Building Credit, Featured

Collection Accounts Don’t Always Hurt Your Credit for Seven Years

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When you fall behind on a bill, you might get charged a late fee and your late payments could be recorded in your credit reports. If a bill goes unpaid for long enough, your creditor may send or sell your account to a collection agency.

The collection agency will then attempt to collect the balance from you — sometimes aggressively — and often reports its possession of your account to the credit bureaus. A new account with the collection agency’s name will then appear on your credit reports, and this can have a significant negative impact on your credit scores.

You might think that paying off the debt clears everything up, but that isn’t necessarily the case.

Generally, if you pay the amount you owe or settle for a lower payment, the collection account on your reports will be updated and marked paid in full, settled, or something similar. The impact of a collection account on your credit scores diminishes over time, and a paid account could look better to creditors than an unpaid account. But like other derogatory marks, the account can remain on your reports for up to seven years and 180 days since the account first became delinquent (your first late payment with the original creditor).

After an account is removed from your credit report, collection agencies can still continue to attempt to collect payment as long as the account isn’t outside the governing statute of limitations (state laws determine how long a creditor can attempt to collect certain debts).

Even so, removing a collection account could improve your credit scores, making it easier and less expensive to open new loans or lines of credit. Here are a few exceptions to the standard timeline and instances when a collection account won’t affect your credit score.

You’re a New York state resident. For current New York state residents, satisfied judgments and paid collection accounts must be removed five years from the date filed or date of last activity, respectively.

The collection account was for a medical bill that your insurance paid. A settlement between New York Attorney General Eric Schneiderman and the three nationwide credit bureaus — Experian, Equifax, and TransUnion — in March 2015 resulted in new national credit-reporting policies. Now, medical debt can’t be reported to the credit bureaus for 180 days, and medical collection accounts that are being paid, or are paid in full, by an insurance company must be removed from your credit report.

You didn’t have a contractual agreement to pay the debt. Another result of the settlement in New York was that credit reporting agencies can no longer report debts that aren’t a result of a contract or agreement you signed. In other words, if your debt from a parking ticket or library fine gets sent to a collection agency, it won’t be added to your credit reports.

The collection agency agrees to a pay for delete. Also known as pay for removal, a pay-for-delete agreement with a collection agency is an arrangement in which you agree to pay some or all of the amount owed the collection agency and requests the credit bureaus delete the collection account from your reports.

You’ll want to get a written agreement from the collection agency before sending a payment, but this could be difficult because in general a pay-for-delete agreement is considered a little shady. “Right now, the credit reporting standards do not allow for deletion of accurate collections simply because they’re paid,” says credit expert John Ulzheimer, formerly of FICO and Equifax. “That doesn’t mean it doesn’t happen, simply that it’s counter to the standards that debt collectors have been given by the credit reporting industry players.”

It requires the collection agency to stop reporting an account that legitimately existed, which may violate the agreement the collection agency has with one or more of the credit reporting agencies.

Midland Credit Management bought your debt. In October 2016, Midland Credit Management, a subsidiary of Encore Capital Group, one of the largest debt collection agencies in the world, announced a new policy.

If MCM bought your debt and you begin payments within three months, and continue making payments until the account is paid off, the company won’t report the account to the credit bureaus (i.e., it won’t appear on your credit reports).

Additionally, if it’s been more than two years since the date of delinquency and you pay the account in full or settle the account, MCM will request the credit bureaus delete the collection account from your credit reports.

The account isn’t yours. If a collection account is on one of your credit reports and you don’t owe the debt, or it’s a type of collection account that meets one of the above criteria for removal, you may be able to dispute the account. The Fair Credit Reporting Act requires the credit bureaus and data furnishers (such as a collection agency) to correct inaccurate information.

Your lender uses one of the latest credit-score models. You might have paid or settled a collection account and still have to wait for the account to drop off your credit reports. However, if your lender is using the latest base FICO Score, FICO 9, or the VantageScore 3 scoring model, paid or settled collection accounts won’t affect your credit score. FICO Score 8 and 9 don’t consider collection accounts if your original balance was under $100.

However, lenders may use older credit-scoring models, which means a collection account could affect your score for as long as it’s on your credit reports and regardless of the original debt.

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5 Ways Your Obamacare Coverage Could Change This Year

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5 Ways Your Obamacare Coverage Could Change This Year

Humana’s announcement last week that it is dropping out of the Affordable Care Act (also known as Obamacare) exchange and President Donald Trump’s tweet Friday that the Obamacare repeal is “moving fast” capped a frenzied week for the embattled law.

The proposed rule the Trump administration issued last week could mean major changes and increased costs for those who have Obamacare as well as other coverage. Congress would have to act to change Obamacare.

Amid the uncertainty about what will happen to Obamacare, here are five potential ways you and your health care spending could be impacted if the changes succeed.

The main changes would include:

  • Giving insurers the ability to offer more products that also cost more.
  • Removing the federal government’s oversight of insurers’ hospital and doctor networks.
  • Cutting in half the open enrollment period.
  • Requiring paperwork in advance that proves eligibility for enrolling outside of the open period.

1. You might need to find a new health plan

Humana last week announced it will drop out of the exchange, saying it would no longer provide individual plans in 2018.

“That’s been a pretty consistent phenomenon for the last two years, where you might have a particular insurance provider and then they pull out of the exchange, and so now you’ve got to go find another one,” says Chris Rylands, a partner in the Atlanta, Ga., office of Bryan Cave LLP, an international law firm. His practice focuses on employee benefits.

Humana analyzed the customers who had signed up through the exchange and found too much risk

2. Your costs for women’s health benefits could rise

With the Trump administration’s vow to overhaul Obamacare, some American women are feeling insecure about their birth control options.

In one example, Cecile Richards, president of Planned Parenthood, told CNN’s Christiane Amanpour in January that Planned Parenthood’s patient requests for IUDs has jumped by 900%.

Sneha Bhakta, 22, is among the women who plan to look into requesting an IUD.

She and her parents pay about $500 each month for the three of them to have insurance through Obamacare.

“I follow the news extremely closely. Yes, my parents are concerned about the changing policies. Mostly because it’s all up in the air,” Bhakta says.

Bhakta, who lives in Atlanta, Ga., attended the Atlanta March for Social Justice and Woman in January, which was among hundreds of events the same weekend as the Women’s March on Washington. She says she’s scared about the possibility of losing coverage, especially the reproductive health care benefits, such as free birth control and pap exams.

3. Your deductible could go up

Proposed changes to the Affordable Care Act will create more leniency in how plans are classified. The greater leniency will allow for more diverse choices in the health care market, but could increase co-payments and deductibles for consumers.

All participating insurance plans have to cover 60% of out-of-pocket costs to qualify as a bronze-level plan, 70% for a silver plan, and 80% for gold. While the insurance plan pays for 70% of out-of-pocket costs for a silver plan, consumers would pay the remaining 30% through a combination of deductibles, co-pays, and co-insurance. Under the Obama administration, a two-point disparity was permitted, meaning that a plan could cover 68% of the costs and still qualify as a silver plan.

With Trump’s proposed changes to the Affordable Care Act, the disparity has been increased from 2% to 4%. Plans with only 66% coverage would still qualify as a silver plan.

It gives insurers a little more room to vary their plan terms,” Rylands says.

He adds that although there’s the potential for higher deductibles or out-of-pocket costs, the fact that the proposal extends it by only 2 percentage points means those increases will not be significant.

Already, Americans are showing they’re willing to pay for a plan with high deductibles in order to save money on premiums.

Over the last two years, enrollment in high-deductible health plans with a savings option by workers with employee-sponsored health insurance has increased 8 percentage points, to 29%, according to the 2016 Employee Health Benefits Survey by Kaiser Family Foundation and the Health Research and Educational Trust.

The survey found average premiums for those plans were “considerably lower” than the average for all plan types, at $5,762 for single coverage and $16,737 for family coverage.

4. You may have to be a bit more on the ball to enroll

The Trump administration’s proposal would cut the open enrollment period, typically three months, in half.

Under the new guidelines, those who need to enroll in health care for 2018 would have from between Nov. 1 and Dec. 15, 2017. Insurance coverage will end on Dec. 31, 2017, for all participants, no matter their enrollment date.

Not only would the open enrollment period be shorter, but the president has already slashed the advertising budget for Obamacare. Upon taking office, Trump cut $5 million in advertising days before the Jan. 31, 2017, enrollment deadline.

Enroll America, a nonprofit, nonpartisan organization that serves as the nation’s leading health care enrollment coalition, criticized the decision and its timing during the critical final days of the enrollment period for 2017. In a January statement, Anne Filipic, president of Enroll America, said, “their decision to halt outreach will have real impact on real people’s lives.”

Also last week, the Trump administration announced plans to place more stringent guidelines for the special enrollment period, in an effort to reduce the number of consumers registering outside the open enrollment period. For 2017, the enrollment period ran from Nov. 1, 2016, to Jan. 31, 2017.

The special enrollment period was originally meant for people who experience unexpected changes, such as unemployment, a new baby, or moving states. The Affordable Care Act allows consumers to enroll and submit proof later that they qualify for the special enrollment.

Insurance agencies have found that people signing up under the special enrollment period have higher health care costs, leading agencies to believe that Americans are signing up when already sick.

Under the proposed revisions, consumers will be required to provide proof before signing up for special enrollment.

Your providers could change

Proposed changes to the Affordable Care Act will also remove federal review of insurance networks. The networks were created by the Obama administration in response to complaints that there were too few providers accepting insurance policies purchased in the exchange.

The requirement for a minimum number of providers within a set distance from enrollees could be removed.

While this could reduce consumers’ access to health care within a reasonable distance, Rylands is hopeful it could allow more health insurance companies to continue providing services on the exchange.

“We’ll just have to wait and see if that happens though,” Rylands says.

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Credit Cards

Review: PenFed Launches 1.5% – 2% Power Cash Rewards Credit Card

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The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

PenFed, a credit union that anyone can join (more on that later) has just introduced a new cash back rewards credit card. The card pays a high, flat cash back rate and brings a credit union approach to fees (low and not many of them) and simplicity. Here are the details on the cash back that you can earn:

  • Anyone with military service earns 2% cash back on all spending, with no limits or restrictions. That is the highest flat cash back rate in the market.
  • Anyone with a PenFed checking account (restrictions apply) earns 2% cash back on all spending, with no limits or restrictions. (If you keep $500 in the checking account, there is no fee and you earn 0.20% APY on the money).
  • If you do not have military service or a checking account, you can earn 1.5% unlimited cash back. At 1.5%, the card matches Chase Freedom Unlimited or Capital One Quicksilver, but it is still beat by Citibank’s Double Cash.
  • There is a minimum redemption amount of $5 for the cash back that you have earned.
  • There is a bonus offer: get $100 of cash if you spend $1,500 during the first 90 days.

In addition to the cash back, here are some additional features:

  • Chip with pin functionality: if you travel overseas, you might find chip + signature limiting. For example, trying to use a card with only signature functionality at kiosks across Europe (like the London Underground) can be challenging.
  • No annual fee and no foreign transaction fee.
  • Variable APR range of 9.24% – 17.99%. If you have excellent credit, the lowest APR at Citi (on the Double Cash product) is 13.49%. For people who revolve occasionally, this could be a better option. (Although our advice remains to pay your balance in full and on time. If you need to borrow money, personal loans and balance transfers remain cheaper options).

Our Verdict

Best Cash Back Credit Card for Military: 2% is the gold standard for a flat rate cash back credit card, and PenFed delivers for men and women who have served. This is better than any competing flat-rate cash back credit cards because of the lower APR and lack of foreign transaction fees.

Best Cash Back Credit Card for Spending Abroad: If you use Citi Double Cash, you would be hit with a foreign transaction fee of 3%. So, you would earn 2% but be forced to pay 3% in fees. Before this card, Capital One Quicksilver was our top choice because of a 1.5% earn rate and no foreign transaction fees. PenFed’s card now wins because (a) if you put $500 into a PenFed checking account you can earn 2% on this card, and (b) the card offers chip and pin functionality. If you spend $1,000 overseas this year, you would pay $10 to Citi, (2% cash back – 3% fees = -1%), would earn $15 with Capital One and would earn $20 with PenFed.

Tie: Best Flat-Rate Cash Back Credit Card: With both Citi Double Cash and PenFed you can earn up to 2%. Each card has its own unique differences, which is why they are tied for best flat-rate card in the market.

  • PenFed: You need to join the credit union, open a checking account and fund the account with $500 (or sign up for direct deposit) to ensure you get the full 2% and avoid fees. Financially it will make sense, but there are a number of obstacles to get the full rewards (unless you are military).
  • Citi Double Cash: It is easy to apply and get the card (no credit union membership or Citi checking account required). However, the card is actually 1% as you earn and 1% as you pay, so it takes longer to get the full 2%. The interest rates are higher and there is a foreign transaction fee.

There are still options to earn higher cash back rates in certain categories. You can find the best cash back credit cards by every category here. For example, you can earn 5% unlimited on gas with Fort Knox Credit Union or 6% (with limitations) on groceries at American Express.

If you want to learn more or apply, you can visit PenFed’s website.

LearnMore

Requirements To Earn 2%

Here are the details on how to ensure you get the full 2% earn rate:

Military: You are eligible to earn 2% if the primary or joint applicant is in military service, the National Guard, the Reserves, an honorary discharged veteran or retired from the United States military. Military members receive the 2% upon completion of the application – no further action is required.

Checking Account: If you do not meet the military requirements, you would need to open a checking account with PenFed. The account is called the “AccessAmerica Checking Account.” There are some decent benefits to the account (you can earn 0.20% APY interest on balances up to $20,000 and 0.50% APY on balances between $20,000 and $50,000). If you shift your monthly direct deposit of at least $500 to this account, you will not have a monthly fee. However, if you do not want to shift your direct deposit, you can deposit $500 and keep it there to meet the required minimum balance. This is actually the easiest way to earn the 2%, cash back rate and, given the 0.20% interest on the checking account, it can be financially worthwhile.

Join the Credit Union: There are multiple ways to join the credit union. If you are active or retired military, you are eligible to join for free. If you work for the US government or are a relative of a member, you can also join for free. But don’t worry if you are unable to meet those requirements. You might belong to an eligible organization (check here). You can also join an organization to become eligible for credit union membership. You can pay $17.00 (one time and non-refundable) to join Voices for America’s Troops or the National Military Family Association. By supporting a good cause, you become eligible for credit union membership. In addition to the credit card, PenFed is known for low rates on auto loans and mortgages.

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9 Essential Tax Tips for Entrepreneurs

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The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

For many entrepreneurs, there is no topic more fraught than taxes. In fact, a 2015 survey of small business owners found that 40% say dealing with bookkeeping and taxes is the worst part of owning a small business and that they spend 80+ hours a year dealing with taxes and working with their accountants. Taxes can be time-consuming, confusing, and a drain on your finances if you don’t prepare well. So whether you choose to do your taxes on your own or hire a professional, this guide can provide some sound advice and hopefully make tax time a little less taxing.

 

#1 Select the Right Entity for Your Business

 

One of the first decisions you’ll make when setting up your business is whether to function as a sole proprietor, partnership, LLC, or corporation. In her recent blog post, Wendy Connick, an IRS enrolled agent and owner of Connick Financial Solutions, says “the type of business entity you choose will have a huge effect both on how you pay taxes and how much tax you pay. It’s wise to consider the pros and cons of each business structure before making a final decision.”

Sole proprietorship

A sole proprietorship is the simplest way to form a business, as it is not a legal entity. The business owner just needs to register the business name with the state and secure the proper local business licenses. The downside is that the sole proprietor is personally liable for the business’s debts.

Partnership

A partnership is similar to a sole proprietorship, but two or more people share ownership. Both partners contribute their money, labor, or skill to the business and share in its profits and losses.

Limited liability company (LLC)

An LLC provides more protection from liability than a sole proprietor or partnership but with the efficiency and flexibility of a partnership.

Corporation

A corporation is more complicated and usually recommended for larger companies with multiple employees. It is a legal entity owned by shareholders, so the corporation itself, not its shareholders, is legally liable for business debts.

Unlike other business entities, corporations pay income tax on their profits, so they are subject to “double taxation,” first on company profits and again on shareholder dividends.

To avoid double taxation, corporations can file an election with the IRS to be treated as an S Corporation. S Corporation income and losses “pass through” to the shareholder’s personal income tax return instead of being taxed at the corporate level.

Some small businesses and freelancers may save on self-employment taxes by registering as an S Corporation and paying themselves a salary. Sole proprietors, partners, and LLC members pay self-employment tax on their entire business net income, but S Corp shareholders only pay self-employment taxes on their wages. They can receive additional income from the corporation as a distribution, which is taxed at a lower rate.

Connick says “many small business owners start out as sole proprietors and adopt a different structure once the business gets big enough to make it worthwhile (which would typically be when the business is making over $50,000 a year).”

 

#2 Get an Employer Identification Number

 

All businesses, even sole proprietors should get an Employer Identification Number (EIN). Technically, sole proprietors can use their Social Security number (SSN) as the business’s identification number, but that means providing an SSN to any clients or vendors who need to issue a 1099, a move that can leave you more exposed to identity theft.

Applying for an EIN from the IRS is free and can usually be done in a matter of minutes using the IRS’s online form.

#3 Make Sure Your Business Isn’t Just a Hobby

 

You know you’re in business to make money, but would the IRS agree? If your company is operating at a loss, the IRS could reclassify your business as a hobby, resulting in some serious tax consequences.

A business is allowed to offset taxable income with business expenses, but hobby expenses cannot be netted against hobby income. Instead, they are deducted as miscellaneous itemized deductions on Schedule A and limited to the amount of hobby income reported on Schedule C. This means a hobby business can never result in a net loss, and you may be prevented from deducting hobby expenses entirely if you don’t itemize deductions.

If you’ve been making money in your business for a while and just have one bad year, you don’t have to worry about the IRS reclassifying your business as a hobby. If you’ve been losing money for a while and especially if your business involves some element of personal pleasure or recreation (such as horse racing, filmmaking, or restoring old cars), you’ll want to make sure you’re treating your business like a business in case the IRS challenges your losses.

The IRS takes several factors into consideration:

  • Does the amount of time you put into the business suggest an intention of making a profit? Side projects are more likely to face scrutiny because you’re spending the majority of your time at another full-time job.
  • Do you depend on the income you receive from the business?
  • Were any losses beyond your control or occur in the startup phase? Losses due to poor management and overspending are less likely to hold up under examination.
  • Have you changed operation methods to improve profitability? Many business experience setbacks. If you learn from mistakes and try to correct your course, the IRS is more likely to agree that you have the intention of running a profitable business.
  • Do you have the knowledge and experience necessary to be successful in your field?

If you are concerned about an IRS challenge of your losses, there are a few steps you can take to treat your activity as a business:

  • Keep thorough business books and records.
  • Maintain separate business checking and credit accounts.
  • Obtain the proper business licenses, insurance, and certifications.
  • Develop and maintain a written business plan.
  • Document the hours spent working on your business, especially if it is a side project.

 

#4 Track Income and Expenses Carefully

 

Maintaining separate business checking and credit card accounts is not only a good way to demonstrate that your business is not a hobby, but it’s also an excellent way to simplify tracking business income and expenses.

Benjamin Sullivan, an IRS enrolled agent and a certified financial planner with Palisades Hudson Financial Group LLC in its Austin, Texas, office, says “small business owners can get a tax benefit from almost anything that is an ordinary and necessary business expense. Travel, meals, advertising, and insurance costs are just some of the popular deductions.”

Use small business bookkeeping software

Small business accounting software like FreshBooks, Xero, or QuickBooks Online can help you easily and quickly track your business revenues and expenses. They can usually be set up to import transactions from your business checking account automatically and let you snap pictures of receipts with your phone.

Whether you choose to use a software program or just a spreadsheet, establish a system for organizing records and receipts right from the beginning. “Little expenses can add up quite a bit over the course of a year,” Connick says, “but you can’t deduct them if you don’t know what they are.”

Special rules for travel, meals, and entertainment

It is especially crucial to maintain good records for business travel, meals, and entertainment expenses. The IRS allows taxpayers to deduct 100% of their business-related travel and 50% of the cost of business meals and entertainment expenses, whether you are taking a client out for a meal or traveling out of town. Because these categories are prone to abuse, the IRS requires documentation to substantiate that these expenses have a legitimate business purpose.

For meals and entertainment, in addition to a receipt that shows the amount, time, and place, taxpayers should also make a note of the individuals being entertained and the business purpose. Meeting this requirement can be as simple as jotting down a note on your receipt or in your calendar regarding who you dined with and the business matters discussed.

For travel expenses, hotel receipts must include a breakdown of the charges for lodging, meals, telephone, and other incidentals. Your hotel should be able to provide an itemized receipt at checkout.

Save cash instead of taxes

One trap that small business owners often fall into is spending money to save on taxes. At year end, many entrepreneurs look at business profits and think they need to spend their cash to avoid a big tax bill. Don’t spend a dollar to save forty cents in tax. If you truly need a new computer, extra supplies, or a new vehicle, buy it. Don’t spend money just to avoid a tax bill. Remember, taxes are a cost of doing business. If you’re paying taxes, you’re making money.

#5 Set Aside Money for Taxes

 

When you set up a separate business checking account, it’s also a good idea to set up a separate savings account to help you organize funds and set aside money for taxes.

Our tax system is a “pay as you go” system. When you receive a paycheck from an employer, money is regularly withheld on your behalf. When you are self-employed, making estimated tax payments is your responsibility. If you don’t pay in enough during the year to cover your income tax and self-employment tax, you may have to pay an underpayment penalty.

Estimated tax payments are due on the 15th day of April, June, September, and the following January. You have a few options for calculating what you owe each quarter:

Use Form 1040ES

This form includes a worksheet to help you estimate how much you owe for the current year. (Corporations use Form 1120-W to calculate estimated taxes.)

Look at last year’s return

If you’ve been in business for a while and there are no significant changes this year, you can aim to pay 100% of last year’s tax as a safe-harbor estimate (110% if your adjusted gross income for the prior year was more than $150,000).

Make a quarterly estimate

If your income fluctuates, you may prefer to make a quarterly calculation. Calculating estimated payments is complex. It depends on your tax bracket, deductions, credits, etc. In this case, it’s best to work with a tax professional who can consider all of the factors and recent changes in the tax law.

Sullivan says, “Tax planning isn’t a one-time exercise that should be done at the end of the year or at tax time. Instead, tax planning is an ongoing process of structuring your affairs in a tax-efficient manner.”

#6 Don’t Forget to Track Your Mileage

 

When you drive your personal vehicle for business, you have two options for deducting business automobile expenses: the standard mileage rate or actual expenses.

The IRS releases the standard mileage rate annually. The rate is $0.54 per mile for 2016. It goes down to $0.535 cents per mile for 2017. You simply multiply the standard mileage rate by the number of miles you drove for business during the year.

To use the actual expense method, total up all of the costs of operating your vehicle for the year, including insurance, repairs, oil, and gas, and multiply them by the percentage of business use. For example, if you drove 10,000 miles during the year and 5,000 of those miles were for business, your percentage of business use would be 50%. If it cost $7,000 to own and operate your vehicle, your deduction using the actual expense method would be $3,500 ($7,000 x 50%).

You can use whichever method gives you the largest deduction. However, if you want to use the standard mileage rate, you must choose it in the first year the car is used for business. In subsequent years, you can choose either method.

Whichever method you choose, you must track your business miles. You can do that with a paper log kept in your glove compartment or with an app such as MileIQ or TrackMyDrive. “Note that ‘business purpose’ is a pretty broad category,” Connick says. “If you drive to the supermarket and pick up some pens for your home office while buying groceries, the trip counts as business mileage.”

 

#7 Consider the Home Office Deduction

 

Some business owners avoid claiming the home office deduction, believing it to be an audit trigger. That may have been true in the past, but today’s technology has made home offices much more common. Connick suggests entrepreneurs shouldn’t fear the home office deduction if they meet the requirements. “It’s no longer audit bait,” she says, “especially if you use the safe harbor method to calculate your deduction.”

To take advantage of the home office deduction, you must use the area exclusively and regularly, either as your principal place of business or as a setting to meet with clients. The home office deduction is based on the percentage of your home used for the business. You can choose either the traditional method or the simplified method for deducting expenses.

Under the traditional method, you’ll calculate the percentage of your home that is used for business by dividing the square footage of your office by the square footage of your entire home. For example, if your home is 1,500 square feet and your office occupies 150 square feet, the business percentage is 10%. Then, you can deduct 10% of all of the expenses of owning and maintaining your home, including mortgage interest, real estate taxes, utilities, association dues, insurance, repairs, etc.

Under the simplified method, you’ll take a deduction of $5 per square foot, with a maximum of 300 square feet. So if your home office measures 150 square feet, the home office deduction would be $750 (150 x $5).

 

#8 Save for Retirement

 

For most self-employed people, the simplest option for retirement saving is an individual retirement account (IRA). Anyone can contribute to a traditional IRA, but with an annual contribution limit of just $5,500 ($6,500 if you are age 50 or older), you may want a retirement savings option that allows you to save more.

Connick says her number one tip for entrepreneurs is to open a SEP-IRA. “These retirement accounts are cheap to open and maintain,” she says. They also “have a high contribution limit, and contributions are fully tax deductible.” SEP-IRAs allow entrepreneurs to contribute up to 25% of their net earnings from self-employment, up to a maximum of $53,000 for 2016.

The deadline to contribute to a SEP-IRA is the due date of your return, including extensions. So 2016 contributions can be made until April 18, 2017, or October 15, 2017, if an extension is filed.

 

#9 Get Help from a Professional

 

Connick recommends that entrepreneurs hire a professional to do their taxes. “If you pick someone who knows their stuff,” she says, “you will likely save more than enough off your tax bill to pay for their fees. For that matter, tax preparation fees are deductible!”

When choosing a tax professional, look for someone with experience working with self-employed taxpayers. The IRS maintains an online directory of return preparers who have additional credentials, such as EAs, attorneys, and CPAs. Search the directory to find a professional near you with the credentials or qualifications you prefer.

If there is one thing all entrepreneurs can agree on, it’s that everybody dreads tax season. Having a basic understanding of tax law, maintaining organized records throughout the year, and working with a professional can help you make the most of this least wonderful time of the year.

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Best of, Credit Cards, Reviews

2017 Best Credit Cards for Small Businesses

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The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Note from the Editor: The information related to Chase Ink Business Preferred Card credit card has been collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card.

 

As a small business owner you know you need to manage your cash flow and plan for financing. Credit cards can be an ideal way to meet those needs. But business owners need to be savvy cardholders. Small business credit cards come with unique risks that personally affect entrepreneurs.

 

In this roundup we cover the risks and advantages of small business credit cards. And we’ll show you what card fits your business needs.

 

Best Cards for Financing

If credit cards are an important source of financing and capital for your business, then you need to be a savvy borrower. Look for cards with compelling terms, and take the time to understand the fine print. Remember, the card may be in the business’s name, but you’re personally liable for the debt. Don’t take on more debt than you can handle.

Best 0% Financing

The American Express Blue for Business card offers 12 months of 0% APR for financing. If you fail to pay back your purchases within 12 months, your interest rate will move to 11.74%-19.74%, depending on creditworthiness. You lose access to the introductory rate if you make a late payment.

The 12-month 0% APR window is one of the most generous offers available. On top of generous financing, you earn rewards for spending.

Rewards include 10x points per $1 spent on the first $2,000 in qualifying purchases at U.S. restaurants for the first six months. You can also earn 10,000 Membership Rewards points after making your first purchase. Plus, you will receive 2x points on qualifying purchases on the first $50,000 in the first year. Every year, you’ll also receive a bonus of 30% of the previous year’s points earned.

The card offers perks including secondary car rental insurance, purchase protection, extended warranties, baggage insurance, trip accident insurance, and travel hotline help.

The Fine Print
  • Introductory rate: 0% APR financing for 12 months. You must pay on time, or you lose this rate.
  • APR: After 12 months, 11.74%-19.74%, depending on your creditworthiness
  • Penalty APR: 29.74%
  • Annual fee: No annual fee
  • Late fee: Up to $38
  • Returned payment fee: $38
  • Cash advance fee: Greater of $5 or 3%
  • Cash advance APR: 25.74%
  • Rewards: 2 points for every dollar you spend in the first year up to $50,000. 1 point per dollar spent. 10 points for every dollar you spend on dining in the first six months.
  • Bonus: 2 points for every dollar you spend booking travel at amextravel.com

Apply Now

Low Interest Rates

If you and your business have excellent credit, the Platinum Plus for Business MasterCard from Bank of America offers low ongoing financing. This is a great card for businesses with periodic short-term borrowing needs. Besides interest rates as low as 9.74%, it offers a seven-billing-cycle 0% APR promo rate and $200 statement credit if you spend $500 in the first 60 days.

Plus, the card offers travel accident insurance, secondary rental insurance, and automatic downloads to QuickBooks.

Remember, it’s not wise to use a small business credit card for long-term financing. Many credit unions will offer low rates on installment business loans.

The Fine Print
  • Introductory rate: 0% APR financing for seven billing cycles.
  • APR: 9.74%-20.74% variable APR, depending on your creditworthiness (after seven billing cycles)
  • Annual fee: No annual fee
  • Late fee: $19-$49 (depending on your balance)
  • Returned payment fee: $39
  • Cash advance fee: Greater of $10 or 4%
  • Cash advance APR: 24.74%
  • Sign-up bonus: $200 statement credit if you spend $500 in your first 60 days
  • Rewards: None

Apply Now

Cash Flow Management

Managing cash flow can be one of the most difficult problems facing small business owners. The Plum Card by American Express makes cash flow easier. The Plum Card is a charge card not a credit card. This means that it is designed to give you access to short-term working capital. However, it is not a good source of financing.

If you pay your bill within 10 days of statement closing, you’ll get a 1.5% discount on eligible charges. Otherwise you have a full 60 days without interest before you need to make a payment. Beware, these benefits come at a steep price. After one year, you’ll pay a $250 annual membership fee. Plus, carrying a balance on a charge card comes with huge penalties. The first time you go past due, you’ll be charged 1.5% of the balance. After that, they charge a late fee of 2.99%. The minimum fee is $38.

The Fine Print
  • Late fee: 1.5%, then 2.99%; minimum of $38
  • Returned payment: $38
  • On-time payment bonus: 1.5% discount if you pay balance within 10 days of statement closing
  • Annual fee: $0 for the first year, $250 thereafter
  • No cash advance
  • Rewards: None

Apply Now

Imperfect Credit

If you’re struggling to get approved for a small business credit card, the Spark Classic from Capital One offers an excellent option. The card has a high variable APR (23.49%) and mediocre rewards (1% cash back). But Capital One will approve business owners with just average credit.

This isn’t a great card for borrowing, even in the short term. However, the Spark Classic will give you some working capital, and it will help your business build its credit. Just remember to pay your bill on time each month and to keep your credit use low.

The Spark Classic also offers perks like purchase protection, free extended warranties, and travel and emergency assistance. These protections offer tremendous value to business owners.

The Fine Print
  • APR: 23.49% variable APR
  • Annual fee: No annual fee
  • Late fee: Up to $39
  • Cash advance fee: Greater of $10 or 3%
  • Cash advance APR: 23.49%
  • Rewards: 1% cash back on all purchases

Apply Now

Cards for Service Members

Former and current members of any branch of the military can join Navy Federal Credit Union and apply for these high-quality credit cards. The Visa and MasterCard have the same fees and conditions, but they offer different perks.

 

Navy Federal Credit Union’s Visa for Business credit card gives former service members access to low interest rates and rewards spending. This can be an excellent choice for service members with excellent credit who may have to borrow for short-term needs.

The card gives access to the Visa SavingsEdge program, which gives up to 15% off business purchases at qualifying retailers. However, the card doesn’t offer extended warranties or other protections, so it isn’t always the best choice.

The Fine Print
  • APR: 9.65%-18.0%
  • Annual fee: No annual fee
  • Late fee: Up to $20
  • Returned payment fee: Up to $20
  • Cash advance fee: $0 at Navy Federal Credit Union branch ATM, 50 cents domestic, $1 foreign
  • Cash advance APR: APR + 2%
  • Rewards: 1 point per dollar spent

Apply Now

Navy Federal Credit Union’s MasterCard for Business credit card gives former service members access to low interest rates and rewards. The low interest rates make it a compelling choice for service members with short-term borrowing needs.

The card gives access to the MasterCard Easy Savings program, which gives automatic 10% rebates at a network of gas stations, auto repair shops, and shipping companies. This can lead to significant savings. The card also connects to the MasterCard Business Network, which makes expense reports easy. However, the card doesn’t offer extended warranties or other protections.

The Fine Print
  • APR: 9.65%-18.0%
  • Annual fee: No annual fee
  • Late fee: Up to $20
  • Returned payment fee: Up to $20
  • Cash advance fee: $0 at Navy Federal Credit Union branch ATM, 50 cents domestic, $1 foreign
  • Cash advance APR: APR + 2%
  • Rewards: 1 point per dollar spent

Apply Now

Best Cards for Rewards

Many small business credit cards offer compelling rewards to cardholders. These rewards can allow you to reinvest in your business, or you can take them for personal use. If you choose to use a rewards credit card, try to avoid paying interest. Most of these cards are not good choices for short-term borrowing.

Travel Perks

If you’re a frequent traveler, these small business credit cards give you access to incredible perks. But be sure to read the fine print. These cards have a few gotchas attached.

 

The American Express Business Platinum Card is a charge card with a premium price tag ($450 per year) and premium benefits for some users. Please note, it is not a credit card; you should not plan to borrow money with this card. These are the most significant perks:

  • Global Lounge Collection access, which includes access to Delta Sky Club lounges and American Express Centurion lounges
  • $200 airline fee credit (for checked bags, inflight refreshment, etc.)
  • One free Global Entry or TSA Pre-check application fee (allows you to expedite security at select airports and U.S. Customs)
  • 10 free passes per year to inflight Gogo Wi-Fi and unlimited Boingo (land-based Wi-Fi) access
  • 50% airline points redemption bonus on first- or business-class tickets (if you spend 100,000 points on a business-class ticket, you’ll get 50,000 points back 6-10 weeks later)
  • Starwood Preferred Guest Gold Elite Status, which also gets you Marriott Rewards Gold status for room upgrades and free breakfast. It also gets you access to the Fine Hotels and Resorts Program (perks like in-room WiFi, complimentary breakfast, and other hotel perks at participating luxury hotels).
  • Elite status for National car rental for free upgrades whenever you rent a car.
  • This could be a great card for frequent Delta fliers; not only do you get access to the Delta Sky Club lounges but you can also convert the points you earn into Delta SkyMiles.
The Fine Print
  • Annual fee: $450
  • Late fee: 2.99% or $38, whichever is greater
  • Returned payment fee: $38
  • No cash advance
  • Sign-up bonus: Earn 50,000 Membership Rewards points after you spend $10,000 within three months of card membership. Earn 25,000 more points after spending an additional $10,000 within your first three months.
  • Rewards: 1 point per dollar spent
  • Bonus rewards: 1.5 points per dollar for first $5,000 spent in a year; 2 points per dollar spent through amextravel.com.

Apply Now

As a business owner, little incidentals can add up in a big way. The Chase Ink Business Preferred Card mitigates these costs by providing high-value insurance protection to you and your employees. Not only will you earn rewards (outlined in the fine print), you’ll enjoy these perks, too.

Trip Cancellation/Trip Interruption Insurance
If your trip is canceled or cut short by sickness, severe weather, or other covered situations, you can be reimbursed up to $5,000 per trip for your pre-paid, non-refundable travel expenses, including passenger fares, tours, and hotels.

Trip Delay Reimbursement
If your common carrier travel is delayed more than 12 hours or requires an overnight stay, you and your family are covered for unreimbursed expenses, such as meals and lodging, up to $500 per ticket.

Travel Accident Insurance
When you pay for your air, bus, train, or cruise transportation with your card, you are eligible to receive accidental death or dismemberment coverage of up to $500,000.

Auto Rental Collision Damage Waiver
Decline the rental company’s collision insurance and charge the entire rental cost to your card. Coverage is primary when renting for business purposes and provides reimbursement up to the actual cash value of the vehicle for theft and collision damage for most cars in the U.S. and abroad.

Baggage Delay Insurance
You are reimbursed for essential purchases like toiletries and clothing for baggage delays over six hours by passenger carrier up to $100 a day for five days.

Lost Luggage Reimbursement
If you or an immediate family member check or carry on luggage that is damaged or lost by the carrier, you’re covered up to $3,000 per passenger.

Extended Warranty Protection
This warranty extends the time period of the U.S. manufacturer’s warranty by an additional year on eligible warranties of three years or less.

Cellphone Protection
Get up to $600 per claim in cellphone protection against covered theft or damage for you and your employees listed on your monthly cellphone bill when you pay it with your Chase Ink Business Preferred Credit Card. There is a maximum of three claims in a 12-month period with a $100 deductible per claim.

The Fine Print
  • APR: 16.49%-21.49%
  • Annual fee: $95 per year
  • Late fee: $15-$39, depending on balance
  • Returned payment fee: $39
  • Cash advance fee: Greater of $15 or 5% of transaction
  • Cash advance APR: 25.49%
  • Sign-up bonus: 80,000 points when you spend $5,000 in the first three months
  • Rewards: 1 point per dollar spent, 3 points per dollar spent on travel, shipping purchases, internet, cable or phone services, or online advertising (social media or search engines)
  • Bonus: Points worth 25% more when you redeem through Chase Ultimate Rewards (Chase’s travel website)

Big Introductory Bonuses

Business owners who know they’ll spend a lot in a short period of time should take note of these cards. These bonuses provide excellent value if you can meet the spending requirements. But be wary: these cards have high interest rates. You won’t come out ahead if you end up financing a big purchase with these cards.

The Business Platinum Card offers excellent travel perks, but it offers an unparalleled sign-up bonus, too. Right now, you can earn 50,000 Membership Rewards points after you spend $10,000 within three months of card membership. You’ll also earn 25,000 more points after spending an additional $10,000 within your first three months.

If you plan to spend $20,000 or more in the next three months, this bonus is worth the highest value when redeemed for travel rewards. Depending on which option you choose, this bonus may offset annual fees. You need to churn through a lot of money to meet the spending minimums, but this is a lucrative bonus.

Click here to see details including perks and the fine print.

The Chase Ink Business Preferred Card offers ideal perks for frequent travelers, but right now you can get a great sign-up bonus, too. By spending $5,000 in three months, you’ll earn 80,000 points. This bonus is worth $1,000 if you spend your points through Chase Ultimate Rewards for travel or $800 if you redeem for cash back. You can also transfer the points to airline partners like United and Virgin Atlantic and hotel partners like Marriott and Hyatt.

In addition to the lucrative bonus, you can earn everyday spending rewards (including 3 points per dollar spent in certain categories) and valuable trip insurance.

Click here to see details including perks and the fine print.

Cash Back Rewards

Every business owner can benefit from more cash in their pocket. These cards give you the best cash back offers for everyday spending. You can find better rewards if you use multiple cards, but these have excellent rewards for those who don’t want to mess around with multiple cards. Plus, these cards have excellent protections, too. But be careful when you finance with these cards; they don’t offer great terms for borrowing.

 

The Spark Cash card from Capital One offers unlimited 2% cash back on all purchases, and it is free for the first year. Plus, if you spend more than $4,500 in the first three months of holding the card, you get a $500 cash bonus. After the first year, you’ll pay $59 to hold the card. After the first year, if you spent more than $3,000 per year, it’s worth it.

The Spark Cash card also offers valuable protective features like purchase protection, free extended warranties, primary auto rental collision coverage, and more. Overall, the Spark Cash card gives straightforward rewards to business owners with excellent credit.

The Fine Print
  • APR: 17.49% variable APR
  • Penalty APR: 29.9% (applied if you make a late payment)
  • Annual fee: Free for the first year, $59 per year afterward
  • Late fee: Up to $39
  • Cash advance fee: Greater of $10 or 3% of transaction
  • Cash advance APR: 23.49%
  • Sign-up bonus: $500 reward when you spend $4,500 in the first three months
  • Rewards: 2% cash back on all spending

Apply Now

The Spark Cash Select card from Capital One offers a rare combination of friendly financing terms and rewards. You’ll earn an unlimited 1.5% cash back rewards on all purchases, and you’ll receive a $200 sign-up bonus if you spend $3,000 or more in your first three months.

On top of that, you’ll have a 0% APR financing rate for nine months, and an APR as low as 13.49% afterward.

This isn’t the most lucrative rewards card, but you won’t pay an annual fee. This makes it a great card for businesses that don’t spend as much on a credit card.

The Fine Print
  • Promo APR: 0% for nine months
  • APR: 13.49%-21.49%, depending on your creditworthiness
  • Penalty APR: 29.9% (applied if you make a late payment)
  • Annual fee: $0
  • Late fee: Up to $39
  • Cash advance fee: Greater of $10 or 3% of transaction
  • Cash advance APR: 23.49%
  • Sign-up bonus: $200 reward when you spend $3,000 in the first three months
  • Rewards: 1.5% cash back on all spending

Apply Now

Best Category Bonuses

If you and your employees spend a lot of money in a limited number of categories, you might want to consider a rewards card with heavy bonuses in those categories. These cards offer at least 3 points for every dollar you spend in a given category. That’s the equivalent of a 3% reward.

Remember, rewards cards aren’t usually a good choice for financing purchases. Look to pay off these cards every month.

Online Advertising

Businesses that regularly advertise on social media networks (Facebook, Twitter, etc.) or via search engines (Google, Bing) can earn impressive rewards on their marketing spending. These are the best cards for heavy online advertisers.

 

You’ll earn 3 points for every dollar you spend on online advertising. In addition, you’ll be eligible for travel perks, sign-up bonuses, and more.Click here to see details including perks and the fine print.

The American Express Business Gold Rewards Card allows you to choose to earn 3 points per dollar spent on any one of the following categories: advertising in select online media, airfare from airlines, gas, shipping, or computers and cloud services from select providers. You’ll earn 2 points per dollar on the categories you don’t choose.

All other spending earns 1 point per dollar you spend.

As a sign-up bonus, you’ll earn 50,000 points if you spend $5,000 or more in your first three months of holding the card. In addition to the rewards, you get trip accident insurance, extended warranties, and purchase protection.

Since the Business Gold Rewards Card is a charge card, you shouldn’t plan to borrow with the card. But the rewards for online advertisers are excellent. Just watch out for the $175 annual fee that kicks in after the first year.

The Fine Print
  • Annual fee: $0 for the first year, then $175
  • Late fee: 2.99% or $38, whichever is greater
  • Returned payment fee: $38
  • No cash advance
  • Sign-up bonus: Earn 50,000 Membership Rewards points after you spend $5,000 within three months of card membership
  • Rewards: 1 point per dollar spent
  • Bonus rewards: 3 points in one category (pick between advertising in select online media, airfare from airlines, gas, shipping, or computers and cloud services from select providers).
  • 2 points rewards on remaining four categories.

Apply Now

Dining and Travel

Dining and travel cost a lot, but these cards offer enticing rewards. The cards we recommend offer more than 3% cash back on restaurant spending, travel, or both. Plus, they have other compelling perks. But most of these cards aren’t great for borrowing, so check the fine print.

 

The American Express Blue for Business card offers the single best dining deal, at least during your first six months. During the first six months of holding the American Express Blue for Business card, you’ll get 10 points for every dollar you spend at a restaurant up to $2,000. Once the six-month offer period is over, you may want to turn to other rewards programs from the cards we outline below.

This is also one rewards card that has a decent financing option. Right now you can get 0% APR financing for the first twelve months.

Learn more here about the perks, rewards, and fine print before you apply.

Looking to thin down your wallet? A Sam’s Club Business MasterCard, doubles as your membership card. But it’s not just for wholesale shopping. Spending on the Sam’s Club Business MasterCard gives you the opportunity to earn 3% cash back rewards on all restaurant spending worldwide. It also gives 5% cash back rewards on gas (except when purchased at other wholesalers) and 1% on all other spending.

Road warriors and frequent business entertainers will love this card. Plus, the $45 statement credit (if you spend $100 the day you open it) pays for your annual Sam’s Club membership.

The Fine Print
  • APR: 15.15%-23.15%
  • Penalty APR: 29.99% (applied if you make a late payment)
  • Annual fee: $0 (requires $45 Sam’s Club membership)
  • Late fee: Up to $39.99
  • Cash advance fee: Greater of $5 or 3% of transaction
  • Cash advance APR: 20.15%-26.15%
  • Sign-up bonus: $45 statement credit when you spend $100 on your first day (applying in-store makes this easy).
  • Rewards: 1% cash back on all spending. Maximum of $5,000 back in a given year.
  • Bonus rewards: 3% on dining and travel expenses. 5% on gas (up to $6,000 in gas purchases). Gas cannot be purchased from other wholesale clubs.

Apply Now

If you prefer Costco to Sam’s Club, the Costco Anywhere Visa Business Card offers similar terms. Their 4-3-2-1 program includes 4% on gas purchases (up to $7,000 per year), 3% cash rewards for all dining and travel expenses, 2% on Costco purchases, and 1% on all other spending.

While the rewards are sweet, the terms can be expensive. This is not a good card for borrowing, so be sure to pay it off each month.

The Fine Print
  • APR: 0% for seven months, then 15.74%
  • Penalty APR: 29.99% (applied if you make a late payment)
  • Annual fee: $0 (requires $55 Costco membership)
  • Late fee: Up to $37
  • Returned payment fee: Up to $37
  • Cash advance fee: Greater of $10 or 5% of transaction
  • Cash advance APR: 22.49%
  • Rewards: 1% cash back on all spending.
  • Bonus rewards: 4% on gas (up to $7,000 in gas purchases). Gas cannot be purchased from other wholesale clubs. 3% on dining and travel expenses. 2% rewards on all purchases from Costco and Costco.com.

Apply Now

If you’re a frequent business traveller, Chase Ink offers the best rewards. You earn 3 points for every dollar you spend on travel, but you get a travel bonus. Every point is worth 1.25 points when you book through Chase Ultimate Rewards.

Travel perks also include trip insurance, auto rental collision damage waivers (this is primary coverage), and more.

Click here to see details including perks and the fine print.

Gas

 

As a small business owner, you know that driving can be an economical choice, but you can also earn rewards for all those miles on the road. Sam’s Club Business MasterCard gives 5% cash back rewards on gas (except when purchased at other wholesalers), and 1% on all other spending.

Even if you don’t frequent Sam’s Club, this is the best category for rewards for gas purchases.

Click here to see details including perks and the fine print.

Learn More

Risks of Using Small Business Credit Cards

Many business owners see credit cards as an easy solution to their capital needs. But small business credit cards have unique risks. Savvy entrepreneurs will consider the risks before opening a new line of credit. These are the most important considerations.

 

1. Personal Liability

As a small business owner, you’re personally liable for credit card debt. Business bankruptcy won’t protect you. Whether your business succeeds or fails, you have to pay back the debt.

The only way to get rid of small business credit card debt is to declare personal bankruptcy. Bankruptcy destroys your credit history for a few years, and it stays on your report for 7-10 years.

Don’t treat a credit card like venture capital. It’s not. You need to repay it.

2. Credit Bureau Reporting

Small business cards don’t report to the credit bureaus the same way personal cards do. Depending on which card you choose, if you pay your credit card on time, you may not see any information on your personal report. For most business owners, that is a good thing. It will keep your personal credit utilization low.

However, an unpaid bill will show up on your personal credit report. A bill that goes unpaid for 60 days will generally appear on your personal credit report. Some banks offer more generous reporting and some less. You can speak with a banker to determine your bank’s reporting standards. Still, your personal credit score can take a hit at the same time that your business credit runs afoul.

When you take out a business credit card, put precautions in place to protect yourself. You can limit employee spending, and remove authorized users. You can also set up automatic payments each month.

3. Not Protected by the Credit CARD Act

In 2009, Congress passed the Credit CARD Act. The act curtailed predatory lending behaviors, including raising interest rates on existing balances. It also required credit cards to be more transparent about rates and fees.

This act does not apply to business credit cards. With a small business card, banks can raise the interest rate on your existing balance at any time. A higher interest rate means a bigger minimum payment and a longer time to pay off your debt. If you’re using your small business credit card to finance something, you could be at risk.

Still, many banks will not raise your rate if you have an excellent history of on-time payments. It is simply a risk to understand.

Another risk related to the Credit CARD Act is the possibility of double-cycle billing. Business credit cards do not require an interest accrual grace period. This means you may begin accruing interest on purchases right away. We only recommend cards that have a grace period of at least 23 days built in. If you choose a different card, be sure to check for this in the rates and fees schedule.

4. Employee Risk

Small business credit cards make it easy to watch employee spending. Still, they pose serious risks. You’re personally liable for any employee spending on a credit card. If you wouldn’t trust an employee with your wallet, don’t trust them with a company card. Employees can rack up debt and leave the company. That leaves you with a bill and no recourse to get the money back.

The Best Ways Use Small Business Credit Cards

Once you understand the risks of small business credit cards, you can also understand their best uses. Over 65% of small businesses use credit cards on a regular basis. Some use them for rewards, and some for financing. In fact, close to 10% of all small business financing comes from credit cards.

Here are some of the best ways to use a small business credit card.

 

1. Earning Rewards and Protection

If you pay your small business credit card in full each month, you can earn substantial rewards. Many business credit cards offer perks, including cash back, travel rewards, extended warranties, trip insurance, and more. As a business owner, you can reinvest the rewards into your business or take them for personal use.

2. Managing Cash Flow

Cash flow problems destroy small businesses, but credit cards provide short-term working capital. If you have a sales cycle that lasts 30 days or less, a credit card can fund inventory purchases. By the time your bill comes due, you’ll have money to pay it off. If you follow this practice, you’ll pay no interest, and you’ll manage your cash flow.

Credit cards can simplify employee monitoring, too. Most business credit cards allow you to place individual restrictions on employee use. That means you can limit how much and where employees can use company cards. But your employees may manage to misuse the cards. If they do, you will be stuck with the bill.

3. Building Business Credit

Businesses have credit reports just like people. Business credit cards can help you build your score. To build your business credit, hold the card under your employer identification number (EIN).

When your EIN establishes a record of paying its bills on time, it makes your business creditworthy. That means you’ll have an easier time finding long-term loans at great rates.

63% of all small businesses carry debt. Having a lower interest rate on that debt could make the difference between success and failure. This means every small business should take their credit history seriously from the outset. Small business credit cards may allow you to build that history without paying interest or fees.

4. Short-Term Borrowing

Small business credit cards have high interest rates, but they can work for short-term borrowing. If you know that you’ll only carry debt for a few months, you may want to finance something with a credit card.

Credit cards do not have origination fees or prepayment penalties. Sometimes this means that they offer the best terms for short-term borrowing. Just be careful when you borrow, and pay it back quickly. High interest debt compounds over time.

If possible, borrow on a card with a 0% introductory offer. Remember, failing to pay off 0% interest purchases may result in back interest. Be sure you understand the risks before you borrow.

The Worst Ways to Use Small Business Credit Cards

Small business credit cards aren’t always the best tool to get the job done. These are a few times when you should avoid using credit cards.

 

1. Personal Expenses

Bad accounting sinks many entrepreneurs. Always keep your personal spending off of your business credit cards. This will simplify bookkeeping, and it will keep your business credit utilization low. If you need to borrow for personal expenses, look for a low-interest credit card instead.

2. Long-Term Financing

Due to the high interest rates, most businesses should not finance long-term commitments using credit cards. Instead, consider an installment loan from a local credit union or a bank.

Applying for an installment loan can be a pain, but the lower interest rate will be worth it in the long run. Keep money in your pocket and avoid small business credit cards for long-term financing.

3. Cash Advances

Cash advances are the most expensive way to use a credit card. Banks begin charging interest right away, and the advance has a higher interest rate. Cash advances also have high fees of up to 10% of the amount you withdraw.

If you need cash, withdraw it from your business checking account instead, or take out a traditional loan.

4. Financing a Failing Business

Do not use credit cards to help a failing business limp along. Too many people will not give up on their idea even when the execution doesn’t work out. Credit card debt will bury a failing company and erode your personal wealth.

Remember, negative credit behavior will show up on your personal credit report. Plus, courts hold you liable for all credit card debt your business incurs. Use an objective lens to decide whether you need to shut down your business.

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Credit Cards, Reviews

Walmart Credit Card and Walmart MasterCard Review

Advertiser Disclosure

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

If you are a regular shopper of Walmart, you’ve probably also seen their ads plastered in the store for the Walmart Credit Card.

Walmart offers two types of credit cards: the Walmart MasterCard offered by Synchrony Bank, which can be used wherever MasterCard credit cards are accepted; and the Walmart Credit Card, which can only be used at Walmart stores, Walmart Supercenters, Walmart Neighborhood Markets, Walmart.com, Walmart and Murphy USA gas stations, and Sam’s Clubs.

For heavy Walmart shoppers who can pay their balance in full each month, either card’s rewards might be sweet enough to justify signing up. Neither has an annual fee, and you’ll earn cash back in Walmart stores (3%). The regular Walmart Credit Card, however, can be especially appealing to those with low or fair credit scores who have trouble getting approved for other credit cards. In that case, the Walmart credit card can be a useful way to build credit, so long as you spend carefully and pay your bill in full each month.

But before you apply for a Walmart MasterCard or Walmart Credit Card, there are a few things you should be aware of as the Walmart Credit Card may not necessarily be the best choice for your spending habits.

Promotional Offers and Rewards

Dangling a sign-up bonus is a clever way to entice shoppers to sign up for the credit card at checkout. But given how high retail credit card interest rates can be, it’s never a good idea to sign up for a card because of the sign-up reward alone. The Walmart MasterCard and Walmart Credit Card are not exceptions. Unless you’re able to use and pay off your card in full each month, the cards’ painfully high interest rates (we’ll get to that later in this review) can easily eat away at any tangible cash back or sign-up bonus offers.

Walmart offers different promotional offers for cardholders and new accounts throughout the year.

Weak Sign-up Bonus

Currently, Walmart is offering a one-time 10% discount on purchases if you are a new cardholder. Before you get too excited, there’s a caveat: it’s only good on purchases up to $250 because there’s a $25 limit on the discount. It may also be confusing to new cardholders as it says “10% discount,” but you don’t actually get a discount at the register. Instead, it’s applied later as a statement credit.

To take advantage of this discount, you must make a purchase on the same day you are approved for your new credit card. The discount cannot be used for cash advances, gift cards, money orders, or gas purchases.

If you don’t receive immediate approval at a kiosk or online at Walmart.com, but are later approved after the company does more research into your credit history, you will receive a 10% certificate in the mail with your new credit card package. This offer is valid until April 30, 2017.

3-2-1 Save Rewards Program

The 3-2-1 Save Rewards Program allows you to save 3% on Walmart.com purchases, 2% at Murphy USA and Walmart gas stations, and 1% at Walmart and anywhere your card is accepted if you are Walmart MasterCard holder.

If you’re a heavy Walmart shopper, their 3-2-1 rewards program might be just tantalizing enough to justify signing up for their credit cards. There really isn’t another credit card on the market that can get you a 3% return at Walmart; however, there are certainly other cash back credit cards for people who shop at a range of supermarkets looking for a wider range of benefits.

The American Express Blue Cash Everyday Card, for example, has no annual fee and gets you 3% cash back at all supermarkets. However, if you do your grocery shopping at a store like Walmart or Target that is not specifically a stand-alone supermarket, you will only early 1% cash back. You also get 2% back on gas and 1% on everything else. So if you’re not a heavy Walmart shopper, the Blue Cash Everyday Card may be a better idea.

Walmart Credit Card and Walmart MasterCard holders are automatically enrolled in Walmart’s 3-2-1 Save Rewards Program. Walmart Business and Community accounts are not eligible.

You are eligible to earn these rewards as long as your account is open and in good standing, and there are no limits on the rewards that can be earned. Rewards never expire, and you can check your balance by logging in to your account here.

These savings are paid as a statement credit each month on net purchases after adjusting for any possible returns. Cash advances, quick cash advances, fees, and interest do not qualify for these savings rewards. Unfortunately, these benefits also cannot be stacked with the 10% discount for the first purchase for new cardholders.

The Fine Print

The Walmart Credit Card and Walmart MasterCard do not have an annual fee. However, the interest rate on the Walmart Credit Card is where it gets scary. The current APR is 23.15% based on the prime rate plus 19.65% and is subject to change as the prime rate fluctuates. The Walmart MasterCard interest rates range from 17.15% to 23.15%, depending on your creditworthiness.

You can avoid paying interest on your charges by paying your entire balance in full every month. Your due date will be at least 23 days after the close of each billing cycle.

Other fees are fairly standard. Late payment fees are up to $37. There is a foreign transaction fee of 3% on the Walmart MasterCard, which means you definitely don’t want to rely on this card overseas. Cash advances for the same card cost $5 or 3%, whichever is greater. The interest rate for cash advances ranges from 20.15% to 26.15%.

Applying for the Walmart Credit Card

You can apply for a Walmart Credit Card or Walmart MasterCard at any Walmart store register or jewelry kiosk, or online at Walmart.com. When you choose to apply, Synchrony Bank will pull your credit score and look at other factors, like your income level, debt level, employment, and more.

Applying for the Walmart Credit Card is pretty simple, and most of the time you can get an instant answer. But like any other credit card application, applying for a new card does require a hard pull on your credit, which will ding your credit score.

There is no preset credit score requirement listed to qualify. But many cardholders report qualifying for this credit card with a low credit score. The high interest rate is also an indicator that those who are working to build credit may qualify.

Applying in-store and being approved means you will receive a Temporary Shopping Pass that is only good for 24 hours in that particular Walmart store location.

Pros and Cons

Pro: There’s no annual fee to worry about.

Con: A high interest rate. Carrying a balance on your account will quickly outweigh the savings benefits of this credit card.

Pro: No cap on regular rewards. You can earn as many rewards as you want for your purchases.

Con: Rewards cannot be stacked with other offers, like the 10% discount for new cardholders.

Pro: Those with low credit may be able to qualify and use this card for everyday purchases to help improve their credit score.

Con: Because there are so many stores and so many items, having a Walmart Credit Card could be a nasty temptation if you don’t have a handle on your finances.

Other Rewards Cards

The Walmart Credit Card limits you to purchases only at Walmart stores, Walmart Supercenters, Walmart Neighborhood Markets, Walmart.com, Walmart and Murphy USA gas stations, and Sam’s Clubs. This is why store cards may not be the best choice if you are looking to earn rewards. But even if you qualify for the Walmart MasterCard so you can use it to save on purchases at locations other than Walmart, there are still better rewards credit cards available.

Citi Double Cash – With the Citi Double Cash card, you’ll earn 1% cash back on purchases, just like the Walmart MasterCard. But with this card, you’ll get another 1% cash back when you pay off your credit card statement. Plus, the Citi Double Cash card has no annual fee. But, you can use this card to earn rewards at superstores and warehouse stores like Walmart and Target.

Discover it – The Discover it credit card gives 1% cash back, but you can also earn 5% cash back in revolving categories each quarter, up to $1,500 of purchases. For the first quarter of 2017, the categories are gas stations, ground transportation, and wholesale clubs. The second quarter of 2017 includes home improvement stores and wholesale clubs. Also, Discover it matches all of your cash back, dollar for dollar, at the end of the first year.

American Express Blue Cash Everyday Card: The American Express Blue Cash Everyday Card, for example, has no annual fee and gets you 3% cash back at all supermarkets. However, if you do your grocery shopping at a store like Walmart or Target that is not specifically a stand-alone supermarket, you will only early 1% cash back. You also get 2% back on gas and 1% on everything else. If you’re not a heavy Walmart shopper, the Blue Cash Everyday Card may be a better idea.

Who Will Benefit Most from the Walmart Credit Card?

While store cards are not usually a good idea for staying on budget, the Walmart Credit Card can be used for things like groceries and household necessities. The card may also be good for someone who is looking to rebuild their credit and can’t qualify for other credit cards as the required credit score to qualify for a Walmart Credit Card is typically low, although a specific score needed is not stated on their website.

On the other hand, it’s worth being cautious if you decide to apply for the Walmart Credit Card. With its high interest rate, carrying a balance will do more harm than good.

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Should My Spouse and I Have the Same Investments?

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One of the golden rules of investing is not to have all of your eggs in one basket. This is pretty easy to do when you’re planning by yourself. It can get complicated when you are married. Should you both have the same investments or is it better to do something different?

Unlike combining checking accounts or getting a joint credit card, combining your investment goals and objectives with your spouse is a bit more complex. Legally, it is not possible to combine retirement accounts like a 401(k) or IRA. However, it is possible to align your retirement saving strategy. Typically these are the biggest investment accounts, and how you choose your investments will determine your level of financial freedom during retirement. Before you sit down with your spouse (possibly with help from a professional financial adviser) to determine how you can both approach your savings in order to maximize your joint benefit, it’s important to consider these things first.

Before you align your investments, start by aligning your investment goals

Before deciding on what investments you may need, you and your spouse should figure out your investment goals. If you’re around the same age, do you both plan on retiring at the same time? If there is a significant gap in age, there is a chance that one of you could be working much longer than the other, and your investments should reflect that.

A common example could be shown with target-date funds (TDFs). Currently, TDFs are offered by 70% of 401(k) plans, and they give investors the ability to invest according to the year they plan on retiring. Someone planning to retire in 2040 would choose the 2040 target-date fund. If you and your spouse are the same age, it would be OK to invest in the same TDF. But if one of you is choosing to retire in 2040 and the other in 2030, it may be in your best interest to choose funds that correspond to your individual goals instead.

Even if you don’t choose TDFs, your investment choices should be based primarily on your tolerance for risk and the amount of time you estimate working before you retire (also known as time horizon). If you and your spouse have different risk levels, then you should definitely have different investments.

If the younger spouse earns significantly less income, this presents a special challenge best left to a financial planner. A discrepancy in income would directly affect the amount you’re able to save and how it is allocated. In some cases you may have to adjust your allocation to compensate. Again, because there are several individual factors which could affect your investment decisions in this specific situation, you will want the guidance of a financial planner.

Understand diversification and asset allocation

The concepts of diversification and asset allocation are the cornerstones of sound investing. By diversifying your assets, you are spreading out your risk over several different types of assets, rather than simply owning one or two. This is why mutual funds have become extremely popular. Because mutual funds consist of a broad range of investments across the stock and bond market, they provide instant diversification. But it may not be necessary or helpful for you and your spouse to own different mutual funds in hopes of diversifying yourselves even more.

Sometimes it is best to keep things simple. You and your spouse could own the same investments but in different proportions.

For example, the two of you may decide to own Mutual Fund A, which is made up of stocks, and Mutual Fund B, which is made up of bonds. Because you’re older and more conservative, you may choose to invest in a portfolio that is split down the middle: 50% in Mutual Fund A and 50% in Mutual Fund B. Your spouse, especially if they are much younger, may choose a more risky asset mix, investing in a mix of 75% Fund A and 25% Fund B. Both of you would still own the same investments but own different amounts due to your preference for risk.

Additionally, if you invest consistently in funds from the same investment firm, such as Franklin Templeton Investments, MFS, or American Funds, you could qualify for discounts after investing a certain amount called breakpoints. Most companies will charge you a percentage to invest in the fund. For example, if you invest $10,000 consistently every year, you could be charged 2.25% or $225. When you hit a breakpoint, however, the fee goes down. After 10 years, you’ve invested $100,000 and anything you put in after this point will be 1.75%. Instead of paying $225 on every $10,000 you invest each year, you would now pay $175 until you hit the next breakpoint. Every company has their own breakpoint levels and fees they charge, which can vary wildly depending on the type of fund and philosophy of the company.

Most experts agree that it is better to choose a few mutual funds with one fund manager and take advantage of the breakpoints rather than choose one fund from several different managers. Using more than one manager can also make it more difficult to track your investment performance.

The Bottom Line

If you and your spouse are the same age and plan to retire around the same time, you should be OK holding the same investments, assuming they are solid investment choices. But if your age difference is more than three years, this should be reflected in your separate portfolios.

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6 Questions to Ask Before You Use Jewelry Store Financing

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6 Questions to Ask Before You Use Jewelry Store Financing

This Valentine’s Day, U.S. consumers were projected to spend a collective $182 billion on fancy dinners, cards, flowers, and other gifts for their loved ones, according to the National Retail Federation. Jewelry retailers can expect to receive a sizable chunk of that spending. One in five Americans said they’d give jewelry as a gift to their significant other this Valentine’s Day, totaling an expected $4.3 billion spent nationwide.

If you can’t afford to pay for a large jewelry purchase out of pocket, most jewelry retailers are more than happy to let you finance it with a store credit card. But beware: Diamonds might be “a girl’s best friend,” but a jewelry store retailer isn’t always looking out for your best interest. As you would with financing any large purchase, you should thoroughly evaluate your decision before you sign on.

Here are 6 questions to ask before you finance through a jewelry store.

What happens if I can’t pay off my balance before the promotional period ends?

Low-interest or 0% financing promotions for jewelers typically last from 6 to 18 months. You may be tempted to wait to make payments until some time goes by. But if you don’t start making payments right away, you may find yourself with a balance even after the promotional period ends. And that can spell trouble for your finances. Some financing offers include “deferred interest” clauses, which means if you even owe $1 after the 0% period ends, they will charge you interest from the beginning.

Take online fine jewelry seller Blue Nile, for example. Right now, the company has a promotion for 0% financing for 6 or 12 months, depending on how much you spend. Deep in the company’s terms, a deferred interest clause is buried, warning shoppers that “interest will be charged to your account from the purchase date if the purchase balance is not paid in full” by the end of the period or if you make a late payment.

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Other jewelers may offer a low promotional rate for a certain period but will raise the annual percentage rate (APR) if you aren’t able to pay the balance in full by then. For example, the Zales credit card starts off with a low 9.99% APR if you make a minimum purchase of $1,500 and pay it off within 36 months. But if you can’t pay it off by then, they will triple your rate, making it 29.40%.

Can I afford my monthly payments?

Do the math to find out what your monthly payments will be and how long you’ll need to pay back the loan. If it looks like it’s going to be a struggle to pay the loan back before your promotional period ends, you’re probably borrowing more than you can really afford and you’re asking for trouble — especially if there’s a deferred interest clause.

If you really want to do it to finance the purchase, make sure it’s something that you can pay off within the promotional period. To save money, try comparing prices at several different retailers, opting for a more modest precious gem instead of a diamond or using a grandparent’s ring instead.

What’s in the fine print?

Some jewelers may require a down payment in order to qualify for a 0% financing offer. For example, Kay Jewelers charges a 20% minimum down payment for their 12-month 0% interest financing plan. Zales offers 6 months of financing interest free if you open up a credit card for a minimum purchase of $150, but that period extends to 18 months for purchases of $3,000 or more.

You don’t want to be surprised by any fees either. Some retailers will charge a transaction fee simply for processing your payment. Zales doesn’t charge a transaction fee for people taking advantage of 6-month or 36-month financing, but it tacks on a $9.95 transaction fee for their 12-month and 18-month interest-free tiers.

Look closely for any maintenance fees like annual fees charged for each year you have the card open, or penalty fees for late or returned payments.

Are there any warranties or insurance policies?

You’re making a large purchase that you can’t afford out of pocket, so you’ll want to protect yourself in case the jewelry is lost or damaged. Many retailers, like Jared or Kay Jewelers, offer lifetime diamond and gem warranties that cover cleaning and repair, although you may have to meet certain requirements to maintain a warranty.

To maintain a Zales Lifetime Diamond Commitment or Jared’s Lifetime Diamond & Color Gemstone Guarantee, for example, you need to take the piece to a store for cleaning and inspection every six months. You’ll need to bring your inspection history with you when you go, and the warranty doesn’t cover making any repairs. You could void your warranty if you don’t keep up or if you don’t make the suggested repairs.

Some plans offer additional protection plans to cover theft. Zales offers a lifetime jewelry protection plan with theft replacement for the first two years. To use it, you’ll need to bring in a police report and proof of purchase, but the warranty is void if a family member steals your jewelry.

You could forgo the jeweler’s insurance for your own, however, and tack the piece onto your home or renter’s insurance plan as a ‘jewelry rider’ for a few dollars more each month.

What’s the return policy?

Not to be a killjoy, but what if you break up with your significant other before you get a chance to give them the gift? What if they don’t like it or — even crazier — the salesperson was just really good and after the purchase you decide you don’t like the jewelry you picked out? You’ll need to make a return, and you’ll want to make sure you get your money back.

Ask about the company’s return policy related to in-store financing. You’ll want to know what the period is to make a return or exchange, as they may differ, and when you’ll see the charge removed from your account. Keep in mind, many jewelers won’t let you return specially made or engraved jewelry; however, some, like Blue Nile, make an exception for rings.

If you’re returning an online purchase, ask about any extra fees you may need to pay, such as shipping or insurance for the jewelry.

Do I get any perks?

If you frequent a particular jeweler, you may be interested in what perks you’ll get from opening a store credit card. For example, Zales cardholders benefit from exclusive coupons, reminders for jewelry inspection and cleaning, and an automatic $50 off birthday purchases $200 and higher.

Sometimes, these perks may not be worth the hassle of signing up for a high-interest credit card or financing deal. Compare the dollar value of the perks to the amount you’ll pay in interest and fees down the road.

Alternatives to Jewelry Store Financing

Friends and family

Reach out to your network of close friends and family to see if you can get a more flexible, interest-free loan. To demonstrate responsibility, you may want to create a contract with payment terms and set a date for when you’ll pay the loan back in full. Warning: Only do this if you’re certain you can pay off the loan quickly to avoid harming your relationship with the lender.

Credit cards

Jewelry store cards generally charge high interest rates, so you might find a more competitive offer with a traditional bank or major credit card issuer.

If you can qualify for a credit card with a longer promotional 0% interest offer, or one with a lower interest rate after the promotional period ends, you may be better off putting the jewelry purchase on it. Depending on the card you choose, you might even be able to earn points or cash back rewards for your purchase.

A bonus tip: If you decide to open a store card but aren’t 100% sure you’ll be able to pay off the balance before the promotional period ends, you could make payments until the period is over, then transfer the remaining balance over to a balance transfer card to avoid paying interest.

Personal loan

If you don’t want to open up a credit card, a personal loan can be an alternative way to finance the purchase, although you won’t benefit from an interest-free promotional period.

Rates on personal loans range from as low as 4% with good credit to as high as 36%. On the other hand, with personal loans you’ll have a fixed interest rate and a fixed repayment term, so you’ll know exactly how much you’ll pay each month and when you’ll pay off the purchase.

You can apply for a personal loan through your bank, or leverage technology and try peer-to-peer lending through sites like Upstart, Lending Club, or SoFi.

The Final Word

Financing a large jewelry purchase may be convenient, but it may not be your most cost-efficient option, especially if you’re not sure you’ll be able to pay off the card before the 0% interest promotional period runs out.

If you’re planning to pop the question soon, remember: the engagement ring and all of the traditions surrounding it are a relatively new construct of modern-day romance. You don’t have to prove your love and commitment to your spouse with a huge, expensive ring.

 

 

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Credit Cards

How to Request a Credit Limit Increase With Wells Fargo

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Wells Fargo Bank

If you want to continue to increase the amount of credit available to you without constantly applying for more credit cards or loans, requesting a credit limit increase is a reasonable solution. However, like most things in life, there are pros and cons to requesting a credit limit increase.

The pros of requesting a credit limit increase:

There are at least two reasons why requesting a credit limit increase may be a good idea for you. First, since you have already proven yourself as a valued customer, it can be easier and faster to request and receive an increased credit line as opposed to applying for a brand new line of credit. Second, if approved, it can increase the total amount of credit available to you, which can potentially improve your credit score. That’s because your utilization rate — how much credit you’re using vs. how much credit you have access to — makes up 30% of your credit score.

The cons of requesting a credit limit increase:

There are also some downsides to requesting a credit limit increase. First, the request will likely trigger a hard check on your credit, which can lower your credit score by a few points. Second, if you are requesting the increase so that you can spend more each month, the advantage of lowering your credit utilization to improve your credit score would disappear. Additionally, it becomes a slippery slope; the more you spend, the harder it can become to pay off the credit card each month, which could lead to credit card debt.

How a credit limit increase can help raise your credit score even if it initially dips

Any hard checks on your credit will likely result in your credit score dropping a few points temporarily. However, the benefit of an increased credit limit and its impact on your credit score will make up for the few points it dropped from the hard credit check.

The number of hard credit checks on your account is not a huge factor in determining your credit score. What is a huge factor in determining your credit score? Credit utilization. In other words, how much of the credit available to you are you using? Ideally, you want to keep your credit utilization under 20%. An increase in your credit limit will immediately lower your credit utilization percentage. However, this will only be the case if you don’t increase your spending with the increased credit line.

Since your credit utilization has a larger impact on your credit score than the number of hard checks, requesting the credit limit increase is likely to help raise your credit score. As improving your credit utilization will do more to improve your credit score than the hard check would lower your credit score, it’s worth it to ask for a credit limit increase.

How to request a credit limit increase with Wells Fargo

Before asking for a credit limit increase with Wells Fargo, you should make sure you meet the minimum requirements of having an account that is at least a year old. If you don’t satisfy these requirements, then your request is likely to be denied. If they do a hard check on your credit and ultimately deny your request, you will still see the negative impact of a few points from having the hard credit check without the benefit of increasing your credit utilization.

Unfortunately, unlike many other banks these days, Wells Fargo does not have a simple online process to request a credit limit increase. According to the Wells Fargo FAQ, if you want to ask for a credit limit increase, you will need to call 1-800-642-4720. As with any request for a credit limit increase, be prepared to have them run a hard check on your credit and to answer questions regarding your current income level.

You can find the information on the Wells Fargo website by going to the “Loans and Credit” section and then clicking “Credit Cards.”

Then click “See credit card FAQs.”

 

The information on how to increase your credit limit by calling the number mentioned above is listed toward the bottom.

How to improve your chances of getting the credit limit you want

 

While ultimately the decision to increase your credit limit is up to the bank, there are a few things you can do to improve your chances. According to credit card expert Jason Steele, banks like Wells Fargo will “look at your reported income, which would demonstrate your ability to repay the loan. They would also look at the length of your relationship with Wells Fargo, and how long your account has been opened. Finally, they might also look at your payment record, and of course, your current credit utilization.” So by ensuring you have an excellent repayment record and a good relationship with the bank and the accounts you have with them, you can give yourself a better chance of being approved.

When looking at those who received the credit line increase they wanted and those who didn’t, the biggest difference appeared to be how active a customer was with Wells Fargo. Meaning they regularly used their credit card and paid it off, and they also often had another type of account with Wells Fargo, such as a mortgage.

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Now You Can Pay for Uber and Lyft Rides With Your Commuter Benefits

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Now You Can Pay for Uber and Lyft Rides With Your Commuter Benefits

Ride-share users, your employee commuter benefits package just got a little better. Earlier this year, Lyft became the latest ride-sharing app to give riders the chance to pay using employee commuter benefits.

That means riders can now use pre-tax dollars to pay for Lyft rides the same way commuter benefits can be used to cover transit costs or parking expenses. Lyft isn’t the first ride-sharing app to add commuter benefits — Uber beat them to it back in August — but Lyft’s addition of commuter benefits signals a trend that could save big-city commuters time and money on the way to work each day.

Right now, it’s not possible for workers to use commuter benefits to pay for regular cabs — including regular Uber or Lyft rides. But Uber and Lyft found a clever way around this. Benefits can be used when riders select Lyft Line or uberPOOL, the apps’ carpooling options.

If you’re curious about this benefit and whether or not it’s worth linking your Uber or Lyft account to your commuter benefit account, we’ve got you covered.

What are commuter benefits?

Commuter benefits are an employer-provided benefits program that lets you set aside pre-tax dollars in an account to be used for your commute costs. Employees can use these benefits to pay for public transportation — trains, subways, buses, even parking passes — used on their daily commute with pre-tax dollars. The amount of money you set aside to pay for your commute doesn’t count as income, so you’re not taxed on it.

Which benefits programs are included?

Each ride-hailing service has partnered with select benefits programs, although there is some overlap. For example, if your company’s benefits package is with Zenefits or TransitChek, you can use them with Lyft, but not with Uber. On the other hand, if you are with EdenRed or Ameriflex, you can only pay with your benefits on the Uber app. The lucky commuters with benefits under WageWorks, Benefit Resource and Navia can use their benefits on either rideshare app.

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How do I sign up for commuter benefits?

Workers have to sign up for commuter benefits in order to receive them. You will be asked to select how much money you want to set aside from your paycheck each month to cover your transportation costs.

Once you’re enrolled, you may receive a benefits card (it can be used like a regular debit or credit card) to make transportation purchases. Otherwise, you can purchase transportation expenses using your regular credit or debit card and then submit a claim to be reimbursed through your benefit provider.

Reach out to your employer’s human resources department to find out how to take advantage of your commuter benefits program.

How much can I really save?

Depending on your current tax bracket, you could have up to 40% more to spend on your commute. For example, if you’re in the 35% tax bracket and contribute $200 each month to your commuter benefits account, you’re getting an extra $70 to spend on your commute each month. That’s an extra $840 per year.

But here’s the catch: Commuter benefits contributions are capped at $255 per month. So if you are already relying on your benefits to finance your monthly subway pass or parking garage expenses, you may not have much left over to use on Lyft or Uber rides.

What are Lyft Line and uberPOOL?

To use commuter benefits to pay for Lyft or Uber rides, you have to select the apps’ carpooling options — either Lyft Line or uberPOOL. Carpool vehicles seat six or more passengers. Both Uber and Lyft use algorithms to place riders going toward the same area together. Because you’re carpooling, however, you may or may not have a shorter commute, depending on traffic in your city and how many other riders get picked up or dropped off during your trip.

How to use commuter benefits on Lyft

First, you need to add your commuter benefits card to your profile.

  1. When you open the Lyft app, tap “Payment” in the left-hand side menu to see your payment options.

  2. Select “Add credit card,” enter your commuter benefits card information, and save. The card will have a “Commuter” distinction.
  3. Next, set the card as your default payment method. There are two ways to do this:
    1. Select the card as your default payment method for your personal profile under the “payment defaults” section in the “Payment” menu.
    2. When you open the app, set your location and destination. You’ll then see the last four digits of the card is being used to pay for the trip. Tap the numbers to change your payment method to your commuter benefits card. You should see a rectangular icon with a diamond in its center when using your benefits card.
    3. Select “Lyft Line & Ride.”
      You can only use your benefits to pay for carpools under Lyft Line. Select the pooling option to be matched with a car with six or more seats, and you’ll be all set.

How to use commuter benefits on Uber

Add your commuter benefits card to your profile by going to the left-hand menu and adding your commuter benefits card under “Payment.” You can also add the card after setting your location and destination under uberPOOL, shown below.

Tap on your card information to set or add your commuter card as a payment option.

Your benefits can only be used to pay for carpools under uberPOOL. Select the pooling option to be matched with a car with six or more seats, and you’ll be good to go.

Pros

Using pre-tax dollars saves you up to 40%

The most obvious perk of using your commuter benefit is that you’re using pre-tax dollars, so your dollar goes up to 40% further. If you’re already paying out of pocket for your commute, this could be a huge benefit.

Cut back on driving

If you drive to work, a 2014 Trulia analysis found you likely spend about 30 minutes in the car each way. If it’s more affordable for you to use a ride-sharing app, you can use that time to read or catch up on work or a nap while you ride.

Reduce your carbon footprint

Legally, commuter benefits can only be used with efforts to reduce your commuter footprint, so ride-sharing counts only when you’re placed in a car that seats six or more passengers. If you drive to work, this cuts down your footprint and takes the hassle out of organizing a carpool.

Cons

Lyft Line or uberPOOL only

You may want to put your pre-tax dollars elsewhere if you’re not into making new friends each morning. You’ll be placed in a vehicle that seats six or more people when you use your benefits card, and other riders may have various personality types.

Limit on contribution

Your contribution is limited to $255 a month, which may or may not be a month’s worth of commuting, depending on how much your commute costs. For example, a LendingTree analysis found the average monthly cost of commuting with Uber’s non-pool service UberX in New York City is more than $700. Still, $255 pre-tax will help cut down on your monthly spending for the trip to work.

Only available in select major cities

The apps’ commuter benefits options are only available in select major cities so far. Here’s a breakdown of where you can use yours.

Lyft: New York City, Boston, Seattle, and Miami

Uber: New York City, Boston, Chicago, Washington, D.C., San Francisco, Philadelphia, Las Vegas, Denver, Atlanta, Miami, Los Angeles, San Diego, Seattle, and New Jersey (state).

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Do you have a question?