Q&A Archives - Page 37 of 163

October 4, 2021 By Liz Weston

Q&A: Business credit card dilemma

Dear Liz: I am a sole proprietor and have two business credit cards. I used my Social Security number to apply for the cards and put $2,000 to $3,000 a month on these cards, yet all this credit card activity is not reported to Experian, thereby hurting my credit score, and I now have “stale credit” per Experian. Is my credit card activity not reported because my cards are considered business cards?

Answer: The short answer is yes. Although you used your personal credit history to apply for the cards, business cards typically don’t report activity to the consumer credit bureaus (although negative activity may be reported, such as if the account is delinquent).

You can remedy the situation by getting and using a personal credit card or two. If your credit report has become so stale that it can’t generate a credit score at all, you may need to start with a secured card or look into a credit builder loan.

Filed Under: Credit & Debt, Credit Cards, Q&A Tagged With: business credit cards, Credit Score, q&a

October 4, 2021 By Liz Weston

Q&A: What you should know about Medicare, Medigap and Advantage plans

Dear Liz: I’ve read your most recent columns about Medicare Advantage and believe that more should be said before people decide to go that route.

You mentioned that switching from Medicare Advantage to Medicare itself can be problematic. As a couple who have had both plans and now have Medicare with a Medigap plan, I want to say that the best (and, by the way, easiest) switch my husband and I made was to go back to Medicare.

People should understand that Medicare Advantage plans become their primary insurance, severely limiting their ability to go to whatever doctor or hospital is most convenient. When traveling, they are limited to the hospital and doctor they chose with their Advantage plan, the one near home! My husband also could not go to a doctor I had because we were signed up at different local hospitals.

So I phoned Medicare in 2009 and a young man was so helpful, and in no time we were back on Medicare. He said to go to the Medicare website, choose from the many Medigap options offered that suited our needs, and we did. It was that easy.

We opted for no copays, skilled nursing care, and much more. Granted, our monthly premiums are more than they would have been before, but since that date we have not laid out one cent for medical care including doctor visits, my husband’s open heart surgery (at a hospital of our choosing), emergency room and surgery for my broken ankle, and annual EKGs to monitor his heart.

Surprisingly, we also have coverage for foreign medical treatments and took advantage of that in 2018 for minor surgery needed. The Medigap insurance covered 80% of that when our travel insurer refused to pay.

Our Medigap policy also allows us to go to any doctor or hospital without a referral. And, of course, Medicare is accepted throughout the U.S., and Medicare Advantage plans are not. The tens of thousands of dollars we have saved in the last 11 years make it worth paying more each month, and we have peace of mind.

Answer: Thanks for writing and for sharing your experience.

For readers who haven’t kept up with the discussion: Medicare Advantage plans are offered by private insurers as an all-in-one alternative to traditional Medicare, the government-administered health insurance program for people 65 and older. Medicare Advantage plans typically cover some things that Medicare does not, such as vision, dental and hearing care, but the plans also have regional networks of providers you’re expected to use. You’ll pay more, and sometimes all, of the bill if you use out-of-network providers.

Traditional Medicare allows you to go to any doctor or hospital that accepts Medicare — which includes the vast majority of both — but can have substantial copays and other cost-sharing. A supplemental plan or Medigap plan offered by a private insurer can cover those costs, and most Medigap plans also offer emergency coverage abroad.

The premiums for Medicare plus Medigap can be higher than those for Medicare Advantage plans, but ultimately may prove more cost-effective for people who travel frequently or who want more choice about their care.

If you sign up for a Medigap plan when you first enroll in Medicare, the insurer is required to take you. If you miss that open enrollment period, an insurer can charge you more or even deny you coverage because of preexisting conditions.

There are a few exceptions, however. If you initially enrolled in a Medicare Advantage plan but want to switch to Medicare plus a Medigap plan within the first 12 months, you’re allowed to get a Medigap policy without underwriting.

Filed Under: Health Insurance, Q&A Tagged With: Medicare, Medicare Advantage, Medigap, q&a

September 27, 2021 By Liz Weston

Q&A: Medicare Advantage plan downsides

Dear Liz: You recently wrote about Medicare Advantage plans, which often cover things like dental care, hearing and vision that traditional Medicare does not. You mentioned that the plans have networks of providers, but people should know that those networks don’t always include the experts they may need if they develop serious health issues. The plans themselves can have copays that make it expensive to get sick. If people want to switch to traditional Medicare and get a supplemental Medigap policy, they may face medical underwriting that could increase their costs.

Answer: Medicare Advantage plans are sold by private insurers as an all-in-one alternative to traditional Medicare. The plans are certainly popular — the percentage of Medicare beneficiaries who sign up for Medicare Advantage has been steadily increasing over the years, in part because these private plans seem to cover more. But the plans can vary widely in the breadth of their networks and how they share costs with beneficiaries.

Once you’ve signed up for Medicare Advantage, switching to traditional Medicare can be problematic, as you noted. Insurers aren’t required to cover you the way they are when you first enroll. Some may decline to offer you a Medigap policy or may charge you more, based on your health.

Filed Under: Medicare, Q&A Tagged With: Medicare, Medicare Advantge, q&a

September 27, 2021 By Liz Weston

Q&A: Why you need a credit score even if you don’t like debt

Dear Liz: As I counsel my teenage kids about their personal finances, I am wondering if they can live without a credit score. It is puzzling that to get a good credit score, you need to have debt, or at least a credit card. Wouldn’t living debt free be best? With FICO scores becoming de rigueur, is it reasonable for anyone to get away with no credit score at all, especially if the only debt they would consider is a mortgage someday? Also, the credit reporting companies now have some adjunct services that provide reporting based on payments for rent and utilities that might be helpful. How effective are those reports?

Answer: Credit scores aren’t meant to gauge how well you manage money. They’re meant to gauge how well you handle credit. If you don’t have and use credit, you won’t have scores, and lenders will be reluctant to extend you credit when you want or need it.

You also may have to pay higher deposits for utilities, miss out on the best cellphone deals and have trouble renting an apartment. In most states, credit information helps determine property insurance premiums as well. In fact, your credit may matter more than your driving record in determining auto insurance premiums.

It’s a myth that you must be in debt to have good credit scores. You just need to have and lightly use a credit card, and you should pay it in full every month. Another option is a credit builder loan, through which the money you borrow is placed in a savings account or certificate of deposit for you to claim when you’ve finished making 12 monthly payments.

There are services that will add rent and utility payments to your credit reports. The most commonly used versions of the FICO score, however, don’t include that information in calculating scores.

Filed Under: Credit & Debt, Credit Cards, Q&A Tagged With: Credit Cards, q&a

September 20, 2021 By Liz Weston

Q&A: Credit reports vs. credit scores

Dear Liz: I recently downloaded both my wife’s and my own credit reports. I noticed that, for a number of reasons, her report has much less information than mine. The probability is that I will die before her, so my question is whether you can suggest any ways to be sure she has a good credit rating after I’m gone. Do the credit reporting agencies give any weight to a spouse’s score?

Answer: They do not, unless the spouse is alive and a co-applicant.

The amount of information in a credit report doesn’t dictate someone’s scores, however. People can have good scores with only a few credit accounts, or bad scores with lots of accounts. Your wife should find out what some of her scores are to decide next steps. Her bank or credit card issuer may supply her with scores, or she could get free scores from one of the many sites that offer those. (FICO is the formula most often used by lenders, but VantageScore can give her a good idea how lenders view her, as well.)

If her scores are less than excellent (generally 740 and up), she could look for ways to improve them such as making all credit payments on time, using only a small fraction of her available credit and perhaps adding an account or two. Credit builder loans from credit unions can be a good way to build or rebuild credit.

Filed Under: Credit Scoring, Q&A Tagged With: Credit Scores, q&a

September 20, 2021 By Liz Weston

Q&A: Financial aid and 529 plans

Dear Liz: As a grandparent who has established 529 accounts for each of my grandchildren, I was particularly interested in your advice to the writer who asked you how to use money that’s left in the 529 account to pay off a loan debt. Although it seems that “the horse had already left the barn,” why didn’t the niece use all the funds in the 529 account before accruing student loan debt? Am I missing something?

Answer: It’s possible the withdrawals could have reduced the niece’s financial aid, so she opted to take out loans instead.

In the past, the federal financial aid formula heavily penalized withdrawals from 529 college savings accounts held by people other than the beneficiary’s parents. The accounts themselves weren’t counted by the formula, but any withdrawals were treated as untaxed income to the student. The standard advice was to wait until the last financial aid form had been filed to begin taking withdrawals.

That’s going to change, although not as soon as originally expected.

The Consolidated Appropriations Act of 2021 required the Free Application for Federal Student Aid, or FAFSA, form to be simplified, removing several questions including one about whether the student got money from people other than parents.

The new FAFSA form was supposed to be released next year, but the Department of Education announced in June that the proposed changes would be delayed but implemented in time for the 2024-25 award year. Until the form has been updated, you’d be smart to hold off on tapping the 529s if your grandchildren will need financial aid.

Filed Under: College Savings, Q&A Tagged With: 529 college savings plan, follow up, q&a

September 20, 2021 By Liz Weston

Q&A: Medicare is complicated. Here’s how it works

Dear Liz: My husband and I are in our 50s and have widowed moms in their 80s. We always understood that when you begin taking Medicare, you are required to choose a plan such as SCAN or Blue Shield and to follow that plan’s benefits and limits. However, my friend who works in a hospital told me that you can elect to have straight Medicare and have no plan limits. Can you explain this?

Answer: What you’re asking about is known as traditional or original Medicare, which consists of two parts. Part A is usually premium-free and covers hospitalization. Part B covers doctor visits and has a standard monthly premium of $148.50.

Traditional Medicare is administered by the federal government and is accepted by the vast majority of medical providers but doesn’t cover everything. For example, beneficiaries must pay deductibles, 20% of Part B services and a portion of hospital stays. For that reason, many people with traditional Medicare also buy supplemental or “Medigap” policies from private insurers to cover these costs. Most Medigap plans, like traditional Medicare itself, don’t have out-of-pocket limits.

By contract, Medicare Advantage plans, also known as Medicare Part C, do have out-of-pocket limits. Medicare Advantage plans are “all in one” coverage provided by a private insurer rather than the government. These plans provide everything covered by Parts A and B of traditional Medicare, and may cover other costs such as vision, hearing and dental that traditional Medicare doesn’t. The plans typically have networks of doctors and other medical providers. If you get care outside that network, you would pay more and sometimes all of the cost.

The final part of Medicare is Part D, prescription drug coverage. That’s purchased from private insurers and may be included in Medicare Advantage plans.

Obviously, Medicare can be complicated, but you can educate yourself at Medicare.gov and download or request the handbook “Medicare & You.”

Filed Under: Medicare, Q&A Tagged With: Medicare, q&a

September 13, 2021 By Liz Weston

Q&A: Giving executors account access

Dear Liz: We are trying to leave our affairs in order for our executors. (Pity them. We have accounts and substantial assets in England and Canada as well as the U.S.!) Thinking of some immediate expenses they will have, I’ve documented details of how to access our accounts online (passwords coded in a way that only a family member will understand). But am I inviting them to do something illegal?

Answer: If a site has a password, then it probably also has a “terms of service” agreement that prohibits you from sharing that password with someone else. You may be able to add someone else’s name to a financial account, but that’s often not desirable, either because you don’t want to give them access in advance of your death or incapacity, or because doing so could have gift tax implications.

The most practical solution is to create a list of the accounts with your login credentials and make sure your executor knows where to find it. (You probably should have only one executor, by the way, with a couple of backups. This is a big job that grows infinitely more complicated when two or more people have to agree on decisions and sign every document.) You’ll also need to keep the list updated, which can be a big task. A password manager could be a good solution, since your executor would only need to know the master password to access your accounts.

Also make sure your executor has the passwords to your email addresses as well as your computers, tablets and cellphones. Otherwise, the executor might not be able to receive identity-verifying codes and links that allow access to your accounts.

Filed Under: Estate planning, Q&A Tagged With: Estate Planning, passwords, q&a

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