive for a period.
If you can save money during the promotional period, despite any balance transfer fees, you'll come out ahead. And if you plow your savings back into your balance, instead of spending it, you'll get out of debt faster than you thought possible.
Getting a new car is a big decision, and you should choose your next vehicle carefully. But if you think finding the right car is difficult, deciding whether to lease or buy can be even more overwhelming. Start the process right by understanding the minimum credit score to lease a car and determining whether this… Read More
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Permanent life insurance is defined as a whole-life policy, one that doesnât expire and may provide a number of benefits during the policyholderâs life and when they pass away. It’s not a specific type of insurance, as such, and is instead an umbrella term used to describe life insurance policies that are not fixed to specific terms. Types […]
What is Permanent Life Insurance and How Much do you Need? is a post from Pocket Your Dollars.
For those who are caring for their aging parents and raising kids at the same time, it can often seem like there’s never enough time, money, or energy to provide for all the family members who need you. In particular, handling finances when two different generations are relying on you can feel like an impossible balancing act — not to mention an exercise in feeling guilty no matter what you do.
But being the caregiver sandwiched between two generations makes it even more important for you to prioritize your own financial needs, especially when it comes to retirement planning. By protecting your retirement during this difficult season of your life, you’ll be in a better place to remain independent as you age, launch your kids into a more secure adulthood, and offer ongoing support to your parents.
Sound impossible? It’s not. Here’s how you can protect your retirement if you’re a member of the sandwich generation.
Retirement savings should get priority ahead of putting money into your kids’ college funds. You know that already. Your kids can take on loans for college, but there are no loans available to pay for your retirement.
The more difficult decision is prioritizing retirement savings ahead of paying for long-term care for your parents. That can feel like a heartless choice, but it is a necessary one to keep from passing money problems from one generation to the next. Forgoing your retirement savings during your 40s and 50s means you’ll miss out on long-term growth and the benefits of compound interest. By making sure that you continue to set aside money for retirement, you can make sure your kids won’t feel financially squeezed as you get older.
Instead of personally bankrolling your parents’ care, use their assets for as long as they last. That will not only allow you to make the best use of programs like Medicaid (which requires long-term care recipients to have exhausted their own assets before it kicks in), but it will also protect your future.
Part of the stress of being in the sandwich generation is feeling like the financial burdens of two generations (as well as your own) are resting entirely on your shoulders. You feel like you’ll be letting down the vulnerable people you love if you can’t do it all. But the truth is that you can’t do it all. And you shouldn’t expect that of yourself, nor should your family expect it of you. So communicating with your loved ones about what they can expect can help you draw important boundaries around what you’re able to offer them.
This conversation will be somewhat simpler with your children. You can let them know what kind of financial help they can expect from you for college and beyond, and simply leave it at that.
The conversation is a little tougher with your parents, in part because you need to ask them about nitty-gritty details about their finances. Whether or not money is a taboo subject in your family, it can be tough for your parents to let you in on important financial conversations — to them it feels like they were changing your diapers only a few short years ago.
Being in the loop on what your parents have saved, where it is, what plans they have for the future, and who they trust as their financial adviser, will help protect their money and yours. You’ll be better able to make decisions for them in case of an emergency, and being included in financial decisions means you can help protect them from scams. (See also: 5 Money Strategies for the Sandwich Generation)
Having adequate disability insurance in place is an important fail-safe for any worker, but it’s especially important for those who are caring for aging parents and young children. The Council for Disability Awareness reports that nearly one in four workers will be out of work for at least a year because of a disabling condition. With parents and children counting on your income, even a short-term disability could spell disaster, and force you to dip into your retirement savings to keep things going. Making sure you have sufficient disability income insurance coverage can help make sure you protect your family and your retirement if you become disabled.
Life insurance is another area where you don’t want to skimp. With two generations counting on you, it’s important to have enough life insurance to make sure your family will be okay if something happens to you. This is true even if you’re a full-time unpaid caregiver for either your parents or your children, since your family will need to pay for the care you provide even if they aren’t counting on your income.
It’s also a good idea to talk to your parents about life insurance for them, if they’re able to qualify. For aging parents who know they will draw down their assets for long-term care, a life insurance policy can be a savvy way to ensure they leave some kind of inheritance. If your parents are anxious about their ability to leave an inheritance, a life insurance policy can help to relieve that money stress and potentially make it emotionally easier for them to draw down their own assets.
Spending time reading up on Social Security, Medicare, and other programs can help you to make better financial decisions for your parents and yourself. There are a number of misconceptions, myths, and misunderstandings masquerading as facts about these programs, and knowing exactly what your parents (and eventually you) will be entitled to can help make sure you don’t leave money on the table or make decisions based on bad information.
The eligibility questionnaires at benefits.gov can help you determine what benefits are available and whether your parents qualify. In addition, it’s a good idea to sign up for a my Social Security account for yourself. This site will provide you with personalized estimates of future benefits based on your lifetime earnings, which can better help you prepare for your own retirement.
Caring for children and parents at the same time is exhausting. Don’t compound the problem by thinking you have to make financial decisions all by yourself. Consider interviewing and hiring a financial adviser to help you make sense of the tough choices. He or she can help you figure out the best way to preserve your assets, help your parents enjoy their twilight years with dignity, and plan for your children’s future.
Even if a traditional financial adviser isn’t in the cards for you, don’t forget that you can ask for help among your extended family and network of friends. There’s no need to pretend that juggling it all is easy. Family can potentially offer financial or caregiving support. Knowledgeable friends can steer you toward the best resources to help you make decisions. Relying on your network means you’re less likely to burn out and make disordered financial decisions. (See also: 9 Simple Acts of Self-Care for the Sandwich Generation)
If you want to keep utility costs consistent month to month, budget billing may be for you.
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