7 Signs You’re Working With a Shady Credit Repair Firm

It’s natural to want a quick fix for your credit problems, but be wary of any practice that seems deceptive — even if it could work in your favor.

In September 2016, the Consumer Financial Protection Bureau filed a lawsuit against Prime Marketing Holdings, a credit repair firm based in Van Nuys, Calif. In its complaint, the CFPB alleged the company charged customers advance fees “totaling hundreds of dollars” and misled customers about their ability to remove negative items from their credit reports.

The case is still active, but it’s just one example of the proliferation of credit repair abuse in the U.S. And it gives rise to the question: How do I know if a credit repair company is legitimate or just another scam?

We’ve put together a litmus test of seven signs you could be working with a shady credit repair company.

  1. They ask you to pay before they start working.

One of the biggest red flags in the credit repair business is requiring an upfront fee before any services are rendered. Under the Credit Repair Organizations Act (CROA), credit repair companies can’t charge advance fees before rendering services.

In some cases, advance fees can be only a couple of hundred dollars. But some companies have been found to ask for thousands of dollars upfront. In 2011, the Federal Trade Commission sued Doug and Julie Parker, owners of a Texas-based credit repair firm called RMCN Credit Services, Inc. The FTC claimed the couple charged customers a staggering $2,000 retainer fee before they completed any work. In the end, the Parkers were fined $400,000 by the federal watchdog.

  1. They try to give you a new “credit identity.”

Another dodgy credit repair practice is when a company tries to convince clients to create a “new credit identity.” To establish this identity, the firm may offer to issue the client a nine-digit “credit profile number” or even prompt them to apply for an employer identification number with the IRS. With the new number in place, the firm could them encourage the client to apply for new credit and stop using their real Social Security number.

Don’t be fooled — this practice is completely illegal. An EIN is only used to identify businesses, and it is not a substitute for a Social Security number. Additionally, that credit profile number could easily be someone else’s stolen Social Security number. “These companies may be selling stolen Social Security numbers, often those taken from children,” the FTC warns. If you fall for this trap, you are essentially committing identity theft.

  1. They ask you to lie on credit applications.

Some credit repair organizations may also ask you to lie on credit applications in order to qualify for more credit. For example, they may ask you to report more income than you earn. It’s illegal to make false statements on credit applications.

  1. They dispute correct information on your credit report.

Yet another way credit repair companies try to manipulate the system is by misinforming consumers about the rules surrounding credit reports. They may tell consumers that they can fight every single item on their credit report — even if the item is accurate.

This is not true. If there is a negative item on your credit report that you feel is an error, you absolutely can fight to have it removed. But if it’s negative because you were, indeed, late on your bill, or did, in fact, file for bankruptcy, you cannot file to have it removed by claiming it is inaccurate.

  1. They promise to get you a perfect credit score.

When a company promises they can improve your credit score or even get your score up to a specific number, don’t believe their hype.

In 2015, the FTC filed suit against a company called FTC Credit Solutions for making exactly these types of claims. The company’s representatives told customers they would get their credit score into the 700s and promised any negative credit report information could be removed. On top of that, they also charged advance fees before rendering any services. The case was settled very quickly to the tune of a $2.4 million penalty against the defendants.

  1. They claim they are affiliated with a government agency.

Some repair firms fraudulently claim they are affiliated with the FTC or another government agency. If you are filing bankruptcy, it is true that you’ll be required to get some kind of credit counseling. But that counseling must be from a government-approved organization. There’s a full list of approved credit counseling firms on the U.S. Trustee Program website. If you’re thinking of working with a firm that isn’t on that list, you might want to reconsider.

  1. They don’t want you to contact the credit bureaus on your own.

Don’t believe a company that tells you they are the only way to contact the credit bureaus. By law, any consumer can contact credit bureaus directly without a third party. You also have the right to access your credit report from each of the three credit bureaus once per year for free. If you’ve been rejected for anything for credit-related reasons, you have 60 days to request a free copy of your report. This enables you to keep potential creditors honest.

If a company ever tells you that you are not allowed to contact the credit bureaus on your own, walk away — fast.

How to Repair Your Credit All by Yourself

The MagnifyMoney team highly recommends taking simple steps to improve your credit on your own, without the risk of working with a shady credit repair firm.

Read MagnifyMoney’s full, in-depth guide to repairing your own credit.

Start by getting a copy of your free credit report from each of the credit bureaus. The simplest way to do this is by requesting copies at AnnualCreditReport.com, which is a government-sponsored website.

From there, look over your information to make sure everything is accurate. If there are late payments listed, did you actually pay late? Does it show closed accounts accurately? Do you recognize all of the accounts?

Sometimes reports do have errors. If you find one, consider the fact that you may be a victim of identity theft and take appropriate steps as necessary.

If you’re instead the victim of an honest mistake, contact the credit bureaus directly. You will have to do so online and via written letter. You will also have to contact the entity that incorrectly reported the line item. You can get a sample letter here.

Be sure to keep copies of all of your paperwork and follow up on your dispute. The credit bureaus have 30 days to investigate. If all turns out well, they will remove the item, which could result in a higher credit score.

If they do not find in your favor, you can request that a copy of the dispute be attached to your credit report moving forward, but you will have to pay a fee to do so. While this will not improve your credit score, it could potentially alert future creditors to the fact that you do not agree with the negative item.

There are also rare cases where you can attempt to get an accurate item removed from your credit report. If you were not aware of a debt, but you quickly paid it off once you were properly notified, the creditor may be willing to remove the item from your report. This kindness may also be extended if you were experiencing a temporary illness or life emergency. These removals are rare, but are most often rewarded when you are an otherwise responsible steward of your debts.

To make your case to your creditor, you will need to write them a letter of goodwill. In it, explain that you understand why the item is on your report, but also explain why you temporarily were unable to fulfill your obligation. Stress the fact that you are an otherwise responsible borrower, and point out specific instances in your business relationship where this has proven to be true.

It’s also a good idea to appeal to their human side. Explain what the removal of the debt would mean for you. Is there a major milestone coming up, such as a job interview or a mortgage application? Thank them sincerely for the time they’re taking to review your case and cross your fingers. Goodwill letters do not have a high success rate, but you will have a zero percent success rate if you don’t try.

Read MagnifyMoney’s full guide on letters of goodwill.

Finding Legitimate Solutions

Even though there are a lot of scammers out there, it’s good to remember that there are legitimate credit repair organizations, too. However, before you pay a company to help you repair your credit, read our guide on repairing your credit on your own and our guide on credit counseling. At the very least, properly vet a credit repair firm before you sign up for their services — and watch out for the warning signs we covered before.

Another potentially safer way to go about credit repair is by working with a not-for-profit credit counselor. These organizations have a lower rate of deceptive practices and can work with you in a more holistic manner to resolve not just your credit report woes but also your current debt situation.

The post 7 Signs You’re Working With a Shady Credit Repair Firm appeared first on MagnifyMoney.

How to Throw a Super Bowl Party on a Budget

Here's how to throw a Super Bowl party with food on a budget.

I don’t know how Super Bowl Sunday got to be one of the biggest parties of the year, but I’m glad it’s almost here. Even if I have no interest in any of the teams participating, I find any excuse to get together with friends to be a good one.

Hosting a Super Bowl party can be a lot of fun, but if you’re not careful, you could end up spending way more than you expected. Between the delicious appetizers and frothy adult beverages, it’s easy to get carried away and put your budget in a bind for the rest of the month. (You can keep tabs on your spending and debt levels by viewing your free credit report card, with updates every 14 days, on Credit.com.)

Here are a few suggestions on how you can host a Super Bowl party on a budget.

1. Start With a Budget

How much do you want to spend on the Super Bowl party? If you want to stick to a budget, you need to know how large it’ll be. The party you throw when you have $5,000 to spend is different than the one you throw when you’re looking to keep it to under $100. Once you’ve established your budget, you can start employing some of the strategies below to keep your spending within limits.

2. Limit the Guest List

Much like a wedding, keeping costs low while having a great time involves getting the right people together. Parties are fun because of the people. The more people you invite, the more expensive the party will be, and the longer the cleanup afterward. Fortunately, a Super Bowl party isn’t a personal marquee event like a wedding, where people may feel slighted if they aren’t invited. Feel free to keep the group small if you need to.

3. Potluck Meals & Appetizers

Food is one of the biggest expenses of any party, and a Super Bowl party is no different. The easiest way to reduce that expense is to host it potluck-style — that is, have each of your guests contribute a dish to the party. We use a Google Doc to coordinate who brings what so we don’t end up with eight bowls of crab dip.

If you want to make a signature “meal” while leaving the appetizers to your guests, you can always go with something like a stew or a chili. Stews and chilis are typically easy to prepare, relatively cheap, very filling, and delicious. You can buy meat in bulk from a wholesale club like Costco, and with so many people coming over, you won’t be stuck with a ton of leftovers. Bonus points if you prepare it in a slow cooker so you can leave it alone during the party.

As back up, we also pick up a few frozen pizzas. If you are afraid you’re going to run out of food, it’s probably going to happen late in the game. At that point, anyone who is hungry will happily welcome a slice of fresh oven-baked pizza.

4. BYOB

For adult beverages, have your guests bring their own. If you’re hosting and responsible for coordinating the party and cleaning up afterwards, the least a guest can do besides bring a snack is bring their own beverages. It’s unlikely anyone will balk at this.

The party will likely go for about four to five hours, and if everyone shows up with at least a six- or 12-pack, and no one gets too rowdy, you won’t need much more to keep the party going. As the host, you might want to supplement with your own supply just in case, but you know your friends best.

Alternatively, you can always make a delicious punch. It can be simple, like some champagne and fruit juice (think citrus) that your guests mix on their own. Or you can get more elaborate and look up some boozy punch drinks on sites like Pinterest.

5. Skip Decorations

You might be tempted to go out and buy Super Bowl decorations because they exist, but don’t. It’s a waste, and you’re better off spending that money on food or drinks.

Instead, focus on what might increase excitement in the game. For instance, you can coordinate a game of Super Bowl squares. It’ll turn people with zero interest in the outcome of the game into raving fans. Super Bowl squares is simply a 10×10 grid where each person picks a square. You put the numbers at the top and side of the square, and they correspond to the score after the first, second, third, and fourth quarters. You can have each contestant contribute to a pool prize or just do it for fun.

5. Remember Seating!

One last thought: If you’re hosting a lot of guests, chances are you won’t have enough seating. Ask some of your guests to bring folding chairs. Not everyone will be seated at all times, so you won’t need as many chairs as people, but it helps to have a few extra just in case.

Remember, a Super Bowl party can be fun without being expensive if you’re smart about it. Just try to keep your budget in mind.

Image: dszc

The post How to Throw a Super Bowl Party on a Budget appeared first on Credit.com.

Everything You Need for Your Best Super Bowl Party Ever

Here's how to throw a Super Bowl party with food on a budget.

Image: dszc 

The post Everything You Need for Your Best Super Bowl Party Ever appeared first on Credit.com.

Gap Credit Card Review: Earn 5 Points Per Dollar at Gap Brands

The Gap store credit card is one that you can use at multiple brand stores including Gap, Old Navy, Banana Republic, and Athleta. There are two types of Gap credit cards. There’s the store exclusive GapCard that you can only use at the Gap Inc. brand stores listed above. The Gap Visa Card has the same rewards benefits of the GapCard, but it can also be used anywhere Visa is accepted.

In this post we’ll discuss:

  • The Gap rewards program
  • Interest and fees
  • How to apply for the card
  • The hazards of store cards

Gap Credit Card Reward Basics

When you are approved for a Gap credit card, you get $15 off your first credit card purchase made at Gap or Gap Factory stores.

You earn 5 points for every dollar spent at Gap Inc. brand stores, including Old Navy, Banana Republic, and Athleta. Gap Visa Card members earn 1 point per dollar at other stores where Visa is accepted as well.

Both GapCard and Gap Visa Card members receive special promotions to earn extra points and birthday savings throughout the year. Cardholders can also take advantage of 10% off Tuesdays at Gap and Gap Factory stores.

How to redeem points

There’s no cap on the number of points you can earn. Every time you reach 500 points, you’ll receive a $5 reward. You can use this reward to get $5 off your next purchase of greater value.

Points earned cannot be redeemed for cash or used for statement credit or gift cards.

If you don’t make enough to earn the $5 reward during a billing period, you can roll over the points you have to the next month. Points expire 24 months after your last purchase on the card, so you don’t want your card to go completely inactive.

Gap Silver status

Gap has a second rewards tier that’s exclusive to cardholders who spend big bucks.

To obtain Gap Silver status, you need to earn 5,000 points within a calendar year (e.g. spend at least $5,000). You must also requalify each year to stay on this rewards tier.

The benefit of being a Gap Silver member is that you get 20% extra bonus points at the end of each quarter.

For example, if you were to earn 1,000 points (by spending $1,000) in a quarter, you’d get an additional 200 bonus points.

In addition, Gap Silver members get:

  • A sales day of their choosing for additional store discounts.
  • Free online shipping with no minimum purchase required.
  • Free basic alterations on Banana Republic purchases.

Interest and Fees

The Gap credit card has no annual fee. However, like most store credit cards, it comes with a staggeringly high interest rate — 25.24% APR. This rate is right on par with other popular retail branded credit cards, but about two points higher than the average APR for store credit cards today.

If you get the Gap card, it’s crucial to pay it off in full each month to avoid racking up tons of interest charges. Interest is charged when you carry a balance instead of paying it off. Like any other credit card, you can avoid interest by keeping your credit card balance low and manageable for each billing cycle.

Applying for a Gap Credit Card

You can apply for the Gap credit card online or in any Gap brand store. You’ll be assigned the type of Gap credit card at application.

There isn’t a specific credit score guideline used to determine which applicants get approved or denied. Although the qualifying criteria is more strict for the Gap Visa Card than it is for the GapCard.

According to a representative from Gap credit card services, you may get approved for the Visa card if your credit score is in the good or excellent range (a score of 700 or above). You may get approved for the GapCard instead if your credit score is fair (a score in the 600s).

Keep in mind, other factors from your complete credit history may disqualify you from a credit card, so having a score within these ranges does not guarantee approval.

Hazards of Store Credit Cards

A store card may be easier to qualify for than other major credit cards because you can get approved with fair credit. But these cards do come with their fair share of downsides.

We’ve already mentioned the high interest rate. You never want to carry a balance on a store rewards card because the interest charges can exceed what you earn in rewards.

The other negative of this store rewards program is that rewards earned can only be used on brand merchandise.

With other major rewards credit cards, you can earn more points (or cash back) in multiple ways and you have more redemption options such as cash back or statement credit.

Other Cards That Can Be Used for Retail Spending

Above we covered some reasons that a store card may not be the most valuable and flexible card to have in your wallet. Here are two low-interest cards with no annual fee that can reward you for diverse spending.

The U.S. Bank Cash+ Visa Signature Card rewards program allows you to choose bonus categories. You can earn an unlimited 2% cash back on an essential category of your choosing like grocery stores, restaurants, and gas stations.

There are also two 5% categories on your first $2,000 in combined net purchases per quarter.

In these categories, you can choose from retail stores, department stores, and more. (Find out the other 5% bonus categories here.)

This U.S. Bank card lets you use cash back as a statement credit or deposit funds into a U.S. Bank savings, checking, or money market account. There is currently a 0% introductory APR for the first 12 billing cycles. After that, your interest rate is 13.49% to 23.49% APR.

The Citi Double Cash card is a no-fuss rewards card that gives you 2% cash back for all spending. There’s no need to select bonus categories each quarter. You simply earn cash back on whatever you buy and then use the cash back for checks, statement credit, or gift cards. The interest rate is currently 13.49% to 23.49% APR.

Who Will Benefit the Most from a Gap Credit Card

If you often shop at Gap and Gap Inc. brand stores, a store card is probably one you have considered or have at least been asked to apply for at the register. While it does reward you for spending, this store card has high interest and a rewards program that can be limiting.

Before applying, think about whether you spend enough money at these retail stores and if you could be better served by the rewards program of another credit card.

The post Gap Credit Card Review: Earn 5 Points Per Dollar at Gap Brands appeared first on MagnifyMoney.

Financial Adviser or Financial Planner: What’s the Difference?

A financial planner explains what to look for when asking someone for help managing your money.

The financial world is full of confusing acronyms and titles, and it seems everyone touting financial advice has a myriad of bewildering designations after their name. One of the most widely used titles is financial adviser. This label is problematic because it is generic and entirely too broad.

Insurance agents, stock brokers, investment advisers, accountants, bankers, and even some attorneys often refer to themselves as financial advisers. The term is so expansive that it typically covers any area of financial assistance. Unfortunately, there is no regulatory guidance or rules for using such a title. So, when you hire a financial adviser, you should also ask about any areas of specialization. You might find that if you want to hire someone who charges a fee for financial advice, your insurance agent — who calls herself a financial adviser — will not be able to help you.

When people ask me what I do for a living, I say, “I am a financial planner.” They typically respond by saying something like, “Oh yes, my financial adviser is with XYZ Company.” This always makes me cringe a bit because I am not just a financial adviser, but I specialize in financial planning. While financial adviser is a broad category, a financial planner — specifically a Certified Financial Planner (CFP) — specializes in providing comprehensive financial planning services (Full disclosure: I am one). Granted, your financial planner may also offer financial products like insurance or investments, but the key difference is he prepares a comprehensive written financial plan.

There are primarily two reasons why hiring a financial planner is important.

1. It minimizes some conflicts of interest. 

Several years ago, a potential client told me I was the third financial adviser he had interviewed. He said the first two said they would provide retirement projections for him at little or no cost. He wondered why I charged a fee for the plan I provide. I asked him one simple question: “How do you think they will be compensated for their time and expertise?” The answer was clear. They had to sell him something in addition to the plan to make the engagement worth their while.

You expect to pay your physician for his advice, and would never go to one who only is compensated if you fill the prescription that he writes. When I deliver a custom financial plan and am paid for my time and expertise, the plan stands on its own. I do not need to sell additional products or services. If the client decides to implement the plan with me, I can certainly help. If, however, he goes elsewhere, it was a fair and profitable engagement for me; I have already been paid for my advice and the client has a working plan.

2. A comprehensive written financial plan can uncover often overlooked but critical financial issues.

Imagine going to your physician with a complaint of chest pain. After the obligatory blood pressure and pulse readings, he places his stethoscope on your chest, listens to your heart and states, “Let’s schedule you for open-heart surgery tomorrow morning.” What would you think? Obviously, you would want some additional testing before jumping to the conclusion that you need open-heart surgery. Just as recommending surgery without a comprehensive medical exam would not be wise, providing investment advice without a full fiscal exam is equally imprudent.

Tax laws are complex, the investment landscape is volatile, and changes in one part of your plan could wreak havoc on another part. You should have a plan that covers all areas of your financial life and clearly shows how each area is impacted by your decisions to implement one or more financial strategies. Just completing a two-page investment questionnaire from your financial adviser is not enough to ensure high-quality financial advice.

[Editor’s note: Knowing your credit score is a key part of understanding your financial health. You can see how you’re doing with our free credit report snapshot, which includes two free credit scores, updated every 14 days.]

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

Image: gradyreese 

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4 Reasons You Should Make Biweekly Mortgage Payments

The vast majority of people make monthly payments on their mortgage either until they sell their property or the mortgage balance has been repaid. Like the beige paint on the walls in your apartment, monthly payments are fine, but maybe there’s a more appealing alternative. One choice is to split your mortgage payment in half, paying every two weeks instead of making one lump-sum payment each month.

Biweekly mortgage payments could actually save you more in the long term, says Jim Lestitian, senior loan officer at Federated Mortgage Corp.: “This is a great and easy way to prepay your loan (shorter term) and reduce the amount of interest paid over the term of the loan.”

When you pay off the principal more quickly, less interest accrues, and you also reduce the amount of time it will take you to pay back the loan. When biweekly mortgage payments are set up properly, it’s possible to accomplish just that.

In this post, we’ll break down the pros of making biweekly mortgage payments and show how this strategy differs from making additional mortgage payments.

4 Benefits of Biweekly Payments

  1. You’ll gain equity in your home a lot faster

Arguably the most valuable benefit of biweekly payment is that you can gain more equity in your home. Equity accumulates more quickly when you pay twice monthly, because the money you borrowed from the bank has less time to accrue interest.

Why does equity matter?

When you buy a house, the ultimate goal is to live in your home without owing the bank any more money. The amount of ownership you have in a home also fluctuates constantly with the current market value. The difference between the current market value of your home and your mortgage is called equity. Therefore, when your mortgage is completely repaid, the total value, or equity, in the house belongs to you. If you sell your house before your mortgage is repaid, some or all of the proceeds from your sale are used to repay the outstanding mortgage balance.

  1. You’ll pay less interest over time

When you first take out a mortgage, the bank gives you a fixed or variable interest rate. This is the “rent” the bank will charge, and it is typically applied to your balance daily. Since your “rent” is charged daily, you want to spend as few days as possible “renting” the bank’s money. In other words, pay back the principal of the mortgage as quickly as possible to reduce your overall interest expense.

Biweekly mortgage payments help to reduce your interest expense because instead of making one payment against interest and principal each month, you’re making two. While the two separate payments are individually smaller, they both have a more significant impact, because each payment slightly reduces the amount of principal. So, if less principal means the bank can charge less “rent,” then the total “cost” of your mortgage will be reduced with biweekly payments.

  1. You’ll pay off your mortgage faster

The third rider on this tandem bicycle of home financing is duration, or the length, of your mortgage. Most often, mortgages are based on 15- or 30-year terms. However, when biweekly payments are made, your mortgage’s principal is reduced more quickly, so less interest is charged. As a result, you simply won’t need the full term of your loan to pay back the balance.

  1. The secret extra payments

Why the emphasis on biweekly payments, rather than twice-monthly payments?

What is 52 divided by 2? OK, what is 12 times 2? These two problems produce two different numbers, don’t they? By making a payment on your mortgage every two weeks, you’ll make an additional two payments over the course of a year.

The inherent benefits of the secret extra payments compound the three perks listed above: you’re going to have a lower interest expense, by chipping away at your principal more quickly, thereby shortening the amount of time you will need to pay off the balance.

Though, just as there’s more than one way to build a house, there’s a second approach to the 13th payment: additional payments toward principal.

Biweekly Payments vs. Additional Payments

Biweekly payments are not your only option for a shorter, more inexpensive mortgage. Additional payments are a great alternative and applicable to any loan. An additional payment is entirely separate from your total monthly payment and then applied directly to principal. An additional payment can also be any amount you wish, made with any frequency that suits your budget.

Additional payments are totally within your control. In the event that biweekly payments are unavailable or not in your best interest, nothing is stopping you from saving one or more months of mortgage payments (a good idea regardless) and then contributing that balance directly to principal. This approach will simulate the secret extra payments created by biweekly payments, but without the need to adopt a biweekly structure.

Similar to biweekly payments, additional payments will reduce your total interest expense and loan duration. When you’re devoting additional cash to accelerate the repayment of a loan, however, you must consider if this is the best use for your money. For instance, the amount of your additional payment could be used to pay other debts, grow more liquid investment accounts, or increase your emergency fund. These are important considerations because you don’t want to find yourself in a position where you need money that is inaccessible due to being tied up in your home.

When you make an additional payment, be sure to call your lender and tell them to apply it to the principal. You would never want to find yourself in a position where you’ve sacrificed the benefits of an additional payment due to a clerical error by a bank employee.

4 Questions You Must Ask Before Signing Up for Biweekly Mortgage Payments

  1. Are biweekly payments available with my lender?

Just as every landlord won’t offer the same amenities, all lenders won’t offer the option to make your mortgage payments on a biweekly schedule rather than monthly installments. Since interest rates do not vary significantly from one lender to the next, most often this payment structure is used as an additional selling point to entice a potential borrower. So why would a lender not offer a biweekly payment structure to its borrowers?

Biweekly payments are more complicated to administer, feasibly doubling the amount of work on the part of the lender. In addition to being more labor intensive, biweekly payments also generate less income for the lender over the lifetime of the loan. Remember, a mortgage is just another product offered by a lender, so when you make biweekly payments, you’re essentially receiving a discount on the total price of your mortgage.

If your lender does not offer the option of a biweekly payment structure, third-party vendors do exist to fill the gap. These companies simulate biweekly payments by coordinating with your lender to fulfill your monthly mortgage payment on your behalf. Then, you make biweekly payments to the third-party vendor, most often with the addition of an initial and/or ongoing fee.

  1. Are there additional fees associated with a biweekly payment structure?

Since a biweekly payment structure means more work for the lender, many lenders charge fees to enroll. Lestitian often sees lenders or third-party vendors apply a $200 to $400 fee to establish a biweekly payment structure and/or charge an ongoing monthly transaction fee. Therefore, unless you are going to save more in interest by making biweekly payments than you’ll pay in fees, it probably doesn’t make sense to pay biweekly.

  1. When will my lender apply my second payment to my mortgage balance?

Lenders don’t always treat biweekly mortgage payments the same. Some lenders will apply your biweekly payments to your mortgage balance as soon as your payments are received. Other lenders will simply hold your first payment until your total payment has been received.

If your lender is not applying your biweekly payments immediately, there is no point in signing up for biweekly payments. Stick to the usual monthly payment or consider refinancing with a lender who will honor extra payments. The benefit of biweekly payments is only realized if the payments are applied to your mortgage balance immediately.

  1. How does my lender calculate interest?

Your bank will calculate the interest due on a daily, weekly, or monthly basis. This detail is important to note because it dictates how much value you will be able to derive from making biweekly mortgage payments.

If interest is calculated daily, then you will save 14 days of interest expense with every biweekly payment. Similarly, if interest is calculated weekly, you will save two weeks of interest expense, with every biweekly payment. The lynchpin for biweekly payments is if interest is calculated monthly, which is very rare. If this is the case, however, you will not realize any additional benefit by making biweekly instead of monthly payments. So you’re better off sticking to once-a-month payments.

The Bottom Line

Biweekly payments, when structured properly, are a great way to shorten the duration and lower the interest expense of your mortgage, all while enabling you to build equity in your home more quickly. Though remember that the devil is in the details.

Before signing on the dotted line, make sure that your biweekly payments are applied to your balance immediately and not held until the end of the month. You also need to be cognizant of how interest accrues on your mortgage and any associated fees, because both components play a major role in how much additional value you will gain from making biweekly payments.

Another point to consider is whether or not biweekly payments are even the best option for you. Your alternative option is to make additional payments toward principal, which can help to produce the same benefits as biweekly payments but without the lengthy commitment. Though whether or not biweekly payments are appropriate for you, your mindset is a prudent one. To be focused on strategies for building equity and reducing expenses as quickly as possible is likely to pay dividends for years to come.

The post 4 Reasons You Should Make Biweekly Mortgage Payments appeared first on MagnifyMoney.

How to Afford All Your 2017 Home Improvements

There are some ways to sock some dollars away and have your new sink and bathtub in the new year, too

A leaky roof or a sagging gutter can be hard to ignore. The same goes for some old-school wood paneling in your den or that hideous palm tree wallpaper you put up in a (misguided) attempt to recreate your honeymoon. Unfortunately, most home improvements don’t exactly come cheap.

In fact, it may even feel like you’re basically saving up another down payment on your home to fix it up. There are some ways, however, to sock some dollars away and have your new sink and bathtub in the new year, too.

Here’s how to work some much-needed home improvements into your 2017 budget.

1. Save

Sure, you may feel inclined to rush into renovations — and when it comes to certain home repairs, things must be readily done. But it still behooves you to save where you can before crossing things off the to-do list. One trick?

“[Set] an automatic transfer from your checking account to your savings account to take place every two weeks on your payday so that the money leaves your account before you ever have a chance to spend it,” Brian Davis, director of education for real estate blog SparkRental, said.

2. Use Your Tax Refund

Getting a big rebate from Uncle Sam this year? Put it toward your home repairs.

“While it’s easy to spend your refund impulsively, try to allocate some or all of it towards a big project that you’ve been holding off on,” Larry Greene, president at Case Design/Remodeling Indianapolis, said.

3. Get a Tax Break

Speaking of taxes, making improvements to your home could qualify you for certain tax deductions or credits the next time you file. For instance, if you take out a home improvement loan or a home equity line of credit (HELOC), you may be eligible to the deduct interest. You can also qualify for a tax deduction if the improvements happen to be related to medical expenses, like constructing entrance or exit ramps or widening doorways for a sick or disabled resident.

Plus, you could qualify for a tax credit if you make certain improvements that increase your home’s energy efficiency. These credits include a $300 credit for installing a biomass stove; a $300 credit for air source heat pumps; and up to $200 for installing Energy Star-certified windows and skylights. You can learn more about the energy efficiency tax credits that are available at Energy.gov.

4. Be Smart About How You Pay

While you don’t want to overextend yourself, you may want to look into borrowing some money to put toward your home improvements — particularly if they’re the kind you can no longer put off.

Of course, it’s important to consider all your financing options before you decide how to fund a project. We already mentioned that home improvement loans and HELOCs can qualify for a tax deduction, but those aren’t your only options. There are also bank-issued credit cards or that tout promotional financing offers which allow you to skip interest on your charges for a certain period of time, usually 12 to 18 months.

If you don’t feel you can stay disciplined with a credit card, depending on your credit, you may also be able to secure a low-interest personal loan. Just be sure to crunch the numbers so you understand what you’re getting into and whether you can really afford to borrow that select amount of money. (You can learn more about this kind of financing in our loan learning center.) 

5. Shop Around

Research the price of the materials you’re looking to use across “at least three, but on average five to six product and brand choices,” John Bodrozic, co-founder of HomeZada, a digital home management platform, said. Prices vary and you could conceivably drive down the costs of a particular home improvement project just for opting for different brands or materials.

Similarly, “if you feel hiring a contractor is the best approach, give them a list of things you want for your project, and go out and get at least three different bids,” he said. “This can help lower your costs by creating a competitive environment for the contractors.”

Another way to find the right person for the job: “Homeowners should ask around among everyone they know: family members, friends, co-workers, neighbors, random strangers in line at the grocery store,” Davis said. “As referrals and recommendations come in, they should call up the contractors and ask to swing by a few of their jobs, to see their work and get a sense of their pricing.”

6. DIY

OK, so not everyone is going to be able to hang drywall (though there’s certainly no lack of how-to videos on the internet to help you learn). And, unless you’re particularly handy or formally trained, many home repairs are best left to the professionals. Still, there are several small projects you can do that could prevent bigger problems and/or help make room in your budget to cover your dream renovations. These DIY projects include:

  • Cleaning out your gutters
  • Swapping out HVAC filters
  • Power-washing your driveway
  • Caulking small holes or cracks around windows, pipes and doors
  • Changing doorknobs
  • Upgrading the hardware on your drawers and cabinets
  • Cleaning carpet stains
  • Simply breaking out the old brush and roller

“You don’t have to spend a ton of money to make major improvements to your home. Look for projects that have the most bang for your buck,” Greene said. “Sometimes even a fresh coat of paint can make your whole house feel new.”

For more DIY options, check out this 10 home improvement projects you can do in a day.

Image: Image Source

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5 Helpful Apps for Families on a Tight Budget

Because it's hard enough to maintain a budget for one, let alone your entire family.

It’s hard enough to keep a budget for one, let alone get your entire family on track with their finances. Fortunately, there are plenty of apps out there that can help keep you, your spouse, son, daughter and 11-year-old pug (OK, maybe not that last one) from spending beyond your family’s means.

Here are some choice apps that can help with your household budgeting.

1. Goodbudget

Platforms: iOS and Android

Essentially a digital version of the envelope system — you know, where you put money allotted for a particular spending category in one and then don’t use any dollars beyond that — this app syncs up across household devices. That way, everyone in the family can know exactly what’s left to spend on groceries, entertainment and other categories each month. The free version lets you set up 10 regular envelopes and 10 annual envelopes across two devices. A subscription service with unlimited envelopes and device syncs costs $5 a month or $45 a year.

2. You Need a Budget

Platforms: iOS and Android

You Need a Budget (YNAB) is another app that lets folks sharing finances sync their devices and work together. This app pairs with web software of the same name to help users implement the YNAB four big rules: give every dollar a job, embrace your true expenses, roll with the punches and age your money. You can try the latest version, launched in late 2015 and dubbed “The New YNAB,” for free for 34 days. After that, a subscription costs $5 a month or $50 a year.

3. Home Budget

Platforms: iOS and Android

This digital expense tracker from Anishu includes a feature called Family Sync, which — you guessed it — enables household devices to exchange income and spending information within a single, shared budget. There’s a free version (Home Budget with Sync Lite) which limits your expense and income entries, and a paid version (just plain ol’ Home Budget with Sync) that costs $5.99.

4. Wallet by BudgetBakers

Platforms: iOS and Android

This budgeting app lets your share selected accounts with family members so everyone knows what’s going on with the household budget. You can also choose to connect your bank accounts to the app to get automatic updates about their standing. Wallet has a free version with limited features and several paid subscription versions that vary in cost. Its top tier, called Master plan, allows up to 10 users, unlimited bank connections and customized financial analysis. It costs $5.49 a month or $44.30 a year.

5. EveryDollar

Platforms: iOS and Android

This budgeting app helps people apply the money management principles of budgeting guru Dave Ramsey. It syncs across devices so you can budget from your smartphone or your household desktop. There’s a free version and a Plus subscription, which lets you connect your bank accounts to the app and call for support. It costs $9.99 a month.

Balancing the Family Budget

Remember, you’ll want to read the terms and conditions of any app you’re looking to use so you know what it costs, how your data is protected and whether any information will be shared with third-parties. You can find more information for vetting mobile apps on the Federal Trade Commission’s website.

And, when it comes to maintaining a household budget, it’s also important to keep track of your credit because a bad or even fair credit score can really cost you on everything from mortgage interest to your family’s cell phone plan.

If your credit isn’t in great shape, you can improve your scores by disputing errors on your credit reports, paying down high credit card balances and getting delinquent accounts back in good standing. And, as always, you can maintain good credit by paying all your bills on time, keeping debt levels low and adding a mix of new credit accounts over time. 

Image: golero

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8 Crucial Tax Tips for Millennials

tax_tips

As a millennial, you might have a surprisingly complex tax situation. Owing student loans, working multiple side hustles, and investing at a young age are all complicated scenarios come tax season.

Because of this, filing your own taxes often comes with added stress and unknowns. To help streamline this chore, here are eight tax tips for filing taxes when you have multiple streams of income and various financial responsibilities.

1. Don’t Miss the Tax Deadline

The most important part of filing your taxes is doing it by the deadline. The IRS doesn’t mind if you need more time or you don’t have the funds to pay the entire tax bill right now, but you must take the proper steps to alert them.

Decide which route to take: Either file your taxes completely, request an extension, or apply for a payment plan. Whatever you do, don’t ignore the situation and hope it will just go away.

If you miss the tax deadline without requesting an extension, you could be subject to penalties, interest, and late fees.

2. Choose the Right Tax Software

If your tax situation is fairly simple, you may feel comfortable filing your own taxes using a DIY tax software program. There are many reputable programs available, so shop around to find a good deal.

You may even qualify for free filing services. If you earn less than $64,000 a year, the IRS offers free software to help you file your taxes at no charge.

3. Write Off Side Hustle Expenses

Sure, you know how to file taxes for the income from your day job. But if you also earn money through a side hustle, you may have extra considerations.

For example, you may be able to write off certain expenses you incurred through your side hustle. If you purchased equipment or office supplies, these costs can be deducted on your tax return. Doing so reduces your taxable income, meaning you would owe less to the government.

4. Maximize Education Tax Savings

If you have student loans, you could save money come tax time. Nearly all education costs, whether it’s interest paid on your student loans or additional classes you’ve taken for continuing education requirements, are tax deductible. See a full list of education credits and deductions here.

List out all of your higher education expenses to see which ones you qualify for. If you’re unsure, speak to a tax professional who can offer additional tax tips, or follow the prompts in your tax software.

5. Inquire About the Saver’s Credit

The longer you wait to start saving for retirement, the less time compound interest will have to work on your behalf. To encourage people to stash away money in a retirement account, the IRS offers a tax credit called the Saver’s Credit.

The Saver’s Credit is often overlooked, even by tax professionals, but it can greatly reduce your tax bill at the end of the year.

The amount of the credit is 50%, 20%, or 10% of your retirement contributions up to $2,000 (or $4,000 if married filing jointly). The amount you qualify for depends on your adjusted gross income.

6. Deduct Job-Hunting Costs

Did you know that you can deduct any costs related to hunting for a new job? It’s true. If the new job is in your current career field, you can claim this tax deduction. Job search costs that you may be able to claim on your taxes include:

  • Resume copies
  • Dry cleaning
  • Employment agency fees
  • Certifications or classes
  • Business travel expenses

7. Block Off Time to File

Scheduling time to actually file your taxes is one of the most important tax tips. Block out time in your calendar to work on your taxes so you don’t have to rush through the process. Pretend it’s a regular appointment, and vow to keep it no matter what else comes up.

The tax filing process may take a few hours, so it’s not something you want to save until the last minute. Schedule time in your calendar sooner rather than later so you don’t feel as stressed.

8. Double Check Your Calculations

Even the smallest calculation errors can prove to be big mistakes when it comes to your taxes. Take time to double check your work: Have you listed all the deductions and credits you qualify for? Did you include all your income sources from various jobs? What about your higher education expenses and retirement contributions?

Nearly all DIY tax programs come with built-in features to ensure that your tax information is correct. The tax software will make sure your math is correct, but nothing is better than your own two eyes — especially when inputting your Social Security number, address, income figures, and expense costs.

Doing your taxes is never a fun task, but taking the time to do them correctly can save you big bucks. Educate yourself on the deductions and credits you may be eligible for and lean on free resources to help you file.

(Editor’s note: Tax season is always full of scams. You can use these tips for protecting yourself from taxpayer identity theft.)

Image: AleksandarNakic

 

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4 Outrageous Travel Fees — & How to Avoid Them

travel-fees

You’ve gone through your ever-growing list of places you want to visit and have finally chosen where your next travel destination will be. As you’re building out your budget for this vacation, you’re seeing the expenses pile up and the supposed stress-free time is losing its luster.

But there are plenty of ways to save, one of which is avoiding paying some of those pesky add-on fees that often come with travel. Here are some of those fees and how you can avoid them.

For Cruises: Corkage Fees

Most cruises allow you to bring your own bottle (or two) of wine or champagne with you when you board the ship. However, if you bring that bottle with you to dinner or to one of the bars, you’ll likely get hit with a corkage fee, which typically ranges from $15 – $20.

“To avoid a corkage fee, you can always just have a drink in your cabin,” Tanner Callais, a cruise expert with Cruzely.com, said. 

Also, be sure to check your cruise line’s alcohol policy ahead of time so you know what you are (or aren’t) permitted to bring on board and where you’ll be able to drink it (for a fee or for free).

For Air Travel: Baggage Fees

According to the United States Department of Transportation baggage fees report, as of September 2016, the 13 main airlines in America had made a combined $2,047,379 in revenue on baggage fees over the course of that year.

You may be able to save a few bucks by paying to check your bag online instead of at the ticket counter, as some airlines offer discounts for doing this, according to Joe Black, who runs Nature Rated, a site focused on exploring the great outdoors. Black said he avoids baggage fees by trying to fly with carry-on bags only.

If neither of these options are right for you, you may want to consider looking at a travel rewards credit card, as many of these will waive your baggage fees. Just keep in mind that these cards often come with annual fees, so you need to make sure you travel enough to make this added expense worthwhile. (You can find more tips for applying for a new card here.)

For Road Trips: Toll Fees

Nothing beats packing a cooler and a bag of snacks and heading out on the open road. But, depending on where your road trip takes you, you may be faced with paying obnoxious toll booth fees. Of course, you can always avoid tolls by opting for longer, scenic byways — and  you can potentially offset this expense by using gas credit cards that reward you for filling up. You can set these rewards aside and use them to help you cover any tolls you encounter on your next road trip.

For Hotel Stays: Resort Fees

Elizabeth Avery, founder of SoloTrekker4U.com, emphasized how important it is to “read the fine print” before you book your stay to see if these fees are built into your lodging charge or if they break them out individually. “Check it out before booking so you won’t find you are paying [for things you won’t use, like] for the fitness center when you’d rather relax than work out,” Avery said. In many cases, you may be able to get these waived by asking a representative when booking your reservation.  

Image: SolStock

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