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Better economy drives card transfer offers

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NEW YORK (3/3/15)--A stronger economy has consumers more comfortable taking on debt. And it also means credit card issuers are more comfortable extending tempting balance-transfer offers ( The New York Times Feb.20).
Credit card comparison website CardHub looked at offers from 15 major issuers and found that longer zero-interest promo periods, up to 18 months, are available. After the promo period ends, card rates can rise substantially. With a household average of $7,126 in credit card debt, many consumers could save as much as $1,000 by transferring balances from high- to low-rate cards--with some significant caveats.
For one, fee-free transfers are rare. Most of the zero-interest offers charge at least 3% of the amount you transfer and some charge more. Absent a transfer cap--also now rare--you could pay $150 to transfer a $5,000 balance.
A smart balance transfer can help you pay off debt at lower interest rates, as long as you have the discipline and the cash to pay off the balance in short order. Credit union credit cards typically charge 1.5 to 3 percentage points less than other credit cards, so your best bet might be to simply apply for a credit union card.
Here are some other things to consider in a credit card balance transfer:
  • How can I avoid paying high interest on the transferred balance?
    Pay the balance in full before the promotional period ends to avoid paying higher interest rates when the offer expires. If you make only the minimum payment and continue to carry a balance, or to add to the balance with purchases and cash advances, you will just perpetuate a cycle of debt.
  • Is everyone eligible for a zero-percent offer?
    No. Card issuers offer these sweet promotions to borrowers with exceptional credit.
  • Can I transfer other debts to a credit card?
    Some cards allow balance transfers of other types of debt, for example, car loans and even mortgages, as well as credit card debt. Credit card debt typically counts more on your credit score because it isn't secured by collateral, so the shift could have a harmful effect on your credit standing. Car and home loans are available at far lower rates than credit cards so it makes little if any sense to make that kind of transfer.
If you're attracted by a zero-interest transfer offer, make sure you also address your reason for being in debt in the first place. Beware of using the transfer as an opportunity to take on more debt.

In the end you are wise to shop around for the best sustainable rate on any loan, and that usually will be from your credit union. For related information, read "Interest Deferred: Beware Zero-Percent Medical Credit Cards" in the Home & Family Finance Resource Center .

6 ways to score senior discounts

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WASHINGTON (2/24/15)--Aging has its perks, in the form of some outstanding discounts. For example, the National Parks and Federal Recreational Lands senior pass costs $10 and gives adults age 62 and older lifetime access to 2,000 parks and recreation areas.
But senior rates aren't always as good as discounts available to the general public (Kiplinger Feb. 12). Here are six categories worth checking out.
Tourist attractions. Before you take the senior rate, compare it with discounts you might receive from online sources. For example, CityPASS offers as much as 50% off the combined prices of admission to popular attractions in 11 major North American destinations. You occasionally can find better deals by visiting Groupon and LivingSocial.
Checking accounts. Read the fine print. According to a Pew Charitable Trusts study of checking accounts offered at large financial institutions, seniors must maintain a high balance to get a better deal than what is offered for a basic account.
Hotels. Compare hotel chain, AARP, and other senior discounts with what you might get through discount travel websites and apps such as Hotels, Expedia, and EveryLodge.
Phone plans. You might meet the age criteria for a plan offered by your wireless carrier, but first compare the offer with those available to everyone, taking into consideration your actual usage. For example, a senior discount might include 200 minutes talk time and charge extra for text messaging and a data plan, whereas a plan that costs less and is available to everyone offers unlimited talk and text plus two gigabytes of data.
Rental cars. Your AARP discount can help you pay up to 25% less for Avis and Budget car rentals, but first check the deals you can get through an online deal aggregator such as Hotwire, which can be 21% to 31% lower than the discounted rates offered through Avis and Budget.
Double up. Consider pairing discounts with discount gift cards. Visit websites such as CardCash, Cardpool, GiftCards, GiftCardGranny, and Raise to purchase gift cards you can use to pay for goods and services at discounted rates, for example in movie theaters and restaurants.
For related information, read "Shop and Save in Every Season" in the Home & Family Finance Resource Center.

Beware fee-harvester cards; choose CU card instead

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NEW YORK (2/17/15)--You've heard the pitch: "If you've been turned down for credit, we can help!" If you have blemished credit or lack a borrowing history, it might be tempting to fall for an unsolicited credit card offer, but be careful. These cards likely will only worsen your financial situation (The New York Times Feb. 5).
Often called fee-harvester cards, these cards target subprime borrowers--people already economically vulnerable with low credit scores and a tarnished credit history or none. Fees often are misrepresented, making some charges illegal. An example, according to Consumer Reports, would be an initial credit limit of $300 that's immediately reduced by a $50 annual fee and a $200 account processing fee, leaving available credit of only $50.
These fees are on top of others--such as a $15 monthly account-maintenance fee, a $25 charge to increase credit limit, and a $5 fee for online payments--not to mention a replacement fee if the card is lost or stolen, as well as over-the-limit fees. The cards also are notorious for high interest rates.
The Consumer Financial Protection Bureau recently ordered one subprime company to refund $2.7 million to about 98,000 customers who'd been charged illegal fees.
Stay away from fee-harvester cards and build your credit while doing so:
  • Find an alternative to fee-harvester and high-rate cards. Credit union credit cards generally have lower rates and fees than cards from other financial institutions.
  • Consider a secured credit card to help build or rebuild credit. A secured credit card trades access to credit for your commitment to keep a certain amount of money in a savings account. Once you've made, say, 12 months or so of on-time credit card payments, you'll be eligible to apply for a conventional credit card.
  • Develop a strong credit history. Don't charge more than you can afford to pay off monthly, and always pay your bill on time. A strong credit history will pay off in the future when you want to buy a house or purchase other big-ticket items. It even can affect your ability to get a job or rent a place to live.
  • Contact your cardholder immediately if you run into trouble paying your bill. Ask for a session with a credit union financial counselor, or for referral to a counseling service your credit union staff can recommend.
For related information, read "20% Rely on Credit Cards to Maintain Lifestyle" in the Home & Family Finance Resource Center.

The case for involving children in family finances

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NEW YORK (2/10/15)--You should be upfront with your children about how much money you make.
That's the argument The New York Times "Your Money" columnist Ron Lieber makes in his new book "The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money," recently excerpted in the Times (Jan. 29).
Lieber argues that your children will have a pretty good idea of your family's financial situation anyway--the value of your home is a Google search away, for example. Avoiding the topic can make money seem mysterious and off-limits for conversation, Lieber argues, potentially hobbling children's ability to make good financial decisions as adults.
He doesn't recommend sharing your income with your children until they're mature enough to comprehend what it means, to find the information meaningful, and to exercise discretion--most likely when they're teenagers.
And, after all, if they apply for college financial aid a few years later, they'll find out anyway. The FAFSA (Free Application for Federal Student Aid) requires the family's income, assets, and signatures from both applicant and parents. 
But regardless of whether you agree that children should be privy to the family's financial information, preparing your child for eventual financial independence is a good idea.
Lieber has some easy ways to introduce common money concepts to your children:
  • Find out why they want to know. When children ask about money, say "Why do you ask?" This both gives you time to think of a good answer, and helps provide insight into what's on the child's mind, especially if the child is asking out of anxiety about any money problems the family is experiencing;
  • Start with simple expenses. Children as young as kindergarten-age can begin to understand simple financial concepts. At the grocery store, start introducing concepts like wants vs. needs, and enlist the kids' help in looking for deals and savings. Consider giving them a portion of any savings from coupons they find;
  • Explain why you spend your money. They see you using your credit card or making purchases online. Use this as an opportunity to both explain financial necessities--your mortgage payment and utilities--and the values that guide your wants, such as the family vacation; and
  • Involve them in the family budget. Making them part of the decision-making process can instill financial responsibility and investment in the family's financial well-being. Plus, children can become accountability partners. For instance, give them the option of skipping a weekly meal out and spending the money some other way they might find more meaningful.
Staff at your credit union also can help you familiarize your kids with money concepts and financial services.

Consumers: Take steps to refi your mortgage

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BOSTON (2/2/15)--Low mortgage rates and revived home prices are combining to make this a smart time for qualified home owners to refinance mortgages (The Boston Globe Jan. 26). The key word is "qualified."
Many homeowners have stayed on the sidelines in recent refi rounds as they learned--or believed--they could not meet a lender's loan requirements. They should not assume they still are out of the running for a better mortgage rate.
To help you decide if this is a smart time for you to refinance:
  • Calculate your break-even point. This is how soon you will recoup the cost of refinancing through lower monthly payments. If the cost to refinance is $2,125 and your monthly savings is $125, your breakeven point is 17 months (2,125 divided by 125).
  • Ask about fees. If you're paying $4,000 in fees to slash monthly payments by $100, refinancing doesn't make sense if you plan to sell in three years.
  • Look at a fixed-rate instead of an adjustable-rate mortgage (ARM). Despite a slightly lower rate on ARMs, the differential isn't worth the higher risk of an ARM.
  • Consider job stability. Switching from a 30-year to a 15-year fixed-rate mortgage lowers the total interest you'll pay over the life of the loan. But if you lose your job, you'll be stuck with higher payments you might not be able to afford. If job stability is a concern, keep a 30-year loan and consider increasing your monthly payment now--while you have a job--to the rate it would be for a 15-year fixed-rate loan.
Then take these steps as you get ready to approach a lender:
  • Clean up your credit. A credit score of 740 or more, plus 20% equity in your house, likely will get you the best interest rate.
  • Shop for the best rate. Start at your credit union and ask about options and rates. Get good faith estimates to compare offers before you formally apply.
  • Collect documentation. You'll likely need to provide recent pay stubs, two years of W-2s, proof of home insurance, two months of financial statements, and--if you're self-employed--two years of tax returns.
For related information, read "$50 Winner: What Newbie Homeowners Need to Know" in the Home & Family Finance Resource Center.

Entrepreneurs: 4 decisions ensure financial success

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DULLES, Va. (1/27/15)--Entrepreneurship can be rewarding at all life stages, from the young adult years to retirement and beyond. But before you invest your time, energy and resources into the entrepreneurial unknown, make these four money decisions to ensure you reach financial success (Daily Finance Jan. 21).
  • Keep spending down. You'll be tempted to spend whatever it takes to ensure the success of your new business. While investing in the business is key to its growth, when you're starting out find ways to cut back on personal expenses and to save.

    Build up your savings even before you launch, then focus on increasing your business' sustainability and improving cash flow--two things vital to business success;
  • Invest in yourself. Think about your retirement. Start by maxing out a traditional individual retirement account (IRA) if you need the tax break. If you can afford to pay taxes, consider contributing to a Roth IRA while you still qualify--your taxes probably will be lower now than when you retire. Contributing to both is a good hedge against unknown future tax rates.

    Once your business is consistently doing well, look at setting up a SEP-IRA or Solo 401(k), both designed for the self-employed. If you hire employees, consider setting up a SIMPLE (Savings Incentive Match PLan for Employees) IRA;
  • Outsource. Weigh your strengths and weaknesses, and outsource the jobs that don't come easy for you. You might hire a bookkeeper, an accountant, a handyperson, someone to answer the phone, or just a freelancer for special projects. Don't waste time and money trying to figure out or do things that someone else can do more efficiently; and
  • Stay with the basics. To stay afloat, adopt these basic financial principles:
    • In your business as well as your personal life, spend less than you earn.
    • Build up your savings accounts to help you get through emergencies and lean times.
    • Set money aside to pay taxes throughout the year.
    • Use a bookkeeping system to track expenses and income. Xero and Quickbooks Online are good examples of online accounting software.
 For related information, read "Uneven Income Calls for Proactive Money Strategies" in the Home & Family Finance Resource Center.

Get employed in today's hot job market

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McLEAN, Va. (1/20/15)--2014 was a great year to land a job. Employers in the United States advertised more job openings last year than they had in the past 14 years, according to the Labor Department (USA Today Jan. 13).
This increase suggests that businesses are confident that strong economic growth will continue and that there will be increased demand for products and services. To remain competitive, employers might offer higher pay to attract qualified applicants.
If you're a job seeker, don't make these mistakes on your resume, during the interview and when you're following up (College USA Today Jan. 16):
  • Typos. A 2013 CareerBuilder survey found that 58% of resumes have typos. Read your resume out loud to yourself and then have someone else read it. Typos can indicate laziness. It may seem trivial, but a typo could cost you the job if it's between you and another just-as-qualified candidate;
  • Pretty white lies. Don't think prospective employers won't follow up on what's on your resume--they will, and often during the interview. Even if there's a skill you "want" to learn more about, telling an employer you already have that skill doesn't work;
  • Not tailoring your resume. Don't submit the same resume and cover letter for every job you apply for. Take the time to tailor these items to demonstrate that you're the best hire;
  • Writing a novel. It might be hard to narrow your abilities and past experience, but employers want highlights of what's compelling about you. Of course you'll list important attributes, but save details for the interview;
  • Using the wrong company name. Take an extra peek to be positive that you're sending the right cover letter to the right company. Saving a separate document for each cover letter may help instead of just replacing the company name each time you create a letter;
  • Repeating your resume on your cover letter. Employers will read your resume. Your cover letter should be a quick overview of why you're applying for the job and why you're the best candidate;
  • Talking negatively about former employers. Doing this only will make the interviewer think you'll do it again--when you're leaving this company. Have some class and remain neutral or positive about previous jobs, especially when you're asked why you're leaving a position; and
  • Following up on social media. This can seem impersonal and lazy. Develop a well-written email soon after the interview, and for extra kudos send a hand-written note.
For related information, read the Turning Point "Get Back in the Game After Losing a Job" in the Home & Family Finance Resource Center.