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Can I Inherit Debt?
When someone passes away leaving debts behind, you might be wondering if you have any personal liability to pay them. If you have aging parents, for instance, you may be worried about having to assume responsibility for their mortgage payments, credit cards or other debts. If youâve asked yourself, âCan I inherit debt?â the answer is typically no, even though those debts donât automatically disappear. But there are situations in which you may have to deal with a loved oneâs creditors after theyâre gone.
How Debts Are Handled When Someone Passes Away
Debts, just like assets, are considered part of a personâs estate. When that person passes away, their estate is responsible for paying any and all remaining debts. The money to pay those debts comes from the asset side of the estate.
In terms of who is responsible for making sure the estateâs debts are paid, this is typically done by an executor. An executor performs a number of duties to wrap up a personâs estate after death, including:
- Getting a copy of the deceased personâs will if they had one and filing it with the probate court
- Notifying creditors and other entities of the personâs death (for example, the Social Security Administration would need to be notified so any Social Security benefits could be stopped)
- Completing an inventory of the deceased personâs assets and their value
- Liquidating those assets as needed to pay off any debts owed by the estate
- Distributing the remaining assets to the people or organizations named in the deceased personâs will if they had one or according to inheritance laws if they did not
In terms of debt repayment, executors are required to give notice to creditors who may have a claim against the estate. Creditors are then giving a certain window of time, according to state laws, in which to make a financial claim against the estateâs assets for repayment of debts.
If a creditor doesnât follow state guidelines for making a claim, then those debts wonât be paid from the estateâs assets. But if creditors are less than reputable, they may try to come after the deceased personâs spouse, children or other family members to collect whatâs owed.
Not all assets in an estate may be used to repay debts owed by a deceased person. Any assets that already have a named beneficiary, such as a life insurance policy, a 401(k), individual retirement account, payable on death accounts or annuity, would be transferred to that beneficiary automatically.
Can I Inherit Debt From My Parents?
This is an important question to ask if your parents are carrying high amounts of debt and youâre worried about having to pay those bills when they pass away. Again, the short answer is usually no. You generally donât inherit debts belonging to someone else the way you might inherit property or other assets from them. So even if a debt collector attempts to request payment from you, thereâd be no legal obligation to pay.
The catch is that any debts left outstanding would be deducted from the estateâs assets. If your parents were substantially in debt when they passed away, repaying them from the estate may leave little or no assets for you to inherit.
But you should know that you can inherit debt that you were already legally responsible for while your parents were alive. For instance, if you cosigned a loan with them or opened a joint credit card account or line of credit, those debts are legally yours just as much as they are your parents. So, once they pass away, youâd be solely responsible for repaying them.
And itâs also important to understand what responsibility you may have for covering long-term care costs incurred by your parents while they were alive. Many states have filial responsibility laws that require children to cover nursing home bills, though they arenât always enforced. Talking to your parents about long-term care planning can help you avoid situations where you may end up with an unexpected debt to pay.
Can I Inherit Debt From My Children?
The same rules that apply to inheriting debt from parents typically apply to inheriting debts from children. Any debts remaining would be paid using assets from their state.
Otherwise, unless you cosigned for the debt, then you wouldnât be obligated to pay. On the other hand, if you cosigned private student loans, a car loan or a mortgage for your adult child who then passed away, as cosigner youâd technically have a legal responsibility to pay them. Federal student loans are an exception.
If your parents took out a PLUS loan to pay for your higher education costs and something happens to you, the Department of Education can discharge that debt due to death. And vice versa, if your parents pass away then any PLUS loans they took out on your behalf could also be discharged.
Can I Inherit Debts From My Spouse?
When marriage and money mix, the lines on inherited debt can get a little blurred. The same basic rule that applies to other situations applies here: if you cosigned or took out a joint loan or line of credit together, then youâre both equally responsible for the debt. If one of you passes away, the surviving spouse would still have to pay.
But what about debts that are in one spouseâs name only? Thatâs where itâs important to understand how living in a community property state can affect your liability for marital debts. If you live in a community property state, debts incurred after the marriage by one spouse can be treated as a shared financial obligation. So if your spouse opened up a credit card or took out a business loan, then passed away you could still be responsible for paying it. On the other hand, debts incurred by either party before the marriage wouldnât be considered community debt.
Consider Getting Help If You Need It
If a parent, spouse, sibling or other family member passes away, it can be helpful to talk to an attorney if youâre being pressured by debt collectors to pay. An attorney who understands debt collection laws and estate planning can help you determine what your responsibilities are for repaying debts and how to handle creditors.
The Bottom Line
Whether or not youâll inherit debt from your parents, child, spouse or anyone else largely hinges on whether you cosigned for that debt or live in a community property state in the case of married couples. If youâre concerned about inheriting debts, consider talking to your parents, children or spouse about how those financial obligations would be handled if they were to pass away. Likewise, you can also discuss what financial safety nets you have in place to clear any debts you may leave behind, such as life insurance.
Tips for Estate Planning
- Consider talking to a financial advisor about how to manage and pay off debts you owe or any debts you might inherit from someone else. If you donât have a financial advisor yet, finding one doesnât have to be difficult. SmartAssetâs financial advisor matching tool can help you connect with an advisor in your local area. It takes just a few minutes to get your personalized advisor recommendations online. If youâre ready, get started now.
- The Fair Debt Collection Practices Act caps the statute of limitations for unpaid debt collections at a maximum of six years, although most states specify a much shorter time frame. However, some debt collectors buy so-called zombie debts for pennies on the dollar and then â unscrupulously â try to collect on them. Hereâs how to deal with such operators.
Photo credit: ©iStock.com/NiseriN, ©iStock.com/AndreyPopov, ©iStock.com/FatCamera
The post Can I Inherit Debt? appeared first on SmartAsset Blog.
Source: smartasset.com
What Is a Recourse Loan?
In borrowing, there are two types of debts, recourse and nonrecourse. Recourse debt holds the person borrowing money personally liable for the debt. If you default on a recourse loan, the lender will have license, or recourse, to go after your personal assets if the collateralâs value doesnât cover the remaining amount of the loan that is due. Recourse loans are often used to finance construction or invest in real estate. Hereâs what you need to know about recourse loans, how they work and how they differ from other types of loans.
What Is a Recourse Loan?
A recourse loan is a type of loan that allows the lender to go after any of a borrowerâs assets if that borrower defaults on the loan. The first choice of any lender is to seize the asset that is collateral for the loan. For example, if someone stops making payments on an auto loan, the lender would take back the car and sell it.
However, if someone defaults on a hard money loan, which is a type of recourse loan, the lender might seize the borrowerâs home or other assets. Then, the lender would sell it to recover the balance of the principal due. Recourse loans also allow lenders to garnish wages or access bank accounts if the full debt obligation isnât fulfilled.
Essentially, recourse loans help lenders recover their investments if borrowers fail to pay off their loans and the collateral value attached to those loans is not enough to cover the balance due.
How Recourse Loans Work
When a borrower takes out debt, he typically has several options. Most hard money loans are recourse loans. In other words, if the borrower fails to make payments, the lender can seize the borrowerâs other assets such as his home or car and sell it to recover the money borrowed for the loan.
Lenders can go after a borrowerâs other assets or take legal action against a borrower. Other assets that a lender can seize might include savings accounts and checking accounts. Depending on the situation, they may also be able to garnish a borrowerâs wages or take further legal action.
When a lender writes a loanâs terms and conditions, what types of assets the lender can pursue if a debtor fails to make debt payments are listed. If you are at risk of defaulting on your loan, you may want to look at the language in your loan to see what your lender might pursue and what your options are.
Recourse Loans vs. Nonrecourse Loans
Nonrecourse loans are also secured loans, but rather than being secured by all a personâs assets, nonrecourse loans are only secured by the asset involved as collateral. For example, a mortgage is typically a nonrecourse loan, because the lender will only go after the home if a borrower stops making payments. Similarly, most auto loans are nonrecourse loans, and the bank or lender will only be able to seize the car if the borrower stops making payments.
Nonrecourse loans are riskier for lenders because they will have fewer options for getting their money back. Therefore, most lenders will only offer nonrecourse loans to people with exceedingly high credit scores.
Types of Recourse Loans
There are several types of recourse loans that you should be aware of before taking on debt. Some of the most common recourse loans are:
- Hard money loans. Even if someone uses their hard money loan, also known as hard cash loan, to buy a property, these types of loans are typically recourse loans.
- Auto loans. Because cars depreciate, most auto loans are recourse loans to ensure the lender receive full debt payments.
Recourse Loans Pros and Cons
For borrowers, recourse loans have both pros and and at least one con. You should evaluate each before deciding to take out a recourse loan.
Pros
Although they may seem riskier upfront, recourse loans are still attractive to borrowers.
- Easier underwriting and approval. Because a recourse loan is less risky for lenders, the underwriting and approval process is more manageable for borrowers to navigate.
- Lower credit score. Itâs easier for people with lower credit scores to get approved for a recourse loan. This is because more collateral is available to the lender if the borrower defaults on the loan.
- Lower interest rate. Recourse loans typically have lower interest rates than nonrecourse loans.
Con
The one major disadvantage of a recourse loan is the risk involved. With a recourse loan, the borrower is held personally liable. This means that if the borrower does default, more than just the loanâs collateral could be at stake.
The Takeaway
Loans can be divided into two types, recourse loans and nonrecourse loans. Recourse loans, such as hard money loans, allow the lender to pursue more than what is listed as collateral in the loan agreement if a borrower defaults on the loan. Be sure to check your stateâs laws about determining when a loan is in default. While there are advantages to recourse loans, which are often used to finance construction, buy vehicles or invest in real estate, such as lower interest rates and a more straightforward approval process, they carry more risk than nonrecourse loans.
Tips on Borrowing
- Borrowing money from a lender is a significant commitment. Consider talking to a financial advisor before you take that step to be completely clear about how it will impact your finances. Finding a financial advisor doesnât have to be difficult. In just a few minutes our financial advisor search tool can help you find a professional in your area to work with. If youâre ready, get started now.
- For many people, taking out a mortgage is the biggest debt they incur. Our mortgage calculator will tell you how much your monthly payments will be, based on the principal, interest rate, type of mortgage and length of the term.
Photo credit: ©iStock.com/aee_werawan, ©iStock.com/PictureLake, ©iStock.com/designer491
The post What Is a Recourse Loan? appeared first on SmartAsset Blog.
Source: smartasset.com
Increasing Your Savings on a Low-Income Salary
A low-income salary can create challenges when it comes to reaching your financial goals. You may want to take a vacation, buy a new car, or just put some cash away for a rainy day, but how can you do that with a limited income? Although you may struggle to add to your savings, there […]
The post Increasing Your Savings on a Low-Income Salary appeared first on Credit Absolute.
Source: creditabsolute.com
Which cards earn American Express rewards points?
Information about the Amex Everyday Preferred Card and American Express Blue Card has been collected independently by CreditCards.com. The issuer did not provide the content, nor is it responsible for its accuracy.
American Express offers a large array of cards â including everyday spending cards, travel cards, business cards and co-branded cards â that let you earn Membership Rewards points. It can be confusing to try to sift through all the offerings and figure out where all the bonuses lie, so weâve sorted it out for you.
Hereâs a breakdown of the cards:
American Express Membership Rewards consumer credit cards
Rewards rate | Introductory bonus | Annual fee | |
![]() Blue from American Express card |
|
None
|
$0 |
![]() Amex Everyday Preferred card |
|
15,000 points if you spend $1,000 in first 3 months (Terms apply)
|
$95 |
![]() American Express® Green Card |
|
30,000 points if you spend $2,000 in first 3 months (Terms apply) | $150 |
![]() American Express® Gold Card |
|
60,000 points if you spend $4,000 in first 6 months (Terms apply) | $250 |
![]() The Platinum Card® from American Express |
|
|
$550 |
American Express Membership Rewards business credit cards
Rewards rate | Introductory bonus | Annual fee | |
![]() The Blue Business® Plus Credit Card from American Express |
|
None | $0 |
![]() Business Green Rewards Card from American Express |
|
15,000 Membership Rewards points after you spend $3,000 in eligible purchases within the first 3 months (Terms apply) | $0 intro first year, then $95 |
![]() American Express® Business Gold Card |
|
35,000 Membership Rewards points after you spend $5,000 on eligible purchases with the Business Gold Card within the first 3 months. (Terms apply) | $295 |
![]() The Business Platinum Card® from American Express |
|
85,000 Membership Rewards points after you spend $15,000 on qualifying purchases within your first 3 months (Terms apply) | $595 |
Entry-level cards
The Blue from American Express card is an entry-level card for newbies with less-than-stellar credit scores. The card offers a paltry rate of 1 point per dollar of spending and 2 points per dollar on American Express Travel purchases and no introductory bonus. Plus, unlike other Membership Rewards cards, it doesnât allow you to transfer points to an outside loyalty program. But you can qualify for the card with a merely average credit score, so it may be a good starting point if you canât qualify for any other American Express card.
Everyday spending cards
Everyday spending is not a strong point in the Membership Rewards program, but Amex does offer a card that lets you earn bonus points on everyday purchases.
The American Express Everyday Preferred card gives you 3% back on U.S. supermarket purchases (up to $6,000 in purchases per year), 2% back on U.S. gas station purchases and 1% back on other purchases, plus a 50% point bonus whenever you use your card at least 30 times in a month, for a $95 annual fee (waived the first year). Thatâs a very generous grocery bonus â amounting to 4.5% back if you trigger the bonus every month â but itâs unfortunately capped at $6,000 in purchases, and the requirement to use the card 30 times each month is onerous.
In fact, the requirements to earn the full bonus are stringent. Unless you use the card for most of your spending, you probably will have a difficult time mustering 30 separate purchases on a single card each month. In other words â if youâre not all about earning Membership Rewards points â this is probably not the card for you.
Travel cards
American Express is the pioneer of travel rewards cards, and its offerings are strongest in this category. You have three levels of card to choose from â all of which offer extensive travel perks, bonuses focused on travel purchases and high annual fees.
The American Express Green card â the lowest tier card â is a good introduction to American Express travel benefits. The card offers a good earning rate on travel, transit and dining purchases: You earn 3x points on a wide array of travel and transit purchases, including airfare, hotel stays, subways, tolls and more. You also earn 3x points on purchases at restaurants worldwide. The remainder of your purchases earn 1 point per dollar. The card also offers a couple of fairly valuable credits, including up to $100 toward CLEAR membership and up to $100 for LoungeBuddy lounge access each year.
The card comes with a lower $150 annual fee. Altogether, itâs not a bad deal, though can find other starter travel cards with lower fees and better rewards, such as the Chase Sapphire Preferred® Card*. Also, if youâre able to foot a $150 fee, you should ask yourself whether itâs worth doling out a little extra to get much better rewards and benefits with Amexâs higher tier travel cards.
The American Express® Gold Card is a good value for middle-of-the road cardholders and comes with a $250 annual fee thatâs relatively affordable, though on the high side for the level of rewards that it offers. You earn bonus points on both travel and everyday purchases â 4x at restaurants worldwide and on the first $25,000 in U.S. supermarket purchases each year, 3x on flights booked directly with the airlines and 1x on other purchases. You also get a decent 60,000-point bonus for spending $4,000 in the first six months.
And then comes the king of travel cards â the American Express Platinum card â offering a stellar 75,000-point introductory bonus (after spending $5,000 in the first six months), a litany of travel benefits and an outsized $550 annual fee. The Platinum card is squarely aimed at heavy travelers â you earn a massive 5% bonus on flights and hotels and you get some very generous travel credits, including a $200 airline fee credit, a $100 credit every four years for Global Entry, a $100 hotel fee credit and up to $200 worth of Uber credits. Also, the card grants you free lounge access â probably the most extensive lounge access package that any credit card has to offer â including Priority Pass lounges and ultra-posh Centurion lounges. The Platinum card is not for the casual traveler; however, if you travel frequently you can get more than $550 of value out of the Platinum card.
Business cards
American Express also has several business card offerings that offer American Express benefits for business owners and bonus points on business purchases. These cards are a great opportunity to earn additional introductory bonuses for cardholders who have exhausted the introductory bonuses on Amexâs consumer line of cards.
Note, too, that you donât have to be the owner of a brick-and-mortar business to qualify for a business card; independent contractors of all sorts may qualify.
The Blue Business Plus card is an excellent option for earning bonus points on everyday purchases â you get a 2x point bonus on your purchases, up to $50,000 each year (1x thereafter). Moreover, the card doesnât charge an annual fee.
Like the consumer version of the card, the Business Green Rewards Card offers an insipid rewards rate of 2x points on eligible American Express Travel purchases and 1 point on the rest of your purchases, for a $95 fee. On the plus side, the annual fee is waived for the first year, and it currently comes with an offer of 15,000 Membership Rewards points after you spend $3,000 in eligible purchases within the first three months.
The Business Gold Card rewards your highest spend in two 4x bonus categories â which can include dining, gas, travel and common business purchases.
The American Express Business Platinum card offers many of the same benefits â including lounge access â as the regular Platinum card. Unforutnately, the card doesnât offer a $200 credit for Uber rides. However, it does have one feature to its advantage: You can earn 35% of your points back when you use them for flights on a qualifying airline that you designate at the beginning of each year (when flight is booked on amextravel.com).
Essentially, you can boost the value of your points to 1.35 cents per point if you use them the right way â thatâs a much better value than the consumer version of the card. Also, the card offers several generous credits targeted to business professionals: You get up to $200 each year on Dell purchases, and up to $200 in statement credits each calendar year for baggage fees and other incidentals at one selected qualifying airline. The value of the added perks can help to outweigh the card’s $595 annual fee.
Co-branded Membership Rewards cards
If the above list of Membership Rewards cards hasnât already boggled your mind, American Express offers several co-branded cards that give you additional options for category bonuses and â most notably â additional options for earning introductory bonuses.
American Express Membership Rewards co-branded credit cards
Rewards rate | Introductory bonus | Annual fee | |
![]() Mercedes-Benz card |
|
10,000 points if you spend $100 in first 3 months (Terms apply) | $95 |
![]() Ameriprise Financial Gold card |
|
25,000 points if you spend $1,000 in first 3 months (Terms apply) | $160, $0 first year |
![]() Ameriprise Financial Platinum card |
|
None | $550, $0 first year |
![]() Morgan Stanley card |
|
10,000 points if you spend $1,000 in first 3 months (Terms apply) | $0 |
![]() Morgan Stanley Platinum card |
|
60,000 points if you spend $5,000 in first 3 months (Terms apply) | $550 |
![]() Schwab Platinum card |
|
60,000 points if you spend $5,000 in first 3 months (Terms apply) | $550 |
Outside of its Mercedes-Benz card â which offers a bonus on Mercedes-Benz purchases â most of these cards are tied to financial institutions and require that you have a qualifying account to apply for the card. If you can pass that hurdle, thereâs a major plus to qualifying for one of these cards: Theyâre all considered to be separate cards from American Expressâs consumer and business line of cards, which means â if youâve already earned the bonuses on the Gold and Platinum cards â you have additional options for earning a 50,000- to 60,000-point bonus.
Which American Express card should you apply for?
Membership Rewards cards arenât for everyone. The rewards are focused on travel purchases and the best asset of the American Express travel rewards program is its travel perks â including lounge access â rather than travel rewards. In other words, you need to be a frequent traveler to really reap the benefits of the Membership Rewards program. That said, if you fit the bill and want to maximize your points, you should consider signing up for the following:
An everyday spending card â Membership Rewards cards are not the strongest candidates for maximizing rewards on everyday spending, but if you are trying to rack up Membership Rewards points, youâll probably want to sign up for the Amex Preferred Everyday card. If you donât mind the $95 annual fee and you are able to use the card 30-plus times each month, the Amex Everyday Preferred card may be your best bet â with its 50% bonus, you can earn up to 4.5% back on your first $6,000 in grocery purchases and 3% back on gas purchases.
A travel card â If you travel frequently enough to use all of its credits and travel perks, the Platinum card is an exceptional value, even with its $550 annual fee. Or, if you qualify as a business owner, you might want to go with the Business Platinum card, since itâs possible to get a 35% bonus on all your redemptions for airfare with your selected, qualifying airline â youâll need to do some math to decide which card offers the better value for you.
Note, if you donât want to dole out the high annual fee for either of the Platinum cards, you might go with the American Express Gold Card instead â it can serve as both a travel and everyday card since it offers bonuses on flights, restaurants and U.S. supermarket purchases.
A flat-rate spending card â You should also consider adding the Blue Business Plus card to your wallet. You can rotate it with your other cards to earn a 2x point bonus on the purchases that donât fit under any other bonus category.
One other very important consideration is timing. American Express has a very strict policy on earning introductory bonuses, only allowing you to earn the bonus on a particular card once in your lifetime. This means if you want to earn the most bonus points possible, youâll want to keep a close eye on the value of the introductory bonus for each card and apply when the bonus is higher than average.
See related: Best ways to spend American Express points
*All information about the Chase Sapphire Preferred Card has been collected independently by CreditCards.com and has not been reviewed by the issuer. This offer is no longer available on our site.
Source: creditcards.com
Best Credit Cards for Bad Credit
When it comes to excuses consumers give for their poor credit scores, banks and lenders have heard it all.Â
Maybe you lost your job and couldnât pay your student loan payment for a few months. Or perhaps you thought youâd gotten a deferment but were too busy job hunting to find out for sure.Â
Maybe you thought you paid your credit card bill but itâs actually sitting on your kitchen counter waiting for the mail.
Whatever the reason for your low credit score, one thing is for certain â lenders donât care.
In fact, banks and other lenders lean on your credit score and other factors to determine whether they should approve you for a credit card or a loan â and thatâs about it. Your personal situation is never considered, nor should it be.
It would be wonderful if credit card companies understood that âlife happensâ and made special exceptions to help people out, but that’s not the world we live in. As most of us already know, thatâs not typically how credit works. Credit cards are backed by banks, and banks have rules for a reason.
Now, hereâs the good news: Credit cards can help rebuild your credit, earn cash back for each dollar you spend, make travel easier, and serve as an emergency fund if youâre stuck paying a huge bill at the last minute. This is true even if you have poor credit, although the selection of credit cards you can qualify for may be somewhat limited.Â
Keep reading to learn about the best credit cards for bad credit, how they work, and how you can get approved.
Best Cards for Bad Credit This Year
Before you give up on building credit, you should check out all the credit cards that are available to consumers who need some help. Our list of the best credit cards for bad credit includes some of the top offers with the lowest fees and fair terms.
- Total Visa®
- Discover it® Secured
- Credit One Bank® Visa® Credit Card
- Secured Mastercard® from Capital One®
- Milestone® Gold Mastercard®
- Credit One Bank® Unsecured Visa® with Cash Back Rewards
#1: Total Visa®
The Total Visa® is one of the easiest credit cards to get approved for in today’s market, and itâs easy to use all over the world since itâs a true Visa credit card. However, this card does come with high rates and fees since itâs available to consumers with poor credit or a limited credit history.
Processing your application will cost $89, which is extremely high when you consider the fact that most credit cards donât charge an application fee. Youâll also pay an initial annual fee of $75 and a $48 annual fee for each year thereafter.
Once you sign up, youâll be able to pick your preferred card design and your credit card payments will be reported to all three credit reporting agencies â Experian, Equifax, and TransUnion. This is the main benefit of this card since your on-time payments can easily help boost your credit score over time.Â
For the most part, the Total Visa® is best for consumers who donât mind paying a few fees to access an unsecured line of credit. Since this card doesnât dole out rewards, however, there are few cardholder perks to look forward to.Â
- APR: 35.99% APR
- Fees: Application fee and annual fee
- Minimum Credit Score: Not specified
- Rewards: No
#2: Discover it® Secured
While secured cards donât offer an unsecured line of credit like unsecured credit cards do, they are extremely easy to qualify for. The Discover it® Secured may not be ideal for everyone, but it does offer a simple online application process and the ability to get approved with little to no credit history.
Keep in mind, however, that secured cards do work differently than traditional credit cards. With a secured credit card, youâre required to put down a cash deposit upfront as collateral. However, you will get your cash deposit back when you close your account in good standing.
Amazingly, the Discover it® Secured lets you earn rewards with no annual fee. Youâll start by earning 2% back on up to $1,000 spent each quarter in dining and gas. Youâll also earn an unlimited 1% back on everything else you buy.
The Discover it® Secured doesnât charge an application fee or an annual fee, although youâll need to come up with the cash for your initial deposit upfront. For the most part, this card is best for consumers who have little to no credit and want to build their credit history while earning rewards.
- APR: 24.74%
- Fees: No annual fee or monthly fees
- Minimum Credit Score: Not specified
- Rewards: Yes
#3: Credit One Bank® Visa® Credit Card
The Credit One Bank® Visa® Credit Card is another credit card for bad credit that lets you earn rewards on your everyday spending. Youâll earn a flat 1% cash back for every dollar you spend with this credit card, and since itâs unsecured, you donât have to put down a cash deposit to get started.
Other benefits include the fact you can get pre-qualified for this card online without a hard inquiry on your credit report â and that you get a free copy of your Experian credit score on your online account management page.
You may be required to pay an annual fee up to $95 for this card for the first year, but it depends on your creditworthiness. After that, your annual fee could be between $0 and $99.
- APR: 19.99% to 25.99%
- Fees: Annual fee up to $95 the first year depending on creditworthiness; after that $0 to $99
- Minimum Credit Score: Not specified
- Rewards: Yes
#4: Secured Mastercard® from Capital One®
The Secured Mastercard® from Capital One® is another secured credit card that extends a line of credit to consumers who can put down a cash deposit as collateral. This card is geared to people with bad credit or no credit history, so itâs easy to get approved for. One downside, however, is that your initial line of credit will likely be just $200 â and that doesn’t give you much to work with.Â
On the upside, this card doesnât charge an annual fee or any application fees. That makes it a good option if you donât want to pay any fees you wonât get back.
Youâll also get access to 24/7 customer service, $0 fraud liability, and other cardholder perks.
- APR: 26.49%
- Fees: No ongoing fees
- Minimum Credit Score: Not specified
- Rewards: No
#5: Milestone® Gold Mastercard®
The Milestone® Gold Mastercard® is an unsecured credit card that lets you get pre-qualified online without a hard inquiry on your credit report. You wonât earn any rewards on your purchases, but you do get benefits like the ability to select your cardâs design, chip and pin technology, and easy online account access.
You will have to pay a one-time fee of $25 to open your account, and thereâs an annual fee of $50 the first year and $99 for each year after that.
- APR: 24.90%
- Fees: Account opening fee and annual fees
- Minimum Credit Score: Not specified
- Rewards: No
#6: Credit One Bank® Unsecured Visa® with Cash Back Rewards
The Credit One Bank® Unsecured Visa® with Cash Back Rewards lets you earn 1% back on every purchase you make with no limits or exclusions. Thereâs no annual fee or application fee either, which makes this card a winner for consumers who donât want to get hit with a lot of out-of-pocket costs.
As a cardholder, youâll get free access to your Experian credit score, zero fraud liability, and access to a mobile app that makes tracking your purchases and rewards a breeze. You can also get pre-qualified online without a hard inquiry on your credit report.
- APR: 25.99%
- Fees: No annual fee or application fee
- Minimum Credit Score: Not specified
- Rewards: Yes
The Downside of Credit Cards with Bad Credit
While your odds of getting approved for one of the credit cards for bad credit listed above are high, you should be aware that there are plenty of pitfalls to be aware of. Here are the major downsides youâll find with these credit cards for bad credit and others comparable cards:
- Higher fees: While someone with excellent credit can shop around for credit cards without any fees, this isnât the case of you have bad credit. If your credit score is poor or you have a thin credit profile, you should expect to pay higher fees and more of them.
- Higher interest rates: While some credit cards come with 0% interest for a limited time or lower interest rates overall, consumers with poor credit typically have to pay the highest interest rates available today. Some credit cards for bad credit even come with APRs as high as 35%.
- No perks: Looking for cardholder benefits like cash back on purchases or points toward airfare or movie tickets? Youâll need to wait until your credit score climbs back into âgoodâ or âgreatâ territory. Even if you can find a card for applicants with bad credit that offers cash back, your rewards may not make up for the higher fees.
- No balance transfers: If youâre looking for relief from other out-of-control credit card balances, look elsewhere. Credit cards for bad credit typically donât offer balance transfers. If they do, the terms make them cost-prohibitive.
- Low credit limits: Credit cards for bad credit tend to offer initial credit limits in the $300 to $500 range with the possibility of increasing to $2,000 after a year of on-time monthly payments. If you need to borrow a lot more than that, youâll have to consider other options.
- Security deposit requirement: Secured credit cards require you to put down a cash deposit to secure your line of credit. While this shouldnât necessarily be a deal-breaker â and it may be required if you canât get approved for an unsecured credit card â youâll need to come up with a few hundred dollars before you apply.
- Checking account requirement: Most new credit card accounts now require cardholders to pay bills online, which means youâll need a checking account. If youâre mostly âunbanked,â you may need to open a traditional bank account before you apply.
Benefits of Improving Your Credit Score
People with bad credit often consider their personal finances a lost cause. The road to better credit can seem long and stressful, and itâs sometimes easier to give up then it is to try to fix credit mistakes youâve made in the past.
But, there are some real advantages that come with having at least âgoodâ credit, which typically means any FICO score of 670 or above. Here are some of the real-life benefits better credit can mean for your life and your lifestyle:
- Higher credit limits: The higher your credit score goes, the more money banks are typically willing to lend. With good credit, youâll have a better chance at qualifying for a car loan, taking out a personal loan, or getting a credit card with a reasonable limit.
- Lower interest rates: A higher credit score tells lenders youâre not as risky as a borrower âa sign that typically translates into lower interest rates. When you pay a lower APR each time you borrow, you can save huge amounts of money on interest over time.
- Lower payments: Borrowing money with a lower interest rate typically means you can usually get lower payments all your loans, including a home loan or a car loan.
- Ability to shop around: When youâre an ideal candidate for a loan, you can shop around to get the best deals on credit cards, mortgages, personal loans, and more.
- Ability to help others: If your kid wants to buy a car but doesnât have any credit history, better credit puts you in the position to help him or her out. If your credit is poor, you wonât be in the position to help anyone.
- More options in life: Your credit score can also impact your ability to open a bank account or rent a new apartment. Since employers can request to see a modified version of your credit report before they hire you, excellent credit can also give you a leg up when it comes to beating out other candidates for a job.Â
In addition to the benefits listed above, most insurance companies now consider your credit score when you apply for coverage. For that reason, life, auto, and home insurance rates tend to be lower for people with higher credit scores.
This may seem unfair, but you have to remember that research has shown people with high credit scores tend to file fewer insurance claims.
How to Improve Your Credit: Slow and Steady
When you have a low credit score, there are two ways to handle it. If you don’t mind the consequences of poor credit enough to do anything about it, you can wait a decade until the bad marks age off your credit report. Depending on when your creditors give up and write off your debt, you may not even need to wait that long.
If you donât like the idea of letting your credit decay while you wait it out, you can also try to fix your past credit mistakes. This typically means paying off debt â and especially delinquent debts â but it can also mean applying for new loan products that are geared to people who need to repair their credit.
If you decide to take actionable steps to build credit fast, the credit cards on this page can help. Theyâll give you an opportunity to show the credit bureaus that youâve changed your ways.
Before you take steps to improve your credit score, however, keep in mind all the different factors used to determine your standing in the first place. The FICO scoring method considers the following factors when assigning your score:
- On-time payments: Paying all your bills on time, including credit cards, makes up 35% of your FICO score. For that reason, paying all your bills early or on time is absolutely essential.
- Outstanding debts: How much you owe matters, which is why paying off your credit cards each month or as often as possible helps your score. According to myFICO.com, the amounts you owe in relation to your credit limits make up another 30% of your FICO score.
- New credit: Apply for too many new cards or accounts at once can impact your score in a negative way. In fact, this determinant makes up another 10% of your FICO score.
- Credit mix: Having a variety of open accounts impresses the credit bureau algorithm Gods. If all you have are personal loans right now, mixing in a credit card can help. If you already have four or five credit cards, it may be wise to back off a little.
- Length of credit history: The length of your credit history also plays a role in your score. The longer your credit history, the better off you are.
If you want to improve your credit score, consider all the factors above and how you can change your behavior to score higher in each category. Itâs pretty easy to see how paying all your bills early or on time and paying off debt could make a big positive impact on your credit score when you consider that these two factors alone make up 65% of your FICO score.
If you want a way to track your progress, also look into an app like Credit Karma, one of my favorite tools. This app lets you monitor your credit progress over time and even receive notifications when your score has changed. Best of all, itâs free.
Should You Use a Credit Card to Rebuild Your Credit Score?
If youâre on the fence about picking up a credit card for bad credit, your first step should be thinking over your goals. What exactly are you trying to accomplish?
If youâre looking for spending power, the cards on this list probably wonât help. Some are secured cards, meaning you need a cash deposit to put down as collateral. Others offer low credit limits and high fees and interest rates, making them costly to use over the long-term.
If you really want to start over from scratch and repair credit mistakes made in the past, on the other hand, one of these cards may be exactly what you need. If youâre determined to improve your score, they can speed things along.
You may pay higher fees and interest rates along the way, but itâs important to remember that none of the cards on this list need to be your top card forever. Ideally, youâll use a credit card for poor credit to rebuild your credit and boost your score. Once youâve reached your goal, you can upgrade to a new card with better benefits and terms.
The post Best Credit Cards for Bad Credit appeared first on Good Financial Cents®.
Source: goodfinancialcents.com
Does Refinancing Hurt Your Credit?
Before you make any big financial decision, it’s crucial to learn how it may affect your credit score. If youâre looking to refinance, itâs natural to wonder if it might hurt your credit.
Typically, your credit health will not be strongly affected by refinancing, but the answer isnât always black and white. Whether youâre still considering your options or already made your choice, weâve outlined what you need to know about refinancing below.
What Is Refinancing?
Refinancing is defined by taking on a new loan to pay off the balance of your existing loan balance. How you approach a refinancing decision depends on whether itâs for a home, car, student loan, or personal loan. Since refinancing is essentially replacing an existing debt obligation with another debt obligation under different terms, itâs not a decision to take lightly.
If youâre worried about how refinancing will affect your credit health, remember that there are multiple factors that play into whether or not it hurts your credit score, but the top three factors are:
1) Having a Solid Credit Score
You wonât be in a strong position to negotiate refinancing terms without decent credit.
2) Earning Sufficient Income
If you canât prove that you can keep up with loan payments after refinancing, it wonât be possible.
3) Proving Sufficient Equity
Youâll also need to provide assurance that the payments will still be made if your income canât cover the cost. Itâs recommended that you should have at least a 20 percent equity in a property when refinancing a home.
How Does Refinancing Hurt Your Credit?
Refinancing might seem like a good option, but exactly how does refinancing hurt your credit? In short, refinancing may temporarily lower your credit score. As a reminder, the main loan-related factors that affect credit scores are credit inquiries and changes to loan balances and terms.
Credit Inquiries
Whenever you refinance, lenders run a hard credit inquiry to verify your credit score. Hard credit inquiries typically lower your credit scores by a few points. Try to avoid incurring several new inquiries by using smart rate shopping tactics. It also helps to get all your applications in during a 14â45 day window.
Keep in mind that credit inquiries made during a 14â45 day period could count as one inquiry when your scores are calculated, depending on the type of loan and its scoring model. Regardless, your credit wonât be permanently damaged because the impact of a hard inquiry on your credit decreases over time anyway.
Changes to Loan Balances and Terms
How much your credit score is impacted by changes to loan balances and terms depends on whether your refinanced loan is reported to the credit bureaus. Lenders may report it as the same loan with changes or as an entirely new loan with a new open date.
If your loan from refinancing is reported as a new loan, your credit score could be more prominently affected. This is because a new or recent open date usually means that it is a new credit obligation, therefore influencing the score more than if the terms of the existing loan are simply changed.
How Do Common Types of Refinancing Affect Your Credit?
Refinancing could help you pay off your loans quicker, which could actually improve your credit. However, there are multiple factors to keep in mind when refinancing different types of loans.
Refinancing a Mortgage
Refinancing a mortgage has the biggest potential impact on your credit health, and it can definitely affect your FICO score. How can you prevent refinancing from hurting your credit too much? Try concentrating your credit inquiries when you shop mortgage rates to a 14â45 day window â this will help prevent multiple hard inquiries. Also, you can work with your lenders to avoid having them all run your credit, which could risk lowering your credit score.
If youâre unsure about when to refinance your mortgage, do your research to capitalize on the best timing. For example, refinancing your mortgage while rates are low could be a viable option for you â but it depends on your situation. Keep in mind that losing your record of paying an old mortgage on time could be harmful to your credit score. A cash-out refinance could be detrimental, too.
Refinancing an Auto Loan
As you figure out if refinancing your auto loan is worth it, be sure to do your due diligence. When refinancing an auto loan, youâre taking out a second loan to pay off your existing car debt. In some cases, refinancing a car loan could be a wise move that could reduce your interest rate or monthly payments. For example, if youâre dealing with an upside-down auto loan, you might consider refinancing.
However, there are many factors to consider before making an auto loan refinancing decision. If the loan with a lower monthly payment has a longer term agreement, will you be comfortable with that? After all, the longer it takes to pay off your car, the more likely it is to depreciate in value.
Refinancing Student Loans
When it comes to student loan refinancing, a lower interest rate could lead to major savings. Whether youâve built up your own strong credit history or benefit from a cosigner, refinancing can be rewarding.
Usually, you can refinance both your federal and private student loans. Generally speaking, refinancing your student loans shouldnât be detrimental in the grand scheme of your financial future. However, be aware that refinancing from a federal loan to a private loan will have an impact on the repayment options available to you. Since federal loans can offer significantly better repayment options than private loans, keep that in mind before making your decision.
Pros | Cons |
---|---|
If the cost of borrowing is low, securing a lower interest rate is possible | Credit scores can drop due to credit checks from lenders |
If your credit score greatly improved, you can refinance to get a better rate | Credit history can be negatively affected by closing a previous loan to refinance |
Refinancing a loan can help you lower expenses in both the short term and long term | Refinancing can involve fees, so be sure to do a cost-benefit analysis |
How to Prevent Refinancing from Hurting Your Credit
By planning ahead, you can put yourself in a position to not let refinancing negatively affect your credit and overall financial health.
Try to prepare by reading your credit reports closely, making sure there are no errors that could keep your credit application from being approved at the best possible rate. Stay one step ahead of any errors so you still have time to dispute them. As long as you take preventative measures in the refinancing process to save yourself time and money, you shouldnât find yourself struggling with the refinancing.
If refinancing makes sense for your situation, you shouldnât be concerned about it hurting your credit. It might not be the most ideal situation, but itâs extremely common and typically relatively easy for your credit score to bounce back.
If you notice that your new loan from refinancing causes alarming changes when you check your credit score, be sure to reach out to your creditor or consider filing a dispute. As long as youâre prioritizing your overall financial health through smart decision making and budgeting, refinancing shouldnât adversely hurt your credit in the long run.
The post Does Refinancing Hurt Your Credit? appeared first on MintLife Blog.
Source: mint.intuit.com
Learning How To Survive On A College Budget
College is expensive and everyone knows that.
Between paying for tuition, parking, textbooks, extra fees, and everything else, you also have basic living expenses to pay for as well.
All of these costs are either brand new or somewhat new to you most likely as well, so you might not even know how to survive on a budget, let alone a college budget.
Don’t worry, though, surviving on a college budget is possible. Learning how to save money in college is possible!
Related post: How I Paid Off $40,000 In Student Loans In 7 Months
Whether you are trying to survive the whole year off of what you made over the summer or if you have a steady job throughout the school year, there are ways to budget your money and not fall into any extra debt. Plus, you can still enjoy your college years on a low budget as well!
Below are my tips on how to survive on a college budget.
Use your student ID.
Your student ID is good at many places beyond just your college campus. Before you buy anything, I highly recommend seeing if a company offers a student discount.
Your student ID can be used to save money at restaurants, clothing stores, electronics (such as laptops!), at the movies, and more. You may receive a discount, free items, and more all just by flashing your student ID.
After all, you are paying to go to college and you are paying a lot. You might as well reap one benefit of paying all of those high college costs.
Make extra money.
You may need to look into making extra money if you just don’t have enough to survive on. I am a firm believer in making extra money and I think extra time can be wisely spent doing this.
Some online side gigs with flexible schedules include:
- Blogging is how I make a living and just a few years ago I never thought it would be possible. I made over $150,000 last year by blogging and will make more than that in 2015. You can create your own blog here with my easy-to-use tutorial. You can start your blog for as low as $3.49 per month plus you get a free domain if you sign-up through my tutorial.
- Survey companies I recommend include Survey Junkie, American Consumer Opinion, Product Report Card, Pinecone Research, Opinion Outpost, and Harris Poll Online. They’re free to join and free to use! It’s best to sign up for as many as you can because that way you can receive the most surveys and make the most money.
- InboxDollars is an online rewards website I recommend. You can earn cash by taking surveys, playing games, shopping online, searching the web, redeeming coupons, and more. Also, by signing up through my link, you will receive $5.00 for free!
- Swagbucks is something I don’t use as much, but I do earn Amazon gift cards with very little work. Swagbucks is just like using Google to do your online searches, except you get rewarded points called “SB” for the things you do through their website. Then, when you have enough points, you can redeem them for cash, gift cards, and more. You’ll receive a free $5 bonus just for signing up today!
- Check out 75 Ways To Make Extra Money for more ideas.
- Read Best Online Jobs For College Students
Use coupons to stay on a college budget.
Just like with the above, you may want to start using coupons.
By doing so, you can save money on nearly everything. You can find coupons in newspapers, online, and in the mail. They are everywhere so you should have no problem finding them and saving money today.
Related post: How To Live On One Income
Learn how to correctly use a credit card or don’t have one at all.
Many college students fall into credit card debt, but I don’t want you to be one of them.
Many college students will start relying on their credit cards in order to get them through their low college budget, but this can lead to thousands of dollars of credit card debt which will eventually seem impossible to get out of due to significant interest charges that keep building up.
In order to never get into this situation, you should avoid credit cards at all costs if you think you will rely on them too heavily.
You should think long and hard about whether you should have one or not. Just because many others have them doesn’t mean they know what they’re doing! However, if you think you will be good at using them, then there are many advantages of doing so.
Related post: Credit Card Mistakes That Can Lead To Debt
Only take out what you need in student loans.
Many students take out the full amount in student loans that they are approved for even if they only need half.
This is a HUGE mistake. You should only take out what you truly need, as you will need to pay back your student loans one day and you will most likely regret it later.
I know someone who would take out the max amount each semester and buy timeshares, go on expensive vacations, and more. It was a huge waste of money and I’m still not even sure why they thought it was a good idea.
Just think about it – If you take out an extra $2,000 a semester, that means you will most likely take out almost $20,000 over the time period that you are in college.
Do you really want to owe THAT much more in student loans?
Skip having a car.
Most campuses have everything you need in order to survive – food, stores, and jobs. In many cases, you do not need to have a car whatsoever.
By foregoing a car, you may save money on monthly payments, maintenance costs, car insurance, gas, and more.
Related post: Should We Get Rid Of A Car And Just Have One?
Eat out less.
Now, I’m not saying you should stop eating out entirely if you are trying to survive on a college budget. I know how it is to be in college and to want to hang out with everyone. These are your college years after all.
However, you should try to eat in as much as you can, make your own meals, and try to eat out only during happy hours or when food is cheaper, such as during lunch time. Eating out can ruin your college budget!
Have a roommate.
The more people you live with, generally the less you will pay when it comes to rent and utilities. If you are living on your own, then you may want to find roommates so that you can split the costs with them.
This will help you to lower your college budget and you may even find some awesome friends.
Related post: What I Learned Having Roommates
What college budget tips do you have?
The post Learning How To Survive On A College Budget appeared first on Making Sense Of Cents.
Source: makingsenseofcents.com