Student Loan ReFi

Should You Refinance Your Student Loans with a Credit Card?

Editorial Disclaimer: 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.

Advertiser Disclosure

Using a balance transfer credit card can be a great way to lower the interest rates on your debt to help you save money and pay your debt off faster. Most people only think about doing a balance transfer with high-interest credit card debt, but recently I’ve been considering a 0% interest balance transfer credit card to help me pay off my student loan.

After making my final credit card payment to be credit card debt free, I started thinking about how I could use a balance transfer offer extended by my creditor to help pay off other types of debt I still have. Since the highest interest debt I have remaining is my student loan, this is what I’m considering refinancing with a 0% interest balance transfer. My student loan only has a remaining balance of about $6,000, which means I could transfer the entire balance to the credit card and pay it off before the promotional rate expires, if I pay it off aggressively.

Of course, there are lots of reasons why you could choose to refinance or consolidate your student loans. I was curious whether or not a balance transfer could be a viable option as well.

Here are some of the pros and cons you should consider before deciding to refinance your student loans with a balance transfer credit card.

Benefits of Refinancing Student Loans with a Balance Transfer Credit Card

There are several benefits you could take advantage of by refinancing your student loans with a balance transfer credit card.

A Lower Interest Rate

One of the main reasons people choose to refinance student loans is to lock in a lower interest rate. For example, my student loans are at 6.8%. If I do a balance transfer to a 0% interest credit card, I could save hundreds of dollars on interest through the end of the 0% interest rate period on the balance transfer.

But keep in mind that not all balance transfers are created equal. You might get all kinds of different balance transfer offers from companies trying to entice you to sign up for a new credit card, or even transfer a balance to a card you already have. Some of these transfer offers will be better than others. You might encounter offers that have a 1% to 3% interest rate for a certain period of time, usually 12, 18, or 24 months. But the best balance transfer offers have a 0% interest rate, obviously saving you more on interest than the others.

Pay Off Student Loans Faster

Transferring student loan debt to a credit card can save money, but only as long as you get the balance transfer paid off before the promotional interest rate expires. This time limit is a big motivation for people to pay extra on their student loans to make sure the balance transfer is paid off before it expires. If you struggle with being motivated to make extra payments, the reality that your interest rate may spike up to 15% or more after a few months may be just the motivation you need to get serious about paying off debt. It’s worked well for me in the past when I’ve transferred high-interest credit card debt to a 0% balance transfer credit card, helping me to pay off $5,284.18 much faster than I would have otherwise.

Drawbacks of Refinancing Student Loans with a Balance Transfer Credit Card

Although using a balance transfer to help pay off your student loans sounds like a great way to save money and pay your debt off faster, there are some potential downsides you should be aware of.

Balance Transfer Fees

A lower interest rate makes balance transfer credit cards an attractive option for those looking to refinance debt, but you need to consider more than just the interest rate before deciding to refinance your student loans with a balance transfer credit card. Make sure you consider the balance transfer fee that many credit cards charge. This can eat away at the amount of money you save on interest. Luckily, some credit cards do have a cap on this fee at $50 or $75, which can be helpful if you plan to transfer a large balance that would otherwise result in a fee higher than that cap. But at that point, it could be difficult to get your student loan transfer paid off before the promotional interest rate on the balance transfer expires.

There are balance transfers without fees, but your options may be limited. If you find a no-fee, 0% interest transfer option you qualify for, it’s almost a no-brainer to use it to pay off other debt.

Potential Loss of Savings on Interest

As mentioned, it’s imperative that you pay off your entire balance transfer before the promotional interest rate expires in 12, 18, or 24 months. If you don’t, the high interest rate after the transfer expires will quickly negate any interest savings you earned by doing the transfer in the first place. In fact, you may end up paying more in interest than if you’d skipped the balance transfer in the first place.

You May Not Qualify

In order to use a balance transfer credit card to refinance your student loans, you first have to qualify for one. In order to qualify for many balance transfer credit cards you must have a credit score of at least 680.

Applying Could Ding Your Credit Score

If you don’t already have a credit card with a balance transfer offer available, you may need to apply for a new card. Anytime you apply for a new line of credit, it will ding your credit score slightly. This may or may not be an important factor depending on what your score is and if you plan to apply for any other credit cards or loans in the near future.

Loss of Federal Student Borrower Protections

A final and very important consideration to think about before you decide to refinance your student loans with a balance transfer credit card is the loss of student loan protections you may have. If you are refinancing federal student loans, you will lose the protections that are offered to you as a borrower, such as:

  • Income-driven repayment plans
  • The opportunity for student loan forgiveness
  • Deferment or forbearance
  • Discharge upon permanent disability or death

Some credit card companies may be willing to work with you in an emergency situation, but chances are high that even in those situations the flexibility offered to federal student loan borrowers is far greater. In some cases, you may be better off not refinancing your student loans in order to maintain your borrower protections.

With most low or 0% interest balance transfer credit cards, you can’t miss a payment or pay late. If you do, your promotional interest rate may be void and you will be subject to the regular interest rate, which could be 15% or more depending on the card and your credit score.

Despite these drawbacks, doing a balance transfer to help pay off your student loans can be a good idea if your goal is to get out of debt quickly while saving money on interest.

Kayla Sloan
Kayla Sloan |

Kayla Sloan is a writer at MagnifyMoney. You can email Kayla at Kayla@magnifymoney.com

TAGS: , ,

Credit Cards, Reviews

Walmart Credit Card and Walmart MasterCard Review

Editorial Disclaimer: 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.

Advertiser Disclosure

Walmart Credit Card and Walmart MasterCard ReviewUpdated April 3, 2017

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

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

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

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

Promotional Offers and Rewards

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

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

Weak Sign-up Bonus

Weak Sign-up Bonus

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

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

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

3-2-1 Save Rewards Program

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

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

screen shot 2

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

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

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

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

The Fine Print

The Walmart Credit Card and Walmart MasterCard do not have an annual fee. However, the interest rate on the Walmart Credit Card is where it gets scary. The current APR is 23.15% based on the prime rate plus 19.65% and is subject to change as the prime rate fluctuates. The Walmart MasterCard interest rates range from 17.15% to 23.15%, depending on your creditworthiness.
screen shot 3

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

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

screen shot 4

Applying for the Walmart Credit Card

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

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

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

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

screen shot 5

Pros and Cons

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

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

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

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

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

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

Other Rewards Cards

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

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

Discover it – With the Discover it credit card, you can earn 5% cash back in rotating categories each quarter, on up to the quarterly maximum (which is $1,500 of purchases) each time you activate. For the second quarter of 2017 (April to June), the categories are home improvement stores and wholesale clubs. All other purchases get 1% cash back. Also, you can get a dollar-for-dollar match of all the cash back you’ve earned at the end of your first year (only for new cardmembers).

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

Who Will Benefit Most from the Walmart Credit Card?

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

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

Kayla Sloan
Kayla Sloan |

Kayla Sloan is a writer at MagnifyMoney. You can email Kayla at Kayla@magnifymoney.com

TAGS:

Credit Cards

How to Use Your New Contactless Payment Card

Editorial Disclaimer: 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.

Advertiser Disclosure

How to Use Your New Contactless Payment Card

If you’ve gotten a new debit or credit card lately, you might have received one that is able to be used as a contactless payment card. You’ll know you’ve gotten a new contactless card if there is a telltale contactless symbol somewhere on the card. It’s often mistaken for a WiFi signal symbol.

But before you use your new contactless payment card, there are a few things you need to know.

What Is a Contactless Payment Card?

“Tap and pay” technology isn’t new, having been around since about 2007, but it is becoming more popular worldwide with countries in Europe relying heavily on the technology more so than in the United States.

Similar to Apple Pay, Android Pay, and Samsung Pay, contactless payment cards are a faster way for customers to make small purchases, usually under $25 or $50, without the need for a PIN or signature. Contactless debit, credit, and prepaid cards can simply be tapped or waved on or near a payment terminal or register.

While most people might enjoy this new convenience, it can seem annoying to some. After all, you probably got a new “chip” debit or credit card after recent security breaches at major chain stores, such as the Target scandal, and now you’re being forced to learn another new system. If this seems like a hassle, keep in mind that these new security features are being introduced to help keep your money safe. As hackers learn new ways to steal your information, credit card companies are working hard to introduce new security features to thwart their attempts.

screen shot 2
This symbol indicates it is a contactless payment-enabled credit card.

Because the cards feature either a radio-frequency identification (RFID) signal or a near-field communication (NFC) signal to make a secure payment at close proximity, they are slightly different from the payment apps on your phone, like Apple Pay. These mobile payment apps use WiFi or cellular data and do not have to be physically close to a sales terminal to work.

Fraud and Security Concerns

According to Visa payWave questions and answers, you must wave your card within 1-2 inches of a terminal and be correctly oriented for transactions to go through, so there is no risk of contactless payment cards being accidently read from your purse or pocket.

This also cuts down on the risk of fraud from someone reading your financial information simply by passing an enabled card reader near you in a crowded street, which is a widely publicized fear internationally.

MasterCard’s website indicates that safeguards are in place to bill you only once for your purchase, even if you accidentally tap twice.

Contactless payments made by NFC are “just as secure” as payment made with chip-enabled cards, and probably more secure than payments made with stipe-enabled cards that must be swiped, according to both American Express and Visa payWave.

In fact, the risk of fraud is also reduced by using contactless payment cards because your payment device remains in your control during payment, rather than having to hand it to a store clerk to be swiped.

If you are a victim of fraud, your contactless transactions are covered by the same fraud protection as chip and PIN transactions.

Where Can You Get a Contactless Payment Card?Where Can You Get a Contactless Payment Card

Most major credit card companies, including Visa, MasterCard, and American Express, have contactless payment technology available; however, your financial institution may or may not yet offer contactless payment enabled cards. Contactless payment enabled cards do not have to be turned on or off, they are always on.

Where Can You Use Contactless Payment Cards?

Contactless payment cards can be used anywhere that has enabled terminals with the contactless symbol at checkout. This includes many popular restaurant chains, gas stations, big box stores, and more. But keep in mind that most locations have a small limit of $25 or $50 for contactless purchases. You won’t be able to make a large purchase with a contactless credit card anytime soon.

Contactless payment cards can still be used by inserting your chip or swiping if terminals are not enabled for contactless payments.

Who Can Benefit from Contactless Payment Cards?

Before you decide to get and use a contactless payment card, be certain you have a handle on your budget and finances. The ease of “tap and go” payments reduces the psychological pain you might feel if you were paying with cash or even having to sign or enter your PIN for a transaction. Merchants are counting on you using contactless payment cards to make transactions more quickly, without giving yourself time to think about your purchases.

If you are someone who’s constantly on the go, and you have your spending under control, you might benefit from contactless payment cards.

Kayla Sloan
Kayla Sloan |

Kayla Sloan is a writer at MagnifyMoney. You can email Kayla at Kayla@magnifymoney.com

TAGS:

Reviews

Review: American Express Personal Savings High Yield Savings Account

Editorial Disclaimer: 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.

Advertiser Disclosure

plants on piles of euro coins

There’s no question having a savings account is necessary to get your financial house in order. Savings accounts are great for storing your emergency fund, planning for upcoming purchases like travel or special events, and more. But it can be frustrating to earn little interest on your money while it’s sitting in a savings account at a physical bank, which is why many people have turned to online banks where interest rates on savings and checking accounts are typically higher.

Online banks are able to offer higher interest rates on savings and checking accounts because there are less overhead costs than for brick-and-mortar banks. One online savings account option to consider is an American Express Personal Savings High Yield Savings Account.

American Express Personal Savings High Yield Savings Account Overview

The American Express Personal Savings High Yield Savings Account currently offers 0.90% annual percentage yield (APY). However, this interest rate is subject to change without notice, which is pretty typical for most online banks. There is no minimum deposit required to open an account, but the funds must come from an external account under your same name held at a different bank. Your initial deposit must be sent within 60 days of being approved or your account will be automatically closed.

There are no monthly maintenance fees associated with this savings account, and you can link it to more than one financial institution or current bank account to make deposits and withdrawals.

Funds are FDIC insured up to $250,000, the same as money at a physical bank.

Making a Deposit into an American Express Personal Savings High Yield Savings Account

Once your account has been opened and initially funded, you will need to link any other external checking or savings accounts to your American Express Personal Savings account in order to transfer funds electronically. External accounts must belong to you and have the same ownership as your Personal Savings account. After you have entered your account information to link it, you will be sent test deposits of small amounts to verify your information is correct.

Funds transferred electronically are generally available within five business days.

In addition to electronic transfers, you can deposit physical checks by mail. If you write a check from another bank, make it payable to American Express Bank, write your Personal Savings account number on the memo line, and mail it to:

American Express Bank, FSB

P.O. Box 30384

Salt Lake City, UT 84130

If you send a check made payable to you, sign the back and under your signature write “for deposit only in account” followed by your Personal Savings account number. However, it is more secure to send a check made out to American Express Bank. American Express does not accept cash deposits by mail.

The maximum account balance you can have in an American Express Personal Savings account is $5 million.

Withdrawing Funds from an American Express Personal Savings High Yield Savings Account

A Personal Savings account with American Express is not meant to be used for everyday spending and other transactions, and thus does not come with an ATM card, debit card, or checks. The Federal Reserve Board’s Regulation D allows a maximum of six transfers or withdrawals per statement period for savings accounts and money market accounts within any bank.

That said, withdrawing funds electronically is just as easy as depositing them. You can make transfers to your linked external accounts within your account online. Transfers to external accounts can take one to three business days, if the account is already linked to your Personal Savings account.

Keep in mind internal transfers from one American Express Personal Savings High Yield Savings Account to another will count toward the limit of six withdrawals per month.

However, if you call and request an official check by mail, this will not count toward the limit.

Pros and Cons

Overall, there are more pros than cons with this account. No monthly fees and a higher interest rate on savings is a big pro versus keeping your money in a savings account at a brick-and-mortar bank. Also, there is no minimum required to open or maintain an account. Even with a $0 balance, American Express will not close your account unless it has been inactive for over 12 months.

However, one disadvantage to keeping your money in an online savings account is the waiting period it takes to access your money. It can take one to three business days to transfer your money to an external account. This can be an inconvenience if you are facing a financial emergency, which is why it’s a good idea to always keep a buffer in your checking or savings account in your physical bank.

Alternatives to the American Express Personal Savings High Yield Savings Account

If a higher interest rate on your savings is really what you are after, the Ally Bank Online Savings Account could be a better alternative as it currently offers 1.0% APY on balance of all sizes. However, Ally Bank does have some fees you’d have to watch out for, like an excessive transaction fee of $10 per transaction and a $20 fee for outgoing domestic money wires.

Barclays Online Savings Account also currently offers 1.0% APY, and their tools can help you set savings targets to reach your overall financial goals. You can use Remote Deposit to transfer money into your Barclays Online Savings Account from your computer or smartphone. Funds received electronically or by check will be on hold for five business days after they reach your account.

Another alternative to consider is opening up a certificate of deposit (CD) instead of a high-yield savings account. American Express currently offers CDs for 24 months at 1.0% APY or more for longer periods of time. The rate will be fixed when you complete your application, as long as you fund your CD within 30 days and do not withdraw interest before the maturity date. Early withdrawal of interest will hurt your future earnings, and early withdrawal of principle will result in a penalty. This is why CDs are good for investing money for short periods of time but may not be the best emergency fund option.

Who Will Benefit Most from an American Express Personal Savings High Yield Savings Account?

Anyone looking to earn money on their savings will benefit from an American Express Personal Savings High Yield Savings Account. Just remember you are limited to no more than six withdrawals or transfers per statement period, and it can take up to three business days to receive your money in an external account.

Kayla Sloan
Kayla Sloan |

Kayla Sloan is a writer at MagnifyMoney. You can email Kayla at Kayla@magnifymoney.com

TAGS: ,

College Students and Recent Grads, Featured

How Does Student Loan Deferment or Forbearance Affect Your Credit Score?

Editorial Disclaimer: 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.

Advertiser Disclosure

LendKey Student Loan Refinance Review

According to the latest annual report from the Institute for College Access and Success, 2015 college graduates showed a 4% increase in student loan debt over 2014 graduates. Among 2015 seniors, 68% who graduated had student loan debt, with the average balance being $30,100 per borrower.

With more college students graduating with student loan debt and balances continually increasing, it’s no wonder many are seeking deferment or forbearance. But if you are considering these options, there are some things you need to know first, including how it might affect your credit score.

What Is Deferment?

Student loan deferment is a period of time when the repayment of your loan’s principal and interest is temporarily delayed.

Unlike forbearance, when your student loan is in deferment, you do not need to make payments. And in some cases, the federal government may even pay the interest portion of your student loan payment. In order to qualify, you must have a federal Perkins Loan, a Direct Subsidized Loan, or a Subsidized Federal Stafford Loan.

Interest on your unsubsidized student loans or any PLUS loans will not be paid by the federal government. You will be responsible for interest accrued during deferment (if it’s not paid by the federal government), but you don’t have to make payments during the deferment period. If you’re not paying interest during deferment, it’s important to know interest may still be added to your principal balance. This may result in higher future payments.

There are several situations in which you may be eligible for student loan deferment:

  • If you are enrolled in college or career school at least half-time
  • If you are in an approved graduate fellowship program
  • During a period where you have qualified for Perkins Loan discharge or cancellation
  • During a period of unemployment
  • During a time of economic hardship (including Peace Corps)
  • During active military duty
  • During the 13 months following active military duty

Most deferments are not automatic, and you will need to submit a request for deferment to your student loan provider. If you are still in school at least part-time, you can apply through your school’s financial aid office.

What Is Forbearance?

If you are unable to make your student loan payments and don’t qualify for deferment, your loan officer may allow forbearance. When your student loans are in forbearance, you may be able to make smaller payments or skip payments altogether for up to 12 months.

However, before you apply for forbearance, keep in mind that interest will continue to accrue on all types of loans. This means your balance will grow, increasing the amount of time and money it will take to pay off your student loans. You can choose to pay the interest-only portion during forbearance. If you choose not to, the interest may be capitalized and added to the principal balance of your loan.

According to the Federal Student Aid office at the U.S. Department of Education, there are two types of forbearance, discretionary forbearance and mandatory forbearance.

Discretionary forbearance is when you, the borrower, request forbearance from your lender due to financial hardship reasons or illness. Ultimately, the lender decides whether or not to grant your discretionary forbearance request.

With mandatory forbearance, your lender is required to grant you forbearance on your student loans if you request it. However, you must meet the following criteria:

  • You are completing a medical or dental internship or residency program, and meet specific requirements.
  • The total you owe each month for all the student loans is 20% or more of your total monthly gross income.
  • You are serving in a national service position and received a national service award.
  • You are a teacher and qualify for teacher loan forgiveness.
  • You qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program.
  • You are a member of the National Guard and have been activated by a governor, but you are not eligible for a military deferment.
  • Similar to deferment, forbearance doesn’t happen automatically. You must apply for forbearance and may be required to show proof of these situations in order to be granted forbearance.

What Happens to Your Credit Score When Your Student Loans Are in Deferment or Forbearance?

As long as you continue making your student loan payments on time and in full until your request for deferment or forbearance is approved, your credit score should not be affected.

According to Rod Griffin, Director of Public Education at Experian, “When a student loan is in forbearance it is not in a repayment status. As a result, the late payments would not be reported. If it is reflected as current and not in repayment, it likely would not have a negative effect on credit scores.”

What Happens if You Default on Your Student Loans?

If you miss a payment between the time you apply for and are approved for deferment or forbearance, you will be considered to be in default on your student loans, and your credit score could be negatively impacted by this missed or late payment.

“Defaulting on a student loan is no different than defaulting on any other installment loan. Failing to pay as agreed will severely damage your credit history and, therefore, your credit scores,” Griffin said.

Being 60 days late or more on a student loan or credit card payment could damage your credit score as much as 100 points.

The Bottom Line

If you are unable to afford your student loan payments, deferment or forbearance may be options to consider. However, it’s important to remember that your student loans will continue to accrue interest, which could result in your paying more over the long run. Between the time of application and the time you are approved for deferment or forbearance, you must continue to make your student loan payments in full and on time in order to avoid potential damage to your credit score.

Kayla Sloan
Kayla Sloan |

Kayla Sloan is a writer at MagnifyMoney. You can email Kayla at Kayla@magnifymoney.com

TAGS: ,

Reviews

Buxfer Review: Trying to Help You Make Wiser Spending Decisions

Editorial Disclaimer: 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.

Advertiser Disclosure

Buxfer Review: Trying to Help You Make Wiser Spending Decisions

With all the money management apps and tools out there, it can be difficult to figure out which one might work best for you. Everyone’s situation is different, and every money management app and tool serves a different audience. That’s why we have put together a comprehensive review of Buxfer, one of the money management apps that’s gained a lot of traction.

What It Does

BuxferAccording to it’s website, Buxfer’s mission is to help people make better spending decisions. They want to provide a product that is flexible and adaptable to users’ needs, including providing actionable advice to help them plan for the future.

Like many money management tools out there, Buxfer allows you to sync data from your bank and credit card accounts. Over 10,000 financial institutions are supported. An offline feature allows you to sync without needing to store your banking username and password on the Buxfer server.

Buxfer also allows you to add manual transactions and upload bank statements and files from Quicken and Microsoft Excel.

Transactions are not automatically categorized in predetermined categories the way they are in many money management apps. Instead, Buxfer allows you to create your own tags, including attaching multiple tags to one transaction, or creating sub-tags within larger tags. After you have established these tags, you can specify automatic tagging “rules” to help new transactions be automatically tagged when accounts are synced.

When your account syncs or manual transactions are added, real-time advice and mobile alerts may be generated to help you avoid overspending, or to alert you if you’ve already gone over one of the budgets you created in Buxfer.

Buxfer can help you set weekly, monthly, or yearly spending limits and reminders for upcoming bills. And pro users can also project future expenses based on previous spending and earning patterns.

Another unique feature Buxfer offers is the ability to create IOUs to track bills and expenses between family and friends. This could be an especially helpful feature if you split bills with roommates or often split the check for meals at restaurants. It could also be used to track reimbursements for small businesses. Pro users have the ability to send money via PayPal to settle up with friends for IOUs.

How Much It Costs

A basic account on Buxfer is free and includes bank syncing for up to five accounts, unlimited transactions, shared bills and IOUs, five budgets, and five bill reminders.

The next step up is a Plus account for $3.99 per month when billed annually. This allows you to sync with unlimited accounts, an unlimited number of budgets, and unlimited bill reminders.

A Pro account is $4.99 per month when billed annually and includes advanced reports, forecasting, online payments for IOUs, and automatic backups of your information.

Pros and Cons

  • Pro: Categorization of expenses is very flexible, which is unique from many other apps and budget software options.
  • Con: Expenses are not automatically “tagged” unless users set rules.
  • Pro: The cost of a basic account to try the service is free. If you don’t need additional features, you won’t have to pay for the app.
  • Con: Upgraded accounts can cost nearly $60 per year.
  • Pro: IOUs offer the ability to split expenses with roommates, friends, or family.
  • Con: Many of the more useful features of Buxfer require a paid account.
  • Pro: Real-time alerts can help you avoid overspending your budgets.
  • Con: Many of the reports in Buxfer cannot be exported, and backing up data may be difficult if you don’t have a pro account with automatic backups.

How It Stacks Up Against Competitors

As mentioned, there are many money management apps and tools available today.

MintMint is one of the most popular apps for budgeting. It’s 100% free for users, and like Buxfer, it allows synchronization to bank accounts and credit cards. However, many users have reported problems with the syncing features over the past several months. Many of the helpful hints shown on Mint are actually ads. These ads may be promoting products and services that are not the right fit for you.

mvelopesMvelopes is another budgeting app that operates off the idea of the cash envelope system popularized by Dave Ramsey. Mvelopes allows users to create up to 25 different envelopes, which are similar to the “budgets” and “tags” in Buxfer.

Although users can have unlimited tags in Buxfer, they can only have five budgets with the free account. These budgets are how alerts are created to track spending and help you avoid overspending. Like Buxfer, the basic version of Mvelopes is free, but the premium version costs $95 per year. This is significantly more than the almost $60 per year for Buxfer’s Pro account.

Who Buxfer Is Best For

Buxfer works best if you split expenses with roommates, friends, or family on a regular basis and need a way to track these transactions. It could also work well if you only struggle with spending in a small number of categories since only five budgets with real-time alerts are available with the free account.

Buxfer’s forecasting is another great feature, but it’s only available if you have a Pro account. However, the cost of a Pro account is less expensive than some other money management apps available.

Kayla Sloan
Kayla Sloan |

Kayla Sloan is a writer at MagnifyMoney. You can email Kayla at Kayla@magnifymoney.com

TAGS:

Best of

5 Best Robo-Advisers to Help Manage Your Investments

Editorial Disclaimer: 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.

Advertiser Disclosure

5 Best Robo-Advisers to Help Manage Your Investments

These days, individual investors have a lot more tools at their disposal to help manage their money like pros, even if they don’t have a lot of knowledge and experience with investing. One tool that has become very popular for individual investors in the past couple of years is the robo-adviser.

Because so many new robo-advisers have popped up and gained traction in the past year or two, it may be difficult to decide which one is best. This review of five major robo-advisers may help you select which one to use to effortlessly manage your investments.

Vanguard

Vanguard Personal Advisor ServicesVanguard expanded their investment services by launching Vanguard Personal Advisor Services to help customers save money and make better investment decisions. Vanguard Personal Advisor Services can help you meet goals like investing for retirement, saving for a college education, buying a home, or just basic wealth building for the future.

According to John Woerth, public relations spokesperson at Vanguard, “Vanguard Personal Advisor Services is a hybrid that offers the best of both worlds — the user-friendly online experience and sophisticated investment modeling of a robo-advisor, coupled with the judgment and coaching of a professional advisor.”

Vanguard Personal Advisor Services appoints an adviser to serve as your financial coach. Based on your goals, this adviser helps craft a custom, investing plan that is meant for the long haul, regardless of how the markets change.

Vanguard doesn’t offer automatic tax-loss harvesting, but they can help minimize your tax burden through asset allocation. This means being more efficient with both taxable and tax-advantaged accounts. They can also help create a tax-friendly distribution plan for retirement.

Vanguard Personal Advisor Services requires an account minimum of $50,000.

Vanguard is known for their low-cost products, and this holds true for Personal Advisor Services, as well. The annual cost is 0.30% of the assets under Vanguard’s management. For example, if you have invested $250,000, the cost would be $750 per year.

Personal Capital

Personal CapitalMany people are familiar with Personal Capital’s robust money management dashboard, including free cash-flow monitoring, asset allocation and portfolio performance, fee analysis, investment checkup, and their retirement planner. However, you may not be familiar with Personal Capital’s wealth management services.

Although Personal Capital is sometimes lumped in with robo-advisers, they claim Personal Capital doesn’t exactly fit into this category.

According to their website, they are different because they “have a team of financial advisors based in San Francisco and Denver to work one-on-one with [their] clients.”

Last year, Personal Capital reduced their minimum asset requirement from $100,000 to $25,000, making it easier for more people to get started. Plus, their web interface is very friendly for users who enjoy managing their information online.

Your money is invested in exchange traded funds (ETFs) to leverage asset allocation, tax-loss harvesting, and rebalancing. You also have access to Personal Capital’s full suite of financial planning services and a licensed team to answer questions on college planning, estate planning, home purchases, 401(k) allocation, and more.

Personal Capital charges a flat 0.89% for the first million assets under management. After the first million, this fee is reduced by 0.10% per additional million dollars.

One nice feature of Personal Capital is the ability to see a complete overview of your finances right from their dashboard.

Betterment

BettermentBetterment Robo Adviser is another popular robo-adviser that uses software and algorithms to help manage your money based on your risk tolerance.

Betterment takes the guesswork out of asset allocation by investing your money into a fully diversified index-fund portfolio made up of 12 ETFs. They also offer fractional shares, broader diversification, and tax-loss harvesting — none of which are available when purchasing ETFs directly.

There is no minimum required deposit to open a Betterment account.

If you automatically deposit $100 per month and your balance is under $10,000, Betterment’s fee is 0.35% annually. Without an automatic deposit of $100, the fee is $3 per month.

Once your account reaches $10,000, automatic deposits are no longer required and the annual fee is 0.25% per year. If your balance is over $100,000, the fee is just 0.15% annually with no recurring deposit required.

Wealthfront

WealthfrontWealthfront and Betterment have a lot of common features, like the use of modern portfolio theory to determine your diversified portfolio of ETFs. Also similar to Betterment, Wealthfront offers automatic rebalancing and tax-loss harvesting (for taxable accounts).

Wealthfront offers several types of accounts, including taxable investment accounts, traditional IRAs, Roth IRAs, Simplified Employee Pension (SEP) IRAs, IRA transfers, and 401(k) rollovers.

Unlike Betterment, Wealthfront does have a minimum amount required to open an account. However, it is only $500, down from $5,000 when the service began. There is no annual fee for the first $10,000, but the fee increased to 0.25% annually above $10,000.

Wealthfront also offers tax-optimized direct indexing for accounts over $100,000. This means Wealthfront directly purchases over 1,001 securities from the S&P 500 and S&P 1500 indices and an ETF of smaller companies. This allows for further tax-loss harvesting and reducing annual fees.

Recently, Wealthfront also began offering a 529 College Savings Plan, which is also free for the first $10,000. Nevada residents get the first $25,000 for free. After these amounts are reached, the fees are 0.43%-0.46% per year.

Charles Schwab

charles-schwabCharles Schwab, the discount stock broker, now offers robo-adviser services in the form of their product Schwab Intelligent Portfolios.

The biggest advantage of using Schwab Intelligent Portfolios is their lineup of 54 ETFs, which is significantly more than Betterment and Wealthfront’s asset classes of 12 and 11, respectively.

Schwab has also attracted a lot of attention for having a low account minimum of only $5,000 and no account fees outside of the annual ETF fees.

Tobin McDaniel, president of Schwab Wealth Investment Advisory, said, “We think our service has a unique combination of features compared to similar types of products in the industry. We’re not charging any advisory fees, our portfolios are sophisticated with up to 20 asset classes using both cap-weighted and fundamentally weighted strategies, we have live investment professionals available 24 hours a day and 365 days a year, and our service is backed by the security and stability of a firm with $2.7 trillion in assets and 40 years of experience working on behalf of investors.”

After you sign up with Schwab, you are given a 12-step survey to help determine things like your goals for investing, a timeline for retirement withdrawals, and your risk tolerance. This will help determine the right mix for your investments. The selection services for ETFs with Schwab tends to be more complex, and most portfolios are made up of a larger number of funds than with other robo-investing companies.

One of the problems with using Schwab Intelligent Portfolios is their fee structure. The Department of Labor’s recent fiduciary ruling says fees have to be level regardless of what you invest them in. Critics have pointed out that since Schwab doesn’t earn the same commission on all products, they are violating the Department of Labor’s new rules.

To further complicate things, a significant portion of their ETFs are allocated in cash. Because Schwab is earning money from this cash, their no account fees claim isn’t exactly accurate or transparent. Again, this doesn’t meet the Department of Labor’s fee level fiduciary rules.

Which Robo-Adviser Is Right for You?

Even with all of this information, it can still be difficult to determine which robo-adviser is right for your investing needs. The decision depends on several factors, including how much you have to invest, how much the service costs, and which features are most important to you. Whether you choose a robo-adviser, a traditional financial planner, or a combination of the two, or choose to do it yourself, the most important thing is you are planning for your future.

Kayla Sloan
Kayla Sloan |

Kayla Sloan is a writer at MagnifyMoney. You can email Kayla at Kayla@magnifymoney.com

TAGS:

Best of, Eliminating Fees

4 Digital Banks That Treat You and Your Money Well

Editorial Disclaimer: 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.

Advertiser Disclosure

4 Digital Banks That Treat You and Your Money Well

If you are still banking with a physical bank, it may be time to go digital instead. Digital banks offer several benefits and features that physical banks can’t, or don’t, offer due to the cost of operating a physical location. Because online banks don’t have these overhead costs, they can offer more benefits to help customers save money on fees, and earn more money via interest too.

There are several online banks from which financially savvy customers can choose from these days. If you are looking to go digital with your banking, here are a few good options to consider.

Ally Bank

ally1_c794a82274fb5b321fa200860b050e1bAlly is a digital bank with a full range of services, including online savings accounts, money market accounts, CDs, IRAs, checking accounts, credit cards, and more. It has also been named the “Best Online Bank” 5 years in a row from 2011 to 2015 by Money Magazine.

Ally has become a popular place for people to store their savings in an online savings account due to the 1.00% APY currently available on all balance tiers. It also offers 0.85% on all money market balances. These accounts offer daily compounded interest, FDIC insurance deposits, and no monthly maintenance fees.

Checking accounts with Ally Bank allow customers to earn interest on their money, which is something that is not as common with physical banks. Daily balances of less than $15,000 earn 0.10% APY, and accounts with a daily balance over $15,000 earn 0.60% APY.

Customers of Ally Bank also enjoy the ability to use any of the 43,000+ Allpoint ATMs in the U.S. for free. Plus, Ally Bank reimburses up to $10 per statement cycle for fees incurred at other ATMS. It also offers exceptional customer service with 24/7 live customer care.

Charles Schwab

charles-schwabCharles Schwab is another bank that started offering more digital products for its customers, including checking and savings, lending, and investing.

The High Yield Investor Checking account is a popular choice for many customers as Schwab offers this account with no ATM fees worldwide and unlimited ATM reimbursement for fees incurred each billing cycle. It also offers no account minimums or monthly services fees, and easy banking 24/7 with Schwab Mobile. The Schwab Bank High Yield Investor Checking account is linked to your existing Schwab One brokerage account so you can manage both accounts with one login.

The interest rate on the Schwab Bank High Yield Investor Checking account is 0.06% APY no matter your balance, but you do have to open a Schwab One brokerage account in order to use a Schwab Bank High Yield Investor Checking account. There are no fees or minimum balance for the Schwab One brokerage account, and you can transfer funds between the two accounts for free.

Schwab also offers a High Yield Investor Savings account with no minimum balance or monthly service charge. The interest rate is 0.10% APY on all balances. It also qualifies for the unlimited ATM fee rebates.

USAA

usaa1 (1)USAA offers checking accounts, savings accounts, credit cards, and many different loan products for cars, homes, and more. According to its website, they have been rated 4.5 out of 5 stars by over 16,000 members.

USAA offers free checking with a minimum opening balance of $25. After you open a free checking account, there is no minimum balance, no monthly service fee, overdraft protection, fee bill pay, and free ATMs nationwide. USAA reimburses up to $15 in ATM fees per month.

Like most digital banks, USAA offers interest on its checking accounts, although it is lower than many competitors at only 0.01% APY. Its savings accounts offer rates of 0.05% APY to 0.15% APY depending on the balance of your account.

There is a catch: you need military affiliation to be able to open an account. This can include a connection through a family member, such as a parent or spouse.

Capital One 360

capital-one-360Capital One 360 offers “no fees, no kidding” checking and savings accounts with no fees and no minimums. While it doesn’t offer ATM fee reimbursement, Capital One does offer a unique feature compared to many other digital banks: the ability to deposit cash into your checking or savings account with select Capital One ATMs in a 360 Café or Capital One Bank location.

The interest rates on a 360 Checking account range from 0.20% APY to 0.90% APY, depending on your balance.

  • $0 – $49,999.99: 0.20% APY
  • $50,000 – $99,999.99: 0.75% APY
  • $100,000 or more: 0.90% APY

The interest rate on a 360 Savings account is 0.75% APY.

If you’re a Capital One credit card customer, you can also conveniently access both your credit card information and Capital One 360 banking information with a single sign-on.

Another unique feature of Capital One 360 is the ability to create multiple savings account with any nickname you choose. You can also use their “My Saving Goals” section to make automatic savings deposits and set goals for your various savings accounts.

Which Digital Bank Is Right for You?

As digital banks become more popular, it can be difficult to determine which one might be the best fit for you. Of course, it depends on several factors, such as the features and services you most value, how you plan to use your account, and more. No matter which digital bank you choose, the important thing is that you are making the right decision for you and your money.

Kayla Sloan
Kayla Sloan |

Kayla Sloan is a writer at MagnifyMoney. You can email Kayla at Kayla@magnifymoney.com

TAGS:

Reviews

BankAmericard Travel Review: No Cap on Miles Earned

Editorial Disclaimer: 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.

Advertiser Disclosure

 

BankAmericard Travel Review: No Cap on Miles Earned

With so many travel rewards credit cards to choose from, it can be difficult to make a good decision about which credit card is best for you. One card you might consider is the BankAmericard Travel Rewards Credit Card.

But before you sign up for this card, or any credit card, you should know all the fine print.

In this BankAmericard Travel Rewards Credit Card review, we’ll cover:

  • Card details
  • Interest rates and fees
  • Rewards details
  • Getting the most from rewards programs
  • Safety and security

Card Details for the BankAmericard Travel Rewards Credit Card

According to the Bank of America website, you are not limited to the number of points you can earn with this credit card. You’ll earn 1.5 points for every $1 you spend on anything, anywhere, and points never expire. You can also earn 20,000 bonus points if you make at least $1,000 in purchases in the first 90 days of your account opening. This reward can be redeemed for a $200 statement credit toward travel purchases.

Bank of America customers are also eligible for a 10% customer points bonus on every purchase with an active Bank of America checking or savings account. Bank of America also has a Preferred Rewards program, which helps customers increase that bonus up to 25% or more. The Preferred Rewards program benefits are based on the three tiers of the program. Your tier is based on your qualifying combined balances in your Bank of America bank accounts and your Merrill Edge and Merrill Lynch investment accounts.

  • Gold Tier: $20,000 – $49,999
  • Platinum Tier: $50,000 – $99,999
  • Platinum Honors Tier: $100,000+ 

bankamericard-travel

Interest Rates and Fees

Another major benefit of the BankAmericard Travel Rewards Credit Card is that there is no annual fee or foreign transaction fees. Plus, BankAmericard also offers an introductory 0% interest rate on purchases for new cardholders for their first 12 billing cycles, after which the interest rate will be determined based on creditworthiness. Balance transfers are subject to a 3% fee on each transaction with a minimum fee of $10. Balance transfers are not eligible for the introductory 0% interest rate.

Rewards Details

In addition to earning 1.5 points for every $1 spent, you can also earn 3 point per $1 spent through the Bank of America Travel Center, with no spending limit or limit on points earned. BankAmericard Travel Rewards Credit Card points do not expire and are not subject to blackout dates or restrictions.

Points can be redeemed for a travel credit or cash reward (statement credit) starting at 2,500 points. A travel credit is applied as a statement credit to your account to offset travel purchases from qualifying merchants for:

  • Airlines
  • Hotels or motels
  • Car rentals
  • Cruise lines
  • Travel agencies
  • Other transportation costs (taxis, buses, etc.)
  • Tourist attractions and exhibits

The fine print states that some costs are not eligible for a travel credit, like tolls, parking garage fees, in-flight purchases, and rentals of vehicles for the purpose of hauling. Travel purchases are eligible for a travel credit for 12 months from the posting date. For travel credit, 2,500 points = $25.

Points can also be redeemed for cash rewards or gift cards starting at 3,125 points. If you’re interested in cash redemption, this can come in the form of a check or an electronic deposit into either your Bank of America checking or savings account or as a contribution toward your Merrill Lynch investment account. Should you chose to redeem your points for cash rewards or gift cards, 2,500 points = $15.

Safety and Security

The BankAmericard Travel Rewards Credit Card offers several safety and security benefits that are pretty standard among major credit card companies, including:

$0 Liability Guarantee: Potential fraud and abnormal patterns are blocked until you confirm the purchase. There is a $0 Liability Guarantee for fraudulent transactions. 

Chip Cards: New chip technology is offered for enhanced security at chip-enabled terminals.

Overdraft Protection: Bank of America customers are eligible for Overdraft Protection to prevent declined purchases when you link your Bank of America checking account to your credit card.

Digital Wallet Technology: Your BankAmericard can be added to your mobile device using Apple Pay, Android Pay, or Samsung Pay.

Online and Mobile Banking: Access your credit card statement and information from almost anywhere with online and mobile banking. 

Account Alerts: You can enroll in several different types of account alerts to help you monitor activity, including when payments are due and when payment is received. 

Text Banking: After enrolling in text banking, you can send a text and get a reply in seconds with all the information you need regarding your BankAmericard Travel Rewards Credit Card.

How to Get the Most Value from Travel Rewards Programs

Although the BankAmericard Travel Rewards Credit Card offers a fairly generous program for earning rewards, there are some ways to get even more value from travel rewards programs.

The Venture Rewards Credit Card from Capital One is another travel rewards credit card that doesn’t cap miles earned. Like the BankAmericard Travel Rewards Credit Card, you’ll be reimbursed for travel expenses on your statement. Every 10,000 miles is worth $100, and you earn 2 miles per $1 spent instead of 1.5 points per $1 with BankAmericard. But there is a $59 annual fee for this credit card that is waived for the first year.

Serious travel enthusiasts love the Chase Sapphire Preferred credit card because points are transferred into real airline miles and hotel points with several travel partners. Every 10,000 points is worth $125 in flights, hotels, or rental cars when booked through the Chase website. Plus, you get double points on all dining and travel purchases you make on this card. There is an annual fee of $95, which is waived for the first year.

Who Will Benefit Most from the BankAmericard Travel Rewards Credit Card?

Serious savers who are already customers with Bank of America and Merrill Lynch or Merrill Edge will benefit the most from having this credit card. The 1.5 points per $1 spent is pretty basic, but if you are a Bank of America customer, you can increase your rewards significantly, earning 2.25-2.6 points per $1 with no limits. Plus, with a bonus of 20,000 points for new customers and no annual fee, this is an attractive option for earning travel rewards.

Kayla Sloan
Kayla Sloan |

Kayla Sloan is a writer at MagnifyMoney. You can email Kayla at Kayla@magnifymoney.com

TAGS: ,

Earning Cashback, Reviews

Discover it Review: What’s the Catch of 5% Cash Back?

Editorial Disclaimer: 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.

Advertiser Disclosure

Discover it Review: What's the catch of 5% cash back?

Updated April 3, 2017

Are you searching for a no annual fee card that has the potential for 5% cash back rewards? Then Discover it® Cashback March may be a good fit for you, but keep in mind that the categories may not always sync up with your routine purchases.

The Discover it credit card actually comes with several perks, including an introductory 0% interest rate for 14 months on new purchases and balance transfers, no annual fee, and a cash back program. It also has a generous introductory offer that matches the cash back you earn at the end of your first year that makes it a great choice upfront. The match is only available to new cardmembers.

But what about after the promo ends? We’ll run down how the card works.

5% Cashback Bonus

The Realities of 5% Cash Back

5% cash back does not mean on everything. Discover, similar to programs like Chase Freedom, offers 5% cash back on select categories that rotate every quarter. You will earn 5% cash back on up to the quarterly maximum, which is $1,500 of spend. To get the 5%, you have to activate every quarter. All other purchases get 1% cash back. Rotating categories can include things like gas stations, restaurants, Amazon.com, wholesale clubs and more.

From April until June 2017, the bonus categories are home improvement stores and wholesale clubs.

With a cap on the 5% cash back of the first $1,500 of purchases in a relevant category, you can earn a maximum of $75 per quarter in cash back rewards and $300 per year.

LearnMore

How do I sign up?

Discover it cardholders do have to “opt in” to the 5% cash back categories each quarter. You can have Discover send you email reminders with the ability to opt in via email or you can opt in after logging into your account.

Do points expire?

Cash back rewards can be redeemed with no minimum threshold and can be redeemed as a statement credit, a credit on Amazon.com orders, a deposit into your bank account, and more. Cash back rewards never expire as long as your account is in good standing. Discover can close your account if has been inactive.

Bonus offer for new customers

Additionally, the Discover it card will match all the cash back you earn dollar for dollar at the end of your first year. The double cash back will be applied to your account balance after the end of the 12th billing cycle.

Cashing Out and Perks

Discover provides the option to use your cash back as either a statement credit or a direct deposit into your bank account.

You can also leverage up by purchasing a gift card or eCertificate through the redemption portal.

Through a partnership with Amazon, you can use your Discover it cash back to pay for Amazon purchases while checking out. Other CashBack Bonus partners include iTunes and Overstock.com.

Discover it also offers access to your FICO credit score for free on each monthly statement.

Some Extra Perks

In addition to the cash back, Discover has been investing in a number of perks that you might find useful. Discover introduced a feature that enables you to freeze your account in seconds.

If you lose your card, Discover offers free overnight shipping to any address in the US. They also promise that paying late won’t raise your APR.

And if you need to speak with someone from customers service, Discover has 100% US-based customer service representatives.

Fees & Gotchas

There is no annual fee for the Discover it card. The balance transfer fee is 3% of the amount of each transfer. There is no late fee the first time you pay late. After that, late payments are up to $37. Discover does not charge foreign currency transaction fees.

Discover it Review

LearnMore

How it Stacks Up

The Citi Double Cash credit card might be a better option if you don’t want to opt into bonus categories every quarter. The Citi Double Cash credit card offers up to 2% cash back with no cap on the amount you earn as long as you pay on time, which makes it a good all-around card as you won’t have to track and time your spending to take advantage of extra cash back in bonus categories like the rotating 5% bonus cash back categories offered by Discover it.

Apply Now

The Capital One Quicksilver card also offers a cash back program, however you can only earn 1.5% with this card. One difference is that the Capital One Quicksilver card offers a sign-on bonus of $100, which is something you don’t get from either the Discover it card or the Citi Double Cash card. That $100 sign-on bonus can easily be made up over the long run by the 2% cash back offer of the Citi Double Cash card or the 5% bonus cash back categories offered by the Discover it card.

Apply Now

The Bottom Line

If you spend a lot of money in the 5% bonus categories, this will be a great card. Just make sure you opt in every quarter.

Kayla Sloan
Kayla Sloan |

Kayla Sloan is a writer at MagnifyMoney. You can email Kayla at Kayla@magnifymoney.com

TAGS: ,