Today’s top story: The long wait for credit card rewards. Also in the news: Simple money lessons to teach your kids, tips on switching your car insurance, and how to impress your loved one on Valentine’s Day without going broke.
Where the Heck Are My Credit Card Rewards?
Waiting is the hardest part.
5 Super Simple Money Lessons To Teach Kids Of All Ages
Starting off on the right foot.
7 Smart Steps to Switching Your Car Insurance
Don’t let your car become a financial liability.
7 Ways to Say ‘I Love You’ Without Breaking the Bank
You don’t have to go to Jared.
When Not to Use Tax Software: Should Man or Machine Be Your Accountant?
Complex finances should be left to the experts.
Today’s top story: The wrong way to boost your credit score. Also in the news: Target’s data breach spreads to big hotels, how to make a tax lien disappear, and better, more responsible ways to use credit cards.
The Wrong Ways to Boost Your Credit Score
What not to do in pursuit of a better score.
Latest Known Credit Card Data Breaches Target Big Hotels
If you’ve stated at the Sheraton, Marriott, or Holiday Inn, pay close attention to your bank statement.
How to Make a Tax Lien Disappear
How to handle on of the worst things to appear on your credit report.
Yes, Virginia, There Is a Responsible Way to Use Credit Cards
Credit cards are not the enemy.
10 Ways to Boost Your Retirement Savings
It’s time to build a better nest egg.
Dear Liz: I’m confused about paying down credit card debt. Some say to pay the lowest-balance cards first and others say the highest balance or the one with the highest interest. I have almost $16,000 on credit cards ranging from a $4,930 balance on a card with an 8.24% interest rate to $660 on a card with an 18% rate.
Answer: Actually, the first question you should ask is “How much credit card debt do I have compared to my income?” If your balances equal half or more of your annual earnings, you may not be able to pay it all off. You should make appointments with a legitimate credit counselor (such as one affiliated with the National Foundation for Credit Counseling at http://www.nfcc.org) and a bankruptcy attorney (referrals from the National Assn. of Consumer Bankruptcy Attorneys at http://www.nacba.org).
If your situation isn’t that dire, the fastest way out of debt is to pay the minimums on your lower-rate cards and send as much money as possible to your highest-rate card. Once that’s paid off, concentrate on paying off the next-highest-rate card, and so on. Some people instead like to target balances from smallest to largest to get a quicker feeling of victory, but you typically pay more in interest with that approach.
Dear Liz: My wife and I have had our bank’s airline cards a long time, but we want to change because it’s become almost impossible to cash in the miles. What I don’t see in various card-comparison articles are ratings of the card issuers for customer service and fraud protection. Our bank has been quite good at both, but what about the other issuers?
Answer: People are often unduly impressed when their credit card issuers contact them frequently about possibly fraudulent charges. The issuers are the only ones at risk in these situations, since under “zero liability” policies you can’t be held responsible for bogus charges. Also, if their software were better, they might do a better job of separating legitimate from fraudulent transactions and have to bother you less.
In any case, it’s tough to tell as a customer how good the issuer’s fraud prevention measures are. So perhaps a better metric to use is customer service, and J.D. Power publishes an annual credit card satisfaction study that tries to gauge six factors: interaction; credit card terms; billing and payment; rewards; benefits and services; and problem resolution. American Express has ranked at the top of the survey every year since it started seven years ago. Discover ranked second for 2013 and Chase ranked third.
Dear Liz: As a CPA financial advisor to individuals and small businesses, I devour your column. It’s almost always spot on. But the first sentence of your advice to the person whose 401(k) doesn’t offer a match — “start looking for a better job” — was not, and you missed an opportunity to educate your readers in how to compare job compensation.
I encourage my small-business and wage-earning clients to adopt a “total compensation” view to evaluate labor costs and to talk wages with their employees or employers. Employer A offering $100,000 might be better, worse or equal to Employer B offering $70,000 plus retirement plan match and, more importantly, employer-subsidized family health insurance. Besides the intangible factor of job satisfaction, one just doesn’t know which employer’s total financial compensation is “better” without crunching the numbers before and after tax. The two companies might be different only in philosophy of how compensation is paid, not better or worse.
Answer: Some jobs come with pensions or pay so good that the lack of a company 401(k) match is all but irrelevant. It’s safe to say those jobs are not in the majority. The median full-time wage at the end of last year was under $44,000, which means half of all workers earned less. Given stagnant incomes and rising costs, many workers have a tough time saving, so the extra help provided by a company match can make a world of difference in their ability to achieve a comfortable retirement.
Nine out of 10 employers that have a 401(k) offer a match, according to PlanSponsor.com, so plans that don’t are definitely outliers. The most common match is now 100%, or one dollar for each dollar contributed, up to 6% of the worker’s salary, according to the most recent Aon Hewitt study. Nineteen percent of the employers surveyed offered this match, up from 10% in 2011. The most common match used to be 50 cents for each dollar contributed up to 6% of salary.
Clearly, more employers are getting the message that good company matches are an excellent way to signal that they care about their employees’ futures.
Today’s top story: Hiccups to avoid when applying for a VA loan. Also in the news: Keeping your home from turning into a money pit, learning the basics of the Affordable Care Act, and how to file your tax returns electronically.
5 Homebuying Hiccups for Veterans to Avoid
How to clear any potential hurdles on the way to a VA loan.
7 Homebuying Mistakes to Avoid
How not to turn your new home into a money pit.
5 things you need to know about the Affordable Care Act
Learning the basics.
Ways to Electronically File Your tax Return
Skip the long lines at the post office.
Medical Services Medicare Doesn’t Cover
If you need glasses or a hearing aid, you’re on your own.
LOS ANGELES (Reuters) – Student loan borrowers who feel trapped by high-rate private loans finally have more options to refinance their debt, but not everyone will be able to find relief.
In January, Citizens Bank became the latest to offer private consolidation loans that provide lower and sometimes fixed rates to borrowers with good credit or creditworthy co-signers. It joins a handful of banks, credit unions and a few online crowdfunding experiments like SoFi and Commonbond attracted by low default rates and relatively little big-bank competition.
The Consumer Financial Protection Bureau last year bemoaned the lack of refinancing options for private student loans, which typically have higher, variable rates than fixed-rate federal student loans. The bureau complained that private lenders have been slow to modify repayment plans for troubled borrowers, in sharp contrast to federal student loan programs that offer flexible repayment options, including income-based plans.
Many lenders have curtailed or shut down their private student loan operations in recent years. JPMorgan Chase and Co and Wells Fargo & Co were among the few major banks offering private student loan consolidation, and Chase exited the private student loan market late last year.
Smaller lenders and start-ups saw the unmet need. SoFi and CommonBond raised money from individual and institutional investors to offer refinancing to students at top graduate school programs and have since expanded their programs to include more borrowers. A network of credit unions called cuStudentLoans and a group of community banks known as iHELP have also been expanding.
Since launching its consolidation program two years ago, cuStudentLoans has refinanced about $250 million in private student loans, lowering rates to an average of 5.54 percent, said Ken O’Connor, director of student advocacy for Lendkey, which provides the network’s technology platform.
Many credit unions see the loans as a way to connect to younger people who could then turn to the member-owned organizations for other financial needs, O’Connor said, much in the way cheap auto loans provided an entry to credit union membership for previous generations.
Similar motives prompted Providence, Rhode Island-based Citizens Bank, which started originating private student loans in 2009 just as other lenders were fleeing the market, to expand into refinancing. The bank, owned by Royal Bank of Scotland, could build more relationships with borrowers who may later need a mortgage or a car loan, and the loans have been profitable, said Brendan Coughlin, director of auto and education finance.
“We’ve come to the conclusion that it’s a very attractive space to be a participant in,” Coughlin said.
Private student loans make up just a fraction of the $1.1 trillion in U.S. education debt, with the seven largest private lenders holding about $63 billion, according to MeasureOne, a San Francisco-based student loan data company.
While delinquency rates for federal student loans have soared, just over 3 percent of private student loans were 90 days or more overdue at the end of last year’s third quarter. That was down from 6 percent in early 2009, according to MeasureOne, and compares with a 21 percent delinquency rate for student loans overall, according to the Federal Reserve.
Citizens’ experience with private student loans has been even better, Coughlin said.
“We’ve made $1 billion in student loans since 2009,” Coughlin said. “Only 28 of our borrowers are 90 days or more overdue.”
Coughlin credits careful underwriting for the low delinquency rate. The bank wants to make sure students and families don’t borrow more than they can afford to pay back, he said.
That’s quite different from federal student loans, which do not require credit checks or an analysis of debt-to-income ratios, as well as many private loans before the financial crisis.
Also, 90 percent of the bank’s loan originations have co-signers – which means another adult, usually a parent, is equally responsible for the loan. Overall, 87 percent of private loans made for the 2012-2013 school year had co-signers, compared with 75 percent in the 2008-2009 year.
Some of the bank’s applicants have been able to qualify for refinancing based on their own strong credit histories, Coughlin said. But many need help to get approved and to qualify for the best rates, which are currently 4.74 percent for the fixed-rate option and 2.4 percent for variable-rate loans.
“For the recent graduates, we do often need a co-signer,” Coughlin said.
Borrowers without co-signers are not the only ones who may be shut out of refinancing, consumer advocates say. Those who are unemployed, in default or who did not finish their educations typically have few options to resolve their debt.
If interest rates rise, more private loan borrowers may have trouble repaying, since most such loans carry variable rates. Borrowers typically cannot find relief in bankruptcy court, since private student loans, like federal student loans, are rarely erased.
These hazards are why many college consultants urge students and parents to exhaust federal student loan options first and to apply for private loans only if they have excellent credit – to get the best rates – and can pay off the debt quickly.
(The author is a Reuters columnist. The opinions expressed are
(Follow us @ReutersMoney or here;
Editing by Dan Grebler)
Today’s top story: What to do with those savings bonds you received as a kid. Also in the news: Teaching your kids about personal finance, tips on becoming debt free in 2014, and when you can finally say goodbye to the old debt lingering on your credit report.
What to Do With a Childhood Savings Bond
Is it time to cash in every child’s least favorite gift?
Kids and Money: New online sites help manage personal finances
Teaching kids about personal finance doesn’t have to be a chore.
5 Tips for Becoming Debt Free in 2014
Make this the year you vanquish your debt.
When does old debt fall off credit report?
Saying goodbye to that old credit card from seven years ago.
Don’t Be a Victim of Fraud: 9 Simple Ways to Protect Your Financial Data
Keeping your data safe from exploitation.
Want to Get Ahead at Work? Be a Mindreader
Become your company’s Kreskin.
Advice for the 20-Somethings: Start Saving For Retirement Now
A little money saved now could turn into something big later in life.
Be Wary of this Season’s Tax Filing Scams
it’s prime scam season.
When I wrote “Easy Money” in 2007, I was this close to paperless nirvana. Our bills were paid automatically, most of our statements were electronic, and I looked forward to the day when my file cabinets would be so empty they would echo.
Something happened along the way. Paper started to creep back in as we opened new credit cards and financial accounts and failed to switch to paperless delivery. My old accountant retired, and my new accountant didn’t get the memo that we preferred everything to be electronic. Add to that all the paper that flows into your life when you have a child in school, and pretty soon my file cabinets were bulging.
A few days ago, I declared war. Thanks to my beloved ScanSnap scanner, 15-sheet cross-cut shredder and the Interwebs, we’re back on the road if not to a paper-free life, at least a paper-less life.
If you’re struggling with what to keep and what to purge, here are some important things to know:
The IRS accepts electronic records, such as downloaded bank statements and scans of receipts. A tax pro can guide you further, but there’s nothing special about a statement you receive in the mail versus one you download from a financial institution’s site (other than the fact that the mailed version can be more easily intercepted by an identity thief).
Your greatest risk of audit is in the three years after you file a tax return. The IRS can extend the audit period another three years if it suspects you under-reported your income significantly. So you’ll want to hang on to documentation for your 2013 return–the one that’s due April 15, 2014–until at least 2017 and probably until 2020. To make it easier to remember, I just subtract 7 from the current year (2014 minus 7 equals 2007) and know that I can shred the documentation for returns filed that year, and before. The tax return itself I keep (in the past as a physical document, but from now on as a scan or electronic document).
Banks and brokerages must make your statements available for at least six years. Many do so for longer (Schwab gives us access for 10 years). Credit card issuers vary, but the cards we use for business purposes–and thus would need to reference in an IRS audit–provide seven or more years’ worth of access. I shut off mail delivery of all our various retirement account statements as well. They’re online when I need them. While it’s important to keep track of the tax basis of your IRAs (any non-deductible contributions you made) to reduce your future tax bills, all your withdrawals from 401(k)s and similar plans will be taxable, so there’s no reason to hang on to the quarterly or annual statements.
There’s no point in keeping owners manuals. Almost all of them are available online…and I’m embarrassed to say I found a few manuals for electronics and appliances we no longer own. The other documents I was keeping in those files, such as receipts and warranties, can be scanned and the originals shredded.
Out with the old, in with the new. Interestingly, all of our insurers insist on sending paperwork. I scan the new policies when they arrive and then shred the previous year’s, along with any and all paid claims.
Backups are essential. I’m still astonished that some people don’t back up regularly. Our computers are backed up daily to external hard drives as well as to an online service.
How about you? Are you hanging on to paper when it’s time to let go?