Late Payments, Credit Scores and Credit Reports

A missed credit card or loan payment can have a seriously detrimental effect on your credit report. The golden rule of using a credit card is to make your payments on time every time, building a respectable payment history, avoiding debt, and keeping your creditor happy.

But what happens when you fall behind with your monthly payments; what happens when you miss a single loan or credit card payment as a result of a mistake, an oversight or a lack of funds? How will your creditor react, how quickly will the credit reporting agencies find out, and what options do you have for getting back on your feet?

How Late Payments Affect Your Credit Score

A late payment can reduce your credit score significantly and remain on your report for 7 years. It won’t impact your score throughout that time and the longer you leave it, the less of an impact it will have. However, the impact could be significant for individuals with good credit and bad credit.

As an example, if you have a credit score of 750 to 800, which is towards the upper end, a late payment could knock up to 710 points from your score. More importantly, it will remain on your payment history for years to come and reduce your chances of getting everything from a student loan to a credit card and mortgage.

How Soon do Late Payments Show on Credit Reports

You won’t be hit with a derogatory mark as soon as you miss a credit card payment. The credit card issuer may charge you a fee, but by law, they are not allowed to market it as a missed payment until it is 30 days due. And this doesn’t just apply to credit card debt, it’s true for loans as well.

Providing you cover the payment within 30-days, you can avoid a missed payment mark appearing on your credit report. But as soon as that period passes, your lender will inform the major credit bureaus and your score will take a hit.

Some lenders wait even longer before reporting, so you may have as long as 60 days to make that payment. Check with your creditor to see when they start reporting missed payments.

What About Partial Payments?

Many lenders treat a partial payment the same as a missed payment, especially where credit cards are concerned. If you’re struggling to meet your payment obligations, contact your creditor in advance, tell them how desperate your situation is and inform them that you can meet part of the payment.

They may offer you some reprieve, they may not, but you won’t know if you don’t ask. However, it’s worth noting that this will only impact your score if you don’t cover the remaining credit card payment before the 30-day period is up.

To avoid confusion, we should also mention that this only applies to the minimum payment. Some credit card users get confused with the difference between a balance and a minimum payment.

Simply put, the balance is what you clear at the end of the month to avoid accumulating debt and paying interest. If you fail to pay that balance on time, your debt will simply roll over to the next month, after which you will be required to meet a minimum payment on your debt. If, however, you miss that minimum payment, then you’re at risk of your credit report taking a hit.

Reporting agencies don’t record the difference between a rolling balance and a debt. If you spend $3,000 on your card every month but pay it off without fail and without delay, you won’t accumulate interest and technically, you won’t have debt. However, at the end of the month, the reporting agencies will show that you owe $3,000 on that card, just as they would show if you had accumulated a balance of $1,000 a month for three months and let it rollover.

How Long Does a Late Payment Stay?

A late payment will remain on your credit report for 7 years. But herein lies another confusion. Just because it reduces your score by 100 points and remains for 7 years doesn’t mean you will suffer a reduction of 100 points for those 7 years. 

It generally stops having a major impact on your score after a couple of years and while it will still have an impact in that 7-year period, it will be infinitesimal by the time you reach the end.

How Many Late Payments Can You Make Before it Reduces Your Score?

One late credit card payment is all it takes to reduce your score, providing that late payment was delayed by at least 30-days. However, that doesn’t mean you can forget about it once the 30-day period has passed and it definitely doesn’t mean that all the possible damage has been done.

It can and will get worse if you continue to avoid that payment. Your credit report will show how late the payment is in 30-day installments. When it reached 180 days, your account will enter default and may be charged-off, which will reduce your score and your chances of acquiring future credit even more.

Your creditor may sell your account to a collection agency. If this happens, the agency will chase you for repayment, seeking to establish a repayment plan or to request a settlement. Accounts are often in this stage when a consumer goes through debt settlement, as creditors and debt collectors are typically more susceptible to accepting reduced settlements because the debt has all but been written off.

How to Remove Late Payments from Your Credit Report

Although rare, it is possible to remove late payments from your credit report. There are also numerous ways you can reverse late payment fees, and we recommend trying these whenever you can as it will save you a few bucks.

Here are a few options to remove late payments and late payment fees:

Use Your Respectable History

The quickest way to get what you want is to ask for it. If you have a clean credit history and have made your payments on time in the past, you can request that the fee/mark be removed. 

Write them a letter requesting forgiveness, explain that it was an oversight or a temporary issue and point to your record as proof that this will likely not happen again. Creditors may seem like heartless corporations, but real humans make their decisions for them and, like all companies, they have to put their customers first.

Request Automatic Payments

Lenders have been known to remove late payment fees if the debtor signs up for automatic payments. It makes their job easier as it prevents issues in the future and ensures they get what they are owed, so it’s something they actively promote.

They may make this offer themselves, but if not, contact them and ask them if there is anything you can do to remove the late payment. They should bring this up; if they don’t, you can. It doesn’t hurt to ask and the worse they can do is say no.

Claim Difficulties

If you claim financial difficulties or hardships and make it clear that a late payment will make those difficulties much worse, the lender may be willing to help. Contrary to what you might think, their goal is not to make life difficult for you and to destroy you financially. 

It’s important to see things from their perspective. If you borrow $15,000 and your balance climbs to $20,000 with interest, their main goal is to get that $15,000 back, after which everything else is profit. If you pay $10,000 and start slipping-up, the risk of default will increase. The worse your financial situation becomes, the higher that risk will be. 

If they eventually sell the account to a debt collector, that remaining $10,000 could earn them just a couple of hundred dollars, which means they will lose a substantial sum of money. They are generally willing to help any way they can if doing so will increase their profits.

How to Avoid Late Payments

A late payment can do some serious damage to your payment history so the best thing to do is to prevent it from occurring in the first place. It’s a no-brainer, but this is a common issue and it’s one that countless consumers have every single year. So, keep your credit card and loan payments stable with these tips.

Set Automatic Payments

Occasionally, consumers forget to pay. Life is hectic, they have a lot of responsibilities to juggle, and it’s easy for them to overlook a single payment. If this happens, it should be caught and fixed before the 30-day period ends and the credit bureaus find out. But even then, fees can accumulate, and problems escalate.

To avoid this, set up automatic payments so your minimum payment is paid in full every month. You can do this for all debt, including student loan payments. Just make sure you have the money in your account to meet this minimum charge, otherwise, you could be paying for debt on one account by accumulating it on another.

Set a Budget

A credit card is designed to encourage you to spend money you don’t have. You’re buying things you can’t afford now in the hope or expectation that you will cover them later, only to realize that you’re struggling so much you can’t even cover the minimum payment.

If you ever find yourself in a situation like this, it’s time to analyze your finances and create a sensible budget. You may feel like you have a good idea of what you’re spending each month and how this compares to your gross income, but the vast majority of consumers seriously underestimate their expenses.

Improve Your Credit by Fixing Your Debt-to-Income Ratio

Calculate your debt to income ratio by comparing your total debt (credit card payments, student loans) to your gross income. The higher this is, the harder you need to work, and the less you need to spend on your credit card. 

Your debt to income ratio should be your central focus when seeking to improve your credit score, because while it’s not considered for loan and credit card applications, it does play a role in mortgage applications and is important for calculating affordability.

Conclusion: It’s Not the End of the World

A late payment can strike a disastrous blow to your credit report, but it’s not the end of the world and you do have a few options at your disposal. Not only do you have up to 30 (and sometimes 60) days to make the payment and prevent a derogatory market, but you can file a claim to have it removed in the event that it does appear.

And if none of that works, a little credit repair can get you back on track. Just keep making those payments every month, talk with your lender when you find yourself in trouble, and remember that nothing is unfixable where credit is concerned.

Late Payments, Credit Scores and Credit Reports is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

The Best Time to Buy a TV, Mattress and More: Here’s Your Guide

Some purchases are tough to plan: car repairs, patches for a leaky roof, a working furnace right before the big snowstorm hits.

But more often than not, you can plan ahead for life’s necessities — and some non-necessities, too.

Before you let an impulse buy drain your bank account, consult our handy calendar of the best time to buy absolutely everything. You might be surprised at the deals each new season brings!

Our Guide to the Best Time to Buy Everything

Be a smart shopper and plan your purchases according to this calendar, which plots the best deals, month by month.

What to Buy in January

Kick off the new year with big savings.

TVs

Retailers know that the newest TVs and other electronics are revealed at the annual Consumer Electronics Show in January. This makes January the best time to buy a TV, thanks to major discounts — as long as you don’t covet the new, fancy models too much.

Calendars

No need to rush to the bookstore in December to get a new wall or desk calendar. Buy one in January to get a discount.

Gym Memberships and Home Fitness Equipment

The pandemic may have kept you out of the gym, and you might still be hesitant to return. But gyms are known to offer big incentives to sign up and get fit in the New Year. Home gym equipment also goes on sale in January, as do scales, according to Consumer Reports. Here’s some guidance on what equipment you need for a good, affordable home gym.

Linens

The yearly tradition of hosting a white sale dates back to the 1870s, when linens were only available in white. But modern white sales include linens and home goods in every color of the rainbow.

Don’t be swayed by sheets with super-high thread counts — you probably don’t know what different thread counts feel like.

Christmas Gear

I know, you have an entire 11 months until you get invited to your next ugly sweater party. But my Goodwill intel reports that January is the best time to find a truly hideous sweater for way cheap. Other Christmas supplies are also on sale in January, including holiday cards and decorations.

What to Buy in February

Fall in love with these deals during February.

Mattresses

Presidents Day is a good time to buy a mattress because it gives you a long weekend to shop with your partner for an item you should both agree on before buying.

That’s why retailers use the holiday to post sales on pricy items many people have put off buying or replacing for a while. Take advantage.

Jewelry

One of the best times to buy jewelry is in February — but only after Valentine’s Day.

Look for deep discounts after retailers remove their rose-colored glasses. It’s not worth paying the “love tax” to celebrate with your sweetheart, anyway.

Also look for discounts on other Valentine’s Day goods, such as cards and chocolate after the holiday itself.

Winter Coats

Winter coats take up a ton of room in your closet and just as much room in stores. Help retailers clear ’em out this month, and you’ll get a big discount.

What to Buy in March

Spring forward by making these smart purchases in March.

A woman carries her luggage down an alleyway in Europe.

Luggage

Don’t wait until a week before your big family vacation to get a new suitcase. March is the best time to buy luggage, as it’s on sale to entice shoppers who are desperate to be done with their snowy, dreary winters and who crave a little spring break.

Just don’t forget where you put it when it’s time to pack.

What to Buy in April

The smart shopper always plans ahead.

Tools

You don’t have to wait until Father’s Day to find excellent prices on tools and home improvement gear.

If you’re eager to start your home DIY projects in the spring, go ahead and shop now.

Sneakers

Everyone’s finally going outside again. Let sporting goods stores make it easier for you to keep up with your New Year’s resolution (remember that?) by discounting those new kicks.

What to Buy in May

Is your refrigerator running? If not, May is a great time to get a new one.

Baby Gear

I understand you’re not going to time your baby’s birth to get the best deal on all their accoutrements.

But if your kiddo needs a new stroller or high chair, May is a good time to shop, according to Consumer Reports — especially if you can grab the Memorial Day deals.

Refrigerators

New refrigerator models debut in the summer. Shop in May to get last year’s model at a better price.

You can’t tell the difference between last year’s refrigerator models and this year’s, right? Didn’t think so.

Also look for deals on other necessities like freezers, oven ranges and air conditioners, according to Consumer Reports.

What to Buy in June

Here come the… deals?

A young girl watches a movie on her iPhone on a plane.

Vacation Tickets

Hopefully 2021 proves to be a better year for travel. Planning a summer vacation? Travel early or late in the summer instead of during peak times. And you’ll pay less for airfare if you can travel midweek.

Outdoor Gear

Now that summer is in full swing, outdoor gear — like tents, backpacks, lanterns and even fitness gear — is marked down.

Cookware and China

June is typically peak wedding season, and stores hope you’ve planned ahead to buy wedding registry gifts.

Now is when those items are discounted, and it’s the perfect time to replace or upgrade what’s in your own cabinets.

What to Buy in July

Don’t sweat these savings.

Furniture

New styles hit stores in February and August, so retailers spend much of July clearing out old stock, especially over Fourth of July weekend — making this the best time to buy furniture.

Dehumidifiers

July means humidity. Pick up an older version of a much-needed dehumidifier in July or August, according to Consumer Reports.

What to Buy in August

The dog days of summer offer some amazing bargains.

Computers (Except Apple Products)

Computer manufacturers typically release their new models in the summer, so back-to-school sales are a great time to buy last season’s model. The specs probably won’t be different enough for you to notice, unless you’re a hardcore gamer or designer.

Apple products, however, typically get announced in the fall, so hold off to get that new MacBook.

Grills

Grilling season doesn’t stop at the stroke of Labor Day. Buy at the tail end of summer to enjoy your grill until almost Thanksgiving (OK, depending on where you live).

What to Buy in September

Back to school? More like back to the checkout lane.

Thanksgiving Flights

Generally, September is the best month to buy Thanksgiving flights.

Swimsuits

Even though your local pool might be closed for the season, you should think about stocking up on swimsuits for next year.

A House

This might not be a frequent purchase, but if you’re in the market for a new home, it can help to hold off past the busy spring and summer buying seasons.

Your costs typically drop a few percentage points at the end of September (after the kids have gone back to school), making this the best time to buy a house.

What to Buy in October

There’s a joke about spooky deals in here, but I won’t make it.

Denim

Jeans typically get discounted in October, after back-to-school sales have ended and families are stocked up on fall attire.

Patio Furniture

Goodbye summer, hello savings.

It’s worth checking out the patio furniture if you don’t mind storing it over the winter. When that first warm spring day hits, you’ll be ready to bask in the sunshine.

Leaf Blowers

October means fall leaves — and they are likely covering your yard. Pick up a leaf blower, and while you’re at it, get ready for the snowy days ahead with a snow blower, according to Consumer Reports.

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What to Buy in November

The days get shorter, but the deals get bigger.

Small Appliances

This time of year is ripe with rock-bottom prices on giftable small appliances.

If you’re looking for a blender, food processor, coffee maker or anything else that’ll proudly take up space on your kitchen counter, it’s worth waiting until Black Friday sales begin in stores and online.

A woman gets her wedding gown fastened in the back.

Wedding Gowns

Bridal shops are slow before the proposal rush during the holiday season, so the few weeks before Thanksgiving is a good time to start trying on gowns.

Ask about sample sales and last year’s styles that may be priced to move.

What to Buy in December

Celebrate the season… by shopping smart, obviously.

Swimming Pools

If your family’s been begging for a backyard pool, December is the best time to have one installed. It might be chilly, but pool pros would rather avoid working on 90-degree days!

Plus, when their workload slows in the winter, many contractors are willing to lower their prices.

Toys

Toy deals stick around after those Black Friday and Cyber Monday sales in November.

Even if you’re done with holiday shopping for your little ones, consider picking up their favorite character and activity toys while they’re still discounted to stash away for birthdays.

Lisa Rowan is a former staff writer and producer at The Penny Hoarder.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Source: thepennyhoarder.com

A Complete Guide To Paying Your Federal Taxes With A Credit Card, Updated For 2021

Updated for 2021. The major change was Pay1040 increasing fees from 1.86% to 1.99% for credit card payments, making it no longer the cheapest option.

It’s that time of the year again, time to pay taxes! For a lot of people, this is their biggest expense of the year and wouldn’t it be great if you could pay your taxes with a credit card? Well as the IRS website clearly states, you can.

Disclaimer: We’re not accountants, this does not constitute tax advice. Please consult a tax professional.

The Basics

The Tax Payer Relief Act of 1997 allowed the IRS to accept credit & debit card payments (under section 6311(a)) and payments were able to made from January 1st, 1999 onwards due to this temporary act. The IRS has authorized three third party providers to process tax federal taxes on their behalf: Pay1040, PayUSAtax & ACI Payments (formerly Official Payments). The reason why the IRS doesn’t process credit cards directly is they are forbidden from charging fees directly for these services due to other federal laws. None of the money these providers collects goes to the IRS and some of these providers can also be used to pay State taxes (we’ll cover this in another separate post).

In this guide we’re going to assume you have the cash to pay your credit card in full, if you don’t have the ability to do this then paying with a credit card is a terrible idea due to the high interest rates credit cards charge. If you can’t pay in full then you’ll most likely be better off with a payment plan/installment agreement with the IRS, more information on this can be found here.

Obviously all these third party providers charge fees (ranging from 1.9% to 2%), those fees are what we look at first.

Another option is to use the Plastiq bill payment service. Plastiq allows paying any bill, including tax payments, with a credit or debit card.

Fees

Obviously all these third party providers charge fees (ranging from 1.96% to 1.99%), those fees are what we look at first. We’ve also included the fees for debit card payments and digital wallet payments.  According to Way Back Machine, the fees have been very similar for awhile now (actually mostly getting slightly cheaper since 2012).

  Debit Cards Credit Cards Digital Wallet
Pay1040.com $2.58 flat fee for consumer/personal cards and 1.99% for all other debit cards (minimum $2.58) 1.99% (minimum $2.58) See debit/credit card fees
PayUSAtax.com $2.55 flat fee 1.96% (minimum fee $2.69) See debit/credit card fees
ACI Payments (formerly OfficialPayments.com/Fed) $2.00 flat fee ($3.95 for payments over $1,000) 1.99% (minimum $2.50). AmEx over $100,000 is 1.9% See debit/credit card fees


There are higher fees if you use any tax preparation software, those can be viewed here.

As for Plastiq, the standard fee is 2.85% for Visa, Mastercard, Discover or Amex.

Making It Worth It

High Cash Back/Rewards Cards

As you can see, PayUSA is the cheapest option at 1.96%. Even if you used a credit card that earned 2% (e.g Fidelity Visa or Citi Doublecash) you’d only be making 0.04% profit. Even if you had to pay $10,000 in taxes, you’d be earning $200 in rewards but having to pay $196 in fees for a profit of $4. Not exactly worth it. Now if we could reduce our fees, then we might be onto something.

Claiming The Fees On Tax

On the IRS page you’ll notice the following (emphasis mine):

The fees vary by service provider and may be tax deductible

Personal Taxes

Update 2018/2019: Looks like 2%+ miscellaneous deduction option is gone effective 2018.

Nothing like something vague and ambiguous to give to confidence that you can claim these fees as a deduction. In 2009, the IRS introduced a new law that allows some people to deduct these expenses when you file electronically. You can view their statement on this on the official IRS website. Here is what you need to be aware of:

  • Convenience fees associated with payment of federal tax can be included as a miscellaneous itemized deduction
  • Only those miscellaneous expenses that exceed 2% of the taxpayer’s adjusted gross income can be deducted

You can view what the IRS considers a miscellaneous expense here. But for most people I doubt they will exceed 2% of their adjusted gross income. So there goes that idea.

Business Taxes

Things are a little clearer for business taxes, they state:

  • For business tax types, the fee is a deductible business expense.

Meeting Minimum Spend Requirements

As easy manufactured spending methods dry up, more and more people are happy to pay a fee to meet minimum spend requirements. That’s because they usually have large sign up bonuses relative to the minimum spend requirements.

Splitting Payments

If you owe $10,000 in taxes, then chances are you don’t want to be paying $187 in fees just to meet one minimum spend requirement (especially since most of them only require ~$3,000 or less in spending). Thankfully the IRS allow you to split your payments up, how many times you can do this depends on what sort of tax you’re paying. They provide a full table here.

If you use Plastiq, there is no limit to the amount of payments you can make. You’ll pay with a card, but each payment will be sent to the IRS via mailed check. The limits given by the IRS are only for card payments, not check payments.

Our Verdict

I think paying your taxes with a credit card is generally not worth the effort involved, unless you want to meet a minimum spend requirement and are happy to pay the fees involved. Even using a 2% card doesn’t net much profit unless you have a massive tax bill. Liquidating prepaid gift cards could still be worthwhile for some.

Feel free to ask other questions below and I’ll update the F.A.Q as we go along. Also remember that we’re not tax professionals, please consult with one of them relating to anything tax related.

F.A.Q’s

Do Any Credit Cards Code Any Of These Sites In A Bonus Category?

Your payment will be broken down into two different payments:

  • Your actual tax payment will show as “United States Treasury Tax Payment”
  • The convenience fee charged will show as ” Tax Payment Convenience Fee”

As far as I know no credit cards will earn a category bonus on this purchase. It’s possible that they do.

Can I Use Visa/Mastercard/American Express Gift Cards To Make A Payment?

Some people have had success in doing this in the past, apparently Official Payments allows you to use more than two debit cards when paying over the phone. Just keep in mind you’ll be paying a $2.25 fee per card. I have no idea if this still works or not.

Will I Be Charged A Cash Advance Fee?

As far as I’m aware, no major credit card issuers charge a cash advance fee. This is confirmed by the websites of each of the payment processors:

  • Pay1040
  • PayUSAtax
  • Official Payments
  • Plastiq

Post history:

Update: We’ve updated this post to make it relevant for 2020, hope you enjoy! One thing to note is that the IRS is no longer prevented from fees for processing credit/debit cards directly under 26 U.S. Code § 6311(d)(2) as amended. This won’t make a difference for this tax year, but might make things interesting for 2021. Hat tip to reader Superman

 

Source: doctorofcredit.com

What Is Cash Back?

What Is Cash Back?

Cash back is a rewards benefit that many credit cards offer to cardholders. By taking advantage of it, you’ll receive back a prespecified percentage of certain purchases you make. Many credit card companies will provide higher cash back rates on certain types of purchases, such as airfare, gas, food and more. Cash back is just one way that credit cards offer rewards, as mileage and points are some alternatives.

Before you spend too much money with your credit cards, make sure you have a financial plan in place. Speak with a financial advisor today.

What Is Cash Back?

The most commonly recognized style of cash back is what you have likely seen advertised as cash back credit cards. This specifically refers to earning a certain percentage of your credit card purchases back as cash rewards. However, cash back rates vary widely, as do the categories that they apply to.

You usually won’t see credit card cash back rates higher than 5%, while 1% is the typically minimum you will earn. Cash back categorization is significantly more complex though, with a merchant category code (MCC) system being the main organizing force.

MCCs run the entire cash back industry, as they ultimately decide how each purchase you make is classified. These designations coincide with cash back rates set by the issuer of your card. For example, you could use your card for a $50 dinner at a steakhouse, which has a “restaurant” code. If your card offers a 2% cash back rate on all spending at restaurants, you’d earn $1 cash back.

Familiar alternatives to cash back include point- and mile-based programs, though many cardholders are partial to cash back. Cash back affords cardholders an independence that is ideal, since you can redeem it for nearly anything.

Popular Cash Back Credit Cards

What Is Cash Back?

Discover, American Express, Mastercard and Visa all have cash back rewards credit cards available for prospective cardholders. Each abide by their own set of regulations, though card issuers decide on cash back rates, promotions and bonuses. Chase, Wells Fargo, Citi and Capital One represent some of the most active card issuers on the market today.

Below are a few examples of what you can expect to earn when looking for a cash back credit card:

Cash Back Credit Cards Card Name Cash Back Rates Cash Back Bonus Costco Anywhere Visa Card by Citi 4% cash back on eligible gas up to $7,000 per year, 3% cash back on eligible travel and restaurants, 2% cash back in-store and online with Costco and 1% cash back elsewhere None Bank of America® Cash Rewards credit card 3% cash back in a category of your choosing, 2% cash back at grocery stores and wholesale clubs and 1% cash back on all other purchases (up to a quarterly cap of $2,500 in combined grocery/wholesale club/choice category purchases) $200 bonus cash back for spending at least $1,000 over your first 90 days Capital One® Quicksilver® Cash Rewards Credit Card Unlimited 1.5% cash back everywhere $150 cash back bonus when you spend $500 during your first three months Citi Double Cash Card 1% cash back on your purchases and another 1% cash back when you pay your bill None Capital One® Savor® Cash Rewards Credit Card Unlimited 4% cash back on dining and entertainment, 2% cash back on groceries and 1% cash back elsewhere $300 cash back bonus for $3,000 spent over your first three months TD Cash Visa® Credit Card 3% cash back on dining, 2% cash back at supermarkets and 1% cash back on everything else Earn $150 cash back when spending $500 within the first 90 days (See Terms) USAA Preferred Cash Rewards Visa Signature Unlimited 1.5% cash back on everything None Blue Cash Everyday Card from American Express 3% cash back on up to $6,000/year at U.S. supermarkets (then 1%), 2% cash back at U.S. gas stations and select U.S. department stores and 1% cash back on other purchases $150 bonus cash back for spending $1,000 over your first six months Getting Cash Back at Retailers

What Is Cash Back?

Picture this: you’re buying some groceries on a Sunday morning, but know you’ll need $40 cash to fill up your car with some gas later. You could swipe your debit card at the supermarket and then head over to the ATM. Or you could ask for cash back right from the cashier, eliminating the extra errand.

The above situation represents the alternative definition of cash back. It’s ultimately the use of a cash register as if you were swiping your debit card at the ATM. When you request cash back from a cashier, your bank account will be charged the amount you asked for. This enables the funds to be pulled from your account so the cash can be placed in your hand.

Although this generally only applies to debit cards, there are a few exceptions for credit cards. Discover® allows cardholders to ask for cash back at more than 50 large retail stores without a transaction fee.

Bottom Line

There are many benefits to utilizing credit card rewards programs. But spending money that technically isn’t yours will always involve some level of risk. If you’re in good financial shape, though, cash back and other types of credit card rewards can help you take more vacations, save money on purchases and more.

Credit Card Tips

  • Managing your credit cards and any debt you accumulate using them is a major part of your long-term financial outlook. Consider working with a financial advisor to make sure you’re managing your money with your goals for the future in mind. SmartAsset’s free matching tool can connect you with up to three advisors in your area. Get started now.
  • If you’re someone who wants freedom when spending credit card rewards, you may prefer cash back to a points- or mileage-based reward system. However, keep in mind that cash back rates are sometimes less than those in point-centric programs.

Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the issuer.

Advertiser Disclosure: The card offers that appear on this site are from companies from which SmartAsset.com receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). SmartAsset.com does not include all card companies or all card offers available in the marketplace.

Photo credit: ©iStock.com/SIphotography, ©iStock.com/MJ_Prototype, Â©iStock.com/Juanmonino

The post What Is Cash Back? appeared first on SmartAsset Blog.

Source: smartasset.com

How to Protect Your Credit While in the Military

Around a third of active military service members in 2019 said they didn’t pay all their bills on time, and close to that number of military spouses said the same. Military service can require some serious financial planning. But many service members might not realize how joining the military impacts their credit—and how their credit can impact their military career.

Find out more about the
relationship between a military career and credit below. Plus, get some
information about resources that can help military members protect their
credit.

How Your Credit Can Impact Your Ability to Join the
Military

No matter which branch of the
military you want to join, you have to meet certain eligibility requirements.
Specific requirements vary by service branch as well as the level of security
needed for the job.

The military does conduct background checks to determine factors such as whether you have a criminal background. A credit check is often included by some branches because the state of your financial situation can help provide a picture about your overall reliability. And if you’re dealing with a great deal of debt or have negative items on your credit report, it could make you vulnerable. Someone in financial distress could be at greater risk of illegal or questionable activity to generate money.

You can be denied military enlistment if you’re in financial trouble, such as if you have a number of collections in your credit history. But it’s actually more likely that poor credit will impact your ability to move up within a military career. That’s because Guideline F of the National Security Adjudicative Guidelines outlines financial considerations that may disqualify you from various levels of security clearance.

Failing to meet those requirements could result in revocation of security clearance. And that could mean losing your job with the military. Any time enlistment depends on a security clearance, the same could be true for simply joining up.

How Joining the Military Affects Your Credit

Joining the military doesn’t
have a direct impact on your credit. You won’t get points on your score because
you’re a service member, for example. However, you might want to pay attention
to your credit because you could be subject to greater financial monitoring
depending on your position and security clearance.

Being in the military can also create some challenges that relate to credit. The National Foundation for Credit Counseling notes some common financial trends and challenges experienced by military members and their families, including:

  • Struggling to pay bills on time. According to NFCC, service member households are more
    likely to pay bills late than other US households. In some cases, this might
    simply be due to challenges associated with managing daily activities, such as
    bills, when you’re deployed or moving from place to place regularly.
  • Putting major decisions on hold. More than 70% of service members or their spouses say they
    put major decisions, including buying a new home, on hold during military
    service.
  • Sticking to a budget.
    More than 50% of active military members and/or their spouses say they don’t
    manage a regular budget.

Protecting Your Credit While You Serve

That doesn’t mean it’s
impossible to maintain a strong credit score while you serve in the military.
In fact, a number of resources are available to help you do just that. Here are
just a few tips for protecting your credit while you’re in the military,
particularly when you’re deployed.

1. Place an Active Duty Alert on Your Credit Reports

An active duty alert is like a fraud alert. It’s a notice on your credit reports that encourages lenders to take extra precautions when approving credit in your name. In some cases, creditors may be required to contact you directly or otherwise verify your identity when approving credit. This makes it harder for someone to pretend to be you and apply for a loan or credit card.

Active duty alerts also remove you from insurance and credit card offers for up to two years. That means that providers can’t do a soft pull on your credit report and send you a preapproved offer in the mail. This reduces the potential for someone to take that preapproved offer and open credit in your name without you knowing about it.

Active duty alerts are free.
You can request one from any of the three major credit bureaus and ask that it
let the other two know to do the same. Active duty alerts last for one year, so
you’ll need to request them annually if desired.

2. Understand Your Rights Under the Servicemembers Civil
Relief Act

The SCRA offers some protection for military members when it comes to civil legal action, including those related to financial matters. Some of the protections under this act include:

  • Rate cap. In some cases, if military members have high-interest debt from before they joined, they may be able to get the interest rates reduced to no more than 6%.
  • Default judgment protection. In civil cases, a default judgment occurs when one person doesn’t show up to a scheduled hearing. If default judgments are allowed, the judge decides in favor of the party that showed up. Due to the nature of their occupation, military members may be protected from default judgments if they aren’t able to make a hearing due to their military service.
  • Repossession and foreclosure. In certain cases, creditors must get court orders to repossess or foreclose on property of an active service member. This typically requires that the military service person took out the loan on the property before enlisting or otherwise going into active duty status.

3. Understand Your Rights Under the Military Lending
Act

The Military Lending Act provides a number of protections for active military members who are seeking credit during their service. Some provisions of the act include:

  • Capping interest, including
    finance charges and fees, on loans to 36% regardless of credit score and other
    factors.
  • Limiting what creditors can ask you to agree to, such as mandatory arbitration clauses and mandatory
    payments from your paycheck.
  • Protection against prepay penalties if you pay the loan back early.

For any
questions about your individual circumstance regarding FCRA or the MLA contact
your military branch’s legal office for guidance.

Credit-Related Perks for Military Members

As a current or former
military service member, you may also have access to perks that help you build
and manage your credit and personal finances. Here are just a few.

  • Special credit card or loan offers. Military members have access to several credit card offers that others do not, including USAA cards with low interest rates. And you might qualify for a home loan backed by the VA, which can help you gain access to potentially better terms or lower down payment requirements.
  • Free credit monitoring. Starting October 31, 2019, military members can access free credit monitoring via the credit bureaus.
  • Access to Personal Financial Managers or Personal Financial Counselors. These are individuals trained to help military members and their families manage money and credit in a positive and proactive way.
  • The Department of Defense Savings Deposit Program. If you’re deployed to an active combat zone and receiving Hostile Fire Pay, you can build your savings with this program. You can deposit up to $10,000 and earn 10% interest on it.

NOTE: The CARES Act specifically provides some protections to military personnel and veterans during the COVID-19 coronavirus pandemic. This includes protections for VA-guaranteed loans for those experiencing financial hardships.

Check Your Credit After Deployment

Understanding your rights and
what resources you have available—as well as taking proactive approaches—can
help protect your credit while you’re in the military. But no plan is
foolproof, and mistakes can happen. So, it’s important to check your credit
reports whenever you return from deployment and regularly even when you’re not
deployed.

If you find anything on your credit that isn’t correct, you have a right to challenge it. DIY credit disputing is possible, but it takes more time than active duty military members might have. Consider working with a credit repair firm such as Lexington Law, which has tools to focus verification and challenges for military personnel. Working to challenge inaccurate negative items can help you protect your credit so you can protect your security clearance and your financial future as well.

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Disclosure: Credit.com is owned by Progrexion Holdings Inc. John C Heath, Attorney at Law, PC, d/b/a Lexington Law Firm is an independent law firm that uses Progrexion as a provider of business and administrative services.


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The Negative Domino Effect Of Running Up Your Credit

Have you ever had a situation where you had to utilize a great deal of your credit limit?  If so, did you find yourself in a negative spiral of repercussions for utilizing credit? Here are some things that can happen when your balance starts to rise.

The post The Negative Domino Effect Of Running Up Your Credit appeared first on Bible Money Matters and was written by Melissa. Copyright © Bible Money Matters – please visit biblemoneymatters.com for more great content.

Source: biblemoneymatters.com