Is There Such a Thing as a Debtor’s Prison?

prison

In this modern world that we live in, consumers are protected and have certain rights when it comes to debt collection. The practices of debt collection agencies have to abide by rules through the Fair Debt Collection Practices Act (FDCPA) as enforced by the Federal Trade Commission (FTC). According to the FTC, consumers are to be safeguarded from abusive, harassing or unfair debt collection practices. But, the question is, “Does this act protect consumers from being arrested for the failure to pay back their debts and sent to a debtor’s prison?” The short answer is yes, but there are some instances related to debt in which people have been sent to jail.

Debtor’s Prisons were abolished in the US in 1833, and thankfully so. Before the abolishment, being arrested for outstanding debt was a catch-22 situation. Since there were no work-release programs in place at that time, there was no opportunity for the debtors to make good on their outstanding debt. To make matters worse and put more debt strain on the debtor, they would be responsible for paying prison fees as well. So, without the financial help of friends or family, there would literally be no way to escape their sentence.

Consumers’ debt rights have come a long way, but why are people still being arrested if the debtor’s prison was abolished so long ago? Here are some answers that can shed some light.

What Could Put You at Risk for Arrest

While arrests can be made in a debt situation, it’s not the debt itself that will get you arrested; it’s the violation of the court order that can land you in jail. Depending on the court and jurisdiction, it may be required of the debtor to appear in court. If you are summoned to appear and ignore that summons, a warrant may be issued for your arrest for failure to appear in court. It’s very important to ensure that you don’t ignore any correspondence from the courts and are compliant in regards to being sued for debt and the appearances you are expected to make.

If you don’t know what to do, don’t procrastinate and push it aside. Ignoring a summons to appear in court will not go away. You have the option to represent yourself. However, you may want to consult an attorney that understands the laws on what debt collectors can and cannot do by law as well as your legal rights as a debtor. Depending on your state, there are some other specific restrictions on what creditors and debt collectors can and cannot do when trying to collect a debt.

Many types of debt collection practices are prohibited.

Should you have any debt that is in the process of collection, it’s important to educate yourself on the types of debt collection practices that are prohibited. In addition to being prohibited from harassment, debt collectors may not:

  • Use any threats of violence or harm
  • Publish a list of consumers who refuse to pay their debts (except to a credit bureau such as Experian, Equifax, and Transunion)
  • Use obscene or profane language when trying to collect on the debt; or
  • Repeatedly use the telephone to annoy and harass a debtor.
  • Take or threaten to take your property unless this can be done legally(meaning the debt is secured and tied to an item that can be repossessed);
  • Threaten to sue, garnish your wages and freeze your bank account if they have no intention of doing so.

Knowing what debt collectors are legally allowed to can be overwhelming. Consider consulting an attorney in your county to help you find out what you need to know to keep yourself protected.

If you’re concerned about your credit, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get two free credit scores updated each month.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

 

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How to Avoid Credit Card Theft while Traveling

Identity Theft Travel

Whether you plan to travel now or in a year, you should take steps to protect yourself from identity theft and credit card fraud while you’re on vacation. Tourists are often victims of theft, including passport and credit card theft—both of which can compromise personal information. Thieves can gain data by physically taking belongings the old-fashioned way or by hacking into your phone or computer.

By following these six tips before and after you travel, you could save yourself years or even a lifetime of credit and financial nightmares.

1.Notify Your Creditors of Your Travel Plans

Before you travel anywhere, call your credit card companies and your banks to let them know where you will be and when you plan to travel. Many banks and credit card companies keep track of your spending habits, so any purchases out of the norm may prompt them to lock down your account—this could be especially frustrating if you are out of the country and have no way of reaching your bank or credit card company.

If you do end up going overseas, find out the best way to get in touch with your creditors should your credit card or bank card get lost or stolen while you are away. Keep this information and all creditor phone numbers in a safe place that is separate from your cards—then you’ll have it on hand no matter what happens to your wallet or purse.

2. Set Up Email or Text Alerts

As you prepare to travel, subscribe to mobile email or text alerts. By doing so, you will be notified of all activity on your accounts. Receiving email or text alerts on your phone can stop credit card fraud in its tracks, since transaction information is sent to you almost instantaneously. This timely warning can help you resolve unauthorized purchases on the spot.

3.Make Copies

Whenever you travel, make photocopies of both the front and back of your credit cards. Give the copies to a trusted family member or friend at home. In the unfortunate event that your credit card is lost or stolen, you can quickly obtain all the information you need to cancel your credit card.

If you prefer to store copies digitally, you can scan and upload your copies to a secure cloud storage site, such as Google Docs or Dropbox. Should you access your documents while traveling, make sure you are connected to a secure network and not to an open Wi-Fi connection where hackers can steal your passwords and get into your accounts.

Whatever you do, do not keep copies in your luggage. Should your luggage get lost or stolen, you are putting yourself at risk for credit card fraud as your credit card numbers can be used to make fraudulent purchases.

4.Check Your Credit Card and Bank Accounts Often

If you haven’t done so already, sign up for online access to your bank accounts and credit card statements. Consider downloading the mobile apps for your bank and credit cards for easy and convenient access to your accounts. With these apps, you can not only view your bank balances and credit limits but also see all current transactions.

As soon as you see anything suspicious, immediately contact your bank or credit card company to report the questionable charge. Once you’re home, review the transactions from your trip to ensure you didn’t miss any unusual activity that should be reported.

5.Update Your Account Passwords and PINs

If you can’t remember the last time you updated your password or account PIN, it’s probably a good idea to do so now. Create passwords that are long and unique to each credit card and bank account. Updating your passwords and PINs may be a cumbersome task, but the time you take to do so will be well worth the extra protection and security.

6.Stay Alert at All Times

With the recent Equifax data breach, many are on high alert and constantly looking out for suspicious activity. But with time, people may grow lax and check their accounts less often—and this is when a credit card thief’s strike will hurt the most.

Some thieves may sit on your information in hopes of catching you unaware. So it’s important to continually monitor your credit and keep your files and important documents in safe and secure locations where thieves may not think to look.

If you’re thinking of taking a trip, use these tips to avoid credit card theft and protect your financial standing. Credit card fraud can be damaging if not handled properly, so don’t be afraid to check your accounts frequently or err on the side of caution. You can never be too careful.

 

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Virtual Credit Card – What You Need to Know

credit card rewards

Virtual credit cards have been around in one form or another for years now, but their use has yet to truly take off among consumers.

A crop of new start-ups however, such as Pay With Privacy and Token Payments, are poised to change that.

These two companies may not be household names but perhaps they should be. Both are joining the effort to help consumers beat credit card fraudsters at their game at a time when the list of blockbuster data breaches seems to be growing longer by the day.

For those not familiar with virtual credit cards, they come in various forms but are typically temporary, randomly generated, credit or debit card numbers. Often the numbers link to a real payment account, such as a credit card, debit card or checking account.

In many cases, the cards are designed for a single use. They’re known as “burners” meaning they expire immediately after use (though some can be scheduled to last for up to one year). There are also virtual cards that can be created and locked for use with only a single merchant and virtual cards that allow for setting a maximum charge amount.

The beauty of such cards is that if a hacker gets hold of the information, it doesn’t matter, because the damage that can be done is minimal.

Originally developed to make online credit card purchases more secure, the cards are now also being used with increasing frequency in brick and mortar stores thanks to the rise of mobile wallets such Apple Pay, Google’s Android Pay and more.

Here are the pros and cons that experts say you should keep in mind with this payment technology.

Refunds and Disputes Can Be a Hassle

Most refunds for purchases made with a credit card are made directly to the account that was used for the original purchase, notes Chargebacks911 co-founder and COO Monica Eaton-Cardone.

However, with disposable credit cards that “account” will no longer exist if the purchase was made with a virtual card and the number has already expired.

“That can create headaches for users,” says Eaton-Cardone.

The solution to this issue can range from the merchant in question providing a cash refund to you being required to accept a store credit.

Another issue to keep in mind, said John Buzzard, an industry fraud specialist at CO-OP Financial Services, is that virtual cards offer little consumer protection in the case of a dispute for services not rendered or received. 

Associated Fees

Read the fine print when using virtual credit cards, and understand how they operate including the various fees charged.

For instance, some companies allow you to load money onto the card, explains Eaton-Cardone. But you may be charged a monthly fee if the balance dips below $25.

“There’s a bunch of things they do because they want to make sure you are incentivized to keep money on the card,” explained Eaton-Cardone

Some of the cards have expiration dates, (also noted in the fine print), which can lead to inadvertently allowing the card to expire while there’s still money on it.

Other disposable cards include foreign transaction fees or fees for paper copies of documents that have already been provided.

Verification May Be a Problem – Particularly for Travel Related Transactions

Virtual credit card numbers can certainly be used to book such things as car rentals and hotel rooms online through sites such as Expedia, Orbitz and more. But when you show up to pick up that rental vehicle, you’ll be required to have an actual credit card to swipe.

“With disposable credit cards, the account numbers won’t match,” says Eaton-Cardone.

When booking hotel rooms online with a disposable card, you may be able to request that the property in question charge the cost of the room to the card you used to make the reservation. However, you will still need to present an actual credit card to be swiped upon check-in to cover incidentals. 

Virtual Credit Cards and Mobile Wallet Technology

One of the growth spaces for virtual credit cards is in conjunction with mobile wallet technology such as Apple Pay, Android Pay and more.

A virtual card can be issued instantly, even while standing in line at a brick and mortar store, and some can be delivered to your Apple Pay account, explained Jason Gardner, CEO of Marqeta, a fintech firm that enables companies to issue and manage virtual cards.

The card can be preconfigured with a spending limit instantly, funded, unloaded, suspended or cancelled, all in real time, granting the cardholder complete control.

“These cards create a lot of choice for consumers, different products that fit different constituencies,” said Gardner. “You are seeing a significant decline in private label cards. The growth of these virtual credit card companies is undeniable.”

For the digital obsessed Millennial demographic in particular, it’s an option that is very appealing. If you look at Millennials and the top 50 brands they focus on, there’s not a single bank, or credit card company among the list. Companies like Facebook, Amazon, and Twitter are all taking over, making digital and virtual products more mainstream.

In such a world, virtual credit cards are a natural fit.

“Most millennials are not carrying credit cards now,” said Gardner. “But they all have mobile phones. And the ability to instantly make a credit decision and pay with the mobile phone is beautiful consumer experience and it also generates choice.”

One last downside however, is that mobile wallet payments are still not widely accepted by merchants. But that too may be changing in 2018 and beyond.

If you’re concerned about your credit, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get two free credit scores updated each month.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

 

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3 Ways to Boost Your Credit Score in 2018

PostHolidayCreditImprovement

All the holiday excitement is over and it’s time to face your post-holiday credit card bills. If you stayed within your budget, you shouldn’t have difficulty paying off your bills. However, if you went a little crazy with December cheer, now is the time to take corrective action, prioritize your finances, and boost your credit score.

As you get your finances back in shape, you’re ultimately helping out your credit—and for a multitude of reasons, it’s important to have a good credit score. Good credit grants you better loan approval, lower interest rates, higher spending limits, negotiating power, and more rewards. Your credit score also impacts the ability to obtain necessities like a home, a car, and other lifestyle needs.

So here’s how to start boosting your credit score in 2018.

  1. Pay All Your Bills on Time

If you’re expecting hefty post-holiday bills, the best way to improve your credit score is to simply make timely payments. Making all of your payments on time is crucial to a great credit score and positive credit history. Your payment history has a huge effect on your credit score.

Set calendar reminders or alerts on your phone to make sure you pay your bills and pay them on time. Unpaid bills are a red flag and may indicate to the lender that you’re an unreliable borrower. It’s also important to tackle balances with the highest utilization and interest rates.

  1. Consider a Lifestyle Change

If you find yourself strapped for cash, there are a few things you can do.

  • Pay at least double the minimum on each payment. If you can, and if there’s no prepayment penalty, doubling down on payments each month will help you tackle the balance quicker.
  • Rework your budget. Evaluate your budget and cut out unnecessary expenses that are eating up your income. Then you can start allocating that money toward getting out of debt. For example, forgo your daily specialty drink at your local coffee shop and bring a lunch from home instead of buying lunch at work. Setting a strict budget will allow you to free up cash and focus on paying down your debt.
  • Pick up a side hustle. If you can, apply for a part-time job or do some extra freelance work to build up your funds.
  • Don’t apply for new cards or loans. For now, stay away from new credit card and loan applications, even if you’re planning to use the extra credit to pay off your debts. Also, avoid using any credit cards you’re currently paying off. 
  1. Check Your Credit Report

About once or twice a year, you should check your credit report for mistakes. Maybe you forgot to pay a bill, or maybe you’re a victim of identity theft. If you don’t check your report for these and other problems, chances are you may miss them and they can harm your score tremendously—which in turn would bring you great financial hardship.

According to the Federal Trade Commission, about 5% of consumers have credit errors large enough to increase costs of insurance or some financial products. When you have bad credit with a low credit score, it may take some time to build it back up. Check your history so you can address these problems right away.

When you do check your credit report, make sure you get reports from all three bureaus (Experian, Equifax, and Transunion) to get the clearest picture of your credit, since some creditors only report to one or two. You can check two of your credit scores for free at Credit.com

 

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How to Make Your Financial New Year’s Resolutions Stick

new years resolutions

Making your New Year’s Resolutions is the easy part and you have the best of intentions, however sticking to them can be challenging. Old habits may be hard to break and achieving your financial goals can be difficult. While you may get complacent and comfortable in your old ways as you head into January, you can stay motivated and follow through on your financial New Year’s resolutions if you consciously avoid procrastination and take action! Starting with small steps and setting weekly goals can pave your way to achieving long term goals and will give you a sense of accomplishment. Once you see the positive results and monetary growth, you’ll feel financially happy and healthy.

By following these five tips, you will soon be on your way to making those New Year’s resolutions stick!

  1. Be SMART

Goals which are “SMART,” or specific, measurable, achievable, realistic, and time-bound are the ones which will be easier to keep up with. Set a specific amount that you would like to save or pay off and keep track of the balances on your accounts. Make sure that goal works with your lifestyle and budget, and give yourself a deadline of when you would like to complete your goal which is realistic. Keeping your goals realistic is key to making them stick.

  1. Break it Down

If your goal is to save $5,000 by the end of the year, that can seem very overwhelming. Try to break it down to a monthly goal of $417 or a weekly goal of $104.25. This will help you figure out what you need to put aside per paycheck and how much of your budget you need to reign in. Breaking it down helps to make your goals more tangible and less impossible; you can plan better for the savings and add it to your daily routine instead of making it a second thought.

  1. Take the Extra Steps

Sometimes, using the tools that you presently have may not be enough to make you successful in achieving your goals. Taking extra steps such as making your lunch and bringing coffee, or even opening up a new bank account (should it be in your best interest to do so) will help you in the long run and make your goals stick. The extra step may be checking your statements weekly to make sure you are staying within your budget. Making a habit of checking your statements is a great way to ensure that you aren’t overspending as well. By assessing your spending habits, you can see where you may be able to cut back.

  1. Replace Not Eliminate Habits

If you try to drastically alter your lifestyle, including your habits, it could be an indicator of why you cannot stick to your resolutions. Consider replacing habits such as buying lunch with a habit of making extra food at dinner so you have leftovers or setting up your coffee pot the night before so you won’t feel the need to stop and get some on the way to work. This ensures that your daily routines aren’t cumbersome and hard to keep up with.

  1. Put Your Finances on Autopilot

Taking control of your finances is taking control of your life. Using tools such as Mint or setting up automatic payments for your bills is a great way to keep your resolutions on track. It may also be beneficial for you to sign up for text reminders or application notifications to help keep track of your spending and savings. Having a notification pop up on your screen daily which reminds you that you are that much closer to reaching your goal is a great way to stay on track and make those resolutions stick! You can also do this to help increase your savings. By setting up a monthly or weekly auto-deduct from you checking to savings accounts, you can help ensure that you actually have set aside the amount of money you intended to save.

If better credit is part of your new year’s resolution, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get two free credit scores updated each month.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

 

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January Best Buys

Best Buys

Now that the Holidays are over, you might need a break from shopping. But, just in case you still have a touch of the shopping bug or you have to visit a store or two to return things any way, this month happens to be a strong month to save while you shop. Retailers bring in a lot of merchandise in anticipation of the holiday rush, and they will be anxious to clear space for spring merchandise if they have excess stock. While there will be sales on and off all month, the experts at deal site Slickdeals.net, found the majority of the deals peaking around mid-January during Martin Luther King weekend. Here’s what we know right now.

Men’s apparel

We expect the most robust sale category to be men’s apparel. Last year, more than 30% of the top deals at Slickdeals were in this category, from retailers like Nike, J. Crew Factory, Macy’s and Walmart.

Deals:

Macy’s: 20% off holiday sale with code TWODAY. Valid 1/14-1/15

REI – holiday clearance up to 50% off  

Target – Extra 20% off Clearance Apparel

Jos A Bank: Clearance sale – suits $79, dress shirts for $15 – valid through 1/11

Men’s WearhouseSave $30 off orders over $100. Through 1/11

Bonobos Men’sSave up to 50% off final sale items. Through 1/14

Land’s End – Save up to 50% off during the Great Winter Sale. Through 1/31

Tax Software

If you’re ready to start thinking about tax time this early in the year, it could be to your advantage. There are typically an abundance of tax prep and tax software deals from retailers like Staples, Amazon and Costco.

Deals:

TurboTax: Get TurboTax Deluxe for $39.99 (coupon is for $20 off TurboTax Deluxe – expires 1/31

Liberty Tax: Take an Extra 20% Off Every Liberty Tax Online Tax Filing Solution. Use Code: LTOCJ20

eSmartTax.com: 20% off Tax Solutions with code ESTCJ20.

H&R Block and United Way: United Way and H&R Block offer 2017 Federal and State Tax Return Filing for those with Adjusted Gross Income of $66,000 or less for Free

White Sales

Since the late 1800s, January has been the month of “white sales”, when all manner of linens go on sale. Many retailers participate, which means you can find bed and bath items slashed up to 60% off from stores like Kohl’s, Target, and Macy’s.

Deals

Macy’s: 25% off winter weekend sale with code STYLE 1/18-1/21

Bloomingdales: Save up to 50% off select home items in the January home sale. Ends 1/15

The Company Store: End of Season sale – save 20% with code X17SAVE through 1/9

Bed, Bath & Beyond: Get up to a $50 gift card with select Aerobed purchases. Through 1/12

Burlington: Save 50% off any order with code AJER587W. Through 1/10

West Elm: Save up to 20% off bedding collections. Through 1/11

Pottery Barn: Annual White Sale – 20% off bedding and towels

New Year, New You

It sounds cliché, but this is the time of year that we think about taking better care of ourselves. Last years’ resolutions may have fallen by the wayside throughout the year, and the snacks, drinks and sweets at all those holiday parties compounded the issue. It’s the perfect time to get back up on that horse!

Deals

My Protein: New Customers, 30% off. No expiration

Vitamin Shoppe: $8 off 5lb Optimum Gold Standard Whey

Sweaty Betty: Save 20% off your purchase. Expires 1/17

Yoga Download: Save 40% off your order. Expires 1/23

Gold’s Gym: Save 50% off select apparel. Through 2/24

Athleta: Save 20% off your next order with code L1B9B9BHBXTW. Through 1/11

What not to buy

Toys

Toys were hot during the holidays, but you probably won’t see many worthwhile toy deals this month. The good news is your little ones are probably set for a while with all of their holiday gifts.

Mattresses

Great deals on mattresses occur in February, when Presidents Day sales bring discounts. For instance, in 2017, Mattress Firm offered up to $500 off storewide. This year, Presidents Day is Feb. 19, so wait another month if you’re in the market for a new mattress.

If February is too soon for your budget, mattress deals will return in May, over Memorial Day weekend, and in September, over Labor Day weekend.

If you’re concerned about your credit, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get two free credit scores updated each month.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

 

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16 Cities Where it’s Cheaper to Buy than it is to Rent

chicago

January is a natural time to take stock of your financial life, and to dream big dreams about 2018. Could this be the year you make the leap to homeownership? Or will you make a big change and trade in your mortgage payment for a landlord? While the housing market has slowly recovered from its dip in the 2000s, blind faith in housing gains has not. Home ownership rates hit a 50-year low in 2015, and first-time home buyers are now waiting a record six years to move from renting to buying. In fact, young adults looking to upgrade out of their one-bedroom apartments are increasingly renting single-family homes rather than buying. Single-family rentals — either detached homes or townhomes — make up the fastest-growing segment of the housing market, according to the Urban Institute.

In the complex calculus that’s required for the renting vs. buying decision, one variable stands out: Which is cheaper? If that seems like a tough question to answer, there’s a good reason: crunch the data from America’s largest cities, and you’ll learn it’s a perfectly split decision. Home buying is a better option for those who plan to stay in one place for 3-5 years or more. It’s also a good investment in many housing markets. According to an Urban Institute analysis, among 33 top metropolitan areas in the U.S., there are 16 where buying is cheaper.

  1. Miami

    While it’s cheaper to buy than rent there, it would be a stretch to call the Miami housing market a bargain. A median-priced home still consumes 32 percent of a median earner income, above the recommended 30 percent.

  2. Detroit

    Not long ago, it was possible to buy a home in Detroit for well below the median home price in the U.S. The Detroit area has seen some revitalization in recent years, however, and while housing prices have gone up, it’s still a better value to buy a home there than it is to rent one.

  3. Chicago

    Rent in Chicago is on the rise faster than home prices. While they may level out in the near future, it’s a good time to buy while you still can.

  4. Philadelphia

    Renting is significantly more expensive than buying in the City of Brotherly Love. In fact, the average wage-earner would need a 36 percent raise to afford the average rent there. Buying, however, is more affordable.

  5. Tampa, Florida

    For roughly 90 percent of Tampa communities, renting is more expensive than buying.

  6. Pittsburgh

    The average rent in Pittsburgh is $1250 per month, whereas the average home price is just over $145,000. Broken down, it’s cheaper to buy in Pittsburgh, as your monthly mortgage will be much less expensive than the average rent.

  7. Cleveland

    In this popular college town, a homebuyer will save an average of $200 a month if they pay a mortgage instead of rent.

  8. Cincinnati

    Historically speaking, it’s been cheaper to rent than buy in Cincinnati based on the percentage of a person’s income that went to housing costs. That number is now lower for buyers and higher for renters.

  9. Orlando

    In the home of Disneyworld, the average monthly rent will will cost you roughly double what the average comparable monthly mortgage payment will.

  10. Houston

    Even though median rents are falling in Houston, it’s still cheaper to buy, especially if you plan on staying in your home for three years or more.

  11. San Antonio

    Average monthly rent for an apartment in San Antonio will run you $1,226 (estimated as recently as December 2017). The price of a home in the area is $232,000. While the housing market is trending upward, it’s still more advantageous to buy a home, especially if you plan to stay in the area for a long period of time.

  12. New York

    It’s no secret that home prices in the New York City area (including Newark and Jersey City) are well above the national average. However, rental prices are even higher, so if you can afford to buy property here, you’d be better off doing so rather than renting.

  13. Minneapolis/St. Paul

    The Twin Cities are becoming an increasingly popular to destination for young families to move, so it’s a good time to invest in property here instead of renting it.

  14. Kansas City, MO/KS

    Both rents and housing prices are low in the Kansas City area (average rent will cost just under a thousand dollars, while the average home price is $126,100), but buying is better long-term, as it offers more benefits, including potential tax write-offs.

  15. Columbus, Ohio

    Many market experts consider Columbus a “no-brainer” metro area as far as buying over renting. With affordable housing on both sides, the advantage goes to buying.

  16. Boston

    While a buyer may need a large income (or two above-average incomes) to buy here, they’ll need a slightly larger one to rent long-term.

If you’re looking to rent or by and are concerned about your credit, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get two free credit scores updated each month.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

 

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7 Tips for Deciding How Much Car You Can Afford

HowMuchCar

According to the most recent State of the Automotive Finance Market study from Experian, the average new car loan surged to a shocking $30,534 during the first quarter of the year. Unfortunately, those purchasing new cars didn’t lower their expenses that much. The study noted that the average used car from a franchise set consumers back $20,904, whereas the price of the average used car purchased independently climbed to $16,612.

But what’s really astounding is how long people promised to pay their loans back. New car loans—for both new and used vehicles—lasted an average of almost 69 months, the report noted. Obviously, this is a lot of cash, and there are borrowers who can’t truly afford these loans.

If you’re getting ready to purchase a car and don’t want to overspend or borrow too much, here are seven tips that can help.

#1: Review Your Budget

Whether you plan to finance your car or pay entirely in cash, you need to make sure you understand the financial implications of the purchase. Figure out how the monthly payment will affect your monthly budget or how paying in cash might affect your finances over all.

If you’ve been paying a $400 or $500 monthly car payment all along, you might already know what you can handle. But if you’re financing a car for the first time, you’ll want to sit down and write out a budget and your expenses to gauge how much you can truly afford without forsaking your other financial goals.

If you’re paying for a car in cash, make sure you’re not depleting your emergency fund—and that you’re leaving enough money behind for your regular bills and living expenses.

#2: Consider the Interest Rate

While the total cost of your new or used car is a good place to start your comparison, you should also check to see what interest rate you qualify for. Generally speaking, the interest rate you qualify for will depend on the quality of your credit score. (You can view your free credit report at Credit.com to get a sense of how your credit score may affect your rates.)

And if you think it doesn’t matter, think again. Even a few percentage points can make a huge difference. If you borrow $25,000 at 8% APR, for example, you’ll pay $506.91 per month and incur a total loan cost of $30,414.59. If you take out the same loan but qualify for 4% APR, on the other hand, you’ll pay $460.41 per month and only $27,624.78 over the life of your loan.

#3: Don’t Forget about the Length of Your Loan

While it’s important to gauge the affordability of your new car’s payment and the interest rate you qualify for, don’t forget about the length of your loan. Taking out a longer loan can help you qualify for a lower payment, but you may pay a lot more interest due to the longer stretch of time it takes you to repay.

And if you need to borrow for longer than you really want, it might be worth asking yourself if you’re spending too much.

“If you must borrow money for a car, make sure it is an amount that can be paid off in three to four years and the payment will comfortably fit within your monthly budget,” says financial planner Matt Adams of Money Methods. “If you need to finance a vehicle for anything longer than four years to simply get the payment within reach, you are likely buying more vehicle than you should.”

#4: Remember the Higher Ongoing Costs of New Vehicles

In addition to the sticker price of vehicles you’re considering, it’s smart to look into other costs you might incur, says financial adviser Ryan Cravitz of Milestone Wealth Management.

“Make sure that you don’t forget to account for the many so-called hidden costs when buying a particular car,” he says. “Factors such as the cost of insuring the vehicle, the average maintenance and repair costs, the fuel economy ratings, and whether you should buy the extended warranty are just a few things that should not be ignored.”

Also, don’t forget that a lot of these costs can be higher if you purchase a new car right off the lot. Auto insurance rates in particular tend to be heftier than you might expect when you purchase a newer, more expensive vehicle.

#5: Ask Yourself about the Trade-Offs

Taking on a new car loan is often one of the easiest ways to get into the car you want. While it’s difficult and time-consuming to save up tens of thousands of dollars in a new car fund, you can visit a dealership, finance a car, and drive off the lot in a matter of hours.

Unfortunately, you’ll likely pay a pretty penny for the privilege. While you may theoretically be able to afford the payments on your new car, something usually has to give. And that something might be an expense you miss being able to afford like you were back in the days you didn’t have a huge car payment hanging over your head.

“Remember that whatever you spend on your car, that’s money you won’t have for clothes, food, or going out with your friends,” says financial adviser Anthony Montenegro of Blackmont Financial Advisors. “So, weigh out the trade-off carefully and spend wisely.”

#6: Set a Firm Limit and Consider Your Options

While any of the tips above can help you figure out how much you can afford to spend on your new ride, some financial advisers suggest simplifying the process with a firm limit.

For example, New York financial adviser Joseph Carbone of Focus Planning Group recommends that his clients never take out a car loan that exceeds 10% of their monthly income. “Of course, everyone’s situation is different,” he says. But this situation can truly work if you let it.

Let’s say your take-home pay is $4,500 per month. Using this rule, your car payment should come in under $450 per month. That may not be enough to get you into the car you want, but it’s enough to get you into the car you need.

Financial adviser Brian Hanks also suggests considering more than one car as you make your final selection.

“After you choose a model car you think you want, pick your second favorite,” says Hanks. “Compare the monthly costs of your first and second choice cars side by side. Without a tangible second choice to compare against, it’s too easy to justify higher monthly costs for your first choice.”

#7: Spend Less Than You Can Afford

If you’re still struggling to decide how much to spend—or you’re worried about overextending yourself—take a step back. Unless you need a new car today, there’s nothing wrong with thinking through your decision for weeks or months until you know exactly where you’re at.

And if you still can’t decide, try to err on the side of spending less than you can afford, says financial planner Mitchell Bloom of Bloom Financial, LLC. Bloom says he sees a lot of people who under-budget for and overspend on cars to the point where it puts them in financial peril. Fortunately, this situation is completely avoidable if you do some legwork.

The bottom line: Keep your expenses low, save as much as you can, and have a long-term plan. And if this advice doesn’t mesh with the car you want to buy, you’re probably spending too much.

 

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10 Places Where Home Ownership is On the Rise

Dallas, Texas cityscape with blue sky at sunset, Texas

For a significant number of Americans, home ownership remains an all too distant dream.

Between record levels of student loan debt, the challenges of squirreling away a down payment and skyrocketing housing prices in many parts of the country, it can be daunting at best to shift from renter to owner.

The U.S. Census Bureau reported in October that as of the third quarter of 2017 about 63.9 percent of Americans own a home. For those 35 and under, the figure is far bleaker, just 35.6 percent.

Home ownership has been on the decline in this country for several years, having peaked in 2004 at 69.2 percent.

A new report from Realtor.com, however, found that there are at least 10 cities around the country witnessing huge increases in ownership – places where the American dream appears to be alive and well.

Realtor.com’s data team discovered that ownership is on the rise in the Rust Belt (think Michigan, Wisconsin, Indiana); small cities just outside of major metropolitan areas and also in some bustling southern hubs.

“What’s interesting about this is most of these places are relatively affordable,” said Realtor.com’s Clare Trapasso.

More than half of the cities on the list offer median prices under the national median of $274,492. Here are the cities to keep in mind if homeownership is on your 2018 agenda.

Milwaukee, Wisconsin

A city most famous for its breweries, Milwaukee has experienced decades of economic challenges. However, it is now witnessing a resurgence, Realtor.com reports and that includes the housing market. The current homeownership rate in the city is 68.7 percent, an 11 percent increase over the past three years. The median home price is $224,950.

Charlotte, North Carolina

A bustling southern financial hub, Charlotte’s homeownership rate has increased 10.5 percent over the past three years to its current 62.8 percent. At $327,050, the median home price here however is substantially more than the national median.

Memphis, Tennessee

A city made famous by Elvis Presley, Memphis is affordable by nearly any standard. The median home price $195,050. Over the past three years, homeownership has increased about 9.3 percent to the current 61 percent.

Baltimore, Maryland

Buyers getting priced out of nearby Washington D.C are finding a more affordable alternative in Baltimore, says Trapasso. The homeownership rate is a significant 68.4 percent. That’s an increase of 7.3 percent over the past three years. The median home price meanwhile hovers around $300,000 (30.2% less than in the D.C. metro area.)

Allentown, Pennsylvania

Singer Billy Joel made Allentown forever famous with his song about the city’s economic hardships. Fast forward to 2017 and it seems the city, which is not all that far from New York City or Philadelphia, is experiencing something of rebirth, says Trapasso. The upswing is due in large part to companies like Amazon, Walmart and Nestle moving in. Homeownership has increased 7.3 percent in recent years to an impressive 74.8 percent, far above national rates. The median home price is about $225,000.

Pittsburgh, PA

Pittsburgh is becoming the right coast’s version of Silicon Valley, according to Realtor.com (minus the sky high home prices). Local university grads are being snatched up by tech companies ranging from Google to Uber and Intel, all of which have local outposts. The homeownership rate, now at 74 percent, represents a 7.2 percent increase since 2014. And shockingly, the median home price is well below the national average at just $174,950.

Albuquerque, New Mexico

Think mild climate, affordable homes and an Old Town filled with historic adobe buildings. Those are just some of the attractions in Albuquerque, which has seen a 5.7 percent rise in home ownership in recent years to 66 percent. The median home price here is about $239,950.

Nashville, Tennessee

This legendary music city has also become one of the culinary hotspots in the south. That the city has so much to offer has not gone unnoticed. Home prices have increased a whopping 89 percent since 2012. Still, it remains a place that’s both comparatively affordable and where homeownership continues on its upward path. The average home price is $359,050 and there’s a 68.8 percent home ownership rate, an increase of 4.9 percent over the past three years.

Dallas, Texas

Texas has long been one of the more affordable places to live in the country (There is no state income tax for starters). That affordability has attracted a lot of big businesses. In Dallas, companies have been both moving to the area and expanding. The city’s desirability is leading to increased prices but for the time being the median is $339,950. The current homeownership rate is 60.7 percent, a 4.8 percent increase over the past three years.

Syracuse, New York

One last city to consider for those determined to become home owners, Syracuse’s median home price is the lowest on the list at $149,950. Buyers can even find single-family homes for between $80,000 to $100,000, says Realtor.com. All of which is translating into a homeownership rate of 66.5 percent, a 4.6 percent increase since 2014.

If you’re wanting to buy a home and are concerned about your credit, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get two free credit scores updated each month.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

 

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Cities to Consider When Renting and Buying

low-housing-inventory

January is a natural time to take stock of your financial life, and to dream big dreams about 2018. Could this be the year you make the leap to homeownership? Or, will you make a big change and trade in your mortgage payment for a landlord?

In the complex calculus that’s required for the renting vs. buying decision, one variable stands out: Which is cheaper? If that seems like a hard question to answer, there’s a good reason: crunch the data from America’s largest cities, and you’ll learn it’s a perfectly split decision. According to an Urban Institute analysis, among 33 top metropolitan areas in the U.S., there are 17 places where buying is cheaper, and 16 where renting is cheaper. We’ll get to that list in a moment, but here’s a hint: renters in high-flying West coast cities might want to sit tight for a bit longer.

Renting vs Buying

Fewer life decisions carry more weight than the renting vs. buying dilemma. And that choice is getting harder. A generation ago, buying a home was seen as a rite of passage, a natural (and necessary) step towards adulthood. It was also a solid path to wealth. A $25,000 home purchased in 1970 was worth almost $100,000 by 1990, and about $200,000 today, using national average appreciation. Plenty of baby boomers who bought average-priced homes as young adults find themselves living in a nice nest egg now.

All that changed when the housing bubble burst. Millions lost their homes to foreclosure. Millions more found themselves “under water,” meaning their homes worth less than their mortgage balance. At the height of the housing recession, 23 percent of mortgage holders — nearly 1 in 4 — were under water. They’d lost money on their investment. The myth that housing prices can only go up has been busted. Many of those bubble-era buyers wished they were renting.

While the housing market has slowly recovered, blind faith in housing gains has not. Homeownership rates hit a 50-year low in 2015, and first-time home buyers are now waiting a record 6 years to move from renting to buying. In fact, young adults looking to upgrade out of their 1-bedroom apartments are increasingly renting single-family homes rather than buying. Single-family rentals – either detached homes or townhomes – make up the fastest-growing segment of the housing market, according to the Urban Institute.

But renting is no picnic either. With all these new renters, markets are reacting accordingly, and costs are now skyrocketing at about four times the rate of inflation. In some places, rents are up much higher. Seattle saw an average of 6.3 percent rent increases last year.

Such volatility in housing and rental prices isn’t the only reason the renting vs. buying equation bas become more complicated. Thanks to structural changes in employment — led by the various form of the gig economy and the contingent workforce — flexibility is key for workers. Gone are the days where a worker could buy a house with a 30-year mortgage and count on a consistent commute for the next three decades. People change jobs much more frequently now. Millennials experience four job changes by age 32, according to a LinkedIn study; they’ll move 6 times by age 30, according to 538.com

While it’s possible to sell a condo or house and move, it’s much easier for a renter to relocate for that great opportunity on the other coast.

Income Driven Decisions 

For most people, however, it comes down to money. You might think renting is always cheaper than buying, but that’s incorrect. A long list of variables must be considered when running the numbers, like these: How long will you stay in the place? How much are property taxes? How much investment opportunity cost will you pay when putting a large down payment into a home? How much will you spend on house repairs or condo fees? How much might your landlord raise the rent?

The Urban Institute provides an interesting answer to these questions by comparing the percent of monthly income a buyer or renter would have to spend to own or rent an average home in cities around the country. To ease the comparison, the constants are pretty simple. The report assumes median income, then calculates how of that monthly paycheck would be eaten up by owning – including mortgage payments, interest, taxes, and insurance payments on a median-priced home – or by renting a median-priced 3-bedroom home.

Ordinarily, these costs have to move relatively in sync. When rents get too high, consumers are pushed into buying. The opposite is true, too — when homes/monthly mortgage payments are too high, people are nudged to rent. So these costs tend to move together, or at least like two balloons tied together by a string, floating up into the sky: One pulls ahead for a short while, then the other, and so on. After all, people have to live somewhere.

Cities Good for Renting

But in some cities, these rules don’t seem to apply at the moment, and either renting or buying has sprinted ahead. In those places, you might say the market is broken. The Urban Institute calls this the “rent gap.” In eight large cities in the US — all on the West Coast — the rent gap is higher than 4 percent, meaning it’s considerably cheaper to rent than buy. But on the other hand, there are six major cities spread throughout the East and the Midwest where buying is cheaper, using this monthly costs test. In between are 19 cities where rental and buying costs are basically running neck-and-neck.

The rent gap is most pronounced in places where housing prices have soared. San Francisco is the clear “winner” in the places where renting is cheaper than buying; there, the gap is more than 42 percent. San Jose comes in second at 19%. Seattle, San Diego, Sacramento, Los Angeles, and Portland round out the list of places where the gap is higher than 5 percent.

Cities Good for Home Buying

On the other side of the list — places where buying is cheaper than renting — begins with the winner, Miami.

It would be a stretch to call Miami a bargain, however. A median-priced home still consumes 32 percent of a median earner’s income, above the recommended 30 percent. Still, renting devours even more.

“Because Miami is the second-most-expensive city for rental housing, however, the median rent consumes 42 percent of the median income. So even at this high cost, homeownership is still the better bet,” the report says.

Detroit, Chicago, Philadelphia, Tampa, and Pittsburgh round out the list of places where the rent gap is 5% or more towards buying.

There are buying “bargains” in other cities, too. Cleveland, Cincinnati, Orlando, Houston, and San Antonio all enjoy rent gaps that are more than two percent.

What to Consider

This list comes loaded with caveats, however. The biggest one: Purchasing a home brings the potential of appreciation, and renting does not. That means buyers can “profit” over time and see the value of their investment rise. The longer the time living in the purchased home, the higher the odds that significant appreciation will occur. But don’t forget, transaction costs are significant. Not all those gains are “profit.” Closing costs when buying, and then later when selling, can easily eat up 10% of those gains. Then, there’s always the chance the value of the home will go down, re-creating the situation from the early part of this decade, when buyers lose money. And of course, there’s the variable every homeowner loves to hate, surprise repair costs. Renters generally don’t face that risk.

In the end, the renting vs. buying choice is intensely personal, and always depends on your family’s very specific situation. It’s unwise to ignore macro trends, however. Even if you live in a city where housing costs seem high, it’s worth considering a purchase if rental costs are soaring, too. On the other hand, don’t simply assuming that buying is better. That’s 20th Century logic which no longer applies to the U.S. housing market.

 

If you’re wondering if your credit it good enough to buy or rent, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get two free credit scores updated each month.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

 

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