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What Your Teen Should Do With Their Summer Earnings

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.

Source: iStock

According to a 2017 survey released by the National Financial Educators Council, 54% of respondents (all 18 years and older) said a course in money management in high school would benefit their lives. Another survey — the most recent from the Program for International Student Assessment — reports that only about 10% of U.S. 15-year-olds are proficient in personal finance matters, falling in the middle among the 15 countries studied. The message is clear: Young Americans need to learn more about money and managing it wisely. One way to start them off is giving them hands-on experience with their own money. Enter the summer job.

Having a summer job can be a good introduction to adulthood for many reasons: The discipline, submission to management, team work, and a regular paycheck are just a few of the things a teenager will get used to with their first summer job.

It’s also a good way to introduce kids to the real world of money. Though the money your teen earns is technically theirs, as a parent, you should use summer job earnings as an opportunity to help your kids form good habits with money. There’s no better time to show them the value of money than in the crucial years before they’ll be saddled with obligations like student loans, car notes, and mortgages.

Here are a few ways to make sure your teen will get the most out of their money-making experience that will keep them money savvy for years to come.

Pay their fair share

Once your teen begins making money, you’ll to want consider how they can begin to cover certain expenses. You’ll be tempted, no doubt, to let your teen keep their hard-earned money for themselves. Trust this process. If the goal is to raise money-smart kids who become even savvier adults, there will have to be simulations of the real world that include actually paying for things

If your teen uses the car, consider having them cover a portion or all of their car insurance bill. Another option is to have them contribute to their cellphone bill or even some of the Wi-Fi they use.

Having expenses is a real part of life, so it’s better to help them understand that now rather than later when ignorance isn’t so blissful.

If the thought of making your child pay for expenses bothers you, consider a different approach: Teach them about the costs of everyday life by asking them to cover their portion of a bill, but take that money and put it away for them. You can save up all that money and, as a nice gesture, give it to them when they need it most, like when they go away to college or finally leave the nest to launch out into the real world.

Open bank accounts

Source: iStock

While many families do not have access to or elect not to participate in the traditional banking system — it’s estimated that 27% of U.S. households are unbanked or underbanked — you’d ideally want to get your teen familiar with banks and how they work. Though check use has been on the decline since the mid-1990s, it’s still important for teens to learn how to write a check, along with keeping a checkbook register. Sure, this practice probably won’t last long, as electronic payments and money management apps continue to grow, but this approach gives your kids the gist of how to keep track of their cash flow.

While your teen has a bank account, you’ll also get them used to understanding how a debit card works. They’ll get familiar with how easy it is to swipe for things they want, yet how difficult it can be to replenish their account with the money they’re making at their job.

Finally, you’ll want to make sure that your teen opens a savings account. In most states, a person can open a bank account when they become 18. For younger teens, many banks have special teen or kid accounts that a child can share with their parents. Co-owned checking accounts can be opened as young as 13, while custodial savings accounts can be opened at any age.

Developing good habits around saving and managing money takes time and some getting used to. So using their summer earnings would be a perfect opportunity to get into the groove of budgeting for expenses and managing money through a bank account.

Set money goals

Once money starts to flow into your kid’s hands, seize the moment and get them to see the bigger picture. Summer money is great, but paying for life will take much more than what your teen earns from a few hours of work in a bike shop. Begin to show them the cost of things like college, cars, homes, and luxuries like vacations or hobbies.

Once you compare the costs with their summer job earnings, it should help them come to conclusions about how money works: The more you have, the more you can do. The idea is to inspire them to increase their earning potential with tools like education or savings to invest in income-producing assets.

Another result of these conversations could be your teen realizing they’ll want to start saving up for life sooner than later. They may decide to put away money for the purpose of paying for school or their first condo.

Ron Lieber, New York Times financial columnist and author of the book The Opposite of Spoiled, says parents should prompt their kids with an immediate goal like having a college fund. “The best thing to do is to use any earnings to begin a conversation with parents about college, if your teen plans on going,” Lieber says.

Lieber suggests questions to guide the conversation:

  • How much of your college expenses will be covered by parents versus the child?
  • How much have the parents saved for the child’s college expenses?
  • How much are kids/parents willing to borrow or spend out of their current income?

According to Lieber, “The answers to these questions may cause a teen to save everything, if they think it will help them avoid debt in their effort to attend their dream college.”

No matter how temporary their summer job is, you’d do well to use it as a springboard for more conversations about money. Whatever their long-term money goals are, it’s never a bad idea to start working toward them early on.

Learn compound interest

While your teen is making all of those big money goals, you could drive the point home with a lesson in compound interest. Using a compound interest calculator, you can show your teenager many scenarios where interest can either work for or against them.

Run scenarios around savings for big-ticket items versus financing them. The math will speak volumes:

*Example APRs are used. APR will vary on factors like individual credit score, loan amount, and bank requirements.

In the above scenario, you’d end up paying a total of $226,815 in interest. That same amount ($226,815) invested for 30 years with a moderate 3.5% return yields over $636,000!

Seeing these numbers in action should motivate your teen to start a savings habit that they will maintain throughout adulthood.

If they are really excited about the prospects of compound interest working on their behalf, encourage them to open their own IRA to begin investing themselves. This way, they’ll not only understand the theory of investing but also get hands-on experience with it. After all, the time value of money works even better when you’ve got more time. Investing as a teen could set the stage for copious returns later on in life.

Create a budget

Making money can be the fun, somewhat easy part of a summer job. Figuring out how to spend it can be difficult. Make your teen prioritize needs and wants by learning to create a budget. A good practice would be to have your teen make a list of things they’ll spend money on versus how much money they will bring in. You could also introduce them to a money-management app — here are some of the best ones.

This will help them understand the finite nature of money and how their current cash flow stacks up against their current earnings.

Have fun

According to Brian Hanks, a certified financial planner in Salt Lake City, “Don’t be concerned if your teen ‘blows’ a portion of their earnings on things you consider to be worthless.” Hanks goes on to say that it’s better to make money mistakes as a youngster: “Everyone needs to learn tough money lessons in life, and learning them as a teen when the consequences are relatively small can save bigger heartache down the road.”

A summer job should be fun and low-stress, but it can also be used as a learning experience that prepares your teen for the real world. If your teen turns out to be a terrible budgeter or extreme spendthrift, give them more than a summer to learn better ways. Remember, they’ll have the rest of their lives to continue grasping and mastering money concepts.

Aja McClanahan
Aja McClanahan |

Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

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Bargains and Deals, Strategies to Save

15+ Apps That Help You Make Money

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.

Need extra money? Your mobile device could actually unlock a world of additional income for you. There are many ways to earn money online, and they are now conveniently available on smartphones and tablet devices. Add an internet connection, and you’re set. Pursuing a side hustle can be time consuming, but if you’ve got a financial goal like getting out of debt or saving up for a down payment on a home, these apps could be a good start to boosting to your income. All the apps here are free to use via web browser and/or mobile device.

Surveys

Swagbucks

Devices: Android, iOS

The Swagbucks iOS app. Source: iTunes.

Swagbucks is a popular survey website with a couple of app counterparts (discussed below), including Swagbucks Local and SB Answers. By taking surveys, you accumulate points called Swagbucks, not actual money. These surveys usually ask about your demographics, preferences, and behaviors on topics like cereal you eat, places you shop, TV shows you watch, and other lifestyle choices. Plan to spend 15-30 minutes on each survey, though there are occasionally seven- to 10-minute surveys.

In terms of how the conversions work, one Swagbuck is about 1 cent, and you can redeem them for gift cards to places like Amazon, Starbucks, and popular retailers like Walmart and Target. You even have the option to donate your Swagbucks to more than 10 charities featured on the site.

So, how good are the payouts? A three-minute survey could offer you five Swagbucks or approximately 5 cents. A 20-minute survey pays out 80 cents on average. However, many people earn much more with the Swagbucks referral program: 500 Swagbucks (worth $5) per person once the referral is active. Plus, you’ll get 10% of your referrals’ point earnings over the lifetime of their account.

You have a few options to earn Swagbucks on your mobile device:

Surveys On The Go

Devices: Android, iOS

The Surveys On The Go iOS app. Source: iTunes

Surveys On The Go allows users to take various surveys with pretty decent payouts: You’ll get surveys for between 25 cents and $1. However, be prepared to spend time on these surveys. You can spend 15-20 minutes completing them (or more).

There also aren’t always a lot of surveys available. I’ve logged in a few times and found there were no surveys for me. The survey availability will depend on your demographic and even location. Sometimes, there are high-paying surveys ($15-$20), but it’s hard to tell when and where that will happen.

There’s no way to know how often there will be surveys available, but you can choose to receive app notifications when there is a new survey you qualify for.

Unlike Swagbucks, these surveys offer you actual money. You’ll need to earn $10 before you get a payment via PayPal. A nice thing about this app is that you get a consolation compensation of 10 cents if you start a survey and are not qualified to complete it.

InboxDollars

Devices: Android, iOS

InboxDollars iOS app. Source: iTunes

Much like Surveys On The Go, InboxDollars offers cash rewards. The app also offers “sweep” points, which allow you enter sweepstakes for more sweeps, money, or other prizes.

This app usually has plenty of surveys to take, though they are not all optimized for mobile viewing. At times, the interface can be a little wonky and a tad clunky to navigate.

You should also know that you can get deep into a survey (say, 5-15 minutes) only to be disqualified because of your answers. Your hourly “wage” comes out to be pretty low considering you make anywhere from 20-25 cents per 20-30 minutes spent answering questions. You cannot request a payout from the app until you’ve reached the $30 minimum. A $3 processing fee applies to every payment request. Your payment options include a check, gift card from Target or Kohl’s, or a prepaid Visa card (the latter two options available to Gold members only.)

Other survey apps to explore include Panel App, QuickThoughts, and SurveyMini. Overall, if you are looking to make a living wage from taking surveys, you likely won’t come close. With payouts that amount to just a few cents an hour, you’re better off with other ways to produce extra income (unless there’s absolutely nothing else you can do to earn).

Fitness

What’s better than losing unwanted inches? Getting paid for it. There are a few apps that allow you to convert your fitness activity into financial benefits. As always, you’ll want to consult your physician before starting any fitness program.

DietBet

Devices: Android, iOS

DietBet iOS app. Source: iTunes

DietBet allows you to turn your fitness goals into money. In order to enter a bet, you have to put money up front in a game that pools the money of other people with weight-loss goals. Those who make their goals win the bet and split up the pot (minus DietBet’s 10%-25% fee) that is paid out by those who don’t make their goals. WayBetter, the company behind DietBet, also has a StepBet app that offers similar games where you put down money when you set activity goals and win the bet if you meet them.

On DietBet, you can participate in a short, four-week challenge called a Kickstarter or a six-month game called a Transformer. You can be in multiple bets at a time to maximize your earnings. The company says Kickstarter winners get back an average of 1.5-two times their bet, while the average Transformer winner takes home $325 for winning all six rounds, or $175 for winning just the final round.

DietBet and StepBet have a No Lose Guarantee, which states that if you win, you will not lose money. They’ll forfeit their cut of the pot to make this happen. Of course, if you don’t win, you don’t get anything, so there’s potential to lose money here. The average Kickstarter bet size is $30, and Transformer costs $25 a month (or $125 up front).

Sweatcoin

Devices: Android, iOS

Sweatcoin iOS app. Source: iTunes

The Sweatcoin app converts your outdoor steps into currency called Sweatcoins (SWCs), which you can redeem for products like watches, fitness apparel, and gift cards. Currently, you’ll earn .95 SWCs for every 1,000 steps you complete. The exact conversion of these coins seems to change depending on the reward: Past promotions include a $12 smoothie gift card for 150 SWCs, a $120 Actofit watch for 1,600 SWCs, and a $88 VICI Life gift card for 250 SWCs.

The items available for purchase with Sweatcoins are limited and change often based on availability and the company’s promotional schedule. This app requires access to your GPS data and location in order to verify that your steps are taken outside.

Shopping

There are many apps that reward you for doing something you’d do anyway — shop. Here’s how most of these apps work: If you purchase a product, the app developer usually gets commissions on purchases you make at their suggestion, which they split with you. In this way, they can provide you with rewards that literally pay you for shopping.

Ibotta

Devices: Android, iOS

Ibotta iOS app. Source: iTunes

Ibotta offers rebates for buying certain products in nearby stores. Once you let it access your geodata, you’ll find deals on items at retailers like Walmart, Whole Foods, Costco, and more.

Sometimes the deals are super product-specific, and other times you can see generic items like milk or eggs offered with a chance to get 25 cents back. In order to get your rewards, you’ll have to scan the item’s barcode with your phone’s camera and snap a picture of the receipt. You’ll then submit these through the app.

This can be somewhat time consuming. For example, the receipt can be long, requiring a few pictures, or you could accidentally throw away the packaging (which I’ve done on a few occasions).

This is another app with a generous referral bonus: You get $5, while your referral gets $10. You accrue referral bonuses and rebates in your Ibotta account and can request payouts via PayPal, Venmo, or a featured gift card once you meet the $20 threshold.

Ebates

Devices: Android, iOS

Ebates iOS app. Source: iTunes

Similar to Ibotta, Ebates gives you rewards for shopping through their portal and purchasing featured items, but Ebates also offers discounts. There are popular stores like Loft, Tom’s, JCPenney, Macy’s, and more. You’ll get your earnings via PayPal every three months (unless you’ve accrued less than $5.01.)

Ebates also has a great referral program. The payouts change from time to time, so you’ll need to check their referral program page for current payouts. At the moment, when you refer one friend who makes a minimum $25 purchase, you’ll get a $5 bonus, while your friend gets $10 added to their account balance after their first purchase.

Shopkick

Devices: Android, iOS

Shopkick iOS app. Source: iTunes

Shopkick pays its users points called Kicks for a variety of shopping activities.

When you open the app, it detects your location and shows you a list of nearby retailers and products that can help you earn Kicks. If you allow the app to access your GPS data, you’ll hear a cha-ching sound when you get close to a participating retailer.

Shopkick is set up to show you the best deals and popular products from retailers like Best Buy, American Eagle, Yankee Candle, and many more.

Kicks can be redeemed for gift cards to places like Best Buy, Starbucks, and Target. The referral program offers 250 Kicks for each friend who signs up and completes their first in-store action.

In terms of the conversion rate, 250 Kicks equals $1 for most rewards. You’ll need to check the rewards section of the app for conversions on specific items.

Gig economy

If you’ve got time and a certain skill set, you can make money helping someone nearby. The apps below are variations of the Uber-like work arrangement we are all getting more familiar with. Given the higher earning potential these opportunities offer, they also require more commitment: Before you can start earning money through these kinds of apps, you may have to submit an application and agree to a background check.

TaskRabbit

Devices: Android, iOS

TaskRabbit iOS app. Source: iTunes

TaskRabbit allows you to complete small tasks like errands, cleaning, or handyman work for people nearby. As a “tasker” you can choose the types of tasks you’ll complete, your rates, and your own schedule. There’s no minimum to the amount of work you can do; however, the site explains that you cannot invoice for jobs that are under one hour. TaskRabbit takes 30% of your earnings and is available in 39 U.S. metro areas.

The application process is straightforward but stringent. In addition to your general demographics, you’ll need to verify your account with official identification like a driver’s license. You will also need to complete a background check. The TaskRabbit website explains that the company receives a large amount of registrations and cannot give you a timeline on when you’ll be approved.

Fortunately, once you get going, it’s pretty easy to see tasks available, accept them, and even invoice your clients. Although earnings for individual taskers vary due to a number of factors, a report by Priceonomics puts the average monthly earnings are around $380.

GoShare

Devices: Android, iOS

GoShare iOS app. Source: iTunes

GoShare is an app for people who need moving and delivery help. You can earn money with this app if you have a vehicle for large deliveries and can lift heavy items. However, GoShare is only available in nine cities among three states: California, Georgia, and New Jersey.

GoShare users can also work with large retailers to help unload shipments and deliver items to customers. For example, someone who ordered a refrigerator from Home Depot could request a GoShare driver to deliver it.

If you live in one of the areas GoShare serves, you can apply to be a driver. Potential earnings vary by vehicle type: The website says someone who drives a small pickup truck could earn up to $47.52 an hour, while someone with a cargo van can earn up to $61.92 an hour.

Uber/Lyft

Devices: Android, iOS

Left: Uber iOS app. Right: Lyft iOs app. Source: iTunes

Probably the most popular of the bunch, Uber and Lyft offer people the opportunity to use their own car to drive people around and get paid for it. Rates are typically set by the company and depend on your location, time of day, type of car you have, whether or not a passenger will share a ride with other passengers, and a few other factors. Uber is in more than 630 cities around the world, and Lyft is in more than 550 U.S. cities.

Chime

Devices: iOS

Chime iOS app. Source: iTunes

Chime is a division of the popular child care site, Sittercity. Chime is a mobile app designed for people who need quick connections for child care. Again, the premise is: I’m available, you need help, let’s connect with this app. Chime is available in Boston, Chicago, New York City, New Jersey, and Washington, D.C.

According to Chime, all sitters are thoroughly vetted and have completed a background check as well as undergone ID verification. The hourly rate is set according to your local market starting from around $15-$18 per hour.

Rover

Devices: Android, iOS

Rover iOS app. Source: iTunes

The Rover app is like Chime but allows users to look for and offer house-sitting and pet care services. Once you apply to be a sitter, your profile, if accepted, takes about five days to be approve. (Note: You can opt to complete a background check through a third party, but it’s not necessary.) You should also know that you get to set your own rates for services.

Once you agree upon a price with your client and complete a job, your client pays through the Rover app. Those funds are released to you within 48 hours, less the 15% transaction fee Rover deducts. Your payments stay in your Rover account until you withdraw them.

A community forum thread on the Rover website puts part-time earnings at $500-$1,000 per month.

GreenPal

Devices: Android, iOS

GreenPal iOS app. Source: iTunes

There are a few Uber-like apps for lawn care, and GreenPal is just one of them. The only issue is that some of these apps don’t have enough users to make it worthwhile for either service seekers or gig workers (GreenPal currently serves 12 U.S. cities).

As a vendor, you’ll apply through the company’s website. Part of the vetting process is passing a criminal background check, providing client references, and confirming that you have proper lawn care equipment.

Once you are approved as a lawn care provider, you’ll get notifications of nearby jobs. You are able to upload photos of your finished work (kind of like a lawn care portfolio), and then your client will rate you.

Depending on your location and market, expect to bid anywhere from $25-$45 per job. GreenPal takes a 3% transaction fee when your client pays you.

If you have a financial goal in mind and need more earning options, apps like these can certainly help. Just remember to weigh the value of your time against the potential of earning more money before you commit to chasing income this way.

Aja McClanahan
Aja McClanahan |

Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

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Pay Down My Debt, Strategies to Save

Create a Budget Designed Just for Dumping Debt

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.

Even if you hate spreadsheets and numbers, coming up with a debt-destroying budget can be simple with a single rule: always apply excess funds to debt.

This rule can work with two of the most common debt repayment methods: the debt snowball or the debt avalanche.

The debt snowball method attacks smaller debts first, regardless of interest rate. The goal is to motivate you with small victories in order to go on and gain confidence to pay off larger debts. The debt avalanche method focuses on paying down debt with the highest interest rate until you pay off the balance with the lowest interest rate.

How Much Can I Throw Toward My Debt?

The math for your budgeting process is super-simple: Monthly income minus monthly expenses equals the amount of extra money you can apply toward your debt each month. The emphasis is on extra money because you’ll still want to pay your minimum debt obligations to avoid getting behind on your payments.

Note: If you still need help with the math because you’ve got to actually figure out how much you spend each month, you can use an app that connects with your bank to add up all your expenses. Check out services like Mint.com, YNAB, or Personal Capital to help you get quick figures around your income and spending along with categories for each.

Though the math is not too complicated, the harder part could be increasing the gap between your income and expenses to actually have a surplus in your budget.

Unless you’ve got little to no wiggle room in your budget, you don’t have to start cutting expenses quite yet. However, there are some expenses that are discretionary and should be omitted from your equation until you’ve tamed your debt load.

For now, just get a baseline of what you should have left over at the end of each month once all your bills and expenses are accounted for. If it’s $15, great. Start there. If it’s more, even better.

Once you get this number, use it to pay more on your debt than is required. So if your minimum payment is normally $50, pay $65 with your $15 surplus. It can be the smallest debt or the account with the highest interest rate. What matters now is that you do something to get into the habit of making extra payments on debt and accounting for it in your monthly budget.

How to Apply This Rule in Various Scenarios

If you budget with a goal in mind, the purpose of your money becomes clearer. Any kind of money that turns out to be extra should be applied to debt to reduce your balances. But the key is being mindful of extra money, even when it doesn’t seem to be extra.

For example, getting a raise is a reason for some people to increase their standard of living. They might move to a place with a view or buy that lavish SUV they’ve been eyeing for a while. If you’ve committed extra funds to a purpose (paying off debt), the decision is made for you far in advance of you actually getting the money.

The same goes for your income tax refund check. You might bank on this money every time income tax filing season comes around. While many people are planning spring break trips and shopping sprees with this money, you’ve got to make up your mind that this money is already earmarked for debt repayment.

Finally, there’s always that unexpected windfall: an inheritance, a settlement, or any type of money you never saw coming. This might be one of the most difficult chunks of money to part with for the sake of paying off debt. After all, you didn’t know it was coming, and maybe you didn’t have to work too hard for it.

In this case, it’s pretty tempting to want to splurge and blow it all on something you think you deserve. Things can get complicated at this point. But if you keep following “the rule,” this money is technically already allocated, and your debt repayment budget suddenly becomes easier to stick with.

Keep Widening the Gap Between Income and Expenses

This is the fun part. Why? You get to be creative and have more control over your debt repayment timeline. Want to get out of debt fast? Then you’ll have to figure out how to make your income outpace your expenses. It could mean adding a side hustle to the mix or getting more aggressive with cutting out or decreasing expenses.

Adjusting Your Tax Withholdings

If you pocket a large tax refund each year, ask yourself why. It is likely because you are paying too much in income taxes throughout the year. If that’s the case, you can change your tax withholdings through your payroll department to keep more money in your pocket throughout the year. It will mean a smaller tax refund come tax time, but you’ll have more cash on hand to put toward your debt with each paycheck.

Use this IRS withholding calculator to estimate your withholdings.

Decrease Your Income Tax Liability

There are more than a few ways to decrease your income tax liability. From IRA contributions to tax tips for entrepreneurial endeavors and other tax credits and deductions, there should be one or more things you can do to owe less on your tax bill.

Cut Expenses Where You Can

There are so many ways to save money on so many things. You can start small with things like eating out and having cable and work up to saving money on housing costs or refinancing student loans.

Then there are the diehards who go full monty and go through full-on spending freezes on things like takeout and travel. The list of cost-cutting measures can get pretty long, but you get the point: Go through your spending with a fine-tooth comb and find out where you can save and what you could cut.

Increase Your Income

Creating another stream of income sounds gimmicky, but there are ways to do it without getting caught up in scams. You can find a part-time job, provide consulting services on the side, or even start a mini-business like dog walking or car washing. It shouldn’t be anything that will cost you tons up front to start, and it shouldn’t hinder your ability to keep your full-time job.

You may find that you have to try a few things before you come up with the perfect combination of low overhead, quick to start, and profitable. That’s OK. Just keep plugging away until something clicks. It’ll be more than worth it to add that extra income to the budget for paying off more debt even faster.

Remember the Golden Rule: Excess Cash Goes to Debt

It all comes down to committing your cash to a purpose ahead of time. No matter how your financial circumstance changes, you’ll know what to do when you’ve got a surplus of money.

You’ll have to come up with a list of things you are willing to do to increase your cash reserves, but if you keep the goal in mind of continually applying extra funds toward debt, you’ll save on interest and also pay down your debt faster.

Aja McClanahan
Aja McClanahan |

Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

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Strategies to Save

Clever Ways to Make Homeownership More Affordable

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.

We all know that aiming to live well below your means will help you save more money, get out of debt, and get ahead financially overall. To supercharge this process, you may want to consider attacking your largest expense: housing.

Just being able to save $200, $500, or more each month on housing could put a large dent in your debt repayment or help you seriously pad your savings. Reducing or eliminating your housing expenses might sound difficult, but there are so many different strategies, at least one could work for you.

What’s more is that these options don’t have to be permanent. You can always go back to a more traditional housing situation once you feel like the arrangement has run its course.

See if one of these ways of cutting your housing costs might work for you.

Be Energy Efficient

The eco-revolution is here, and as a result, there are so many ways to save on utilities. A bonus is that some energy-efficient modifications and products can help you earn federal tax credits.

The list of things you can do is long and can get expensive, but there’s some low-hanging fruit when it comes to reducing your energy consumption:

  • Stop air leaks with caulk, insulation, or weatherstripping
  • Swap out incandescent lights for LED lights
  • Turn down your water heater and get a jacket for it
  • Plug your devices into powerstrips that minimize idle current usage (or unplug devices altogether)
  • Use rainwater barrels for your outdoor water needs
  • Air-dry your clothing
  • Choose light colors on flooring and walls to minimize artificial light use during daylight hours
  • Program your thermostat
  • Get alerts for higher priced kilowatt rates during certain hours of the day

You get the point. The more you can minimize your energy use, obviously the more money you’ll save on these costs. Pick a few that work for you, then use the money saved to get ahead in your finances.

Put Your Bills on Autopay

Not only will this small gesture save your sanity, it could potentially save you fees and penalties connected with late payments. You can set up automatic payments to be deducted from your bank account or a credit card account. If you choose the latter, be sure to avoid carrying a balance from month to month and pay your credit card bill on time as well. Otherwise, the interest and late fees from missing your credit card payment could cancel out the benefits of your autopay setup.

Appeal Your Property Taxes

If you’ve ever gotten those solicitations in the mail from companies that claim to reduce your property tax bill, don’t put it in the junk pile quite yet. According to the National Taxpayers Union, up to 60% of U.S. properties are over-assessed. This means that 60% of Americans could be paying inflated property tax bills.

Many property owners don’t even know that they can get their property tax bill reduced via an appeal process. Because of this, it’s very possible that you are paying too much for your property taxes.

The appeal process to get your taxes can seem daunting, but it’s usually a string of paperwork and deadlines. Of course, you’ll be dealing with government entities so that could add a layer of complexity to the whole ordeal, but it’s not insurmountable.

If you have the time and ambition, it’s a process you could easily undertake yourself. If not, it may be worth hiring help to file and follow up through the property-tax appeal process. If the appeal is successful and your property taxes are reduced, you’d fork over a portion of the savings to the firm or person you hire.

Shop Around for Insurance

If you’ve got home insurance, you are likely to have other policies for vehicles, and perhaps you also have coverage for health and life insurance benefits, too. If you’ve got insurance needs that require multiple policies, you can leverage your buying power to shop around for better rates.

Shopping around for insurance can seem straightforward, but be ready to use your brain to the utmost in this endeavor. Not only will you need to compare prices, but you’ll also want to compare things like coverage amounts, premiums, deductibles, and available riders at the quoted prices.

Fortunately, there are comparison sites and independent insurance agents that can make this task a little easier. Either way you do it, it’s a good idea to check around every once in awhile to make sure your current insurance provider is being competitive and offering you the best rate.

Become a DIYer

One of the most costly expenses of owning a home can be maintenance, repairs, and upgrades. Save money by learning to do some things around the house yourself. There are many resources to help you with anything you don’t know much about, from books, to websites, to YouTube. Though it can take more time, you might come out ahead by cutting your own grass or installing your own kitchen backsplash.

If you’ve got complicated jobs that require special expertise and equipment, consider a partial DIY approach. For example, if you’re redoing your bathroom, you might ask the contractor about things you can do yourself to shave the bill down some. Demolition and cleanup of existing fixtures might be the type of work you can handle.

Don’t be afraid to experiment, but definitely be wise about the projects you decide to take on yourself. Finding the right balance between hiring and DIYing can save you time, money, and headaches as a homeowner.

Rethink Your Home Purchase Plan

Getting a conventional mortgage with vanilla terms that include a 10%-20% down payment and a 30-year loan period are all too familiar to the home-buying public. But if you really want to save on the single largest expense in your life, you might have to be a little more flexible than the standard terms accepted on most home loans.

Larger Down Payment

One approach to consider is putting down at least 20% on your home purchase. This will allow you to skip private mortgage insurance (PMI), which can amount to thousands of dollars over the life of your home loan. PMI can eventually go away over the life of the loan when certain criteria are met, but you can save more money by dumping it sooner than later.

Refinance Your Mortgage

Many people refinance their homes in hopes of getting a lower monthly payment or locking in a lower interest rate. Adjusting these numbers downward can definitely save money for some homeowners over the long run.

However, refinancing your home loan is not a silver-bullet solution that will work in every scenario. In some cases, it makes perfect sense to refinance, and in others, it wouldn’t be a good idea. The best thing to do is run the refinance numbers and make a decision. After doing the math, you might actually find that fees and extended loan terms could cause you to lose money rather than save it.

Make sure you fully understand the terms of your refinanced mortgage along with the potential impact on your entire financial outlook. Most definitely, confirm your assumptions about this move with math. If you need help running the numbers, check out this refinance calculator from myFICO.

Pay Cash for Your Home

While not an option for the average American, paying cash for your home is not unheard of. Paying cash for a home would eliminate tens, maybe hundreds of thousands of dollars in interest, mortgage fees, and PMI. If you think you’d like to go for the gusto and pay cash for a home, consider ways to make this feat possible:

Make Some Lifestyle Changes

Though these options aren’t for everyone, they are still worth a mention. These suggestions are for those who might be willing to change their lifestyle in order to garner the most savings possible when it comes to housing.

Get a Roommate (or Two)

The home-sharing revolution has caught on, and everyone from young professionals to empty nesters are finding boarders on places like Craigslist and Airbnb. If it works out, it can truly be a good solution to help lower your housing costs. Plus, having a roommate can be temporary or longer term, based on your living preferences.

Again, this option is not for the faint of heart. Adding a roommate to your living equation could be utterly disastrous or surprisingly pleasant, so choose your housemates wisely.

Buy a Multifamily Unit, Rent One Unit Out

Depending on the location and property type in these situations, homeowners can often cover their entire mortgage amount with their renters’ payments. It can definitely have its benefits, but don’t buy that two-flat just yet.

Remember, with this arrangement, you’ll be swimming deep in the waters of landlordship. How it all pans out can be based on so many variables: the landlord, tenant, property, location, and a host of other factors can make this arrangement easy income or a nightmarish headache.

If things go wrong with your property, your tenant doesn’t share the burden of fixing things though they live there just the same. There can be costs associated with maintenance and repairs that go well beyond the monthly income your rented unit brings in. You’ll want to have a comfortable cash cushion for incidentals before starting your homeownership journey as a landlord.

Downsize

You don’t have to join the tiny home revolution to downsize (though it’s not a terrible idea). Downsizing can look different for different people. Downsizing for one person might be moving from the lake-view two-bedroom apartment to a studio in a less ritzy location. You’ll have to decide what downsizing looks like for you and if it will be worth the effort.

While you might not be game for all of these suggestions, you can probably adopt a few that could change your financial situation significantly. Whatever measures you choose to save or eliminate your housing costs, make sure you are ready to deal with the consequences. These consequences can be both beneficial and somewhat inconvenient for your quality of life and your financial health. In the end, you’ll have to determine if it’s worth it.

Aja McClanahan
Aja McClanahan |

Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

TAGS: ,

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Featured, News, Strategies to Save

How to Save on Your Next Family Vacation

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.

With spring and summer breaks imminent, many families are already planning their vacations. A 2013 report by American Express puts the average cost of vacation for a family of four at $4,580.

But for most, that’s not an affordable family vacation. With many Americans in large amounts of debt, barely saving for retirement, and unable to cover a $400 emergency, spending $4,000 on a vacation is simply not an option.

That doesn’t mean you should give up on family vacations altogether.

Vacations are a great way for families to bond and spend time with one another. On top of bonding, it’s been noted that people who take time off from work are more productive and enjoy a greater sense of health and wellness overall.

There’s pretty compelling evidence that a family vacation is worth the money, but unless you can get around the hefty price tag, it might be a luxury families will have to forgo. If your family is looking for a budget-friendly trip that won’t require a vacation loan, you might want to consider some of these affordable family vacation options.

National and State Parks

National and state parks are perhaps some of the most under-recognized destinations in the country. Though a Caribbean vacation might seem more luxurious, a visit to a national or state park can compete on so many levels.

Each park varies on pricing, but day passes can start at $20 per person while campsite rentals can be as low as $15 per night.

When it comes to bang-for-buck, these picturesque park sites have so many options for activities that you’ll end up having to choose. Hiking, camping, rafting, and sightseeing are just a few of the low-cost, family-friendly things you’ll find to do.

The draw of national and state parks is in the wide variety and flexibility of the grounds. You will find parks with a variety of climates, landscapes, natural features, and accommodations. If you want something super-rustic, you’ll probably save more money sleeping outside in tents and cooking your own food over a campfire. If you prefer “glamping” or glamorous camping, there are parks with luxury-type cabins and lodges as well.

The key is finding a location that suits your family size, interest, and personality. A little research can help you find the perfect combination of affordability, proximity, and fun.

Stick Close to Home

No matter where you live, chances are you’re close to some place worth visiting by car, train, or bus. If you can’t spring for $350-per-person plane tickets, then driving four to five hours to a destination might be more palatable — and affordable.

What you save on airline tickets could be used toward experiences, meals, and nicer accommodations. Depending on where you live, you might find a nearby farm, amusement or water park, bed and breakfast, or beach that could be just as satisfying as that $4,000 vacation.

You could also stay hyper-local and explore your hometown or neighboring communities. Check with your city or county visitors’ bureau to learn more about local attractions and activities. There are also sites like TripAdvisor, Groupon, and Airbnb experiences that help local visitors find activities and tours according to interests. You’ll find specially curated experiences for small groups, large groups, or families, or arranged around activities like cycling, gastronomy, sightseeing, or crafting.

With the rise in these “microtour” offerings, your family may even be introduced to your very own neighborhood in a different way. More than likely, there are tons of things you haven’t yet explored right in your own backyard. You could stay at home for your local experience or in a nearby hotel for a true “getaway” feel.

Visit with Relatives

Haven’t seen Grandma and Grandpa in a while? Make it a vacation! Visiting with relatives like grandparents can mean intergenerational quality time plus savings on things like food, entertainment, and lodging. Even if your aunts and uncles live in the middle of nowhere, you can plan activities centered around family meals, outings, and games.

A family game night out in the country under the stars can be just as exciting as an all-inclusive cruise or resort stay. Movie night with cousins can be fun with snacks while catching up on old times. With a little creativity, you can make a visit with your kinfolk into an epic family vacation that won’t break the bank.

And the real perk? You can save hundreds if not thousands of dollars by crashing with family versus staying at pricey hotels.

Volunteer + Vacation

Family volunteer vacations are increasing in popularity as people want to engage in purpose-centered travel. Many families desire to give their children a sense of perspective via traveling so they can interact with people of different backgrounds, races, income levels, and types of upbringing. A volunteer vacation can be the perfect way to give back, enjoy family time, and save a little money at the same time.

The types of volunteer vacations will vary in focus, pricing, activities, and accommodations. Some programs will provide free or extremely low-cost lodging in exchange for service, but will not necessarily cover travel costs.

If your family is open to working with people or nature, there are some volunteer opportunities that might appeal to you. Farming, in particular, seems to have many opportunities for 1-2 week commitments, but there may be age restrictions for younger members of your family.

Working Weekends on Organic Farms (WWOOF) is a network of organic farming sites with over 160 worldwide locations and volunteering opportunities. You’ll have to choose a site and arrangement that would work for your family. You’ll explore listings to find hosts that can accommodate your lodging entirely or at a deep discount.

Websites like Workaway can easily connect you to host families abroad needing help for specific tasks and time periods. Each listing for housing and help will describe the volunteer commitment along with the types of accommodations available in exchange for that work.

Though prepackaged volunteer vacations and networking websites are a good place to start when researching options, don’t be afraid to arrange your own service outing. If you have the time to make phone calls and send emails, it might be worth the effort to create a unique experience designed to serve others that your entire family can take part in.

Go Where the U.S. Dollar Is Strongest

Lastly, you might consider traveling to places where the cost of living is relatively inexpensive. A favorable exchange rate plus a low cost-of-living index could help you vacation like royalty in some places.

The only caveat to this approach is that travel to some places can get very expensive. However, if you are strategic, you can use credit cards that offer travel reward points and miles or cash back to use toward travel to help offset some of the travel costs for your family.

Traveling to an affordable destination would be ideal if you plan to have a longer stay or take a deep dive into local food, activities, or amenities. If your family of four can vacation well on $50-$100 a day or less, it might be worth the plane ticket to get there.

For example, going to a country in South or Central America or the Caribbean could save you tons. Low exchange rates and low-priced accommodations could give you plenty of wiggle room to dine well and participate in varied experiences that would be more expensive elsewhere.

In Cuba, there are fairly nice accommodations that could start as little as $25 per night for an entire apartment rental. Though the convertible peso is pegged to the dollar, the national money is at a ratio of 25 to 1 USD. At this exchange rate, you can get upscale dining options for less than $5 per person.

There are many low-cost activities like walking tours or people watching in one of the many town squares in Old Havana. The museums are plentiful, educational, and interesting. It’s not uncommon to find live music in restaurants or at popular gathering places. Plus, nearby beaches are beautiful with many inexpensive options for dining and snacks.

Costa Rica is becoming a popular destination because it’s easy and affordable to reach from the U.S. One of the most biodiverse places on the planet, it has almost unlimited options for cheap, family-friendly excursions. The national parks are accessible by inexpensive bus rides and can be explored for little to nothing in terms of self-guided or guided tours. A search for lodging on a site like Expedia or Airbnb will produce many results for under $100 per night that can accommodate families of up to 4-5 people.

The whole point of the family vacation is to spend time together, bond, and create lasting memories. If you are flexible and creative, you’ll find that you don’t have to spend a lot of money to make that happen.

Aja McClanahan
Aja McClanahan |

Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

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Featured, Strategies to Save

Clever Ways to Reduce or Eliminate Your Housing Costs

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.

We all know that aiming to live well below your means will help you save more money, get out of debt, and get ahead financially overall. To supercharge this process, you may want to consider attacking your largest expense: housing.

Just being able to save $200, $500, or more each month on housing could put a large dent in your debt repayment or help you seriously pad your savings. Reducing or eliminating your housing expenses might sound difficult, but there are so many different strategies, at least one could work for you.

What’s more is that these options don’t have to be permanent. You can always go back to a more traditional housing situation once you feel like the arrangement has run its course.

See if one of these ways of cutting your housing costs might work for you.

Be Energy Efficient

The eco-revolution is here, and as a result, there are so many ways to save on utilities. A bonus is that some energy-efficient modifications and products can help you earn federal tax credits.

The list of things you can do is long and can get expensive, but there’s some low-hanging fruit when it comes to reducing your energy consumption:

  • Stop air leaks with caulk, insulation, or weatherstripping
  • Swap out incandescent lights for LED lights
  • Turn down your water heater and get a jacket for it
  • Plug your devices into powerstrips that minimize idle current usage (or unplug devices altogether)
  • Use rainwater barrels for your outdoor water needs
  • Air-dry your clothing
  • Choose light colors on flooring and walls to minimize artificial light use during daylight hours
  • Program your thermostat
  • Get alerts for higher priced kilowatt rates during certain hours of the day

You get the point. The more you can minimize your energy use, obviously the more money you’ll save on these costs. Pick a few that work for you, then use the money saved to get ahead in your finances.

Put Your Bills on Autopay

Not only will this small gesture save your sanity, it could potentially save you fees and penalties connected with late payments. You can set up automatic payments to be deducted from your bank account or a credit card account. If you choose the latter, be sure to avoid carrying a balance from month to month and pay your credit card bill on time as well. Otherwise, the interest and late fees from missing your credit card payment could cancel out the benefits of your autopay set-up.

Appeal Your Property Taxes

If you’ve ever gotten those solicitations in the mail from companies that claim to reduce your property tax bill, don’t put it in the junk pile quite yet. According to the National Taxpayers Union, up to 60% of U.S. properties are over-assessed. This means that 60% of Americans could be paying inflated property tax bills.

Many property owners don’t even know that they can get their property tax bill reduced via an appeal process. Because of this, it’s very possible that you are paying too much for your property taxes.

The appeal process to get your taxes can seem daunting, but it’s usually a string of paperwork and deadlines. Of course, you’ll be dealing with government entities so that could add a layer of complexity to the whole ordeal, but it’s not insurmountable.

If you have the time and ambition, it’s a process you could easily undertake yourself. If not, it may be worth hiring help to file and follow up through the property-tax appeal process. If the appeal is successful and your property taxes are reduced, you’d fork over a portion of the savings to the firm or person you hire.

Shop Around for Insurance

If you’ve got home insurance, you are likely to have other policies for vehicles, and perhaps you also have coverage for health and life insurance benefits, too. If you’ve got insurance needs that require multiple policies, you can leverage your buying power to shop around for better rates.

Shopping around for insurance can seem straightforward, but be ready to use your brain to the utmost in this endeavor. Not only will you need to compare prices, but you’ll also want to compare things like coverage amounts, premiums, deductibles, and available riders at the quoted prices.

Fortunately, there are comparison sites and independent insurance agents that can make this task a little easier. Either way you do it, it’s a good idea to check around every once in a while to make sure your current insurance provider is being competitive and offering you the best rate.

Become a DIYer

One of the most costly expenses of owning a home can be maintenance, repairs, and upgrades. Save money by learning to do some things around the house yourself. There are many resources to help you with anything you don’t know much about, from books, to websites, to YouTube. Though it can take more time, you might come out ahead by cutting your own grass or installing your own kitchen backsplash.

If you’ve got complicated jobs that require special expertise and equipment, consider a partial DIY approach. For example, if you’re redoing your bathroom, you might ask the contractor about things you can do yourself to shave the bill down some. Demolition and cleanup of existing fixtures might be the type of work you can handle.

Don’t be afraid to experiment, but definitely be wise about the projects you decide to take on yourself. Finding the right balance between hiring and DIYing can save you time, money, and headaches as a homeowner.

Rethink Your Home Purchase Plan

Getting a conventional mortgage with vanilla terms that include a 10%-20% down payment and a 30-year loan period are all too familiar to the home-buying public. But if you really want to save on the single largest expense in your life, you might have to be a little more flexible than the standard terms accepted on most home loans.

Larger Down Payment

One approach to consider is putting down at least 20% on your home purchase. This will allow you to skip private mortgage insurance (PMI), which can amount to thousands of dollars over the life of your home loan. PMI can eventually go away over the life of the loan when certain criteria is met, but you can save more money by dumping it sooner than later.

Refinance Your Mortgage

Many people refinance their homes in hopes of getting a lower monthly payment or locking in a lower interest rate. Adjusting these numbers downward can definitely save money for some homeowners over the long run.

However, refinancing your home loan is not a silver-bullet solution that will work in every scenario. In some cases, it makes perfect sense to refinance, and in others, it wouldn’t be a good idea. The best thing to do is run the refinance numbers and make a decision. After doing the math, you might actually find that fees and extended loan terms could cause you to lose money rather than save it.

Make sure you fully understand the terms of your refinanced mortgage along with the potential impact on your entire financial outlook. Most definitely, confirm your assumptions about this move with math. If you need help running the numbers, check out this refinance calculator from myFICO.

Pay Cash for Your Home

While not an option for the average American, paying cash for your home is not unheard of. Paying cash for a home would eliminate tens, maybe hundreds of thousands of dollars in interest, mortgage fees, and PMI. If you think you’d like to go for the gusto and pay cash for a home, consider ways to make this feat possible:

Drastically Change Your Lifestyle

Though these options aren’t for everyone, they are still worth a mention. These suggestions are for those who might be willing to change their lifestyle in order to garner the most savings possible when it comes to housing.

Get a Roommate (or Two)

The home-sharing revolution has caught on, and everyone from young professionals to empty nesters are finding boarders on places like Craigslist and Airbnb. If it works out, it can truly be a good solution to help lower your housing costs. Plus, having a roommate can be temporary or longer term, based on your living preferences.

Again, this option is not for the faint of heart. Adding a roommate to your living equation could be utterly disastrous or surprisingly pleasant, so choose your housemates wisely.

Buy a Multifamily Unit, Rent One Unit Out

Depending on the location and property type in these situations, homeowners can often cover their entire mortgage amount with their renters’ payments. It can definitely have its benefits, but don’t buy that two-flat just yet.

Remember, with this arrangement, you’ll be swimming deep in the waters of landlordship. How it all pans out can be based on so many variables: the landlord, tenant, property, location, and a host of other factors can make this arrangement easy income or a nightmarish headache.

If things go wrong with your property, your tenant doesn’t share the burden of fixing things though they live there just the same. There can be costs associated with maintenance and repairs that go well beyond the monthly income your rented unit brings in. You’ll want to have a comfortable cash cushion for incidentals before starting your homeownership journey as a landlord.

Downsize

You don’t have to join the tiny home revolution to downsize (though it’s not a terrible idea). Downsizing can look different for different people. Downsizing for one person might be moving from the lake-view two-bedroom apartment to a studio in a less ritzy location. You’ll have to decide what downsizing looks like for you and if it will be worth the effort.

While you might not be game for all of these suggestions, you can probably adopt a few that could change your financial situation significantly. Whatever measures you choose to save or eliminate your housing costs, make sure you are ready to deal with the consequences. These consequences can be both beneficial and somewhat inconvenient for your quality of life and your financial health. In the end, you’ll have to determine if it’s worth it.

Aja McClanahan
Aja McClanahan |

Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

TAGS:

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Credit Cards

Disputing Credit Card Charges: What You Need to Know and Instructions for Each Card Issuer

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 use credit cards, chances are at some point you’ll need to dispute a charge that appears on your statement for one reason or another. The good news is that this common practice has some pretty awesome guidelines and provisions protected under both state and federal laws.

Whether your dispute is straightforward or complicated, you’ll want to know the ins and outs of how the dispute process works so that it can ultimately work for you should you need it. The dispute process will help you get the best outcome in the case of billing errors, fraud, misrepresented products, or any other charge on your statement you believe you shouldn’t be responsible for.

When to Dispute a Charge on Your Account

The Fair Credit Billing Act (FCBA) protects consumers from unfair credit billing practices. This federal law also provides guidelines to both consumers and credit card issuers for dispute management and resolution. According to the FCBA, consumers can file disputes, according to the FCBA settlement procedures, for the following billing errors (list provided by the FTC website):

  • Unauthorized charges. Federal law limits your responsibility for unauthorized charges to $50.
  • Charges that list the wrong date or amount.
  • Charges for goods and services you didn’t accept or that weren’t delivered as agreed.
  • Math errors.
  • Failure to post payments and other credits, like returns.
  • Failure to send bills to your current address — assuming the creditor has your change of address, in writing, at least 20 days before the billing period ends.
  • Charges for which you ask for an explanation or written proof of purchase, along with a claimed error or request for clarification.

There are additional FCBA provisions covering problems with the actual goods or services, aside from billing errors. This is known as the right to assert “claims and defenses.” In other words, the charge is correct, but the goods or services are not delivered as promised or described. This right can be exercised up to one year after purchase.

Under claims and defenses, the purchase has to be made within 100 miles of your current billing address and be more than $50, and you’ve got to make a “good faith” effort to resolve the dispute with the merchant first. The dollar and distance rules don’t apply if there is a special relationship between the buyer and seller or the purchase was made via internet, mail, or phone.

When you are initiating a dispute on this basis, make that clear with the credit card company so they’ll process the dispute accordingly. In this case, state laws may also play a part in determining what actions you can take against the merchant and the credit card issuer if the dispute is not resolved in your favor.

How to Dispute a Charge on Your Credit Card

The first thing you’ll want to do is determine if the charge is really an error. A little research will help you figure out if a charge is an error, fraudulent, or a purchase gone wrong. Some things to consider:

  • Did you let someone use your card? Do you have an authorized user on your account? They may have made a purchase with it.
  • Is it possible that someone obtained your information illegally and made a fraudulent charge on your card?
  • Does the merchant use another company name that appears on your credit card statement? (For example, Binky Toys can appear as “TOY CORP” on your billing statement.)
  • Did you read the fine print? You may have signed a contract with a merchant authorizing charges you were not aware of.

Once you determine there is an actual problem with your statement, you’ll want to figure out if the problem is with your credit card issuer or a merchant. The process can be slightly different if a merchant is involved or not.

If the charge is an error that doesn’t involve a merchant, like fraud or identity theft, then you can contact your credit card issuer directly. Though it’s best to document your dispute in writing, many card issuers will discuss the issue with you (and sometimes even resolve it) over the phone.

Nowadays, most major card issuers will allow you to log in to your account and file the dispute or initiate an inquiry about a charge online. If you don’t feel comfortable with any of these methods, you can use this sample dispute letter provided by the Federal Trade Commission (FTC) and begin the dispute process via mail.

If the charge involves a merchant whose goods or services were either defective, misrepresented, or not delivered as agreed, then you’ll want to contact them first. You can place a call to start the process, but it’s best to have things in writing. So an email or snail mail letter can either kick things off or confirm and reiterate what was discussed over the phone regarding the issue.

Many times, merchants will work with you because they want to keep their chargeback rates (credit card refunds due to errors and disputes) low. Merchants who have higher chargeback rates are deemed high risk by credit card processors and face higher penalties and processing rates which cut deeply into their bottom line. For this reason, try to settle with them before going to your credit card company with the problem.

If you can’t get an acceptable resolution from the merchant who charged your card, then it’s time to contact your credit card issuer. Just like the process outlined above for billing errors, you can choose to initiate the dispute via phone, internet portal, or mail.

In all your disputing, remember the timelines set forth by the Fair Credit Billing Act. If your problem is with a merchant, you’ve got up to a year to make a claim under “claims and defenses.”

For errors, your dispute correspondence has to be received by the credit card issuer no later than 60 days after the first statement containing the charge you are disputing. In either case, if you decide to send your correspondence via mail, it’s a good idea to send it certified with proof of delivery.

What Happens After You Initiate a Dispute

Under the FCBA, your card issuer has to acknowledge your complaint 30 days after receiving it (unless they resolve it before then). Sometimes, the dispute process is fairly straightforward and within a matter of minutes the dispute could be resolved in your favor. You’ll receive a credit on your statement and the issue is resolved.

You should also be aware that under the FCBA, you don’t actually have to pay the amount in dispute or any interest or any related late fees while the dispute is ongoing. Sometimes, the card issuer will even remove the charge under investigation right away. The bank has 90 days to investigate the issue and resolve it either in your favor or the merchant’s favor.

Keep in mind that you could be asked for supporting documentation to back up your dispute. This could include police reports, photos of a defective product, manufacturer claims and descriptions, tracking numbers, screenshots, and email correspondence.

This evidence will be gathered and checked against any evidence supplied from the merchant. Once the bank has concluded the investigation, you’ll receive a final ruling where the charge is either removed permanently or placed back onto your statement and becomes your responsibility to pay. You should also know that you may be responsible for interest and fees that accrue for a dispute you ultimately do not win.

What If Your Dispute Isn’t Approved

If finally, despite your best efforts, you’re deemed responsible for the disputed charge, you still have a few options. You could appeal the final decision with the credit card issuer within 10 days of the decision. Sometimes, the investigation could be reopened. Inform the bank that you’ve got new information they should consider.

If they still decline to reconsider or resolve in your favor, they can report your failure to pay to credit bureaus. If they do report this information, it must also state that you do not believe you owe the amount in question.

Another option is to take the merchant, your bank, or both parties to court. This can be costly, but for an amount that’s high enough, a court case could be justified. Be sure to check terms and conditions for both the merchant and the issuer, because you may have waived your right to this course of action in doing business with them. Also, state laws will have a say in what legal recourse is available to you against both the merchant and credit card company. Check with the consumer protection division of your state’s attorney general office for guidance in this area.

Also, don’t be afraid to engage help and organizations that might have oversight of the institutions involved in your dispute. You can file a complaint against credit issuers with the FTC. The FTC complaint process, however, won’t apply to banks. Banks are regulated by the FDIC. You can find the regulator that has oversight of the bank you are dealing with here, or you can file a complaint with the Federal Reserve Consumer Help website.

If you’ve got the time, energy, and ambition, you can always take to social media to vent and tell the world about your experience. Many companies are diligent about protecting their online reputation and prefer to route these conversations offline for resolution. If possible, be just as polite and diplomatic on social media channels as you would be with a phone call or written complaint. You’ll likely get further with this approach.

Where It Can Get Sticky

As mentioned, disputes can be settled quickly and easy. Some people say that their card issuer didn’t even ask for documentation but charges were immediately reversed. Other times, it can be a longer process, especially if a merchant objects to your dispute.

When this happens, there can be a lot of back-and-forth between everyone involved in a credit dispute. The purchaser, the merchant, the acquirer (Visa, MasterCard, American Express, Discover), and the issuing bank all have to coordinate communication to make sure disputes are investigated thoroughly and resolved appropriately.

Be aware that there are circumstances that can complicate, delay, and even hinder the dispute procedures.

Bankruptcy

When a merchant doesn’t deliver goods or services due to insolvency, there may not actually be any money in their bank’s account to cover a chargeback. You might be better off filing a case in small claims court. Sadly, in many bankruptcy proceedings, outstanding payables due to customers are one of the last payment priorities.

Collections

Though the dispute can be resolved in your favor from the credit issuer, the merchant could come back and bill you anyway. They can even send your account into collections. In this case, keep your documentation and be ready for a potential battle with collection agencies that have been engaged to recoup the funds from you. You credit report could also suffer.

Prepaid services

Let’s say you make an advance payment on a fitness camp 12 months in advance, but the company goes out of business and won’t be hosting the camp after all. You’ll want to make sure that you fully understand the dispute resolution process regarding future purchases. It will vary for each card issuer, so find out how you are protected in a situation like this. Consult your bank’s card member agreement and speak with someone who can give you clarity on dispute terms before making advanced payments with your credit card.

Product returns

If the dispute is resolved in your favor, part of the resolution may be connected to returning goods in order to receive the refund amount. There are very clear rules around what merchants must do when they receive your goods — a credit must be transmitted to the card issuer within seven days. From there, the issuer must ensure it shows up on your account within three days. It’s not unheard of for a seller to “send” for an item and never retrieve it in order to delay or avoid issuing a refund. Make sure that you take responsibility for returning goods. It’s a good idea to pay for tracking and insurance to make sure your items arrive safely, with proof of delivery, to the seller.

Pre-existing contracts

Terms and conditions are no fun to read, but it’s a good practice to look at the fine print (especially for large purchases). Hidden in these terms could be strict refund policies and even waivers to the dispute process should a problem occur with a sale.

Instructions for Filing Disputes with Major Credit Card Issuers:

 

Card Issuer: Instructions for Disputes:
Chase Chase dispute instructions
Bank of America Bank of America dispute instructions
Capital One Capital One dispute instructions
Barclays Barclays dispute instructions
Discover Discover dispute instructions
Citi Citi dispute instructions
American Express American Express dispute instructions

Final Thoughts on Credit Card Instructions

There are so many variables that can influence the outcome in all of these cases that it can seem like the final decisions are arbitrary. What worked in one scenario may not work in another with a different company or cardholder.

Many times, you’ll be working with a customer service representative who is unfamiliar with your rights as a consumer and the laws that should govern the outcomes of credit card charge disputes. When all else fails, research, education, and persistence may be your most powerful weapons in the fight for your consumer rights.

Aja McClanahan
Aja McClanahan |

Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

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Guide to Adding an Authorized User to Your Credit Card

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.

Disclaimer: Though we have done our best to research information regarding this topic, be aware that issuing banks may have unique rules and agreement terms that apply to their particular credit card accounts. Contact issuing banks directly for questions on terms and policies relevant to specific credit card accounts.

What is an Authorized User?

An authorized user on a credit card account is any person you allow to access your credit card account. Not to be confused with a joint account holder, an authorized user can only make purchases and, in some cases, have access to certain card benefits and perks. Joint account holdership is becoming extremely rare, but typically occurs when two people apply for a credit card together. In joint account ownership, both people are liable for charges and can access and make changes to a credit card account.

An authorized user can be a spouse, relative, or employee. When you designate an authorized user on your credit card account, this person usually gets a card bearing their name with the same credit card number as the primary cardholder. In this scenario, the primary cardholder is liable for all transactions made by themselves as well as by any authorized user tied to their account.

Why Would You Add an Authorized User to Your Credit Card Account?

There are many reasons you might think about designating an authorized user for your credit card account. It all comes down to convenience and extending benefits that a credit account offers: access to credit, related perks, and credit card rewards, as well as the potential to improve the credit score of the authorized user.

For example, couples that share expenses might find it easier to designate one or the other as an authorized user to avoid passing a single card back and forth to make purchases. Perhaps you have a relative who lives far away, and it would be easier to give them access to your credit account for emergency purchases. You may also have a child that you want to assist in building credit history to increase their credit score. Adding them as an authorized user could help with this, but we’ll cover that more in another section.

Additionally, if you are an employer whose employees need to make purchases on behalf of the company, it would make sense to make them an authorized user. Without this designation, it could be extremely inconvenient for them to not have a company credit card at their disposal.

In some cases, adding an authorized user can also accrue reward points connected to a credit card account. These reward points can be used to make purchases or receive discounted pricing on things like travel and retail products. Typically, points are accrued from reaching credit card spending amounts within a certain time frame. Sometimes, the act of adding an authorized user can garner additional rewards as well.

How Can I Add an Authorized User to My Credit Card Account?

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As the primary cardholder you are the only person who can designate an authorized user. The authorized user cannot contact the credit card issuer and add themselves to your account. You will have to contact the issuing bank and request to add one or more authorized users to your account.

Depending on the bank and the technology in place, you may be able to handle this process entirely online. Some banks allow you to log in to your banking portal to designate additional authorized users, create their own bank login and profile as well as determine the level of access you’d like them to have to your account. Levels of access can range from being able to view transactions only to making purchases. If your bank doesn’t have this technology in place, usually a phone call is sufficient.

Adding Authorized Users Online

How to Add an Authorized User to a Chase Credit Card Account:

  1. Log into your Chase credit card account
  2. Under “My Accounts” click “Add Authorized User”
  3. Complete the information requested (see screenshot below for reference)How to Add an Authorized User to a Chase Credit Card Account

How to Add an Authorized User to a Bank of America Account:

  1. Log onto your Bank of America account.
  2. Select the credit card you’d like to change.
  3. Click on the tab labeled ‘Information & Services’
  4. Scroll down to the section labeled “Services”
  5. Click on “Add an authorized user”

How to Add an Authorized User to a Chase Credit Card Account

screen shot 2

How to Add an Authorized User to a Capital One account:

  1. Log onto your Capital One credit card account online.
  2. Under the “Services” tab, click “Manage Authorized Users”
  3. Click “Add New User”

screen shot 6
screen shot 7

How to Add an Authorized User to a American Express credit card account:

  1. Log onto your Amex account online.
  2. Click on “Account services”
  3. From the lefthand menu, select “Card Management”
  4. Under “Account Managers”, click “Add and Manage Users with Account Manager”screen shot 10
    screen shot 11

How to Add an Authorized User to a Citi credit card account:

1. Log onto your Citi credit card account online.
2. Select the “Account Management” tab.
3. Click “Services” from the lefthand menu.
4. Click “Authorized Users”
5. Click “Add an authorized user”
6. Fill in the authorized user’s personal information.

 

screen shot 14

 

 

screen shot 12

How to Add an Authorized User to a Barclays credit card account:

  1. Log onto your Barclays credit card account.
  2. Select the “services” tab.
  3. Under the dropdown menu, select “Authorized users”
  4. Select “Add an authorized user”
  5. Complete the form to add an authorized user.
    screen shot 17screen shot 18screen shot 20

Who Can Be an Authorized User on My Account?

An authorized user can be anyone you choose, whether they are related to you in some way or not. In most cases, the bank will request identifying information such as name, birthdate, Social Security number, and address. Some card issuers require that authorized users meet age requirements, and others do not have age requirements. As always, check with the bank to understand the criteria authorized users must meet for your card.

The Fees

Some credit cards will charge an additional fee for more additional authorized users, while others will offer this benefit at no charge. Make sure you read the fine print in your cardholder agreement so that you are aware of all the fees associated with having one or more authorized users on your account.

Fees can range from less than $100 to a few hundred dollars and beyond each year. Business accounts especially can carry higher fees when multiple authorized users are associated to one account.

Liability

As the primary account holder, you must understand that you are 100% solely liable for any and all charges made on your account by both yourself and your authorized user. If you have been designated as an authorized user, you do not legally share liability for purchases made on the credit card account. However, you may have a personal arrangement with the primary account holder to pay your share of charges when the bill is due.

What Can an Authorized User Do?

This can depend on the level of access you’ve chosen with your card issuer for your authorized user. If there are not varying levels of access to choose from, check with the card issuer to find out exactly what an authorized user can and cannot do.

In most cases, an authorized user cannot make changes to an account. They cannot close an account, request changes in bill due dates, change account information, or request limit increases or a lower annual percentage rate.

Again, this varies from card issuer to card issuer, but there are many other things an authorized user can do.

Here are some possible capabilities based on the terms of your credit card issuer:

  • Make purchases
  • Report any lost or stolen cards
  • Obtain account information
  • Initiate billing disputes
  • Request statement copies
  • Make payments and inquire about fees

Benefits of Adding an Authorized User

As mentioned before, adding an authorized user to a card can be for convenience, accruing rewards, or sharing card perks and benefits. An authorized user can be incredibly convenient in the case that you don’t have your personal card or for some reason don’t have immediate access to it.

Having an authorized user can help a primary user reach limits to earn reward points for some cards. One of the most effective marketing strategies of credit card companies is to offer bonuses and rewards for adding authorized users to your account. Adding another user to your account could add a few thousand extra reward points you would not have earned without adding the user. Then, there’s always the chance that the authorized user will make purchases that contribute even more to your attempt to accrue reward points.

Finally, there are a number of credit cards that offer perks or benefits that can extend to your authorized users. Depending on your credit card, benefits like car rental insurance, lost luggage reimbursement, and extended warranties could apply to all purchases made, including those by your authorized users, on your credit card account.

Benefits of Becoming an Authorized User

Though the credit-reporting landscape is changing, there’s still the potential to “piggyback” on a primary account holder’s credit history for a card in good standing. But not all credit card companies report information to credit bureaus for authorized users in all circumstances. However, to know for sure what will be reported to the credit bureaus in regard to your authorized user status, speak with your card issuer for the details of what information is reported and when to credit bureaus.

Another benefit is having access to more credit. If you are in a bind and have emergencies that come up, access to credit can be helpful. Plus, exercising diligence in managing purchases and bill payment can help you develop good credit habits.

You should also know that being an authorized user may grant you access to certain perks for account holders and their primary users. There are benefits like access to travel lounges, Global Entry or TSA PreCheck application, travel credits, and discounts an authorized user could be privy to as well.

What Could Go Wrong?

If for some reason the credit card account doesn’t remain in good standing, the credit score of both the primary account holder and the authorized user could be affected. If you are a primary account holder, make sure your authorized user understands the terms under which they can make purchases. If they make purchases that cause your payments to be delinquent, your credit score could suffer.

Even if you did not give this person permission to make purchases with your credit card account, the fact that you designated them as an authorized user is evidence that you at some point trusted them with your credit card access. A claim of criminal or fraudulent activity in this instance would be extremely difficult to prove, so choose your authorized users wisely.

Though not as common with an authorized user, your credit score could be negatively affected if an account becomes delinquent. Because tradeline reporting for authorized user accounts to credit bureaus varies from card to card and scenario to scenario, a delinquent account status could still appear on your credit report. If you will be added to someone’s account as an authorized user, find out whether or not the credit history of the account will be reported to credit bureaus under your authorized user status.

Removing an Authorized User from an Account

Either the primary cardholder or the authorized user can remove an authorized user from an account by contacting the credit card issuer. You may be asked to verify your information as well as the information of the primary account holder.

In many cases, only one card number is issued between one or more users. Your credit card company may deactivate the primary cardholder’s credit card number and reissue a new card and number once an authorized user is removed from an account.

If your status as an authorized user does show up on your credit report for the credit account after you’ve been removed from a credit card account, you may have to contact credit bureaus to have it removed.

The Best Way to Manage Shared Credit Access

Designating someone as an authorized user is not something to be taken lightly. Even a small misunderstanding of credit card issuer terms and your own interpersonal credit arrangement can cause problems. Before adding an authorized user to your account, set ground rules around card use that covers access to perks and making purchases.

Some things to consider and discuss with your authorized user include:

  • What is the goal in having the authorized user on the account?
  • Will the authorized user have a physical card?
  • When is it OK to use or not use the credit card to make purchases or access card perks?
  • The credit history of both the primary cardholder and the authorized user
  • Good credit habits that will prevent identity theft and fraud
  • Setting up monitoring alerts with the credit card company or an identity theft protection service

The ability to add an authorized user to a credit card account can be a double-edged sword. On one hand, convenient benefits of access to credit and credit card perks can make life easier in so many ways.

On the other hand, this same convenience can cause problems if both the primary cardholder and the authorized user don’t understand the rules of engagement with each other or the terms set forth by the credit card company.

Adding an authorized user to your account has the potential to be incredibly convenient and mutually beneficial if handled the right way. Make sure you follow best practices to get the most out of this financial arrangement.

Aja McClanahan
Aja McClanahan |

Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

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These Women Paid Off $262,000 Worth of Debt Using Accountability Groups

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.

Just a few short years ago, Janet Lombardi of Long Island, N.Y., was mired in debt. Her husband of 25 years was recently sent to prison, and she was left to face their $485,000 mortgage and $60,000 of credit card debt alone.

“Once I realized the astounding levels of debt he had accumulated, I resolved to get solvent, and I did,” Lombardi told MagnifyMoney.

Help came from an unexpected source: an accountability group. Lombardi joined a support group for people struggling with debt called Debtors Anonymous (DA), an offshoot of the well-known support group Alcoholics Anonymous (AA).

Using a process similar to the 12-step program made famous by AA, the DA process includes making amends to those wronged and becoming aware of compulsive habits and characteristics that can lead to overspending. People can attend meetings at no cost with the options of face-to-face, online, or phone meetings in several languages.

After joining DA, Lombardi made some big strides in her finances: She sold the home she couldn’t afford, negotiated her credit card debt down from $60,000 to $20,000, and paid it all off over the next two years. She says she now lives solely on cash and enjoys the kind of financial stability she’d never experienced before.

Lombardi

“Having a place to openly discuss feelings around money is enormous,” Lombardi says. “And having partners to help you go over your finances and help you with day-to-day management is super helpful.”

If getting out of debt has been difficult for you, joining an accountability group might be a simple way to get the support you need. Whether you are trying to lose weight, overcome addiction, or fix your finances, those who work in a group setting are more likely to reach their goals, research has shown.

Things like stating a goal and having accountability along with action steps make all the difference in reaching that goal.

In this post, we spoke to Lombardi as well as three other women who have paid off a collective $262,000 worth of debt with the help of debt accountability groups.

3 Reasons Accountability Groups Work

The Group Effect

Studies reveal that those who explicitly state a goal or an attempt to solve a problem are 10 times more likely to reach their goal than those who don’t. In a group setting, there’s no negotiating: You’ve got to be up front about your problems along with your resolve to fix them.

Positive Peer Pressure

Dr. Robert Cialdini, a social psychologist who studies the power of social influence, is noted for observing the effects of positive peer pressure: It helps us make difficult decisions and attempt to one-up our peers (in a good way). In other words, you are more likely to strive toward a goal if you see people similar to you achieving (or going toward) the same goal.

Powerful Problem Solving and Inclusion

Group therapy is common in the world of psychotherapy and can be an effective tool for dealing with the behavioral root of money problems. A group approach to problem solving involves talking, reflection, and listening to people with different backgrounds and viewpoints. Groups can also remove the stigma and loneliness of dealing with a problem like money mismanagement.

Jessica Garbarino, 39, of Wellington, Fla., completed a popular course on money management called Financial Peace University (FPU) in 2010. The class isn’t free, with a fee of $109 to $149 to enroll. FPU was created by debt-free guru, Dave Ramsey. FPU’s course is typically taught at churches, community centers, or schools, but people can also complete the course online. For Garbarino, the group approach of tackling debt helped her pay down $8,000 while in the class and gave her the tools to get rid of another $26,000 worth of debt that same year.

Jessica Garbarino

“It made you feel like you were not alone in your financial journey,” Garbarino says. “We were all able to talk openly and honestly about our current financial situation and encourage each other.”

How to Find a Debt Accountability Group

Debt accountability groups and forums exist all over the internet. Many, like Financial Peace University and Debtors Anonymous, mainly operate as in-person meetings. Some of your favorite financial gurus might have groups you can participate in as well. Look for personal finance authors, bloggers, or experts who discuss money regularly. They may have a debt accountability group or be able to direct you to one they can vouch for. These groups can be offered in a variety of formats: in person, online (Facebook groups, Google Hangouts, webinars, website forums, etc.), or even on group conference calls.

Leslie Walsh, 48, of Sparks, Nev., is a government worker who says she paid off over $28,000 with the help of her accountability group. She found support in an unconventional arena: Facebook. Walsh joined a group started by personal finance blogger Jackie Beck of The Debt Myth. Walsh says she received support and encouragement through the Facebook group, via email, and through a debt repayment app the group’s founder created.

Leslie Walsh
Leslie Walsh

When searching for an accountability group, make sure that it’s is a good fit and that you are comfortable with the way it operates. For example, some groups have rules around confidentiality and want participants to check in regularly. Some groups are more relaxed in terms of updates and accountability. Choose a group approach that works for you and will help you reach your goal of paying off debt.

How to Get the Most Out of an Accountability Group

Rachel Gause, 38, of Richlands, N.C., completed Financial Peace University twice and now teaches the class herself. She believes firmly in the power of a group to fix your finances. After paying off $180,000 in debt as a single mom, she believes coming clean and taking responsibility helps you get the most out of a group setting.

Rachel Gause
Rachel Grause

“[Group members] must acknowledge that they have an issue with managing their personal finances,” says Gause. “People with all types of incomes have issues regardless of race, age, and education level.”

There are many ways to participate and get value out of an accountability group, but the more you put in, the more you’ll get out of it.

Here are some tips that should help:

  • Remain committed to check-in times, assignments, and times to share.
  • Be as transparent as you possibly can but avoid sharing personal details like account numbers, passwords, etc. with group members.
  • Have a plan to share with your group, but be realistic (and open) about your progress.
  • Though group advice will be helpful, remember that debt problems can be financial and legal in nature, so engage professional help when necessary.

The evidence is compelling: An accountability group could help you make strides toward eliminating your debt once and for all. But although accountability groups can be good for people who need an extra nudge toward their financial goals, remember to seek professional help when necessary. Done the right way, group accountability could be just the thing you need to make a dent in your debt.

Aja McClanahan
Aja McClanahan |

Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

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7 Signs That Identity Protection Service Isn’t Worth It

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7 Signs That Identity Protection Service Isn’t Worth It

According to a report released by the Federal Trade Commission (FTC), identity theft complaints increased by 47% from 2013 to 2015. Needless to say, identity theft is on the rise, and many people are concerned they could become a victim. Like any crime, totally preventing identity theft is practically impossible. However, that hasn’t stopped many so-called identity theft protection and prevention companies from selling services that promise to do just that.

As a consumer, it’s important to be cautious when purchasing identity theft services simply out of fear. Sometimes, fear-based marketing tactics can cause consumers to pay or overpay for services they may not need, or worse yet, may not be even be effective.

Before we dive into the details of assessing the value of the ID theft protection service you are considering, let’s do a quick recap on the types of identity theft and common services offered to help with this issue.

A Quick Recap: Types of Identity Theft and Protection Services

Types of Identity Theft

There are two primary types of identity theft. The first is account takeover, which is more common and normally not too difficult to address. In account takeover, someone steals a credit card or gains illegal access to your bank account or credit card to make unauthorized transactions.

The second, less common and often more complicated to resolve, is identity takeover. That’s when someone assumes your identity and acts fraudulently on your behalf. Identity takeover can manifest in medical, criminal, or financial scenarios.

Common Identity Theft Protection Services

The most common offerings from identity theft protection companies are along the lines of prevention, monitoring, and resolution.

To be clear, you can reduce your risk of being an identity theft victim with good “identity hygiene” habits, but you can’t totally prevent identity fraud. An effective identity theft protection service is not prevention so much as it is early detection (monitoring) before the damage gets out of hand. Once a problem is detected, having a plan that includes resolution services (doing the legwork of fixing the fraud damage) is likely the most value you’ll get for your money.

7 Signs to Watch Out For

1. Misleading Claims and Offerings

Many consumers are reeled in with hefty promises of $1 million or $5 million in “coverage” and may not know what that coverage entails. When you see these numbers, it usually means that a company will commit up to $1 million in resources to help you through the resolution process. That might mean things like covering notarized forms or other professional services needed in the resolution process. Some companies will cover lost wages from missing work due to dealing with an ID theft incident.

In many cases, your bank or credit card company will have policies in place so that you are not liable for fraudulent transactions anyway, so the millions in “coverage” wouldn’t be applied toward recovering that property. (Some services will reimburse fraudulent transactions but with stipulations around reporting time frames, proof of criminal activity, and making sure you aren’t covered already under another benefit.) Resolution services can be extremely helpful, but they usually only run a few hundred dollars, not even close to millions!

2. Excessive Offerings

Looking at the laundry list of items that a common identity theft protection company offers can make these services look like consummate, comprehensive coverage. IDShield, a LegalShield product, promises to monitor so many things that you wonder what could fall through the cracks: 10 phone numbers, 10 email addresses, your driver’s license number, and a host of other personal data points.

With all these monitoring claims, it makes you feel good about spending that $20 or $30 per month for a service, but the fact of the matter is that it’s highly unlikely that you’ll get the medical ID number monitoring promised. A quick visit to the Better Business Bureau complaint section shows this to be true for many companies. Common complaints for identity theft protection services reveal monitoring and alerts don’t always happen as promised. In these complaints, people report moving, opening new accounts, and other activities they are sure should trigger alerts, but receive no notifications.

3. Services You Can Do Yourself or Already Have Coverage For

Eva Velasquez, president and CEO of the Identity Theft Resource Center (ITRC) says there are many things you can do yourself if you have the time. ITRC provides resources for helping people execute the DIY version of identity fraud resolution. Velasquez feels you shouldn’t be shut out of help in the midst of an identity fraud crisis because you don’t have the money to handle it.

Velasquez also encourages people to check other places they might already have identity theft protection benefits in place at low or no charge. Insurance riders, employee benefit packages, credit cards, credit unions, banks, or motor clubs are are few places where protections could already be in place for you.

4. Aggressive or Questionable Marketing Tactics

When a data breach occurs, the company whose customers’ information was compromised typically offers identity theft protection services to these customers at no charge. The provider of these services is call the data breach vendor. In the famous Target data breach of 2013, Target provided a basic service to customers through Experian’s product, ProtectMyID. There were many complaints citing Experian’s aggressive attempts to upsell vulnerable customers to monthly subscriptions because the free services offered by Target and the data breach vendor were limited in benefits.

5. Limited Offerings

In the example above, Target opted to provide data breach victims a pared-down package of the complete ProtectMyID package. This package monitored only one credit-reporting agency (CRA), while complaints surfaced of victims who would eventually face identity fraud due to the data breach and poor vigilance of their personally identifiable information post-breach.

Zander Insurance offers services that focus heavily on the resolution side. They offer monitoring of your personal information in varied capacities, but only have reminders to check your free credit report each year. Their take is that CRA monitoring provides a false sense of security and that the real value is in the resolutions services they offer.

6. Not Following Best Security Practices

Enrolling in an ID theft protection service means you’ll likely have to give your service provider a lot of your precious personal information. The idea is that they will be able to effectively monitor all the data points you provide for fraudulent activity.

If this is the case, you’ll want to make sure that your information is collected, stored, and accessed in a secure manner. A major player in the identity theft protection space, LifeLock, was fined by the FTC in 2010 and 2014 for poor information security practices, among other things.

7. Complaints, Lawsuits, and Fines

Eva Velasquez of the ITRC, who also worked for the Better Business Bureau for five years, says third-party verification agencies like the BBB can be a consumer’s best friend when vetting identity theft protection services. Search sites like Consumer Affairs and the BBB for common complaints about an ID theft protection service you are considering. The complaints section is a great resource to learn about common problems and misunderstandings with a particular ID theft protection company.

Tips on Evaluating Identity Theft Protection Services

As a reminder, these services will help you mainly with detection and resolution, not prevention. There is no perfect identity theft protection solution, only a solution that is perfect for you. To start, you’ll have to play an active role in protecting your personal information and reducing your risk for ID theft.

In the end, it’s true that there are many services you could perform on your own to resolve ID fraud, but you may not have the time. So one person’s value-add would be different for another. Read the fine print and understand exactly what you are paying for. Check third-party consumer advocacy sites with honest reviews about identity theft protection service shortfalls and gaps in coverage.

Understand your specific needs, time constraints, and risk exposure to find the solution that provides the most value, not the one that feeds off your worst fears.

Aja McClanahan
Aja McClanahan |

Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

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