Advertiser Disclosure

College Students and Recent Grads

Is It OK to Spend Your Financial Aid Refund?

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.

iStock

Just a few weeks into their college education, many students receive funds totaling hundreds or possibly thousands of dollars — the “extra” money from the student’s financial aid package. Usually, the money comes with little to no information on how students should spend it, or how to return any funds they may not immediately need.What many students may not realize immediately is, the majority of the time, taking any extra money not truly needed to pay for educational expenses results in them owing even more student loan money and making payments over a longer period of time after graduation.

Simply learning about the money and creating a budget could prevent many students from adding to the average $34,144 student loan balance they are already expected to pay back.

What Is A Financial Aid Refund?

Your refund is the amount of money left over after all of your scholarships, grants, and federal and private student loans are applied toward tuition, fees and other direct educational expenses for the semester. The refund could come as a lump-sum direct deposit to your bank account, as cash or as a check.

The school legally has to disburse any leftover Federal Student Aid money you are awarded. “[Schools] cannot hold onto that credit balance unless the student gives written consent,” says Karen McCarthy, Director of Policy Analysis at National Association of Student Financial Aid Administrators (NASFAA). In the case of a PLUS loan, the parent must give consent for the school to hold the credit balance.

Most refunds most likely come from leftover federal student loans, but recipients of some grants may receive a refund for unused funds as well.

In fall 2009, Brooklyn, N.Y., resident Crystal Chery, was just beginning an associate’s degree program at Kingsborough Community College. She qualified for the Pell Grant, which covered $5,350 of her tuition and expenses for the school year. After tuition and fees totaling $1,550 were paid, Chery received a credit for about $1,125 to her bank account each semester.

While there is no official record of exactly how many college students end up with a positive balance on their account after all of their financial aid package is applied, each semester possibly thousands of U.S. college students in the United States find themselves in a similar position as Chery did her freshman year.

The total amount of financial aid that a student is able to receive is up to the institution’s calculated cost of attendance, which is a big part of the math that goes into calculating a student’s financial aid award. Sometimes colleges pad their total cost of attendance estimates to include things that aren’t directly paid to the school, like books, housing, transportation or child care. The idea is that the student will use any leftover funds for other things they need in order to go to school.

“Kids going to a $4,000 community college can walk away with about $5,000 of refunded money,” says college aid expert Joe Orsolini, especially if they find ways to save on expenses like housing. In Chery’s case, she lived at home, which meant she didn’t need any funds for housing.

If you received a refund from a mix of loans, scholarships and grants, carefully examine your refund to understand where it came from and if you’ll have to pay back that money.

Grant and Scholarship refunds

Grants and scholarships — truly “free money” — are usually applied to your institutional bills first. There may be restrictions on how you can use money from these sources, as rules vary widely by state, institution and scholarship program regarding how students are allowed to spend the funds they receive.

Usually the amount of “free money” a student gets is smaller compared to loans they receive and is depleted by direct institutional bills, so most students don’t get that money refunded to them. However, it’s possible for some students who received a large amount of scholarships to be refunded “free” money.

Chery isn’t required to repay the leftover Pell grant money she received for her education, as she doesn’t fall under any special circumstances like students who may have withdrawn early from their program, or dropped to part-time enrollment during the payment period. In addition, the school was legally required to issue her a refund credit for the excess federal funds.

Student loan refunds

If you receive a refund from unused federal student loan money, you’re free to keep it, but remember you’re still borrowing that money. You will need to pay any federal loan money refunded to you, with interest, starting six to nine months after you graduate.

Generally speaking, you should return any unused loan money that you don’t need right away to avoid taking out more in loans than you really need. But if you need to keep it, make sure you spend the money wisely.

Whatever you do, “don’t go buy a car or go on spring break with [your student loan refund],” says Orsolini. If you’re spending federal loan money, a $10 pizza today at 6.5% APR will cost close to $20 to pay off in 20 years.

Do that math for thousands of dollars in student loans. Make your best effort to limit any flexible, frivolous or impulsive spending to money you don’t have to pay back with interest.

How you handle your student loan refund may also depend on what kind of loan it is — unsubsidized or subsidized.

Subsidized student loans

Interest won’t begin to accrue on subsidized student loan money until six months after you have graduated. So, if you keep your refund, you don’t have to worry about racking up interest charges on the debt you owe while you’re in school.

For that reason Orsolini argues students shouldn’t give back any “extra” subsidized loan money until they are in their last semester of college.

“Until you know for sure that you’ve made it to the finish line, hang on to that money because you never know what is going to happen,” says Orsolini. He recommends placing excess financial aid funds into a 529 college savings account, where it can grow, and you can use the money if you plan to attend graduate school.

If students don’t want to open a 529 account, Orsolini recommends they stash unused subsidized loan money in an emergency savings fund, to help maintain as much flexibility as possible in paying for college.

Orsolini says this method provides a financial safety net for students, as you never know what can happen to your income. If you choose to do this, you should pay back any unused subsidized loan money the month before your graduation to avoid paying interest.

Warning: Orsolini’s method takes a lot of self-restraint.

Unsubsidized student loans

Students shouldn’t pocket any unsubsidized student loan money, as interest will begin to accrue immediately, and keeping the money won’t be worth it.

“Even if you put it in a savings account for a few months, it’s going to accrue more interest as a loan than it would in the savings account,” says Ashley Norwood, Consumer and Regulatory Adviser at American Student Assistance (ASA), a nonprofit student loan advocacy group that helps students finance and repay their student loans.

Avoid keeping unneeded unsubsidized loan money at all costs if you can.

If you find yourself keeping the loan because you need to live off of it, Betsy Mayotte, Director of Consumer Outreach and Compliance at ASA, suggests you do your best to reduce your cost of attendance.

You could make up some or all of the maximum $2,000 a student can receive in unsubsidized loans by getting a part-time job or a work-study job, for example. If cost of living is too high at the school you’re attending, look at a cheaper school or consider moving home if the school is close enough

Should You Spend Your Refund — or Return It?

Unless you have restrictions on how you can use it, what you decide to do with your refund money as a college student is really up to you.

“The assumption is that the student is using that credit balance to pay for those [indirectly billed] expenses,” says McCarthy.

But students don’t always do that.

“When I was in college, I remember all of my friends getting True Religions and all of this stuff [with their refund money] … I did not,” says Chery. “I was focused on other things.”

Chery used her fall semester “refund” to buy equipment to launch a DJ career, starting with a $1,350 MacBook, which she used to create her own mixes and to use at gigs she booked while in school. With the following semester’s refund, Chery purchased a Canon 60D DSLR camera for another $1,200 because she wanted to “dabble in photography and promote [her business].”

Chery says the investment paid off. After booking larger, professional gigs and gaining some experience, she was able to present work that helped her land an internship with Hollywood, Calif.-based media company, REVOLT TV, where she got to work with big-name music artists like Sean “Diddy” Combs and Damon Dash.

“When I started making these investments, I didn’t know that they were going to alter my career like that,” says Chery, who now hosts and books events with hundreds or thousands in attendance throughout the northeast United States.

After you’ve allocated funds to different areas of your budget, you need to figure out what to do with any extra funds. If the money is “free,” meaning you don’t have to pay it back later, you can keep it, but you may need to look into what you are allowed to spend it on, says McCarthy, as there may be restrictions on how you can use scholarship or grant money.

If you think you have enough money for your needs, the experts at ASA and NASFAA agree students should immediately send back any money they don’t think they need, since students can always ask for that disbursement again later on.

Giving money back or canceling a federal student loan won’t affect how much financial aid you are offered the following semester and if you need the money later on in the current semester, Mayotte tells Magnify Money.

“Let’s say you refused all of the loans. You can go back to the financial aid office and ask for part or all of that loan money up to 180 days after the last day of classes,” adds Mayotte.

As long as you were eligible to receive the student loan funds during that pay period, you can receive a federal loan for a prior or the current payment period without penalty if you ask for it within the 180-day period.

For example, you can technically still receive loan money you denied during the fall semester if you request a late disbursement for that money during your spring semester as long as it’s within 180 days after the end of the payment period.

Ask Yourself These 3 Questions Before Spending (Or Returning) Your Refund

Have you paid for all of your non-negotiable expenses for the semester?

Certain non-negotiable expenses (read: tuition and fees) are usually billed at the beginning of the semester, but the school won’t send you a bill for everything you can’t succeed without, like technology for classes, a working laptop, or sheets for your dorm bed. Here are a few possible spending categories you may or may not include in your budget:

  • Living expenses not billed by the institution
  • Books and other educational supplies you’re going to need over the course of the whole term
  • Transportation (gas, on- and off-campus parking)
  • Child care, if you need this so that you can attend school
  • Miscellaneous personal expenses

Do you need the money to cover other college-related expenses?

There are a host of hidden college costs college-bound families fail to consider for one reason or another, and they can dry an unsuspecting student’s checking account. They are all the little things families don’t think about during move-in, like organization membership fees and paying for food outside of a prepaid student meal plan. If you can’t cover those things with part-time income during the school year, tally up an estimate and keep what loan money you need.

Do you have an emergency fund?

You should have every reason to have savings, especially if you’re paying for school on your own. You won’t get many opportunities to stash away $1,000 in cash working for minimum wage as a barista in school. Pocketing some of the money now will help you steer clear of rainy days and expensive borrowing options in the future when those hidden costs creep up on you. Set one up ASAP.

How to return your refund to the Department of Education

The rule is simple: Return the loan within 120 days of disbursement, and it will be like you never took it out in the first place.

The rule is found in the text of the Master Promissory Note, which all FSA borrowers are required to sign promising to pay the loans back before they can receive any federal aid funds. The following information is found under “Canceling Your Loan”:

You may return all or part of your loan to us. Within 120 days of the date your school disbursed your loan money (by crediting the loan money to your account at the school, by paying it directly to you, or both), you may cancel all or part of your loan by returning all or part of the loan money to us. Contact your servicer for guidance on how and where to return your loan money.

You do not have to pay interest or the loan fee on the part of your loan that is cancelled or returned within the timeframes described above. We will adjust your loan amount to eliminate any interest and loan fee that applies to the amount of the loan that is cancelled or returned.

If you make the 120-day deadline, you’re in the clear. You won’t be required to pay loan fees or any interest already accrued on unsubsidized loans in that time. Sometimes, your university can send it back on your behalf, so your first point of contact should be the financial aid office at your institution. Check with them to see if they can send the unused federal student loan funds back on your behalf, or if you will need to send the money back to your loan servicer on your own.

After the deadline, you’ll need to simply make a loan payment back to your loan servicer. You can begin to pay your loans back while still in college. If you do, you won’t pay any interest on subsidized student loan money (it doesn’t begin to accrue until six months after you graduate), but you will pay any loan fees charged to your account.

When will I get my financial aid refund?

If you’re expecting a refund, you aren’t likely to see that money until after the add/drop period for classes — the grace period during which you can change your choices without penalty — ends. That can be about three to four weeks into the semester, although some schools may disburse funds earlier. According to the Department of Education, schools must pay a credit balance directly to a student or parent no more than 14 days after the first day of class or when the balance occurred if it occurred after the first day of class.

Until then, you’ll have to cover your costs out of pocket.

“Students who are expecting refunds are very anxious for them,” says Norwood.

Norwood adds the anxiety may be because many students who see a refund check are lower income — they may see the money because they qualified for more aid. They may depend on the funds from the refund to pay for important costs related to their education such as rent for off-campus housing or educational supplies for classes.

If you missed something on your financial checklist — like signing the Master Promissory Note or completing Loan Entrance Counseling — over the summer, you may see funds even later than four weeks. Overall, if you’re hoping to use refund money to cover your rent or other school expenses, you may need to come up with the cash by other means.

“If [students] don’t budget well for the whole year, it’ll be the same thing in January,” says Mayotte.

There is a silver lining for you if you received Federal Student Aid (FSA). As of July 1, 2016, Title IV schools are required to provide a way for FSA recipients to purchase books and supplies required for the semester by the seventh day of the semester if:

  • The school was able to disburse FSA funds 10 days before the semester began, or
  • The student would have a credit balance after all FSA funds are applied.

The school doesn’t have to write you a check outright for books. Institutions can award the funds in school credit or bookstore credit, too, but must grant you the amount you are expected to spend on educational supplies according to the institution’s calculated cost of attendance by the end of the first week of classes.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

TAGS:

Advertiser Disclosure

Credit Cards, Reviews

PayPal Launches a 2% Cash Back Rewards Card: Double is the New Rewards Standard

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

PayPal’s new Cashback Mastercard, launched Aug. 30, is packed with features that pin it head to head with the current highest no-fee flat-rate cash back credit card on the market.

The PayPal Cashback Mastercard® is a no-fee rewards card that offers users a flat 2 percent cash back upfront on all eligible purchases made using the credit card. The offer is a step up from the current leading cash back card, the Citi® Double Cash Card, which credits 1 percent upfront and another 1 percent on what cardholders pay off each billing cycle.

The digital and mobile payment company partnered with Synchrony Bank to launch the Cashback Mastercard, which grants users benefits exclusive to PayPal and Mastercard members.

Although it boasts a generous cash back offer, the PayPal Cashback Mastercard® has its drawbacks.

“The 2 percent cash back rate is a solid offer. But the PayPal Cashback Mastercard® falls short in three main ways: no sign-up bonus, high APR and no 0% introductory period,” says Chris Mettler, president of our sister site CompareCards.com.

How the PayPal Cashback Mastercard® works

PayPal is clearly targeting PayPal users with this new cash back rewards card. The application for PayPal’s new credit card is only open to existing PayPal customers. Access to the application is granted after users submit a username and password to log in to a PayPal account.

They are then redirected to an application on the Synchrony Bank website. After filling in sensitive information, applicants have the option to set the card as a default payment option in their PayPal wallet and purchase Synchrony Bank’s card security program before submitting the form.

If approved, customers are charged one of three variable interest rates — 16.99%, 24.99% or 27.99% — based on creditworthiness and other factors like income. PayPal doesn’t charge cardholders an annual fee.

Cardholders can earn an unlimited, flat 2 percent cash back on all eligible purchases made using the PayPal Cashback Mastercard®. The cash back rewards are credited directly to the user’s digital wallet on PayPal. The money stored on PayPal wallet can be used to make purchases where PayPal is accepted, sent to peers, or cashed out to a bank account.

Cardholders don’t need to wait for a physical card to show up in the mail before they can start earning rewards. Users have immediate access to the line of credit through their PayPal account. PayPal’s Cashback Mastercard will show up right away in their PayPal wallet, where it can be used to make purchases or pay bills online.

How to qualify for the PayPal Cashback Mastercard®

Borrowers with good or excellent credit scores are most likely to qualify for the PayPal Cashback Mastercard, but those working to better a poor credit score may qualify for a card, too.

Applicants are approved for one of three interest rates, based on creditworthiness and other factors. The lowest rate, 16.99%, is offered to applicants with the best scores, whereas the highest rate, 27.99%, is reserved for applicants who are a greater credit risk.There is a 24.99% APR that’s likely to go to anyone that falls in between.

What we like about the PayPal Cashback Mastercard®

2 percent cash back on all eligible purchases

PayPal’s Cashback Mastercard® is now the highest, no-fee rewards card on the market. The 2 percent cash back feature is the greatest value to credit card users who want a simple, straightforward way to earn rewards. This cash back card is ideal for users who make most of their everyday purchases on a credit card and pay off the card’s balance each month.

Cardholders will get 2 percent cash back on all eligible purchases made at Paypal.com, eBay.com and anywhere Mastercard is accepted using the PayPal Cashback Mastercard®.

Automatically added to PayPal Wallet

The credit card is automatically linked and added to the PayPal wallet, a digital wallet that lets users pay for purchases online with linked bank accounts, credit and debit cards, or money on the account balance. That means users opening the card to make a purchase can gain access to the line of credit and earn rewards for spending right away.

Redeem cash rewards to PayPal balance

To use any cash back earned, users must transfer the money to their PayPal balance. Once in the digital wallet, that money can be used to complete online purchases, pay bills, or send money to peers all over the world.

No cash back restrictions

PayPal doesn’t cap the amount of cash back users can earn or set a minimum on the amount of cash back a user can redeem. Plus, cash back rewards won’t expire, so users aren’t pressured to use the money or lose it by a certain date.

Mastercard benefits

PayPal Cashback Mastercard® users also gain exclusive Mastercard cardholder benefits. They include doubling the length of warranty coverage on purchases up to one year, 60-day price protection, and Mastercard’s identity theft protection service.

What we don’t like about the PayPal Cashback Mastercard®

For PayPal customers only

You must have a PayPal account in order to apply for a PayPal Cashback Mastercard® account and keep the account open to maintain the credit account.

If your PayPal account is closed, or you unlink the card from your PayPal account, your card account will be closed. If you have cash back available, you won’t be able to redeem those awards, and they will be forfeited.

If your PayPal account is suspended for any reason, you won’t be able to redeem cash back to your PayPal balance until the account is back in good standing.

No sign-up bonus

The PayPal Cashback Mastercard® misses an opportunity to offer users even more value by omitting a sign-up bonus. If users are looking to earn a boost in credit rewards after a few months of use, they may have more luck with a cash back card like Chase Freedom®, which offers 1 percent back on all purchases and a $150 signing bonus after cardholders spend $500 in the first three months the account is open.

No interest-free period

The card’s benefits also exclude an interest-free period. So while users can make a purchase with the line of credit immediately after opening the account using the PayPal wallet, they should avoid making large purchases as interest will begin to accrue right away.

Credit users should instead use a credit card with an interest-free period like the Discover it Cash Back® credit card, so they have more time to pay off the balance of the purchase before interest kicks in. The card offers an 0% introductory APR for 14 months on purchases and balance transfers.

A high APR

Cardholders should be careful not to carry a balance on this card to avoid getting hit with interest charges. For borrowers with a poor credit rating, the card charges a super high 27.99% APR, which trumps any 2 percent cash back earned that period. To avoid paying interest and make the most of the Cashback Mastercard, cardholders should make sure to pay off the card balance each period.

3 percent foreign transaction fee

It costs cardholders 3 percent to swipe the PayPal Cashback Mastercard® overseas. Even with 2 percent cash back, users end up paying 1 percent to make foreign purchases.

Who the PayPal Cashback Mastercard® is best for

The PayPal Cashback Mastercard® is best for existing PayPal customers who want a straightforward way to earn cashback on all of their everyday purchases.

If a cardholder is a heavy online shopper, the Cashback Mastercard may also be a good choice because they can easily earn cash back from using the card as a payment option when they pay online using PayPal, then credit the cash back to their PayPal balance for future purchases.

PayPal Cashback Mastercard<sup>®</sup>

LEARN MORE Secured

on PayPal’s secure website

Alternatives to the PayPal Cashback Mastercard

PayPal Extras MasterCard

If you prefer to earn credit card rewards in points instead of cash back, you can apply for PayPal’s other no-fee credit rewards option, the PayPal Extras MasterCard®. This card has a traditional points reward structure. It awards cardholders three times points on each dollar spent at gas stations and restaurants, double points on purchases made through PayPal or eBay, and one point per dollar spent everywhere else.

Unlike the cash back card, rewards earned on the PayPal Extras Mastercard expire® within two years if unused or if no purchases are made using the card for one year.

Citi® Double Cash Card

PayPal’s 2 percent Cashback Mastercard is only for PayPal account holders. If the benefits and 2 percent cash back upfront aren’t enough to rope you into creating a PayPal account, the Citi Double Cash Card® is a good alternative.

The card rewards 2 percent cash back on all purchases, but not all at once like PayPal’s Cashback Mastercard® does. Cardholders earn 1 percent cash back when they spend, and then 1 percent cash back when they pay, instead of awarding the entire 2 percent upfront. The Citi® Double Cash Card also omits an interest-free period for purchases and a sign-on bonus. However, it does offer a 0% introductory 18-month balance transfer.

PayPal Cashback Mastercard® FAQ

Cardholders receive 2 percent cash back on all eligible purchases made at Paypal.com, eBay.com and anywhere Mastercard is accepted using the PayPal Cashback Mastercard®.

No, cash back rewards don’t expire and can be redeemed to your PayPal balance at any time.

If you are unable to pay off your statement balance in full, you will be charged a variable interest rate of either 16.99%, 24.99% or 27.99% on purchases made in the billing period and be required to make a minimum payment.

Cardholders can redeem cash back by transferring the cash back balance to their PayPal account balance. The funds can then be used to make purchases anywhere PayPal is accepted or transfer money to peers using PayPal.

Use a cash back credit card that fits your day-to-day spending needs best, pay your bill in full each month, and spend only what you can afford to pay off.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

TAGS: , , ,

Advertiser Disclosure

News

Freaked Out by the Equifax Hack? Here’s What You Need to Know

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

About 143 million consumers’ sensitive information has been compromised in what was one of the worst data breaches to date in size and potential impact on consumers. Credit reporting agency Equifax announced the breach Thursday, more than a month after detecting the intrusion.

Equifax is one of the three national credit reporting agencies (the others being TransUnion and Experian) and collects a wide variety of consumers’ sensitive and personally identifiable information (PII). The information on credit reports determines credit scores and is used in lending decisions, among other things.

What happened

The breach exposed the names, Social Security numbers, birth dates, addresses, and, in some instances, driver’s license numbers of about 44 percent of the current American population. Hackers also took the credit card numbers for about 209,000 U.S. consumers and dispute documents for 182,000 U.S. consumers.

In its announcement, Equifax said “criminals exploited a U.S. website application vulnerability to gain access” to the files. In addition to the millions of U.S. consumers affected, the company says the criminals had access to limited personal information of some U.K. and Canadian residents.

The Atlanta-based reporting agency said the thieves had access to the data from mid-May through July 2017, but it didn’t discover the breach until July 29. Equifax announced the breach more than a month after discovering it and hiring a cybersecurity firm to investigate.

The company says it’s also working with law enforcement authorities and that its investigation will be complete soon. Equifax has not said who they believe attacked their database.

What the breach means for consumers

The breach isn’t the largest to date, but it’s close. In 2016, Yahoo announced an attack that affected 500 million users. Another breach, announced just a few months later, involved 1 billion users. In those breaches, hackers stole users’ phone numbers and passwords.

The Equifax breach could be worse in impact, given the sensitive nature of the consumer data the company has on file. In its release, Equifax said it had found “no evidence of unauthorized activity on Equifax’s core consumer or commercial credit reporting databases.” That doesn’t necessarily mean the information hasn’t been misused or that it won’t be misused, as signs of identity theft may not immediately show up on a credit report.

“If you were going to rate this breach from one to 10, this is a 10. The amount of sensitive info that is contained in the Equifax database is staggering,” says Adam Levin, founder of CyberScout and author of “Swiped,” a book on how and why consumers can protect themselves from identity theft.

When this level of information has been compromised, it “opens up the door for thieves to commit many different other types of identity theft. Not just financial, but criminal, government, medical theft as well,” says Eva Velasquez,the president of Identity Theft Resource Center.

Levin adds, when Social Security numbers are part of a database that’s been exposed, all of the individuals who have their numbers in that database will need to be “looking over their shoulders for the rest of their lives.” The Social Security Administration rarely changes someone’s Social Security number.

What to do now

First, don’t panic.

“People really feel violated when things like this happen,” says Velasquez. “Direct your energy from being angry or upset and feeling powerless to actually doing something and taking some steps to feel more empowered.”

Levin says the breach may add to “breach fatigue” — how the drastic rise in security breach causes consumers to believe breaches are inevitable and react to them apathetically instead of with urgency.

“But it shouldn’t,” Levin says. “It should be a clarion call. Unfortunately, as consumers we have to think of this as as if we’re alone. The government has failed us. The financial industry has failed us, and frankly we have failed ourselves. It’s important that we develop a culture of privacy and security.”

Find out if you are one of the impacted
Given the increasing threat and frequency of data breaches, everyone should be proactive in detecting identity theft. For this breach in particular, Equifax set up a website to see if you’re one of the people affected and how to enroll in the free year of credit monitoring it’s offering victims.

Visit equifaxsecurity2017.com and click on “Potential Impact.”

You’ll see a page with a large, rectangular button that says “Check Potential Impact” and a few lines of text.

Source: Equifax

The text explains that if you click on the link that says “Check Potential Impact,” you’ll be taken to a form that asks you to provide your last name and the last six digits of your Social Security number.

Based on that information, you’ll then be shown a message that says whether your personal information may have been impacted by the breach.

Source: Equifax

Regardless of the message you see, Equifax will give you the option to enroll in a credit monitoring service from TrustedID Premier. Beware: if you enroll, you’ll have to agree to waive some of your rights to sue Equifax. The arbitration clause is written in all caps in the company’s terms of service, but consumers may miss the language. The Washington Post reported earlier Equifax on Friday updated its terms to incorporate a way out of the arbitration clause.

Equifax cleared up the confusion Friday afternoon by adding the following information to its FAQs section on equifaxsecurity2017.com:

“The arbitration clause and class action wavier included in the TrustedID Premier Terms of Use applies to the free credit file monitoring and identity theft protection products, and not the cybersecurity incident.”

However, New York State Attorney General Eric Schneiderman still found the addition “unacceptable.”

Consumers can be excluded if they let Equifax know within 30 days in writing they would like to be excluded from the arbitration clause, but must first accept the agreement.

If you choose to enroll, you’ll be given an enrollment date. There’s quite a backlog of people enrolling, so you have to take it upon yourself to return to the site on your enrollment date. In short: You have to take your protection into your own hands. Equifax isn’t doing it for you.

Source: Equifax

Sign up for credit monitoring

Equifax is offering one year of free credit monitoring through TrustedID Premier to all U.S. consumers, regardless of whether they were affected by the data breach. There are five services under the program:

  • Get a free copy of your Equifax credit report.
  • Sign up for credit monitoring and automated alerts to be notified of key changes to your credit report on any of the major big three reporting agencies.
  • Put a freeze on your Equifax credit report.
  • Scan suspicious sites for use of your Social Security number.
  • Get up to $1 million of identity theft insurance to help you pay for any costs you may incur if someone commits identity fraud against you.

Even if you don’t want to enroll in Equifax’s service, you should enroll in a credit monitoring service, like free options offered through Credit Karma, Discover, Mint, Wells Fargo, and Capital One® — there are lots of ways to keep tabs on your credit.

Some identity theft protection services like the ones offered through myFICO, charge a monthly fee to monitor your credit year-round and provide identity theft insurance.

Regularly review your credit reports

You’re entitled to a free annual credit report from each of the major credit bureaus, which you can get through annualcreditreport.com. Carefully check your credit report for any accounts or recent activity you don’t recognize.

Make a plan to respond to identity theft

Detecting identity theft as soon as possible is crucial to minimizing the damage and stress it can cause — that’s where credit monitoring and reviewing your credit reports comes in. But the next step is just as important: Know what to do when it happens.

You can dispute errors on your credit report, file a police report documenting the identity theft, and do the legwork of resolving any problems it causes. You can also pay for identity theft insurance or identity theft resolution services (some employers offer this as a benefit, so check with your human resources department). Here’s a guide on identity theft resolution, so you know what to do in case you see anything suspicious. Even if you don’t see anything out of the ordinary, you should continue to remain vigilant in monitoring your credit activity.

Freeze your credit report

Velasquez says a credit security freeze is an option impacted consumers should look at. It prevents any application for new credit without first verifying your identity. If you want to apply for new credit, you’ll have to “thaw” your credit reports. The credit bureaus charge a fee, which varies by state, every time you freeze and thaw your credit report.

“While that does create some added inconvenience, the level of protection is worth it,” says Velasquez.

Be alert for unusual activity

Now is the time to practice what Velasquez calls good “identity hygiene.”

“Being vigilant about your identity is just a part of the world that we live in,” says Velasquez. “ If being involved in a data breach is the catalyst that brings that to the top of your mind, then we can see that as a positive.”

Velasquez recommends consumers act proactively and remain cognizant of anything that may involve using or verifying their identity. For example, if you receive a notice from a government agency about benefits or some weird explanation of benefits, pay attention to it.

Even after you do things like enroll in credit monitoring and freeze your credit, continue to do your best to watch out for signs of abuse. Don’t wait until you start receiving strange calls from government agencies and debt collectors.

When tax season rolls around, file your return as soon as possible. Identity thieves frequently use Social Security numbers to get fraudulent refunds, and if they file before you do, it will further complicate your tax-filing process.

At the least, go through your financial statements regularly (the more often, the better) to look for anything out of the ordinary. While protection is top of mind, sign up for any alerts you can set up on your mobile banking app to receive transaction notifications.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

TAGS: , , ,

Advertiser Disclosure

News

Amazon Drops Prices at Whole Foods — Here’s What Shoppers Can Expect

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: Whole Foods Market

Amazon made good on its promises to lower prices at Whole Foods on Monday, the same day the company completed its $13.7 billion acquisition of the grocery chain.

Prices on items at the organic grocery chain were down by as much as 43 percent on Monday, as reported by Bloomberg Business. At some Whole Foods locations in Manhattan, prices fell on popular items like organic avocados (reduced  from $2.79 to $1.99)and organic Fuji apples (reduced from $3.49 per pound to $1.99 per pound).

Here are the 4 biggest changes coming to Amazon-owned Whole Foods:

1. Price drops on 10 popular items

Amazon said Whole Foods shoppers could expect lower prices on 10 specific items beginning Aug. 28. :

  1. Whole Trade bananas
  2. Organic avocados
  3. Organic large brown eggs
  4. Organic responsibly-farmed salmon and tilapia
  5. Organic baby kale and baby lettuce
  6. Animal-welfare-rated 85 percent lean ground beef
  7. Creamy and crunchy almond butter
  8. Organic Gala and Fuji apples
  9. Organic rotisserie chicken
  10. 365 Everyday Value organic butter

The discounts on those items and a number of other food staples are marked with an orange label, pictured below.

 

2. Amazon Prime members will get perks for shopping at Whole Foods

Amazon says its customers can expect to see additional perks when shopping at Whole Foods moving forward. The company gave an overview of what customers can expect.

Amazon will use its Prime membership as a new Whole Foods rewards program, and Prime members will soon receive “special savings and other in-store benefits” for their loyalty, according to Amazon’s press release. However, the company has yet to release more specific details clarifying how the new program will work.

The addition of a rewards program could make shopping at Whole Foods doubly beneficial for Amazon Prime members and may attract more Whole Foods customers to sign up for a $99 annual Prime membership.

Prime members already get free two-day shipping or same-day delivery on select items, two-hour delivery or scheduled delivery on more than 10,000 items via Prime Now, music streaming, video streaming, unlimited photo storage, and a host of other perks through the membership program.

Some customers, like Preston Michael Cole, are wondering whether they’ll receive rewards for using Amazon credit cards at Whole Foods locations.

3. You can now purchase Whole Foods private label products via Amazon

If you get Whole Foods private label products delivered, you can now ditch Instacart for one of Amazon’s services. Customers who order groceries online will find Whole Foods labels offered through Amazon.com, AmazonFresh, Prime Pantry and Prime Now. Whole Foods private labels include 365 Everyday Value, Whole Foods Market, Whole Paws, and Whole Catch brands.

For Prime members, that means the ability to use free two-hour, same-day, or two-day shipping on 365 Everyday Value products and schedule deliveries of Whole Foods branded products through Amazon’s grocery delivery service AmazonFresh.

4. You can pick up Amazon orders at lockers located in some Whole Foods Markets

Amazon customers will soon be able to order products from Amazon.com and pick them up during their evening grocery run. The retailer says it will soon add Amazon lockers to some of the Whole Foods 400+ locations across the U.S. Customers will also be able to return items at locations with Amazon lockers.

Customers took to social media to share their excitement about Amazon’s presence in Whole Foods stores.

Some poked fun at new additions to Whole Foods inventory, like Amazon’s Echo and Echo Dot, now available for sale at Whole Foods locations. Whole Foods previously didn’t have a section devoted to electronics.

Twitter user Elvin, the Esquire commended Amazon for making healthy foods more accessible for all.

 

3 ways any shopper can save at Whole Foods

You don’t need to be an Amazon customer to save money shopping at Whole Foods. Try using any of these 17 strategies to save on your grocery store run. Get a head start with these three simple ways to save on your next trip to Whole Foods.

Sign up for the Whole Foods newsletter

A simple way to save money at Whole Foods: Sign up to get the retailer’s free newsletter delivered to your inbox each week. Sign up here to get coupons, recipes and shopping tips from Whole Foods via email.

Ask for samples to try before you buy

Whole Foods has a lenient free-trial policy. You can try just about anything — packaged items included — before you buy. Try something first, so you don’t waste money on something you won’t enjoy. Plus, avoid wasting additional time and resources it’d take to make a return.

Look out for food holiday sales in 2017

This year, Whole Foods will celebrate a different food holiday each month. The retailer celebrates one day each month with an in-store offer.

For example, on National Pi Day on March 14, Whole Foods celebrated with a $3.14 discount on any large pie from the bakery or any large take-and-bake pizza.

Find out about upcoming food holidays through the Whole Foods email newsletter. The sales are also promoted in stores during the week leading up to the promotion.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

TAGS:

Advertiser Disclosure

Featured

6 Bad Money Habits That Could Wreck Your Finances — and How to Break Them

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.

Bad spending habits — everyone has at least one of them. Maybe for you it’s adding “just one more thing” to your shopping cart, or repeatedly getting slapped with overdraft or late payment fees.

These bad habits may seem innocuous at first but could easily turn into financial self-sabotage.

“Breaking a habit like these can be really difficult because these habits have developed over the years, and they provide us with psychological comfort and safety,” says Thomas Oberlechner, founder and Chief Science Officer at FinPsy, a San Francisco-based consulting firm that integrates behavioral expertise into financial services and products.

Oberlechner says the key to overcoming a bad money habit lies in knowing when you’re using the impulsive, right side of your brain — as opposed to the focused, concentrated left side — in financial decision-making.

“It’s really about psychological experience. It’s about behavior. If we understand the role of emotion, then we have a chance to fix it,” Oberlechner says.

Once you understand yourself and can identify your bad habit, Oberlechner adds, then you can create a plan “that turns your impulsive or unconscious behavior into the healthy financial behavior that [you] actually want.”

Of course, breaking any bad habit is easier said than done.

MagnifyMoney spoke to financial professionals to hear how they and their clients broke their bad habit. See if any of their hacks could help you break yours.

Bad money habit #1: Spending money as soon as you get it

The solution: Automation

If you’re constantly feeling broke just a few days after you receive a paycheck, you may be guilty of this bad money habit. One way to make sure you hold onto some of your cash is to use what the behavioral finance community calls a “commitment device” to lock you into a course of action you wouldn’t choose on your own, like saving your money.

In this case, the device is automation. Automating your savings won’t help you stop siphoning money from your checking account the same day your direct deposit clears, but it can make sure you save what you need to first. Check with your bank or the human resources department at work to have a portion of your paycheck automatically sent to a savings account instead of putting the entire sum in your checking account.

You should automate your bills and credit card payments for the pay period, too. Once your obligations are automated, “you can be impulsive with your play money,” says Oberlechner.

Bad money habit #2: Reaching for your credit card all the time

The solution: A cash diet

Paying for everything you buy with a credit card can be good practice if you pay off your card every month. If you’re chronically swiping your credit card for things you can’t afford to pay off by the next billing cycle, leave your card at home and use cash instead.

When you don’t pay off your card each billing cycle, you rack up interest charges on everyday purchases, and that may cost you a lot more money in the long run. If you’re using more than 30 percent of your total credit limit each month, you may also be harming your credit score.

To break your habit, leave your credit card at home and use cash or a debit card for your purchases.

“Take a certain amount of cash and say ‘I can spend no more than that,’” says Vicki Bogan, an associate professor at Cornell University in Ithaca, N.Y., who researches behavioral finance. “If you have a huge [spending] problem, try to limit yourself so that you only have access to a certain amount of money.”

If you really want to challenge yourself, you can try going on what’s called a spending freeze, where you stop spending any money on non-essentials for a period of time. On top of helping you save money, the freeze can help you notice how much money you may be wasting simply because you’re always pulling out your credit card. After your freeze ends, you may be less inclined to swipe your credit card.

Another rule that could help you break your swiping habit is the $20 rule. The financial rule of thumb is simple: Anytime your purchase is less than $20, pay in cash, not credit. The $20 rule forces you to think about whether or not a purchase is worth swiping your card for. Chances are, if what you’re buying costs less than $20, it’s not something you’d be OK paying interest on.

Bad money habit #3: Spending beyond your means

Solution: Budgeting

If you chronically spend beyond your means each pay period, you are likely digging yourself into debt. Get a handle on this habit by understanding how much money you have coming in and how much you can afford to spend on a monthly basis. You can use budgeting apps like Mint or YNAB to make that part easier. These tools can also help you identify the spending categories that are costing you more than you might realize.

Oak Brook, Ill.-based certified financial planner Elizabeth Buffardi tells MagnifyMoney that after examining one of her client’s expenses she found the client was spending a lot of money at drugstores picking up snacks and little things after work. So the client gave herself a budget of $10 per drugstore visit to save money.

“We’ve been seeing her spending at drugstores go down steadily over the last few months,” says Buffardi.

Buffardi had two other clients who struggled with overspending because they loved to shop online. They both created boundaries for themselves when it came time to pay for the items in their online shopping carts. One client decided to buy a certain amount of gift cards that she could use on a given site.

“If she spent all the gift cards in the first day, then she was done until the next paycheck. If she wanted something that was more expensive than the amount she had on the gift cards, she had to hold off on other purchases in order to purchase the more expensive item,” says Buffardi.

The other client simply removed her credit card number from her payment profiles so it would be more difficult to make thoughtless purchases. Her theory, Buffardi tells MagnifyMoney, was that if she was forced to stop and pull out her credit card before she could make the purchase, it might slow her down and give her time to think about the purchase she is about to make and — maybe — stop some purchases from happening.

Bad money habit #4: Always buying lunch from a restaurant

The solution: Plan your lunches a week in advance

If you’re losing $10-$15 a day to the local deli during the workweek, remember this: You don’t have to buy lunch if you bring it to work with you. However, organizing your day so that you actually have time to prepare and pack your lunch may be where you struggle.

Leave room in your busy schedule to pack your lunch in the mornings, or during the evening when you may have more time to yourself.

Melville, N.Y.- based certified financial planner David Frisch says he packs his lunches in the evening because he knows he runs late in the morning. He puts together everything but the dressings and sauces he plans to eat while making dinner, so lunch is already 90% done, then he adds the last 10 percent in the morning.

Frisch suggests setting a budget for how much you’d like to spend on food per pay period, then tracking how much money you typically spend on the convenience of frequently going out to lunch. Again, a budgeting app can be handy here to easily identify places where you spend the most.

Compare that amount to how much you spend on food for entertainment purposes, like going out to dinner with friends over the weekend and for your necessities, like eating lunch to fuel your workday.

“If you are spending so much money on convenience, you have that much less money to spend on everything else,” says Frisch. If you’re spending money from your food budget for convenience purposes, you may be more reluctant to go out on Saturday night for dinner.

If you’re already packing your lunch, but purchase a second lunch because you’re still hungry or you no longer want to eat what you packed, try packing a larger meal or having leftovers for a second lunch.

Bad money habit #5: Ordering out for dinner because you’re too tired to cook

The solution(s): Prep when you have time/energy; try meal delivery services

It’s easy to spend more than $50 getting dinner delivered three to four days out of the week, or buying groceries that go to waste because you’re too tired to cook. Oberlechner suggests doing some of the “work” of making dinner when you know you have more energy.

“If you’re too tired to cook in the evening, replace the spontaneous behavior by preparing dinner in the morning. So in the evening you don’t have the work of preparing anything,” he tells MagnifyMoney.

Another hack Oberlechner suggests is making a little extra dinner for the days you know will be especially long, when you won’t want to cook dinner. For example, if you know Tuesday is a really long day but Monday is not, cook a little extra on Monday and have those leftovers for dinner on Tuesday.

If cooking dinner simply isn’t a habit for you, you can try a meal kit service like Blue Apron, Plated, or HelloFresh to get interested in cooking, suggests Brooklyn, N.Y.- based certified financial planner Pamela Capalad. She tells MagnifyMoney she’s advised many of her clients to sign up for a meal kit service, then transition into grocery shopping and cooking at home regularly.

Generally, the services cost about $10 to $15 per serving and can serve up to four people.

Bad money habit #6: Letting your kids throw extra things in your shopping cart

The solution(s): Shop solo or lay ground rules early

Frisch says he and his wife solved this problem with their now 15-year-old triplets when they were four years old.

“Up until they were four we couldn’t bring them to a supermarket because it was impossible for my wife and I to watch three kids at the same time,” says Frisch. The easiest recommendation, he says, is to have somebody watch them at home while you go do the shopping. You may spend some money on a sitter, but you are also saving money without an eager child sneaking candy and toys into your shopping cart as well.

If an extra set of hands at home isn’t available, then try to set ground rules before you go to the store. For Frisch, that meant allowing the triplets to get one — just one — extra item at the store.

When a child wanted to add something “extra” to the cart, Frisch or his wife would say, “If you want this now, then you have to put the other one back.”

“Ultimately what happened was they kind of had to make a decision as to which one they would really get,” says Frisch.

The triplets quickly realized they could all benefit from working together.

“They actually started to communicate and say ‘if you get this and I get this, we can share,’” Frisch told MagnifyMoney. “They just figured out that if they all got one thing and shared, they ultimately all got more than they would have.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

TAGS: ,

Advertiser Disclosure

College Students and Recent Grads, News

Not-So-Free College: Oregon Changes Requirements for Free Tuition

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.

Some college-bound students in Oregon won’t receive money for college the state promised them for this upcoming school year. In 2016, Oregon became one of the first states to offer to cover students’ community college tuition, setting a $40 million budget for the Oregon Promise Program. However, state funding missed that mark by about $8 million this year.

The funding shortfall and a high turnout of applicants has forced Oregon state legislators to change the program’s eligibility requirements and disqualify students from the highest-earning households.

What’s changing

The Oregon legislature has given authority to the Higher Education Coordinating Commission (HECC) to establish cost controls for the Oregon Promise Program. HECC made a new rule that caps grant eligibility at students whose families are able to contribute $18,000 or more toward the student’s post-secondary education, according to the expected family contribution (EFC) calculation students receive after submitting the Free Application for Federal Student Aid (FAFSA) or Oregon Student Aid Application (ORSAA).

As a result, the state will only be able to award grants to about 80% of eligible new applicants for the fall 2017 semester. More than 15,000 students have applied for the grant for the upcoming 2017-18 school year, starting in September, HECC tells MagnifyMoney. So far, about 8,300 have been told they are eligible for Oregon Promise grants. However, notification of eligibility does not mean a student will receive an award — HECC won’t have an official number of recipients until students enroll in community colleges.

In its first year, the program awarded a total of $4.4 million to about 6,800 students, or 5.4% of fall 2016 community college students. Between November 2015 and March 2016, more than 19,000 people applied, and of that group, 10,459 met GPA, residency, and FAFSA requirements. Among them, 1,091 enrolled in public universities, therefore they didn’t receive a grant, and 6,745 enrolled in community college and received grants.

If you’re one of 6,745 students who enrolled in the program last year, you’re safe. Last year’s participants won’t be affected by the new income criteria and will continue to receive the grant, according to HECC.

The commission says the new limit could change again. Moving forward, the HECC will check the program’s funding annually and may adjust or eliminate the EFC limit, depending on how much funding is available.

What the Oregon Promise covers

The grant covers the gap between what a student receives in scholarships and grants, like the federal Pell grant, and what they need to cover tuition at Oregon community colleges. Legislators set a $1,000 annual award minimum, so even students who have tuition fully covered with federal grant money or scholarships still receive funds. Applicants must be a recent Oregon high school graduate or GED recipient, have high school cumulative GPA of 2.5 or higher, be an Oregon resident for at least a year before attending college, and not have attempted or completed more than 90 college credits.

Students left without the money they need for school may be forced to turn to other borrowing options like taking out a federal student loan or personal loan to attend school this year.

Other states with similar programs

Oregon isn’t the only state that offers free tuition to its community college students. The trend, started by the Obama Administration in 2015, gained even more popularity during the 2016 election season, prompting states like New York, Tennessee and Rhode Island and cities like San Francisco to test drive free college programs. Here’s a rundown of some of these programs:

New York

New York’s Excelsior Scholarship Program allows students to attend a State University of New York or City University of New York college tuition-free. Beginning in fall 2017, New York state residents from households earning $100,000 or less are eligible to receive up to $5,500 per school year for college.

Tennessee

In Tennessee, any state residents who have yet to earn their associate’s or bachelor’s degree can attend community or technical college for free. Starting in 2018, the Tennessee Promise Program will offer scholarships that cover the gap in of tuition and mandatory fees after what’s covered by a student’s Pell grant, the HOPE scholarship, or the Tennessee Student Assistance Award.

Rhode Island

Residents — regardless of income — can earn their associate degree for free at the Community College of Rhode Island beginning in fall 2017. The Rhode Island Promise program (seeing a trend here?) applies to 2017 high school graduates or those 19 years old or younger who received their GED in 2017.

Louisiana

Louisiana’s TOPS, or Taylor Opportunity Program for Students, is a collection of scholarships that pays tuition and some fees for Louisiana residents attending any of the state’s community colleges or public four-year colleges or universities, as long as the student graduated from high school with at least a 2.5 GPA.

San Francisco

San Francisco became the first U.S. city to offer a free college tuition program by introducing its Free City program in 2017. Beginning fall 2017, city residents who have lived in the state of California for a year or longer as of the first day of school are eligible to receive free tuition for the City College of San Francisco. Some lower-income residents are also eligible to receive stipends up to $250 per semester to help cover things like books and other college related expenses.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

TAGS: , ,

Advertiser Disclosure

Credit Cards, Reviews

FS Build Card Review: Build Credit With This Payday Loan Alternative

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

Credit cards for people with poor credit scores are few and far between, but FS Card is looking to change that with its first product, the Build Card, an unsecured credit card designed specifically for borrowers with subprime credit scores.

If you’re in need of a couple of hundred dollars and your credit score falls below 600, you’re not likely to get approved for an unsecured credit card. You’re considered a subprime borrower — a lending risk to banks, who worry they won’t get their money back.

But when banks refuse to lend to risky borrowers, those consumers turn to more expensive short-term borrowing options like payday loans, auto title loans, and pawn products. Annual interest rates on those products often exceed 300%, according to research from the Pew Charitable Trusts. Paying a high interest rate and a number of additional fees attached to those short-term products can trap consumers in a cycle of debt.

What is FS Card?

FS Card was founded by former Consumer Financial Protection Bureau Assistant Director of Card and Payment Markets Marla Blow in 2014 to fill what she says was a gap in the credit card industry. Blow says she began FS Card when she noticed — after the housing market crashed in 2008 — banks began “pulling back from subprime consumers in a very directed way,” because they were wary of tougher regulations on the financial industry. As a result, those consumers turned to more expensive products like payday loans, she says.

“I wanted to be able to put that consumer into a place where, rather than having to go out and get a payday loan, they could use a credit card,” Blow says. She designed the Build Card to offer subprime consumers access to something that “a lot of our economy assumes is already present” — a rotating line of credit.

Build Card overview

The Build Card is an unsecured credit card for borrowers with subprime FICO credit scores in the 550 to 600 range (on a scale of 300 to 850). The invite-only card charges a variable 29.9% APR. The rate is high for a credit card but about 10 times less expensive than some payday loans. However, it’s not a card you’d want to open unless you are seriously in need of the funds and are looking to build your credit score.

What we like about the Build Card

Payday loan alternative

Ideally, a payday loan is used to meet short-term borrowing needs — to hold you over until you receive your next paycheck. However, Pew research shows the average borrower uses them for five months at a time on average and has to pay an average $55 fee ($95 online) each time they extend the loan, which is what makes these loans so expensive. That’s $275 spent renewing a loan that’s on average $375. Furthermore, Pew research found seven in 10 borrowers use them for everyday expenses like groceries, rent, and utilities.

With access to a rotating line of credit, borrowers can extend the amount of time they have to repay borrowed money without having to pay renewal fees for a payday loan.

Unsecured credit card for subprime consumers

The Build Card is a rare unsecured credit card for those with poor credit scores. Most cards you can qualify for with a score lower than 600 are secured cards, which require a deposit to secure a credit line. For people who have a few hundred dollars on hand, a secured card is a great way to get access to credit, but many low-income Americans are not in a position to spend that kind of money.

Build your credit score

FS Card reports your activity to national credit bureau TransUnion so you can use the Build Card to improve your credit score if you maintain good credit management habits. Negative activity — like late payments and high credit card balances — will also be reported, so be sure to pay your balance on time and in full each month for best results.

Quick and easy approval process

Because you must be invited to apply for the Build Card, you are prequalified for approval. There is an excellent chance you will be approved for the Build Card, unless something on your credit report has drastically changed between the time FS Card mailed your invitation and when you apply.

No foreign transaction fees

The Build Card doesn’t charge you for using it overseas, so you don’t need to worry about racking up fees for swiping your credit card on vacation.

What we don’t like about the Build Card

Invite-only

As of this writing, the Build Card is invitation only and has more than 50,000 cardholders, Blow says. You’ll have to wait to receive a code in the mail before you can apply for the card online, which is unfortunate for anyone who is in need of short-term funds now.

FS Card selects borrowers using an algorithm to prequalify borrowers with subprime credit scores and sends invitations to potential customers monthly. The algorithm sifts through consumer credit reporting data to identify consumers who have recently done something that reflects better borrowing habits like paying off a payday loan or an account in collections.

Blow tells MagnifyMoney FS Card will offer an open application for Build Card in 2018.

Many fees

This card carries a lot of fees. If you’re trying to build your credit and have the funds to get a secured credit card that doesn’t charge an annual fee or has an interest-free period, you’re better off going that route, as it will be significantly less expensive.

  • Startup & membership fees: It costs Build Card customers $125 simply to open the account. FS Card charges the initial start-up fee ($53) and annual membership fee ($72) on your first statement. Although the card begins accruing interest immediately, Blow tells MagnifyMoney FS Card does not charge Build Card users interest on the start-up fees assessed to the credit card.After the first year, the annual membership is paid in $6 monthly installments, charged to the Build Card.
  • Authorized user fee: If you authorize another person to use your Build Card, you’ll be charged a $12 fee per authorized user.
  • Late/returned payment fee: Don’t miss a payment on this credit card, or you’ll be charged a whopping $35 fee.
  • Cash advance fee: Try your best not to take cash from this credit line — in addition to paying 29.9% interest, you’ll be charged the greater of $10 or 3% of the amount you take.

A $500 limit

If you need to borrow more than $500, you’re out of luck with this card. Everyone who opens a Build Card account starts off with a $500 limit. But remember, that limit is immediately reduced to $375 once you open the card and are charged $125 in fees. That also doesn’t leave you a lot of room to spend, considering it’s bad for your credit score to carry a balance close to your credit limit. Blow says the company may soon offer starting lines above and below $500.

Right now, FS Card checks every month to see if you’re managing the card wisely (read: making payments on time). If you are, you could qualify for a credit line increase to $750 in as soon as seven months. Blow says 59% of Build Card customers have gotten increases so far.

No 0% interest period

This card doesn’t come with an interest-free grace period. It will begin charging a 29.9% APR to your purchases immediately.

No balance transfer

The Build Card doesn’t come with a balance transfer offer, so you won’t be able to use the card as a debt consolidation tool. If you are in a large amount of credit card debt, you could try applying for a personal loan through online lenders like Lending Club or Prosper, which offer personal loans to people with credit scores below 600.

Who is the Build Card best for?

The Build Card is worth opening if you:

  • have a credit score between 550 and 600,
  • are ready to start rebuilding your credit score, and
  • want an alternative to payday loans in the event of an emergency but don’t have the cash on hand to open a secured credit card.

Beware: If your poor credit history resulted from poor spending habits like spending more than you could afford or making late payments, ask yourself if you’re ready to make a change. Opening this credit line won’t help your credit score any in the long run if you don’t.

How to apply for Build Card

You must be selected to apply for the Build Card. When you receive your invitation to apply, you’ll be given an offer code and application ID to enter into the application form on the Build Card website. Enter that information, your ZIP code, and the last four digits of your Social Security number to apply for approval. You should know if you’re approved or not within a few minutes.

Source: thebuildcard.com

Alternatives to the Build Card

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

TAGS: , , ,

Advertiser Disclosure

News

Why These 3 Families Chose to Live on a Single Income

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.

Before they decided to live off only one income, Devra Thomas, 39, and her husband, Clinton Wilkinson, 38, brought in a combined $50,000 annually working in corporate retail. When their daughter, Sophia, was born, they struggled to find ways to juggle their work schedules with child care.

“Since we were both working at the time, we really had to supplement with a lot of funky child care between parents, extended families, after school care, and babysitters,” says Devra.

Then Clinton got an opportunity for a raise and a job relocation. The family moved from outside of Chapel Hill, North Carolina, to Morehead City, where their cost of living was lower and Clinton’s work commute was shorter. Devra, who was an arts administrator at the time, initially looked for work when they moved, but when she wasn’t able to find a job in her field in the area, she and Wilkinson changed their plan. They decided Devra would stay home so they could eliminate one significant expense: child care.

For the couple, deciding to live off one income was worth it if it meant they could simplify their lives. Still, choosing to live on a single income didn’t come without its own set of challenges.

Devra and Clinton, along with two other single-earner families, told MagnifyMoney why they chose to budget their lives on a single income and how they make it work. For this article, we define single-earner families as those in which one family member generates 80% or more of the total household’s income used to cover household expenses.

Devra Thomas & Clinton Wilkinson

Morehead City, North Carolina

Annual Income: $70,000 to $80,000

Clinton Wilkinson, 38, Devra Thomas, 39, and daughter, Sophia, 9. Source: Devra Thomas

Their strategy: Zero-based budgeting and constant communication

Devra and Clinton swear by a zero-sum budget.

“Every time we get paid, all of that money has a name,” says Devra. The couple sits together every two weeks to discuss and create their budget and make sure every dollar earned is fulfilling a purpose. They put each dollar they’ve earned in a spending category such as groceries, transportation, subscription services, utilities and savings.

Devra does some light freelance marketing and writing projects on the side, which helps supplement their income to the tune of about $10,000 per year. Any income she brings in from freelance work becomes what they call “play money.” It either gets added to savings or spent on something they want but haven’t been able to fit into their budget, like a date night.

For example, they’ve already earmarked funds for their anniversary in August. Every part of their date night is planned for, with money going into categories for the dinner, babysitter, hotel, someone to watch their dog, and other expenses.

Where they run into obstacles

Thomas and Wilkinson like their single-income lifestyle, but as their daughter, 10, gets older, the pressure to keep up with the Joneses increases.

“There are other things kids in school have that she says I wish I had … or it may even be an experience like going to Disney World,” says Wilkinson. When that happens they explain to her that those things are “not where [they] are choosing to put [their] priorities.”

They also advise their daughter to try making use of her community. If she wants to play with a toy a friend has, for example, she can borrow it from them, or vice versa.

Overall, making all of their financial decisions together has been a crucial element in making their strategy work. “That’s typically when we break our budget. When we weren’t communicating about spending,” says Thomas.

Sage & Emerson Evans

Salt Lake City, Utah

Annual Income: $50,000

Sage, 25, and Emerson Evans, 24. Source: Sage Evans

Salt Lake City, Utah newlyweds Sage and Emerson Evans chose to live on one income while Emerson focuses on applying to medical school. They have learned to manage their lifestyle on Sage’s $50,000 salary in digital marketing and public relations. Their hope is that investing in Emerson’s education will pay off by way of a higher salary later.

Their strategy: deal-hunting and communication

Sage and Emerson, both in their mid-20s, don’t follow a strict budget but they try to add at least $500 to their savings account each month. The couple spends the bulk of their income on things like dinner, cultural events, movies, and travel. But they have no student loan debt and only one car payment to manage.

Emerson says he’s used to pinching pennies because he grew up being frugal. He was able to qualify for the Pell grant and other scholarships to help pay for college. Although he isn’t working full time, he takes odd jobs on the weekend to earn pocket money for minor expenses like gas for his car or lunch outside of home.

“I make it so that Sage never has to send money my way,” says Emerson. “I know I’m not the income and I know I’m not working full time. I try to make sure I’m not a financial burden.” For example, if he doesn’t have money for lunch, he’ll simply skip lunch that day.

“He almost takes it too far,” says Sage, “I had to force him to buy a new pair of shoes.”

Where they run into obstacles

For Sage, adjusting to married life on a single income was tough. “I definitely had to learn to think of money as our money and not just my income,” Sage says about the transition.

“Part of it was just a personal problem that I had to overcome. Realizing that when you get married, me becomes we,”  she adds.

The couple has learned to communicate about things such as what qualifies as a large purchase and whether or not Sage had to inform her husband of what she’s doing with what’s technically ‘her’ income.

Sage imagines their roles will flip once Emerson completes medical school and earns a higher wage than hers or if she elects to stay at home after having children.

“We get by, but it’s definitely not an income I want to spend the rest of my life on,” says Sage.

Matt and Brit Casady

Rancho Cucamonga, California

Income: $60,000 – $70,000

Matt, 28, and Brit Casady, 26, and 1-year-old son. Source: Matt Casady.

Matt, 28, and Brit Casady, 26, decided to live on one income to save on childcare, which doesn’t come cheap in their hometown of Rancho Cucamonga, California. They manage on Matt’s salary as an online marketer for a self storage company, where he makes between $60,000 and $70,000 a year.

“We were scared at first but we knew that we wanted to live on one income because we didn’t want to have to pay for child care,” says Brit, adding she’s always wanted to be a stay at home mom. “That money that I’d be earning from working would be paying just for daycare. So financially, one income makes more sense.”

Their strategy: thrifting and living two paydays ahead

The couple decided to transition to a single-income household when they were expecting their son, now 1. They started by reducing their monthly bills by paying off both of their car loans and cutting back on unnecessary expenses. The couple also got lucky: Within six months of having their son, Matt got a new job that paid a higher salary. But the new job also meant relocating the family from their hometown in Lehi, Utah to Rancho Cucamonga, a vastly more expensive area.

All of the furniture in their new house is either a hand-me-down or was purchased used. The Casadys bargain shop at discount retailers when they want nice, designer clothes.

“We’re very cheap people. We don’t feel like we live a restricted life,” says Matt. The couple also finds deals on things like furniture and decor for their baby’s room by joining yard sale or thrifting groups on Facebook.

They use a Google spreadsheet to keep track of the monthly family budget. When Matt’s paycheck comes in, the couple takes no less than 20 percent of his take-home pay and adds it to their savings. After paying for fixed expenses, they put the remainder of their funds to a spending category. When they spend money, they record the amount, place and description of the purchase in the spreadsheet and subtract it from the limit in the spending category.

“It’s more freeing than it is restrictive when you know that the money that you’re spending isn’t going to prevent you from paying rent next month,” Matt says.

Brit earns $2,000 to $3,000 annually freelancing as a graphic designer. She says about 90% of the time, the money she makes is added to the couple’s savings account. If Matt gets a bonus, or the couple receives an influx of funds in a tax return, it’s treated the same way.

Where they run into obstacles

Moving to a more expensive place has presented some challenges. Housing alone costs about 69% more in Rancho Cucamonga than in Lehi, Utah, according to Sperling’s Best Places cost of living calculator.

“It’s definitely been a sticker shock. Rent alone is significantly more money,” says Matt. The couple says they have adjusted to the rise by staying frugal.

“The activities that we do are mostly free, so we can create memories versus [buying] things that cost a lot of money,” says Brit.

The couple also tries to avoid keeping score on things like who has spent more money from the ‘fun’ category in their budgeting. For example, Matt, a fan of USC football, may buy a ticket to a game for $150 and Brit may get her hair done for $90, but she doesn’t try to find another way to spend $60 afterward.

“Just because he spent more doesn’t mean I can spend more,” Brit says. “It helps us to stay in our budget and not compare [who spent what] so we are not constantly trying to level up.”

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

TAGS: , , ,

Advertiser Disclosure

College Students and Recent Grads, Featured, News

How to Master the College Enrollment Process and Beat ‘Summer Melt’

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.

As many as 40 percent of college-bound students never make to campus their freshman year thanks to a phenomenon called “Summer Melt.” The term was coined by researcher Karen Arnold in 2009 to describe what happens when high school seniors get accepted into postsecondary institutions but still fail to enroll.

Students susceptible to summer melt, many of whom are often low-income and first generation college students, may get stuck on one or more of the steps required to complete enrollment. These steps can be as simple as filling out housing applications, taking placement tests and attending summer orientation — but the most common culprit behind summer melt is the financial aid process.

“A lot of the reason why students struggle over the summer is wrapped up in the process of accessing financial aid and following through with the financial aid that they are offered,” says researcher Lindsay Page , who co-authored the book, “Summer Melt: Supporting Low-Income Students Through the Transition to College”.

Making a mistake on the Free Application for Federal Student Aid, or FAFSA, or missing important financial aid deadlines could mean little or no scholarship or grant money for at-risk low-income students, who may not be able to attend attend school without the aid.

Here are a few steps students and their families can take to make sure they don’t fall prey to summer melt.

Reach out to school counselors and nonprofits for help

Dejah Morales, 19, could easily have fallen into the summer melt trap. As a first generation college student, the East Boston, Mass. teen told MagnifyMoney she wasn’t sure how to navigate the college matriculation process. But rather than giving up, she sought help from nonprofit organizations with experts on hand to guide her.

“I wanted to go find help because I knew all of the paperwork that is filled out needs to be done correctly because it affects how much [money] you get for financial aid and anything that has to do with you living on campus,” Morales said.

She started by contacting her high school college admissions counselor, who turned her on to a program offered by Bottom Line, a Boston, Mass.-based nonprofit that helps low-income and first-generation students get through the college application process and provides additional support when students are in school. Bottom Line made sure she correctly completed the application process in order to become a student. The nonprofit also has offices in Chicago, New York City, and Worcester, Mass.

For first generation college students like Dejah Morales, 19, (pictured above) getting accepted to college is only half the battle. Completing the enrollment process is the next hurdle. Photo courtesy of Dejah Morales.

When it came to sorting outout the nitty-gritty details of securing financial aid, Dejah turned again to her high school’s resources. All Boston-area high schools are staffed with a counselor from uAspire, a nonprofit that helps college-bound students get the information and resources they need to complete the college admissions and financial aid process.

“Submitting your actual [income verification] paperwork to the school was the hard part. And then having to get my parents tax information was always a struggle especially my dad since he wasn’t living with me,” says Morales. The uAspire counselor assisted her through the entire process.

Even if your school doesn’t have dedicated college counselors on staff, there are many free programs dedicated to helping students navigate the college financial aid process. Check out national non-profits like the College Goal Sunday Program hosted by the National College Action Network, or Reach4Succes. Also, students and families can contact their school counselor’s office for access to local resources.

Know your national AND state FAFSA deadlines — and submit your forms early

In order to get access to financial aid — that includes federal grants like the Pell grant and federal student loans — students and families absolutely MUST fill out the Free Application for Federal Student Aid (FAFSA).

That’s why it is so crucial to stay on top of deadlines to submit your FAFSA. If you miss the deadline, your options for financing school become incredibly limited.

Check out our guide on how to get through the FAFSA smoothly >

What’s more, federal grants and scholarships — ‘free’ money for school that you don’t have to pay back — are typically doled out on a first come, first serve basis. That means the later you wait to submit the FAFSA application, the less likely those funds will be available to you — even if you qualify for the aid.

There are two deadlines to keep in mind: the national FAFSA deadline and your state FAFSA deadlines.

State FAFSA Deadlines:

Your state may have set a different FAFSA submission deadline to qualify for state-specific aid. Check here to find your state’s deadline.

Get your parents on board early

Joe Orsolini, CFP and founder of College Aid Planners, says the majority of financial aid issues he sees occur just weeks before the fall semester begins are a result of parents not getting involved early on. Even small mistakes, like entering an incorrect social security number or miscalculating a parent’s income, could mean delays in receiving aid.

“The parents never really sat down with the kid and asked, ‘Hey. where is the rest of this money coming from?’” says Orsolini.

You’ll need to have important documents like your parent’s taxes and income from the past two years and your social security number on hand to complete the FAFSA form. Those can be difficult to get hold of when you don’t live with one or both your parents or if your parents don’t fully understand what they are being asked to provide.

Easy mistakes that can throw off your FAFSA submission

Incomplete e-signature. The FAFSA can also trip you up on seemingly-easy steps, like providing an e-signature. If you don’t provide the e-signature correctly, or think you hit ‘submit’ but didn’t, you may waste valuable time waiting for an email that won’t come until you sign the form properly.

Missing mistakes on your Student Aid Report. About two weeks after you submit the form, you should receive a Student Aid Report which gives you basic information about your eligibility for federal student aid along with your Expected Family Contribution – what your family is expected to pay. The SAR also includes a four-digit Data Release Number (DRN), which you’ll need to allow your school to change certain information on your FAFSA.The SAR also lists your responses to the questions on your FAFSA, so be sure to review it and correct any mistakes.

Income verification notifications. After you receive your SAR, check to see if you’ve been flagged for ‘income verification’ as about 1/3 of students are required to verify their parent’s income with additional proof to complete the FAFSA process. The government usually follows up on students who are more likely to qualify for the federal Pell grant or other grant-based aid, Page says. If flagged for income verification, you’ll have to submit verification to each school you apply to, and the schools may have different paperwork and processes.

Missing deadlines in e-mail. When you create and submit the FAFSA, you give the Education Department your email address. The Education Department will email you, so you need to check the inbox of the email address you provided for correspondence. Create your FAFSA account using an email account you check regularly. Turn on your email notifications on your devices so you won’t miss any emails reminding you to submit your FAFSA form or letting you know if something went wrong somewhere in the process.

Formally accept your financial aid awards

After submitting your FAFSA, you will receive a student aid award letter from your college. But your work isn’t done there. You’ll have to sign online to officially accept the aid (student loans, grants, work-study programs, etc). Typically, that will be facilitated through your college’s website.

If you applied for federal work-study, this is when you’ll decide if accepting it is best for your circumstances. Work with a financial aid counselor at the college if you need help weighing the pros and cons of accepting or denying any aid you’ve been offered.

Don’t forget to sign your Master Promissory Note. In order to receive federal student loans, you must sign a Master Promissory Note. The MPN is a legal document you must sign saying you promise to repay your loan(s) and any accrued interest and fees to the U.S. Department of Education. If you miss this final step, you won’t actually get any of the federal loans you’ve been assigned.

Log into your school’s student portal ASAP

Income freshman likely have access to a student portal provided by their college or university. There, you’ll likely find a checklist of important steps to complete before you can officially enroll.

The list may include important financial aid actions like accepting grants and scholarships or signing your Master Promissory Note.

Contact your school’s financial aid counselors early

If you’re not sure what your next steps should be in the financial aid process, you should reach out to the school you’re planning to attend. Call or send an email to the financial aid or admissions offices at your school if you are concerned about receiving the aid you need or get stuck completing all of the steps in the process.

In the future, your college may be the one reaching out to you first, as Georgia State University did with it’s Fall 2016 freshman class. The school experimented using a “chatbot” to send a control group of incoming freshmen alerts about the enrollment process.

The chatbot ‘nudged’ students to remind them of things they needed to do, like signing their MPN, or accepting scholarships, but it could also respond to students’ questions or help them get in contact with a human if asked or if it couldn’t answer the question.

“We saw our melt rate drop from 18% to 14%,” says Scott Burke, the school’s’ Associate Vice President and Director of Undergraduate Admissions. “That was 300 more students in our freshman class in fall 2016 than in fall 2015.”

Don’t forget your high school resources

Like Morales, high school seniors can still ask their high school counselors for help after they’ve graduated. Don’t hesitate to reach out with questions you may have about your transcripts or other parts of the financial aid process.

High school counselors, like Morales’ uAspire counselor, are usually equipped to answer many of the questions you may have about the financial aid process or with the FAFSA, but they may not be able to answer more college-specific questions. For example, your high school counselor could help you navigate your way through Loan Entrance Counseling, but may not be able to explain the process you need to go through to accept any awarded scholarships or grants from the university.

If a high school counselor can’t answer your questions, they generally direct you to the proper entity or person who can.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

TAGS: