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Auto Loan, Life Events

3 Steps to Take After You Caused a Car Accident

Loss Adjuster Inspecting Car Involved In Accident and taking pictures

If you’re a driver, it is likely that over your lifetime you will be in a car accident. Hopefully, that accident only involves injuries to your car and not to you.

The next time you find yourself in a car accident and you’re the offender, follow the tips below.

1. Evaluate the accident scene

Immediately after an accident you should evaluate the accident scene. This means you should pull over right away and call the police. Put your hazard lights on and keep in mind your environment. Be very careful if cars are driving around you that you’re safely to the side. Make sure you’re okay and everyone you’re with is okay. Take note of any injuries that you or anyone else has.

After you’re safe, call the police. Whether the accident is big or small, it’s important that you call the police to the scene right away so there’s a record of the accident.

Approach the person you hit and exchange contact information with him. Get his name, address, and phone number. If you can see his identification, that’s even better, because you can confirm his identity. If there are any witnesses at the scene, you should also get their contact information, too. The more information you have, the better.  This may be done by you directly, or it may be done by the police. If it is done by the police, make sure that you get the information from the police officer, so you have record of it personally.

Take photos of the accident scene, including your vehicle, the vehicle of the person you hit, and any additional photos that could be relevant (like photos of the entire scene to show the exact space and geography of where the accident took place). If shooting a video is possible, consider recording the scene. The more documentation you have, the less opportunity there is for dispute over the scene itself.

2. Watch what you say (don’t admit fault)

While you are evaluating the accident scene and speaking with anyone other than the police, do not talk about how the accident happened or who was at fault. Do not admit that you were at fault and do not make monetary offers to the person you hit. It is tempting to apologize during a highly stressful situation, like a car accident, but it’s to your benefit that you do not say sorry or that it was your fault. Doing this could put you at risk for additional legal liability. Even if you think or know you are at fault, do not admit it.

It’s equally as important not to discuss how you’re feeling. If you say you are completely fine and later you discover you’re injured, it will be harder to prove with statements that you made saying you weren’t injured after the accident. The bottom line is that you should be very careful with what you say at the scene of the accident. Less is more.

When you are speaking with the police, be very clear about what you know happened. If you don’t remember or can’t recall exactly, then say that (don’t try to fill in the blanks).

3. Complete follow up actions after the accident

After you leave the accident scene there are follow up actions you need to take. If you are injured, seek medical attention right away. Even if you don’t start to feel pain until the following day, or some other time after the accident, make sure you get the proper attention you need.

Report the accident to your auto insurance company

Aside from the medical attention, you need to contact your auto insurance company immediately after the car accident and report the accident. As the person who caused the accident, it is your responsibility to report the accident to your insurer. But note that even if the police report puts you at fault, it is your insurance company that will determine whether you’re at fault for insurance purposes. If your insurance company does determine it was your fault, then it is likely that your insurance will be the source of your claim and the victim’s claim. However, your insurance company may fight with the victim’s insurance company or it may decide not to cover the victim’s claims if they are minimal and it’s unclear if you’re at fault. It’s not obvious what will happen because every situation is different. If the insurance company decides you’re at fault, then in most states, your insurance company will handle your medical claims and car repair claims in addition to the victim’s claims.

Keep your own paper trail

Get the name of the agent who is handling your call and who will handle your insurance claim. If you’re given a claim number, make sure to write that down and keep it on file. The more information you document, the better.

Check-in before getting repairs done

Discuss getting your car repaired with your insurance agent. Sometimes, insurers require you to get their permission before getting your car fixed. Be sure to get accurate information from the insurer and note that you can take your car where you want to be repaired – you don’t have to follow the recommendation of the insurance company as to where you take your car. When you get your car fixed, document your repairs and keep your receipts.

Decide if you need to meet with a lawyer

Your final course of action after an accident is to determine whether to pursue legal action or if you need to legally defend yourself based on the victim’s decision. You can meet with an attorney, typically for a consultation at no fee or a very small fee, so do not be deterred from an initial meeting due to fear that it will be expensive. You don’t have to commit to pursuing legal action until after you’ve met with an attorney. So, if you’re unsure about whether to move forward legally, you’re not risking much by meeting with an attorney. The attorney will also be able to advice you on whether your situation is worth pursuing legally.

A Final Note

State law governs the specific rules that will apply to you after you’re in a car accident. Check your state’s laws to determine the specific course of action you need to take. Your insurer should be able to help you with this.

Steps to take if you’re the victim of a car accident. 

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Life Events

3 Steps to Take When You’re the Victim in a Car Accident

Loss Adjuster Inspecting Car Involved In Accident Crouching Down.

Loss Adjuster Inspecting Car Involved In Accident Crouching Down.

If you’re the victim in a car accident, you need to make sure you quickly complete certain actions (and refrain from a few others). While being the victim in a car accident can be stressful and painful, it is important that you take the steps most favorable to you.

Follow the 3 steps below the next time you’re a victim in a car accident.

1. Evaluate the accident scene

You should pull over right away and call the police, keeping in mind your environment and making sure to use your hazard lights. Take enough precaution not to make the accident worse, if possible. Assess whether you’re okay and whether anyone you’re with is injured.

Once you know you’re safe, call the police immediately. Regardless of the size of the accident, it’s important that you call the police. If the car tries to get away, it’s standard advice not to pursue the vehicle. Try to get the license plate information and any other identifiable information. But do not pursue the person.

If the offender does pull over, get out of your car and exchange contact information. Get his name, address, and phone number. Try to get a photo of him or see his drivers license to verify his identity. If you see witnesses, get their contact information, too. The more information you have, the better. This step may be done by you directly, or it may be done by the police if the police arrive quickly. If it is done by the police, make sure that you get the information from the police officer, so you have record of it personally.

Next, it’s important for you to document the scene as much as possible. This includes taking photos of the accident scene (all vehicles involved). Consider recording the scene with your phone, if that’s possible, too. The more documentation you have, the better. You want to minimize the opportunity for the offender to escape blame.

2. Watch what you say (less is more)

While you are evaluating the accident scene and speaking with anyone other than the police, do not say you’re sorry or that you were at fault. It is tempting to apologize during a highly stressful situation, like a car accident, but if you do this and the offender is the person at fault, it will hurt your case against him. Doing this could put you at risk for additional legal liability. Be clear that you think it was the offender’s fault and not yours. Don’t apologize.

Be careful discussing how you’re feeling, too. If you say you are completely fine and later you change your story or feel hurt, it’s harder to prove.

When you are speaking with the police, be very clear about what you know happened. If you don’t remember or can’t recall exactly, then say that (don’t try to fill in the blanks). Similarly, if you aren’t sure if you’re injured, say that. It’s not uncommon for injuries to develop later after an accident but still be because of the accident. For this reason, it’s important that you don’t say you’re 100% okay and not injured, if you think you could be.

3. Complete follow up actions after the accident

After you leave the accident scene there are follow up actions you need to take. If you need immediate medical attention, make sure you seek that first. However, it’s almost as important that you call your insurance company and report the accident. Even if you’re not at fault, it’s good practice to call your insurer to let them know about the accident. If you’re not at fault, they will investigate and determine that, too, for themselves. You can provide your insurer with the appropriate information to determine this (e.g.: the police report).

Insurance companies don’t always agree with police reports

Typically, it is the offender’s responsibility to pay for the victim’s medical claims and vehicle repairs resulting from the accident. It’s possible that the offender’s insurance company could deny your claim if it determines that the offender wasn’t at fault. However, you should still pursue your financial claims through the offender’s coverage. Your insurance company may talk with the offender’s insurance company and determine who is responsible (or they could disagree and fight about it). Note that even if the police report puts the offender at fault, that doesn’t mean that the insurance company will find the same result. The insurance company will do its own investigation. Provide your insurance company with as much information as possible so that you help yourself and show the offender is the person at fault.

Keep a paper trail

Get the name of the agent who is handling your call and who will handle your insurance claim. If you’re given a claim number, make sure to write that down and keep it on file. The more information you document, the better.

Check-in before making repairs

Discuss getting your car repaired with your insurance agent. Sometimes, insurers require you to get their permission before getting your car fixed. Be sure to get accurate information from the insurer and note that you can take your car where you want to be repaired – you don’t have to follow the recommendation of the insurance company as to where you take your car. When you get your car fixed, document your repairs and keep your receipts.

Decide if you want to take legal action

Finally, consider meeting with an attorney to determine what your legal rights are. Typically, an attorney can tell you whether you case is likely to have merit and what the likely fees will be. The attorney will also be able to advice you on whether your situation is worth pursuing legally.

A Final Note

State law governs the specific rules that will apply to you after you’re in a car accident. Check your state’s laws to determine the specific course of action you need to take. Your insurer should be able to help you with this.

Steps to take if you caused the car accident. 

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The Perfect Credit Score Isn’t Really 850

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Do you really need an 850 credit score to get the best rates?

Most people assume that in order to get the best treatment from lenders, you need to have perfect credit. Across both of the most common credit scoring brands, FICO and VantageScore, that highest score is 850 out of the now-standard range of 300 to 850.

But the truth is that while it’s nice to boast that you’ve maxed out your credit score, it’s almost impossible to achieve the magical 850. It’s also entirely unnecessary. There is no lender or credit product that requires you to have a credit score of 850 in order to be approved.  There is no lender or credit product that requires you to have a credit score of 850 in order to earn the best terms. In fact, your credit scores can be 90 to 130 points off the maximum and still result in your getting approved for the best deals from mainstream lenders.

To put it bluntly, 850 doesn’t buy you anything but bragging rights.

Case in point, according to Informa Research, which tracks interest rates by credit scores on a daily basis, the lowest rates offered on various mortgage related loans are being offered to people with scores at or higher than 760. And, the lowest rates offered on various auto loans are being offered to people with scores at or higher than 720.

The quest for a perfect 850 is often given different fictitious monikers like “Triple-A Credit” or “A+ Credit”, when in reality there is no such designation in the world of consumer credit scoring.  Your credit “rating” is the number, whether it’s an 850 or a 525.

Earning the ever-elusive 850 credit score requires that you have a statistically perfect credit report that indicates you are completely void of any sort of credit risk. But again, this is unnecessary and you will do just fine with 760 or better, which is a much easier target to hit.

How to get to 760

A score of 760 doesn’t require perfection. You can even have derogatory entries (like a missed payment) and still get there. It just requires that these negative marks are older and limited. You can even have a balance on your credit card and still score at or above 760. Your best bet is to use 10% or less of your card’s credit limits.  That means no more than a $1,000 balance for every $10,000 in credit limits across all of your cards.

The other targets are harder to hit because they’re not entirely in your control.  For example, the older your credit history is the better you’re going to score. Since you can’t exactly control time, this will be one of those areas where you’ll do better organically as time passes.

Account diversity is also a tough one to control. People will score better if they’ve got a record of managing different types of accounts, such as credit cards, student loans, auto loans, and mortgages. Nobody will (or should) go out and buy a car or a house just to benefit their credit scores. This is one of the metrics where you will improve as time passes and you build a history of auto loans and mortgages.

If all of this seems too complicated then let’s make it really simple. If you pay all of your bills on time all the time, apply for credit only when you actually need it and use credit cards sparingly then you’re going to earn and maintain great credit scores. It would be impossible for you not to do so.

Still obsessed with hitting 850?

If you are still obsessed with credit score perfection then there are some milestones that are going to need to be met and maintained.

A perfect payment history. Your credit report is going to have to be void of any negative information, and there are no exceptions. If you’ve got derogatory entries like late payments, liens, judgments, collections, defaults and the like then an 850 is not in the cards for you.

A low utilization rate. Utilization plays a big role in your score and it can be a little confusing. Essentially, credit scoring models look at your total statement balances across all your cards and compare it to your total available credit limit. They don’t even give you bonus points if you pay that balance off in full each month. They simply look at how much your balance comes out to with each billing cycle. The lower your total statement balances are, the better off you are score-wise. To get the perfect 850, don’t even think about carrying a balance on your cards. You need to be at or close to zero percent.

You’ve shown a long history of good behavior. If you apply for credit too often, have limited credit score information or have a young credit report then you’re not going to max out your score. You can’t open a bunch of accounts in a short period of time without hurting your scores. It reduces the average age of your credit and it also means a hard credit inquiry on your account, which can also ding your score. Again, this is no big deal if you’re shooting for the ideal credit score of 760 (or in the neighborhood of that) but it can certainly hurt you on your path to 850.

Have more questions about your credit score? Send us an e-mail at info@magnifymoney.com. 

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Life Events

New Parents Guide: Financially Preparing for a Baby

Financially Preparing for a Baby

Getting ready for your first child will be one of the most exciting – and potentially stressful – times of your life. But before even starting to get into the nitty gritty financial details of what you’ll need to have prepared before your little bundle of joy arrives, take a second to rejoice.

You’re having a baby – congrats!

Then, once the initial giddiness has worn off, you’ll probably have about a thousand questions all at once:

  • Will I stay at work?
  • What do I need to buy?
  • When should I start saving for college?
  • Will my health insurance cover everything I need?

We’ll help walk you through each of the major important financial phases of having a baby, so when Junior arrives, you’ll hopefully be feeling calm and prepared.

Ready? Let’s take a walk down Baby Lane …

Step 1: Figure out your health insurance coverage

It should come as no surprise to you that having a baby requires lots of doctor’s appointments. From ultrasounds and glucose tests to genetic testing options and general checkups, over the next nine-plus months you can expect to become very familiar with your obstetrician.

So — just how much can you expect to pay for the joy of bringing your little one into the world? According to WebMD, without health insurance you can expect to pay about $2,000 for prenatal care (which doesn’t even include delivery and hospital stays), although remember that this number can vary drastically.

To gear up for prenatal and delivery costs, your first step before visiting the doctor (if you don’t already have one through your insurance) should be to check with your health insurance carrier for your options. They will be able to help you figure out which providers in your area are in-network (meaning you’ll be covered for visits with them and won’t have to pay additional out-of-pocket expenses), as well as which tests, check-ups and procedures are covered under your plan. Some things to remember:

  • Keep in mind that certain procedures tend not to be covered by most insurance plans (mostly optional tests, like genetic testing, for example), and they can cost a pretty penny if you plan to pay for them out-of-pocket, so get all the financial details up front before having anything
  • This extends to your hospital stay and delivery, as well. For example, the anesthesiologist in your hospital may not be covered under your health insurance plan, even if your doctor and everything else is. Again, always check with your insurance provider ahead of time so you can be prepared for any additional expenses that might come your way. No question is a silly question when you’re pregnant!

After you find out your maximum out-of-pocket expenses (aka the absolute highest amount of money you should have to pay for covered procedures and services performed by in-network doctors), you can budget accordingly so there are no big surprises come bill-paying time. Of course, sometimes surprises still come up, but if you think negotiating or haggling over your pregnancy medical bills might be in your future (which could be especially true if you don’t have coverage right now), it’s best to discuss that ahead of time with your doctor and figure out a plan. Along those lines, check out this piece for any additional specific pregnancy billing questions you might have.

Once you’ve figured out your own health insurance coverage, don’t forget that Baby will need insurance of her own once she’s born. If you or your significant other can provide it for her through your employer, get the specifics of that policy as soon as possible, or else check out your options through the healthcare marketplace.

  • If you’re uninsured: Keep in mind that if you’re currently uninsured, pregnancy does not qualify as a ‘change of life’ situation that would allow you to sign up for a healthcare plan outside of the open enrollment period, which starts again on November 1 and will run through January 31, 2017. Having a baby, however, does. If you’re outside of the open enrollment period and find yourself pregnant without health insurance, you do have a few options, including checking into your Medicaid eligibility, potential COBRA coverage if you recently left a job, or you may even be able to still get coverage under your parents’ plan, depending on your age and their policy.

Step 2: Take control of your budgeting and spending

If you listen to everything everyone says about how expensive it is to have a baby, you’ll most likely decide to never have one. In fact, according the recent USDA findings, the average cost of raising a child today is over $245,000, which doesn’t cover college or inflation.

Before you have a panic attack, consider some of the things these types of findings do cover, like housing expenses (which you’re most likely already paying, although you may need a larger space, depending on your circumstances), food and transportation expenses (which, again, you’ll already be paying some money towards, anyway) and miscellaneous items like personal care, entertainment and reading materials, which can vary widely.

In other words — take a step back from studies like this and reassess, because it will be okay … as long as you budget. In truth, you will be spending more on food and transportation once Baby arrives, and if you need a new car or a bigger space to live you’ll need to add those additions into your current budget. (We’ll talk about childcare in its own section.) To get ahead of the curve before Baby arrives, consider taking the following steps:

  1. Revisit your current budget: Sit down with your significant other and assess your current living situation, including where you might need upgrades, like with a second car or a bigger house. Determine how much extra you can afford to put towards these upgraded things each month so you can put together a new, baby-friendly budget to work with.
  2. Cut back where possible: Try to consider areas in your current budget where you can scale back, at least for a while, to make room for your new expenses. For example, perhaps monthly subscription services can take a backseat for now, since you’ll likely have little time for them in the beginning months anyway. (Learn how to get rid of your subscription services without feeling the burn here.)
  3. Open a new, baby-only savings account, and start saving now: If you can, it’s not a bad idea to start funneling away some additional money each paycheck towards a new savings account geared specifically for Baby. For as much planning as you do, it’s always best to be prepared for any additional, surprise expenses that come up, and having a little cushion to help cover these things will help you feel better during stressful times.

Step 3: Gear up on baby goods

Here’s one area where new parents have the potential to go a little crazy — buying all kinds of new stuff for Baby. That’s where a baby shower can really help though, and if you’re lucky enough to have someone offer to throw you one, you should absolutely take her up on it, and then be strategic about the items you put on your baby registry.

A couple things to keep in mind:

  • Heading out with someone you trust and who’s already a mom is always a good idea for the feedback and knowhow.
  • Remember that just because a product looks cute or promises to work wonders for your kid doesn’t mean it’s actually necessary. In fact, you might want to check out this piece for five things to reconsider putting on your registry. Not all babies love bouncy swings, for example, so it might be worth borrowing one from a friend for a bit to see if your kid even takes to the swing before dishing out (or having someone else dish out) for a brand new one.
  • Babies won’t need a ton of stuff in the beginning, so if you’re worried about space, it’s okay to scale back at first. Stock up on a car seat and stroller, diapers and wipes, a monitor, onesies and a bassinet or Pack ‘n Play to keep the baby in your room for a while, if that’s your plan (you can always get a crib later). Plus, if you’ll be breastfeeding, remember your pump could be free through health insurance, so check into that. Once you meet your little one and get to know him better, you can decide later if additional things would be necessary or helpful, like extra swings or activity sets, fancy products like a jogging stroller or bottle and wipes warmers, etc.
  • Remember, most places offer discounts for items left on your registry that you want to purchase once your shower is over, so if there’s something you really want but you worry about putting it on your registry because it’s too much, you should still do so. That way, even if someone else doesn’t get it for you, you’ll still be eligible for the discount. Sign up for email newsletters and follow your favorite brands on social media, too, where they’ll be likely to share coupons and additional discounts with their customers.

Step 4: Consider your work options

Ah, work. Especially for women, there’s so much to consider when it comes to having a baby and a career. There are essentially two main things that you’ll need to figure out heading into parenthood when it comes to your job and your baby:

  1. How much maternity leave do you have? Unfortunately the U.S. is one of the few developed nations that hasn’t quite come around to fair and practical maternity leave policies — in other words, we have no set policies. For the most part, it’s up to each individual company to decide how to handle maternity (and paternity) leave with employees. What we do have is the Family and Medical Leave Act, which entitles all eligible employees to take up to 12 work weeks within a 12-month period of unpaid, job-protected leave for specified family and medical reasons (like the birth of a child) with continuation of group health insurance coverage under the same terms as if he or she had not taken leave. Find out if you’re eligible for FMLA here. Outside of that, it’ll be essential to sit down with your employer or HR rep to discuss how much additional paid leave you’re entitled to, and whether or not you can use saved vacation or personal days for maternity leave. Figuring out how much income you and your partner will have coming in during maternity leave will help you potentially budget for the length of time you’ll be able to take and how much additional money you should have saved up before baby comes, too.
  2. What are your plans for returning to work? For many women there is no real option — they simply can’t afford to not go back to work. For women with a little more wiggle room with their choices, though, there is a lot to consider before leaving a job to be a full-time mom. Childcare costs (which we talk about below) are often a big factor that comes into play when most women are deciding whether going back to work is even worth it, financially at least. If you’ve determined that you can afford to stay home financially, you’ll still need to consider:
    1. Where your health insurance will come from (can a spouse provide it for both you and the Baby?)
    2. How will you continue to save for retirement (you can read more about that, here)
    3. How to keep your foot in the door for your career should you decide to go back some day. If you plan to take classes or enroll in continuing education to do so, you should consider factoring those additional expenses into your budget.

Step 5: Take a look at childcare costs

If you’ll be heading back to work after baby (or you’re trying to determine whether it’s financially necessary to do so), it’ll be essential to take a look at your potential childcare costs. To help determine average costs in your area, check out the interactive map on ChildcareAware.org for specifics. In Colorado, for example (my home state), a married couple can expect infant, center-based care costs to average around $13,154 annually (or approximately $23,036 when you factor in a second child).

So, how can you potentially lower the costs of childcare? Here are some suggestions:

  1. Tag in Grandma and Grandpa (or any other friends and family willing to help): If you’re lucky enough to live in an area near family — and especially retired family, or family with flexible work schedules — it’s worth seeing if you can work out some kind of care situation whereby they look after your little one, even if only for a day or two a week. You’ll need to check with your primary caregiving source if you want to go this route, though, as some require payment for full weeks, months or even a year, regardless of whether your child is there every day of the week or not.
  2. Trim back additional costs: If your nursery or daycare charges extra for additional services like providing a meal or late pickup options, find out what those are up front and do everything you can to avoid paying for them.
  3. Check your FSA: A Flexible Spending Account is a special savings account sometimes offered through employee benefit packages. If you or your spouse has access to one, you may be able to save up to $5,000 per year, tax-free, which you can then use to cover daycare costs. (Learn more about an FSA here.)
  4. Consider alternative care options: While daycares and nannies are the most popular childcare options, there are other choices. For example, you could host an Au Pair at your house whose job would be to watch your kids in exchange for room and board, or you could consider a nanny share, where multiple families share one nanny and split the cost.

Step 6: Get additional paperwork in order 

When you’re about to become a parent, there are all kinds of ‘grown up’ documents you’ll now need to have on your radar. Here are some of the most important ones to consider putting together right away:

A life insurance policy: Even if your employer offers one, it’s worth searching around to see if an outside provider might offer a broader range of coverage for competitive pricing. Remember that when it comes to life insurance, your main goal is to provide your family with the funds necessary to continue on with their lives should something happen to you (they might need money, for example, to pay off a house, put the kid through college, and just pay the day-to-day bills). There are many calculators online that can help you get an idea for how much estimated life insurance you might want to get coverage for, and about how much that might cost you per month but remember that how much you actually pay will be determined by a number of factors, including your overall health and lifestyle factors.

A will: When you don’t have a will, the fate of all your possessions and property will be left up to the law when you die, which is never something you’d want to have happen, but especially not when there are children involved. While there are plenty of DIY methods available to create your will, this isn’t necessarily an area where you want to skimp, and it’s best to make sure that everything is done properly and legally, so using an estate attorney is your best option. If that’s too costly, a legal online site (like LegalZoom) could be a backup, but those sites are really only helpful if your will is going to be simple and straightforward (as in you’re leaving everything to one person).

Another important aspect of your will is including guardians for your children. Ideally these will be people with whom you’ve discussed the arrangement ahead of time. Keep in mind you can also name two different types of guardians for your children — a guardian for their finances and one to actually look after their care — should you feel that’s necessary.

Short-term (and potentially long-term) disability coverage: Remember that you’re much more likely to fall ill or suffer from an injury that keeps you out of work for a while, so signing up for short-term disability coverage to keep those bills getting paid while you’re laid up is a good idea. Check with your employer to see what they offer, and read this piece for more on the different options available.

Step 7: Start looking at college savings options

While it might seem crazy to start thinking about saving for college before Baby is even born (and it certainly shouldn’t be your top priority, above everything else on this list), it never hurts to get a jump start thinking about this financial aspect, since it could be a hefty sum you’ll need or want to have saved.

College savings will be a personal thing you and your significant other will have to discuss — all parents must decide for themselves whether or not they want to pay for any, some or all college expenses for their kids, or if there will be some kind of limit they’ll put on their contributions, etc. Also keep in mind that most experts would recommend that saving the maximum amount you can for your own retirement plans should always come before socking away for your kid to go to college. As the old saying goes, you (or your kid) can always take out loans for school … you can’t do the same for retirement.

Having these discussions sooner rather than later will also help dictate exactly when and how much you start saving, since obviously the longer you invest, the more opportunity you have for your funds to grow.

  • When it comes to actually saving, a 529 is the most traditional way that most parents decide to save (if you’re interested in sorting through your own 529 options, check out this piece about the five best 529 options), but that’s certainly not the only way to save. Some additional options include Coverdell Accounts, UGMA or UTMA Accounts and even Roth IRAs. (We covered each of these in length here.)
  • After you’ve done your research and come up with a general idea of how much you’d like to save, and what vehicle (or vehicles) you’d like to save in, you’ll have a better idea of the timeline you’re looking at to start. Remember, additional products can help you save even more on the side, too (like the Upromise MasterCard by SallieMae, for example, or the Fidelity Rewards Visa Signature Card, which allows users to deposit rewards directly into their Fidelity managed 529 College Savings plan).

Of course this isn’t an exhaustive list of things you’ll need to have prepared for Baby (although it may feel exhaustive to read it), but prepping these items before the arrival of your bundle of joy will certainly help you feel more financially ready once she does get here.

Plus, if looking at this list scares you off, remember — you’ll have nine long months to get everything in order, which is plenty of time. Take it one day at a time, and you’ll be more than ready — both financially and emotionally — when Baby arrives.

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College Students and Recent Grads

What to Do When Parents Won’t Pay for College and FAFSA Won’t Provide Aid

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When you’re applying for financial aid to attend college as an undergraduate, the amount of need-based aid you qualify for is usually based on your parents’ income and assets. The Free Application for Federal Student Aid (FAFSA) calculates your expected family contribution (EFC), and individual colleges and universities then use your EFC to determine how much need-based student aid you are eligible to receive. If it is determined that your parents can reasonably cover 100% of the cost of college, you may not qualify for any need-based aid at all.

However, this process of determining need-based aid is based on the assumption that if your parents can afford to make a substantial contribution to your tuition, room, and board, they will be willing to do so.

But what if your parents simply aren’t willing to make that contribution?

If you don’t qualify for need-based aid (or only qualify for partial need-based aid) and your parents simply aren’t willing to contribute, you may feel like college is not an option. And it’s true that tuition, room, and board can be very expensive—tens of thousands of dollars per year in many cases. However, don’t give up right away. There still may be ways for you to attend college even if your parents won’t help you out financially. Here are ways to start:

1. Check the current guidelines for dependent vs. independent students

All students applying to college are considered either dependent or independent by the federal government. If you are a dependent student, your parents’ income and assets are taken into account when determining need-based aid, but if you are an independent student, only your own financial situation (and that of your spouse, if you are married) is taken into account, which means you may qualify for more need-based aid. There are several ways to qualify as an independent student, including being married, being older than a certain age, having dependent children, or being a veteran of the U.S. armed forces. The FAFSA can help you determine if you are dependent or independent. More information is also available here.

2. If you haven’t already done so, fill out the FAFSA

Even if you are a dependent student and your parents have already told you they’re not willing to contribute to college costs, you should still absolutely fill out a FAFSA. You may find that you are eligible for more aid than you think. In particular, you may have the option of taking out student loans that would help you cover the cost of college yourself, without your parents’ help. Student loans should only be taken out under careful consideration, as they can take many years to repay, but if they are the only way you are able to go to college, they may be a good option for you. 

3. Remember that need-based aid isn’t the only type of aid available

There are many merit-based scholarships and grants available that you may be able to apply for. The school(s) you’re considering attending may offer merit scholarships; check with the admissions office for details and to determine whether or not you need to submit an extra application for these awards. You can also search online for grants and scholarships that are funded by external organizations and thus can be applied to the cost of any school. Apply for as many of these grants and scholarships as possible.

4. Consider asking for help from other relatives

Is there anyone else in your family who might be willing to help you out with college costs, perhaps through a personal loan? If you do take out a personal loan from someone you know, be sure to sit down with them and draw up a written agreement about interest and repayment so there are no misunderstandings.

5. Attend a state or community college

Tuition costs vary widely from school to school, so make sure you’re considering schools at the least expensive end of the spectrum. Many state colleges offer an excellent education at a much lower cost than private schools, and community colleges in some states even offer four-year degrees.

6. Consider taking a year off to work and save money, and apply next year instead

If your parents are open to it, you might be able to live at home while working and save even more money.

7. Look into supporting yourself through college by working full-time or part-time

Carefully calculate how much it would cost you per year to attend the least expensive school possible, taking tuition, fees, books, and living expenses into account. Is there any way you could pay for this yourself, either by going to school full-time and working part-time or (more likely) by working full-time and going to school part-time?

8. Look into applying for jobs at colleges that offer free/reduced tuition to employees

Some colleges and universities allow their full-time employees to take classes for free or at a reduced cost. However, note that this may vary widely by school, and there may also be a requirement that you must work a certain number of months or years before these benefits kick in. Not having a college degree yet may also limit the number and type of jobs you are able to apply for. However, this option is worth looking into.

Combine several of the above strategies

Putting together enough money to cover the cost of college yourself can be very challenging, but you may be able to make it work through a combination of merit scholarships, personal and/or federal loans, choosing an inexpensive school, saving money before you begin, and working while you’re enrolled in classes.

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Health, News

Being Poor Can Cost You Big on Your Auto Insurance

 

Auto Insurance
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If you’re single, a renter, out of work or haven’t owned a car in a while — even your perfect driving record won’t be enough to get a good auto insurance rate.

It’s no secret that auto insurers consider a lot more than just your driving record when they calculate your premium. New customers are routinely asked to provide personal details, such as whether they’re married or single, renters or homeowners, unemployed or employed, college- or high school-educated.

It is how you answer these personal questions — not your driving record — that can result in higher premiums, a consumer advocacy group argues in a new report.

In a study of five of the leading auto insurers in the U.S., the Consumer Federation of America found drivers with a good driving record pay 59% more — or $681 per year on average — when their answers to these personal questions point to a lower income status (e.g.: people who answer that they are single, out of work, or have only a high school education). The CFA has long studied how economic status can be tied to higher auto insurance premiums.

For this report, they used the online quote features at Geico, State Farm, Farmers, Progressive, and All State. They created four driver profiles to test — two men and two women, each pair including a high and low socioeconomic status — and requested quotes from each insurer in 15 major cities.

All four drivers shared characteristics in common. They each had a stellar driving record, with no prior accidents or traffic violations. They were each listed as 30 years old living at the same address in each city tested.

Where the two test groups (we’ll call them Group A and Group B, for simplicity’s sake) differed was in how they answered the personal questions on each quote request. In group A, one woman and one man were married homeowners with executive level jobs, a master’s degree and three years with the same insurance company.  In group B, the man and woman were single renters with high school degrees, and neither had owned a car in the last six months.

When the insurance quotes rolled in, an obvious trend emerged: across the board, Group B drivers were hit with higher premiums. On average, Group B drivers were quoted an average annual premium of $1,825. On the other hand, the married, home-owning, college-educated drivers from group A were quoted $1,144 per year.

Source: Consumer Federation of America
Source: Consumer Federation of America

GEICO and Progressive turned out to be the most costly option for drivers in Group B, charging premiums that were 92 percent and 80 percent more expensive, respectively, than premiums for Group A. In one extreme case from the report, GEICO quoted a man living in Minneapolis, Minn. from Group B two and a half times as much as the man from Group A – $1,840 per year compared to $528. The difference between premiums GEICO quoted for a low-economic status and high-economic status woman in Minneapolis was even more staggering — $2,158 vs. $528, amounting to a 300% upcharge.

MagnifyMoney reached out to all five insurers included in this report for comment. Each declined to comment.

James Lynch, senior actuary for the Institute, which represents the interests of insurers in the U.S., said insurers use personal information like marital status and education for a simple reason: they are highly predictive of whether a potential customer will cost the insurer in the future.

“Driving record is an important factor but it’s not the only predictor,” he added, noting insurers use upwards of 20 different factors to assess rates.

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Get the best auto insurance rate possible

Short of state regulator intervention, auto insurers will be able to assess risk in their customers however they see fit. It’s up to drivers to do their due diligence in order to get the best rate possible. Even then,

Start with your state’s insurance department website. Since insurance is regulated at the state level, Hunter recommends checking your state’s office of insurance website to find out what average premiums are like in your area. This website should also list a number of reputable insurers you can contact for quotes. Take those names and check them out on the National Association of Insurance Commission’s database, which maintains a history of service issues and complaints.

Never accept your first offer. Asking several different insurers for auto insurance quotes is an important yet often overlooked part of the shopping process. As the CFA found in this report (among others), premiums can vary widely by state by state and insurer by insurer.

Let your good driving speak for you. Some auto insurers today offer usage-based tracking technology that allows them to see just how often and how well (or, how poorly) you drive. This technology can be a boon to good drivers who have low annual mileage and aren’t hit with any traffic violations. You’ll likely qualify for insurance discounts. It is entirely optional to allow your insurers to track you, as it obviously requires you to forfeit some privacy while on the road.

Have a question for us? Send us a note at info@magnifymoney.com 

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Life Events

4 Reasons to Have Your Own Life Insurance, Even if it’s Already an Employee Benefit

Your Own Life Insurance

If you work for a company that offers life insurance through a group policy, you may be surprised to find out that there are good reasons to consider getting additional coverage.

Before discussing why you may need additional coverage it’s really important to understand why you need coverage at all. The purpose of life insurance is to protect people who depend on you financially when you die. With adequate coverage, when you die, you can be sure that the people who depend on you have enough money.

According to LIMRA, more than 70 million people know and admit they need more life insurance in the United States. Yet, they aren’t making it a priority.

The scariest part about this is that you jeopardize the financial lives of the people you love the most when you have inadequate coverage.

Consider life insurance planning as part of your overall financial plan and make it a priority. This includes know the reasons why your employer coverage may not be the only coverage you need.

Reason 1: Your Employer’s Coverage May Be Inadequate

Your group life insurance coverage may not provide a large enough death benefits for your dependents when you die.

For example, if your coverage pays out a $50,000 death benefit, and your family would need $1,000,000 to live off without you, then your employer plan would be inadequate and you would need additional coverage.

Understanding how much insurance you need is crucial to knowing how much additional coverage to purchase. There are several approaches to determining how much life insurance you need, so it’s important to talk with a professional to know what’s best for you given your specific family circumstances. Some professionals use an old school model where the rule of “10 times your income” is how much life insurance you should have. Beyond general rules that you can find online, a professional will be able to tell you how much life insurance you need, given your specific circumstances.

Your coverage may fall short in other areas in addition to the death benefit, too. For example, you may want riders on your life insurance plan that you can’t add with an employer plan.

The customization of an employer plan is limited compared to life insurance you can buy on the open market. For this reason, you may find your life insurance coverage through your employer inadequate.

Reason 2: You May be Able to Get a Better Deal Somewhere Else

Your employer provided life insurance coverage may not the best financial decision for you. You may be able to find a better deal by shopping for life insurance through an insurance broker. Not only can you price shop, but you can shop for insurance that fits your needs.

Shopping for a good deal on life insurance now is important. If you wait until you switch jobs, you are giving up time that could work in your favor. For example, if you change jobs in five years, you will likely pay a higher rate for life insurance (assuming you’re in the same health, which is also a risk) than if you got the life insurance policy earlier. Locking in a price now will help you get the best deal you can, regardless of your job status.

Reason 3: Your Insurance is Dependent on Your Job

With employer group life insurance, the coverage only exists so long as you are an employee. If you quit, are laid of, or are fired, you most likely lose your life insurance coverage.

The average employee works at his job for 4.6 years according to the Bureau of Labor Statistics. This means that most people are changing jobs a lot. With each job change, benefits end – life insurance coverage included.

While you may think you can always get life insurance with your next employer, your next employer may not offer life insurance or some other turn of events may happen in your life where you don’t have access to employer life insurance coverage.

Reason 4: If Your Health Changes You Put Your Coverage at Risk

If you get sick or become disabled you put your life insurance coverage at risk. Getting an illness may cause you to have to leave your job, which means you may lose your benefits, including your life insurance coverage. In this case, as opposed to quitting or being fired, your ability to get life insurance somewhere else may be very difficult because it’s hard to get life insurance (if not impossible) in poor health. Life insurance is easiest and cheapest to get the younger and healthier you are.

For example, if you are the sole provider for your family, become disabled, have to leave your job, and die a few years later, you would leave your family without life insurance money after you passed away if you only had employer life insurance coverage because of the years where you lived disabled and unemployed. If you had additional life insurance coverage in place before you became disabled, your loved ones would receive a death benefit regardless of whether you worked in the last years of your life. This is a really important reason to consider shopping for life insurance above and beyond your employer group coverage.

Shopping Young Makes Sense

Life insurance is easiest and cheapest to obtain when you are your youngest and healthiest self. Therefore, it’s really important that you consider your health and your age when you decide how to meet your life insurance needs.

You need life insurance if you have people who would financially suffer if you died. The purpose of life insurance is to protect your loved ones financially when you’re no longer here. With adequate life insurance coverage you can have confidence that the people who depend on you will have enough money to live without your support.

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Personal Loans

Should You Finance or Lease Solar Panels for Your Home?

Finance or Lease Solar Panels

Who doesn’t want to save the planet and maybe save a little money along the way? One way to chip in and do your part is by changing where you get your electricity on a day-to-day basis. Instead of using traditional electricity to power your home, you can look into greener alternatives like solar panels.

These systems used to be very expensive, however, as more people have moved into the market, the pricing on these sun-gathering energy collectors has come down rapidly.

On top of decreased costs at the time of purchase, solar panel systems can actually have a profitable return on investment. Here are some of the costs and benefits you should take under consideration before making the plunge.

Cost of solar panels

When figuring out upfront costs, you’ll want to account not just for the panels, but also for their installation. The national average cost to purchase and install a solar panel system is $3.50 per watt, with the average American home requiring a 5,000 watt system. That means that the average upfront investment is $17,500.

The price for your power system may vary your particular home in your state. You should, of course, do local research, but we’ll go with the national average for the purposes of our calculations.

The Federal government offers a 30% tax credit for the installation of solar or wind systems at residential properties, so this will effectively bring the average cost down to $12,250. On top of federal tax credits, also do some research for state and local tax credits or programs that can further bring down costs.

Over the life of your solar panels, which will likely be between 25 and 40 years, you will have to perform regular maintenance. National averages for this cost come out to a little over $20 per year.

You will also want to call your insurance provider to see what will happen to your homeowner’s premiums. In many cases the costs stay the same or even go down as those who are eco-conscious enough to install solar panels are currently viewed as more responsible than the general populace. The rate cut is even more likely if you have the panels set up in your yard rather than on your roof. Some insurers will raise rates, though, because of the added load to the structure when panels are installed on the roof.

Benefits of using solar panels

If you’re going to spend about $12,500 on a solar panel system and then pay at least $500 in maintenance over the term of its life, warm and fuzzies about saving the planet may not be doing it for you. You’ll want to know there’s a return on investment.

Producing solar power is not inherently cheaper than using regular electricity at this point in time. When you purchase your solar panels, you are essentially paying for your electricity for the next 25 to 40 years up front. Depending on where you live, this may or may not be cheaper than actual costs of electricity.

However, one beauty in making this investment is that you can actually sell off any excess energy you generate.  Those that deliver electricity have to meet certain quotas of green energy per month. They do this less often by generating green energy themselves, and more often by buying green electricity from others.

That green energy is bought and sold via Renewable Energy Certificates, or RECs. When you generate 1 megawatt-hour in excess of what you actually use, you will be issued a certificate that you can then sell to your local utility company. How much you get for each of these certificates will vary both by geographic location and current market value, but to give you an idea, last year you could get about $200 per certificate in the state of New Jersey.

Financing Your Solar Panels

Don’t have $17,500 up front to invest? Because of the potential savings on energy, depending on your area, and the added bonus of RECs, it may be worth it to finance. (You’ll have to wait until tax season to see that 30% credit from the IRS.)

The government offers Energy Efficient Mortgages to fund these types of improvements. In order to obtain one, you will need to get your home assessed so the government can calculate how much savings the solar panels would provide to you. That way, they know the loan is a good investment.

You can also take out a Home Equity Line of Credit (HELOC) where your home serves as collateral if you are unable to repay your loan. Taking out a HELOC means you have the potential to lose your home if you fall behind.

Another option is personal loans. Here are some of the most competitive lenders in the personal loan industry, all of them providing unsecured lending, so you won’t have to hand over any collateral.

SoFi

SoFi provides unsecured personal loans, currently at a rate of 5.95%-12.99% APR depending on your cash flow and credit history. Loans can be for either 3-, 5- or 7-year periods with no origination fees, and if you lose your job during that time, SoFi may temporarily pause your payments and help you find new employment through its Career Services resources.

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LightStream

LightStream actually provides loans specifically for the purchase of solar panels. Shorter terms of 2-3 years based on our average loan come at a fixed rate of 3.99% for those with excellent credit, and rates increase with your term up to 7.59% on 7-year loans for those with excellent credit. It charges no origination fees.

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Earnest

If you have a credit score of 720 or over, you may want to look into Earnest. It provides personal loans in 1-, 2- and 3-year increments at starting fixed interest rates of 5.25%, 5.50% and 6.00% APR respectively, based on our $17,500 number. These loans also have no origination fees.

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Upstart

Upstart loans do come with an origination fee of 1%-6%, but they are more likely to accept a wider range of applicants than the above lenders. Its interest rates are competitive starting at 4.66% APR, though those with lesser credit scores can end up paying up to 29.99% APR if approved. Upstart’s loans come in three-year terms.

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When to Lease

If you can’t qualify for a personal loan, or simply don’t want to go through the hassle of installation and maintenance, there is hope yet. You don’t necessarily have to purchase your own solar panels in order to turn your house into a green machine.

Many companies now allow you to lease panels. Typically you lease panels for 20 years, with most companies installing and maintaining your panels for free. You pay them a flat monthly fee that will generally increase somewhere between 1.5% and 3% per year depending on your contract. In some years, that will be less than your electric company increase its prices, and in other years it will be more. The national average for annual energy cost increases to consumers between the years of 2003 and 2015 was 3.19%.

The reason companies are able to install and maintain your panels free of charge is that they will be taking all of those tax credits; you don’t get to claim them come April. They will also be benefiting from the sale of any RECs your household generates.

You are likely to save a little money long-term when you lease, and you’ll be making a decision that will help the planet for future generations. Doing so costs very little up front, and you won’t have to deal with any stress related to maintenance over the years.

If you’re looking for an investment that will net you cash long-term, though, buying is the way to go if you can afford it or get your hands on a personal loan with a competitive interest rate. Be sure to do research relative to your local community as far as costs and energy generation goes, as solar panels will be far more financially advantageous in some regions of the country over others.

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College Students and Recent Grads

Will You Get Charged a Student Loan Origination Fee?

Student Loan Origination Fee
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Most people know that when you’re considering borrowing money for your education, it’s extremely important to take interest rates into account. But did you know that in addition to interest rates, some types of student loans also carry origination fees?

What is an origination fee?

An origination fee is a one-time fee collected at the time the loan is disbursed; it is typically a percentage of the total loan amount. This means that instead of receiving the entire amount that you borrow, you receive the amount that you borrow minus the loan origination fee.

Origination fee rates

Most types of federal student loans, with the exception of Perkins loans, carry an origination fee. The current loan origination fees in 2016 for federal subsidized, unsubsidized, and PLUS loans are as follows:

Federal Direct Subsidized Loans: 1.068%

Federal Direct Unsubsidized Loans: 1.068%

Federal PLUS Loans: 4.272%

Decoding the cost

This means that if you take out, for example, a $10,000 unsubsidized loan from the federal government, the loan origination fee will be $106.80. So instead of receiving the full $10,000, you will only receive $9,893.20.

Similarly, if you take out the same $10,000 using a federal PLUS loan, the loan origination fee will be $427.20. In this case, you’ll only receive $9,572.80.

However, in both of these cases you will still be required to pay back the full $10,000. Additionally, interest will accrue on the full amount you borrowed and not just the amount you received.

Note also that the fees listed above are the current fees for new loans and are valid until October 1, 2016, at which time they may be adjusted. Additionally, if you took out a federal student loan prior to October 1, 2015, your fee may be different. You can find more information about origination fees on federal student loans at the StudentAid.gov website.

Private lenders don’t always charge origination fees

In contrast to the federal government, many top private lenders, such as Wells Fargo, Discover, Sallie Mae, and PNC, do not charge origination fees for loans that are applied toward study at undergraduate or graduate colleges. However, keep in mind that there may be other disadvantages to borrowing from private lenders, such as higher interest rates or a lack of the types of loan forgiveness, income-driven repayment plans or forbearance and deferment programs that are available through the federal government.

Always crunch the numbers

Origination fees are important to be aware of when considering taking out student loans. When you take out a loan with an origination fee, you will always be paying back the total amount that you borrowed, rather than the amount you received after the origination fee was subtracted, and interest will also accrue on that total amount. Although origination fees are one-time fees, they’re important to factor into your overall financial and loan repayment plan.

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Earning Cashback, Reviews

Amex Blue Cash Preferred Review: The Perfect Cash Back Card for Heavy Grocery Shoppers?

Amex Blue Cash Preferred Review

If you’re looking for a cash back program that will reward you handsomely for grocery shopping, the Amex Blue Cash Preferred is one to check out. Although it has an annual fee, the amount of cash back you have the potential to earn can easily cover the expense.

In this Amex Blue Cash Preferred review we’ll cover:

  • The Amex Blue Cash Preferred basics
  • How cash back works
  • The fine print details
  • The Amex Blue Cash Preferred benefits and protections
  • The pros and cons

The Basics of the Amex Blue Cash Preferred Card

1. Earn 6% cash back at U.S. supermarkets with a cap

You can earn 6% at supermarkets excluding superstores and warehouses including Walmart. Specialty stores like wine and convenience stores probably won’t count for the 6% category either, so be careful with this spending if you choose to sign up for the card. The annual cap for this category is $6,000.

2. Earn 3% cash back at gas stations and select department stores, 1% cash back on everything else

Gas stations affiliated with grocery stores won’t count for this category unless otherwise noted by American Express. You can also earn 3% cash back at the following department stores:

  • Bealls
  • Belk
  • Bloomingdale’s
  • Bon Ton Stores
  • Boscov’s
  • Century 21 Department Stores
  • Dillard’s
  • C. Penney (JCP)
  • Kohl’s
  • Lord & Taylor
  • Macy’s
  • Neiman Marcus
  • Nordstrom
  • Saks Fifth Avenue
  • Sears
  • Stein Mart

Cash back is unlimited for the 3% category. On all other purchases you get an unlimited 1% cash back.

3. Earn extra bonuses

If you spend $1,000 within the first three months of card signing, you’ll get a bonus $150 cash back.

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How Cash Back Works

Cash back you earn converts into Rewards Dollars. You can redeem Rewards Dollars for statement credits in increments of 25. You can’t use your Rewards Dollars to pay your minimum credit card balance each month. You’ll need to make your regular payment to keep the card in good standing.

The Fine Print

The Amex Blue Cash Preferred card has an annual fee of $75. This card is a step up from the basic Amex Blue Cash Everyday card which offers less cash back (3% cash back on groceries) and no fee. The fine print on both cards are the restrictions in the highest cash back categories. There’s a $6,000 annual cap for groceries, and you have to shop at specific places to earn money back.

American Express uses merchant codes to determine how much cash back you get on each purchase. For groceries, strictly grocery stores will qualify and not stores like Sam’s Club or Costco. Same goes for gas. You can’t earn at the pump just anywhere; it has to have a gas station merchant code.

How to Get the Most Value from the Cash Back Program

You only need to spend a little over $100 on groceries each month for the year to earn enough cash back to pay the annual fee. Not bad at all. Since the cap for the year is $6,000 for groceries, you have plenty of room to earn more cash back for free.

If you have a small household and don’t spend much on groceries each month, this card may not be worth the cost. Check out the Amex Blue Cash Everyday card for free instead. You earn 3% on groceries. And 2% cash back on gas and department store spending.

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If you want to earn more than 1% cash back on all other purchases, you could try doubling up rewards cards with the Fidelity Investment Rewards Visa Signature. This card gives you 2% cash back on all spending with no restrictions. Use the Amex Blue Cash Preferred for the 6% and 3% categories and then whip out this card for everything else. `

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Amex Blue Cash Preferred Benefits and Protections

Besides the cash back program, the Amex Blue Cash Preferred card comes with other perks and protections that’ll make your life easier.

Roadside Assistance & Travel Accident Insurance

American Express will help connect you with a towing or repair company if your car breaks down. Travel accident insurance is included as well if you pay for an entire vacation with the card.

Car Rental Loss & Damage Insurance

American Express covers damage and theft if you rent a car. No need to pay for the damage waiver through the car rental agency. You should check out the fine print terms of the coverage first because some restrictions on the car types covered may apply.

Extended Warranty & Purchase Protection

American Express will give you up to an extra year on top of your manufacturer’s warranty on products if the warranty is five years or less. The card also covers your purchases from damage and theft for up to 90 days. If you want to return an item within 90 days of purchase that a merchant won’t take back, American Express may refund you up to $300 per item, and up to $1,000 per year.

Pros and Cons

Pro: A high amount of cash back. Although there’s an annual $75 fee, you can earn 6% cash back on the first $6,000 you spend on groceries during the year. That’s $360 in cash back and more than enough earnings from just one category to cover the fee.

Con: The fine print. The category restrictions may be a deal breaker. Shop outside of the designated merchant codes and you’ll only get 1% cash back. Although, to be fair, most rewards cards exclude warehouses and superstores in the rewards program. You may have better luck sticking with options like the Fidelity Investment Rewards Visa Signature if you’re a bulk shopper. No need to worry about merchant codes, you’ll just get 2% cash back on everything.

Pro: No rotating categories. You don’t have to worry about switching up your spending habits each quarter to get the max cash back.

Con: Only 1% cash back on other purchases. Cash back for everything outside of the categories is low. You may want to get a second rewards card that will earn you more cash back outside of groceries, gas and department store spending.

Pro: The benefits and protections. American Express has your back with purchase protections, travel accident insurance and more.

Who Will Benefit Most from the Amex Blue Cash Preferred?

The Amex Blue Cash Preferred card is a top pick for cash back on groceries if you spend enough to substantiate the annual fee. You also get an unlimited amount of cash back for gas which is a good deal if you need to fill up the tank often. Check to make sure that your spending habits will allow you to get the most value from the card before signing up.

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