Ask Liz Weston

Get smart with your money

Credit Cards

Tuesday’s need-to-know money news

By

Today’s top story: How to approach buying home insurance for the first time. Also in the news: How to get PrEP with or without insurance, could this be the summer of debt forgiveness, and these credit cards come with sweet airport perks.

How to Approach Buying Home Insurance for the First Time
Proactive research will make the home buying process easier.

How to Get PrEP With or Without Insurance
Here’s what health care experts say about how to get PrEP for HIV prevention, with or without insurance.

Will This Be the Summer of Student Debt Cancellation?
The “will he, won’t he” summer of student debt cancellation is upon us.

These Credit Cards Come With Sweet Airport Perks
You may already have access to a fancy airport lounge and not even know it.

Friday’s need-to-know money news

By

Today’s top story: Curb inflation with 5 credit card perks. Also in the news: What you need to know about Apple’s Buy Now Pay Later feature, how to tell if free business software will cost you, and how one person ditched $20K in debt.

Curb Inflation With 5 Credit Card Perks
Your credit card may hold some valuable money-saving features or benefits, whether your goal is to pay off debt or save on costs.

What You Need to Know About Apple’s Buy Now, Pay Later Feature
Apple Pay Later divides your purchase into four equal installments with zero interest or fees, but there are risks to “buy now, pay later” plans.

How to Tell if Free Business Software Will Cost You
Free business software may have no upfront costs, but you could pay for it in other ways.

How I Ditched Debt: From $20K to $0 in Five Years and 8 Steps
I dug deep into a bag of tricks and tips to pay down debt. Here are the ones that made the most difference.

Q&A: How to kick your ex off the credit cards

By

Dear Liz: My divorce was final in 2016. My ex and I divided our credit cards as part of the settlement. I have several joint credit cards with high credit limits and zero balances. I have used them once a year to keep them in active status. Do I consider canceling them or do I risk lowering my credit score if I do?

Answer: If these truly are joint credit cards, then your ex potentially could run up a balance and default, damaging your credit. Obviously, that’s not ideal. With joint cards, neither party can be removed by the other, so the best option may be shutting down the account.

But joint credit cards are increasingly rare. Most cards used by couples have a primary cardholder and an authorized user. The authorized user is not responsible for paying the bill and can be removed at any time.

Contact the issuers to find out your status on each card: Are you a joint account holder? Primary or authorized user?

If you’re the primary holder on a card and your ex is still an authorized user, ask that your ex be removed. If the account truly is joint or if you’re the authorized user, consider opening one or two cards in your own name before taking any further action.

Your credit scores may still take a hit when you close accounts or get removed as an authorized user, but the additional lines of credit may limit the damage and ensure you still have access to credit.

Q&A: Why home equity loans are a better option than credit cards

By

Dear Liz: My husband is 68, I am 70, both of us are retired and on Social Security. We have little in savings. My husband wants to charge $10,000 to a low-interest credit card to pay for a new furnace and water heater. He plans to pay the minimum each month and at the end of each year transfer the balance to a different credit card with low interest. Is this a good idea?

Answer: You may have better options.

Many credit cards offer low introductory rates that expire after 12 to 21 months, but you typically won’t know before you apply what your credit limit will be.

You may not get a high enough limit to make all your purchases or you could use up so much of the limit that it causes damage to your credit scores. (Scoring formulas are sensitive to how much of your available credit you’re using, and ideally you wouldn’t use more than about 10% to 30% of your credit limits at any given time.) When you apply to transfer your balance to another low-rate card, you’ll run similar risks.

A home equity line of credit or home equity loan might be a better choice. HELOCs have variable rates, but you would have a source of funds you can tap and repay as needed (much like a credit card, but backed by the equity in your home). Home equity loans typically have fixed terms and rates, so you can borrow what you need and pay off the debt over time (often 15 to 20 years).

If paying back the money would be a hardship, a reverse mortgage might be an option. Reverse mortgages can be complicated and expensive, however, so talk to a housing counselor approved by the Department of Housing and Urban Development before proceeding with one.

Tuesday’s need-to-know money news

By

Today’s top story: Disability and Credit Access: why scores are key in a crisis. Also in the news: 4 features to look for in the best credit cards of 2022, considering the suburbs, and is trading employee equity a good idea?

Disability and Credit Access: Why Scores Are Key in a Crisis
Having good credit can help you get low-interest loans or credit cards to help you cover your bills in an emergency. Here’s how to get started.

Best Credit Cards of 2022: 4 Features to Look For
Credit card issuers are offering more choice and flexibility as they add features to new cards.

Can’t Buy the House You Want? Consider Moving Out of the City
Suburban and small-town living has its perks, including more spacious and affordable choices for first-time home buyers.

Is Trading Employee Equity a Good Idea?
Buying or selling employee equity has become easier and more accessible, but is it right for your portfolio?

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

By

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.