Credit Cards, News

Deeper Into Credit Card Debt With No Regrets This Holiday Season

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Deeper Into Credit Card Debt With No Regrets This Holiday Season

This holiday season, spending increased 7.9 percent from a year ago (according to the MasterCard Spending Pulse report). People spent more money on gifts, making many retailers happy and helping the overall economy.

Although the increased spending will be applauded by retailers, many American households are left with a precarious post-holiday financial situation. The euphoria of giving gifts will undoubtedly be replaced by a predictable debt hangover in January. MagnifyMoney conducted a national survey, and found that:

  • American consumers spent without a plan. 50.7% of people set no holiday budget at all. A further 15.1% of people set a budget, but ignored it and spent more than planned. That means 65.8% of people had no control over their holiday spending.
  • After spending money on holiday gifts, a majority of Americans are “broke.” 56.3% of people surveyed have less than $1,000 combined in their checking and savings account.
  • Credit cards will be used to fund a big portion of holiday purchases. 38.3% of the people surveyed will not be able to pay off their credit card in full this month. High interest rate credit cards were used to fund holiday debt.
  • Despite the debt, there was “no regret.” Despite borrowing money at high interest rates to fund holiday purchases, 85.7% of Americans have no regrets about their holiday spending.

During the 2015 holiday season, American consumers have demonstrated their willingness, and apparent happiness, to spend money they don’t have on gifts they can’t afford.

But in just a few days, people will start making New Year’s Resolutions. And if 2016 is like any other year, two themes will dominate the resolutions made across the country. People will promise to become physically fit and financially fit in the New Year.

One of the top resolutions made in January 2015, according to Nielsen, was to “spend less and save more.” This is a recurring theme, and we can expect similar resolutions in 2016, as the credit card statements start to arrive and the debt hangover begins.

However, Nick Clements, Co-Founder of MagnifyMoney, has two messages for people who have found themselves deeper in debt after the holidays:

First, we need to learn valuable lessons from our grandparents and great-grandparents about how to manage money. Before credit cards ever existed, people would only spend money if they had it. Most of our grandparents would have never even considered borrowing money to buy people gifts during the holidays. If we don’t develop that same type of mentality, any New Year’s Resolution will fail. I don’t want to sound like a belated Grinch, but borrowing money to buy gifts should have left more people feeling regret.   

Second, people need to be wise about how they try to fulfill their New Year’s Resolution to become financially fit. Skipping a few lattes isn’t going to do the trick. I recommend taking a day off, and spending as much time and effort building a financial plan for 2016 as you did organizing your presents and your holiday parties in 2015. 

Survey Results in More Detail

There was no spending plan or budget in place

  • 50.7% set no budget. Instead, they “just spent.”
  • 34.2% set a budget and followed the budget.
  • 15.1% set a budget, but ignored the budget and spent more.

A majority of Americans are “broke”

  • 24.8% have less than $100 in their accounts.
  • 23.8% have between $101 and $500 in their accounts.
  • 7.7% have between $501 and $1,000 in their accounts.
  • 16.4% have between $1,001 and $5,000 in their accounts.
  • 27.3% have more than $5,000 in their accounts.

Most financial planners recommend having an emergency fund with at least $1,000. Ideally, the fund should cover three to six months of living expenses. 56.3% do not have even the minimum of $1,000.

A significant minority will be paying off their credit cards for a long time

  • 61.7% of people will be able to pay their balance in full.
  • 27% will take some time, but pay more than the minimum due.
  • 11.3% can only afford to pay the minimum due.

For the 11.3% paying the minimum due, they can expect to stay in debt for more than 25 years and will end up paying more interest than the original amount borrowed.

Despite the spending, we felt no regrets.

  • 85.7% do not regret the amount of money they spent.
  • 14.3% do regret the amount they spent.
  • Of those with no regrets, 13.3% felt they could have spent more.

Tips for A Successful New Year’s Resolution

When the credit card bills start to arrive in January, many people will start to feel the annual debt hangover. As an antidote, people will start making resolutions to spend less, save more and get their finances in order.

MagnifyMoney believes that people should spend as much time in January building a financial plan for 2016 as they did shopping in December for the holidays.

For people in credit card debt, MagnifyMoney has a free 45 page Debt Guide available for download. This guide helps people prepare a customized action plan to lower interest rates, build a budget, negotiate hard with creditors and become debt-free.

In addition, MagnifyMoney recommends that all people spend time in January 2016 doing the following:

  1. Understand where your money actually went. When people create forward-looking budgets, those budgets almost always balance. Yet, when people look back in time, they have usually spent more than they planned. The best way to diagnose your spending problem is to understand where the money has actually gone. And there are great apps, like LevelMoney or Mint, which can help you understand where your money has gone. We particularly like LevelMoney, because it splits your expenditure into fixed, recurring expenses and variable expenses.
  2. Review your credit report from all three reporting agencies. You need to know what is on your credit report in order to build a good credit score. You can download your report for free at AnnualCreditReport.com.
  3. Understand your credit score and put together a plan to improve your score during 2016. People with the best scores never charge more than 10% of their available credit and pay their bills on time every month. Not only is that good for your score, but it is good for your wallet. And you can now get your official FICO for free in a number of places. Otherwise, you can get your VantageScore at sites like CreditKarma.
  4. If you have a good credit score, all debt can probably be refinanced. Mortgages, student loans, auto loans and credit cards (with a balance transfer or personal loan) can all be refinanced. Although the Federal Reserve increased interest rates in December, the rates are still very low. Find ways to lock in much lower interest rates now to help you pay off your debt faster.
  5. There are two big warnings with refinancing. First, try to avoid extending the term to get a lower payment. The biggest trap people fall into with refinancing is that they lower their rate and extend their term. By doing this, you might end up paying more money in the long run. Second, be careful before you refinance federal student loans, because you give up valuable protection.
  6. Automate all of your decisions, including savings and making credit card payments. Data has consistently shown that automating decisions greatly increases the likelihood of achieving your goals. To build that emergency fund, set up automatic transfers from your checking to your savings account. (Even better, get a higher interest rate online account and keep it completely separate from your checking account). To build your retirement savings, automate your 401(k) or IRA contributions. And to pay your credit card bill, automate your monthly payments.
  7. “Net worth” is not just a concept for the rich, and you need to focus on your net worth now. Net worth is a simple concept: it is what you own minus what you owe. Building wealth and being financially responsible means you are building your net worth. It doesn’t mean you make your payments on time and have a fancy car. Focus on the right number: building your net worth.

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Survey Methodology

The survey was conducted by Google Consumer Surveys for MagnifyMoney between December 24 – 26, 2015. 532 people responded to the questions in a nationwide, online survey. All respondents were 18 or older.

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Consumer Watchdog, Featured, News

Overdraft ‘Protection’ is a Lie

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Young woman taking money from ATM

You wake up the day before payday to alerts from your mobile banking app saying your account has been overdrafted. How could this be? After all, you had $50 in your account last time you checked. So you start backtracking.

Dinner was only $45, right? You should have $5 to spare. Then you check your account and realize your $30 gym membership conveniently posted to your account this morning. Rather than declining the charge due to insufficient funds, your bank allowed the transaction to post — and charged you $35 for the favor.

This is an example of how banks have turned so-called overdraft protection and insufficient fund fees into a multi-billion-dollar cash cow.

According to a new analysis by Pew Research Center, more than 40% of 50 banks studied order transactions in a way that maximizes overdraft fees. The practice is called “high to low processing,” in which the bank posts transactions from largest to smallest rather than posting them chronologically. This can make customers more susceptible to incurring multiple overdraft fees on the same day.

The fees have effectively allowed banks to profit off of some of their most financially vulnerable consumers: those who keep low account balances and are thus at higher risk of overdrafting. Only 18% of checking account holders are responsible for 91% of overdraft and insufficient funds fee (NSF) fees according to research from the Consumer Financial Protection Bureau.

Pew’s analysis found most heavy overdrafters — those who pay $100 or more in overdraft and NSF fees annually — earn less than $50,000 per year. One-quarter of these account holders pay up to a week’s worth of wages in overdraft fees each year.

In 2015, 628 banks with more than $1 billion in assets reported a total of $11.16 billion — about 8% of total net income — of revenue from consumer overdraft and NSF fees according to the Consumer Financial Protection Bureau. That’s more than two-thirds of all consumer deposit account fee revenues.

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Overdraft Protection: The Ultimate Catch-22

When you are enrolled in overdraft protection, you give the bank authority to approve charges when you don’t have enough to cover the full amount in your account. The bank will approve the transaction, then charge you a predetermined flat rate fee — typically around $32 — for allowing your purchase to go through.

That’s why overdraft protection is something of a catch-22. On the one hand, it saves you from the embarrassment of a declined card at point of sale. On the other, it is one of the most expensive ways to borrow money for what are typically small purchases.

Let’s go back to the payday example from before.

If you had not realized right away you overdrafted your account, you might have thought you still had $5 in the bank, just enough for a cup of coffee. Your debit card would have been approved for the $3 coffee thanks to overdraft protection — and you would have been hit with yet another $35 overdraft fee, twice in the same day. Effectively, you just borrowed $3 for a fee of $35 — an annual percentage rate of over 1,000%.

Here’s how the math works out (in this example, we assume the person banks with Bank of America, which carries an overdraft fee of $35):

Original balance: $50

Dinner: $50 – $45 = $5

Gym fee: $5 – $30 = -$25

Overdraft fee for gym membership: -$25 – $35 = -$60

Coffee: $-60 – $3 = -$63

Overdraft fee for coffee: $-63 – $35 = -$98

At the end of the day, you would be left with a negative balance of -$98.

Some institutions limit the number of times you can be hit with overdraft fees in a single day. Bank of America, for example, limits overdraft fees to four times a day. Some banks will allow you to link your checking account with another account to pull funds from when you overdraft, but will then charge you for an overdraft protection transfer fee, which is typically lower than a full overdraft fee. Even if your bank doesn’t approve the overdraft and your purchase is declined, you could still get charged an insufficient funds fee, which will usually be equal to the overdraft fee.

Overdraft fees can quickly spiral out of control if the person cannot afford to pay back the bank and bring their balance back in the black. If you maintain a negative account balance for about five days, you are charged on average $20 for what’s called an extended overdraft fee. More than half of the banks Pew studied said they charge an extended overdraft fee.

It’s important to make sure to take care of overdrafted accounts. Excessive overdraft fees could lead to a closed account or loss of check-writing privileges. It could also become difficult for you to open accounts with other banks if your bank reports your behavior to ChexSystems. ChexSystems keeps a record of your banking history similarly to how the credit bureaus keep track of your credit history.

In a worst-case scenario, excessive overdraft fees could damage your credit score as well. If your bank decides to write off your unpaid account and send it to collections, it can show up on your credit report. At that point, your accidental overdraft could seriously damage your credit score.

How to Avoid an Overdraft Fee

Don’t “opt in”

You can’t be charged an overdraft fee if you don’t sign up for the program, but beware: your bank can still charge you an insufficient funds fee.

Choose “no” when presented the opportunity to opt in to a debit card-based overdraft protection program. Don’t miss this step as it can be easily overlooked as part of the process. It may be in the form of a question asked by your banker or a pre-checked box when you enroll in online banking.

Link your accounts

If you are worried about getting denied at a point of sale and are okay with a fee to automatically transfer your own money, you can link your debit card checking account to another account for overdraft protection. This lets the bank pull the money from the account that you’re linked to to cover new transactions. Banks typically charge a median $5 fee for this service.

Track your balance

Keep your eye on your balance to avoid overdraft and NSF fees altogether. If your bank offers them, you can set up banking alerts so that you’ll be notified when your account goes into the negatives and balance it out before you’re charged a fee. You can use a budget-tracking app like Mint that sends you overdraft and fee notifications as well, although they may not come in time to help you.

You should also go over any automatic payments that you have set up and record and set reminders for them so that you won’t have any surprise withdrawals from your account.

Call your bank

If you don’t overdraft your bank account often, you have a better chance of getting the fee reversed. Because banks make most of their money from a small percentage of accounts that are regularly overdrafted, bank agents usually have more flexibility to reverse the charge for those who don’t overdraft as much. If you make a mistake, and don’t do it often, it’s worth a call to ask the bank to reverse the charge.

Best Banks with Low Overdraft Fees

There is no bank account that truly offers no overdraft fees. However, you can find a bank that either doesn’t allow you to overdraw your account at all or doesn’t excessively fine you for overdrawing your account.

Ally Bank is one of the better banks when it comes to overdraft penalties. So long as you link a savings account to your checking account, the bank will transfer funds from savings when you make a purchase larger than your available balance. And it doesn’t charge a fee for that transfer. However, you will be fined $9 per day if you don’t have enough money in your savings to cover the charge. And they will continue to charge you $9 per day until you make your checking account whole again.

Bank of Internet’s Rewards Checking account has no overdraft or insufficient funds fee, but they will decline the charge if you don’t have enough to cover it in your account. The bank also gives you the option to link an account for overdraft protection with no fee for the transfer, or create a line of credit that can be used to cover overdrafts. If you decide to use the line of credit you will be charged interest on the overdraft balance until you pay it off, but there is no fixed overdraft fee.

MagnifyMoney has a full list of best account options for overdraft fees. In addition, you can use the checking account comparison tool to rank accounts based on overdraft fees and other options.

At the very least, opt out of overdraft protection to avoid getting hit with fees each time your card is declined.

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Featured, News

5 Steps Yahoo Users Can Take to Protect Their Data

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Sunnyvale, CA, USA - Apr. 23, 2016: Yahoo Inc. Headquarters. Yahoo Inc. is an American multinational technology company that is globally known for its Web portal, search engine Yahoo! Search, and related services.

More than 1 billion Yahoo customers may need to come up with some super creative new account passwords. The company revealed Wednesday 1 billion customers were impacted by a data breach in 2013, the largest known data breach in U.S. history.

In an email sent out to affected users, the company says it believes the breach began in August 2013. A third party stole data associated with users accounts, including passwords, contacts, birthdays, and answers to security questions. The FBI is helping to investigate the Yahoo breach, but the culprit has yet to be identified.

If you’re feeling some deja vu, here’s why: just a few months ago, Yahoo went public about another hack, which impacted 500 million accounts in 2014. That appears to have been a separate attack entirely, meaning as many as 1.5 billion Yahoo users have been effected in total.

The company said customers’ payment information was likely unaffected, as that information wasn’t stored in the system that was breached. However, it also now believes the attacker found a way to forge their way into users’ accounts without a password.

If any of that banking information was in your emails, you may be vulnerable to identity theft, but you can take a few steps to protect yourself:

Here’s what you should do if you were impacted by the Yahoo data breach:

Change Your Password(s)

Yahoo is already requiring ‘affected’ users to change their passwords, but even if you haven’t yet received an email instructing you do so, you should change yours.

If you use similar passwords or security questions and answers for any other online accounts, you should go ahead and change all of those too. It may be a pain to do so, but it’s worth not leaving yourself vulnerable to identity fraud.

Check Your Yahoo Account for Suspicious Activity

Do a thorough review of your Yahoo accounts and look for anything suspicious like emails you didn’t send or emails received from accounts that you may not recognize. Stay away from emails asking you to click on a link or download an attachment, as these could be phishing scams. Phishing scams gain access to your device or account to get additional information that can be used to access existing credit accounts or create new credit accounts. Finally, watch out for emails asking for your personal information or refer you to websites asking for your personal information. If you see those kind of emails, delete them immediately.

Set Up Two-Factor Authentication

This breach may be a great incentive for you to take a few minutes to set up double authentication via Yahoo’s Account Key tool. You won’t need your password at all anymore if you set this up. The tool sends a notification to your cell phone asking you to authorize account access each time an attempt is made to log into your account.

Check Your Credit Report

It’s a good idea to check your credit report for any suspicious activity whenever you feel your personal information may have been vulnerable. Request your free credit reports from all three bureaus via annualcreditreport.com and look over them for any accounts you may not recognize. It may also be beneficial to you to set up alerts on your report so that you are notified and asked to authorize any requests for your report from lenders. You can find more information about how to do that here.

Close Your Yahoo Account

If two breach disclosures is your breaking point, you could terminate your relationship with the email service provider. All you’d need to do is visit Yahoo’s account termination page, and follow the instructions. After Yahoo confirms your termination was successful, it’ll take about 90 days  for your account data to be totally gone from the company’s system.

Backstory

There’s never a good time for a data breach but Yahoo’s timing is especially unfortunate. The company is currently in the middle of a $4.83 billion acquisition deal with Verizon. However— as Bloomberg reported following the announcement — there may be some indication that this most recent announcement could delay the deal’s close or cancel it altogether. The recent disclosure might also lower Verizon’s asking price for the struggling email service provider.

Yahoo shares lost nearly 6% in afternoon trade Thursday on NASDAQ. Shares are currently trading at $38.80.  Verizon stock is at $51.84, up 0.4% in afternoon trade on the NYSE.

 

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Featured, News

How the Fed’s Interest Rate Hike Could Impact Your Finances

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

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It’s widely expected that the Fed will raise interest rates this month, but we won’t know for sure until they meet December 13 and 14. The last time the Federal Reserve raised its benchmark interest rate was a year ago, when it voted to raise the rate from .25% to .5%.

Why should we care?

Consumers should be aware of the rate hike for a simple reason: Lenders and banks base their interest rates on the federal funds rate, so when the benchmark increases or decreases, it can impact rates on products like credit cards, auto loans, mortgage rates, and more.

So, what could change for you?

Mortgage Rates

Cheryl Young, a chief economist at Trulia, says homebuyers don’t need to be terribly worried about an increase in the federal funds rate.

“Don’t rush into a home purchase decision because you think that rates are going to go up,” said Young. “Make sure to take your time and don’t get driven into a hasty decision based on what may or may not happen with rates.”

A Trulia report released Wednesday shows homebuyers are more concerned about saving for a downpayment than rising mortgage rates. Young  says if you are renting and thinking about buying, for the majority of market, buying still makes more financial sense. In fact, mortgage rates would have to double in order to make renting more affordable on the whole.

Existing homeowners and people who are preparing to buy a home soon should take the opportunity to lock in today’s low rates before they rise, says David Demming, CEO of Demming Financial Services in Aurora, Ohio.

Buy when things are cheap,” said DemmingIf you are getting your first house, don’t drag your heels, so that you can lock in the low rate right now. Some lenders will give you a 10-year fixed rate and you should take advantage of those.”

Those who have a balance on a home equity line of credit, or HELOC loan, may want to make some aggressive payments now, warns Margarita Cheng, the CEO of Blue Ocean Global Wealth in Rockville, Md.

“When the prime rate goes up, the interest rate on a home equity line of credit will float up,” says Cheng.

Credit and Savings

“The costs for the credit card lender increases when the benchmark rates go up, so they are then tempted to raise rates on short term loans like credit cards,” says Chris Chen, Wealth Strategist at Insight Financial Strategists in Waltham, Mass.

There is some good news, although it may not be what you wanted to hear. The interest rates on credit cards are already high — currently 15% on average. Even if the Fed raises rates by another .25%, credit card users likely won’t notice.

For savers, however, a rate hike could be good news. You might start to earn more on the cash you have stashed in savings accounts, Money Market funds and CDs. Rates on these products are much lower than prior to the recession but a fed rate hike might make them “just a teeny bit less unattractive,” says Chen.

Car Loans

Car loans are one of those short-term loans you can expect to be influenced by a rise in the funds rate, but borrowers likely won’t feel much of a sting.

To get the best rate on a car loan, you should shop around for a low rate first, then make sure to negotiate the price of the vehicle. Interest rates on car loans are fixed, so if you do that, you’ll be set for a while. Heads up: the current average rate on a 60-month auto loan for a new car is 4.27%.

Investments

Bonds react inversely to the federal funds rate. When interest rates go up, the price of a bond goes down.

“To what degree, we don’t know,” Cheng says. “But that’s why it’s important to be prepared and have diversified investments.”

Don’t panic just because some of your bonds could lose value, adds Kristi Sullivan, the CEO of Sullivan Financial Planning. It’s all part of the cycle.

The Bottom Line

Whether or not the Fed’s December meeting results in an increased funds rate, you should think about your entire financial picture. The general expectation is that rates will continue to increase as the economy strengthens. Keep an eye on your interest rates and maintain a diverse portfolio and you should be prepared for whatever happens.

 

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News

Mandi Woodruff to Join MagnifyMoney As Executive Editor

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MagnifyNews-02-01

MandiHeadshotEnriqueWe are pleased to announce that Mandi Woodruff will be joining MagnifyMoney as Executive Editor on June 15th.  Mandi will be joining us from Yahoo Finance, where she was a reporter covering all areas of personal finance. Prior to Yahoo, she was the personal finance editor for Business Insider.

Through in-depth investigative features on industries such as payday lending and for-profit higher education to her smart and her witty weekly video series “The Payoff”, Mandi has distinguished herself as a tireless consumer advocate and a leading millennial voice. She regularly appears as an expert on programs such as Good Morning America and CBS This Morning and recently debuted her own weekly podcast, Brown Ambition.

Mandi’s commitment to financial literacy and her unique investigative voice will be a perfect fit for MagnifyMoney, a rapidly growing personal finance website dedicated to providing unbiased, actionable advice.  Since launching two years ago, MagnifyMoney has emerged as a trusted resource for hardworking Americans.  Mandi and her editorial team will continue that mission by holding financial institutions accountable and simplifying complicated decisions for readers.

“Mandi is a perfect fit and an excellent brand ambassador for our company,” said Nick Clements, CEO and co-founder of MagnifyMoney. “When we launched in 2014, our goal was to bring increased transparency to personal finance and to make it easier for people to make better financial decisions. Creating excellent, unbiased personal finance content is at the center of our mission, and I can think of no one more qualified than Mandi to lead our efforts.”

“I couldn’t be more thrilled to join the MagnifyMoney team and head up what is sure to be a stellar editorial team,” said Mandi Woodruff. “I respect their mission to demystify the world of personal finance for the masses. I’m eager to join their team and continue to help grow what is quickly becoming one of the most trusted sources for financial information online.”

Mandi is an alumna of the Grady College of Journalism at the University of Georgia and an active member of the National Association of Black Journalists, the New York chapter of NABJ, the Society of American Business Editors and Writers, and the Journalism & Women Symposium.

 

 

 

 

 

 

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News

How to Make the Best Impression At Your First Job

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

Female Woman Sitting At Interview

Whether or not you worked all through high school and/or college, those early days (or months, even) at your first job out of school are bound to bring on the nerves. There’s a lot to learn about office politics, how to behave, how to best deal with co-workers and bosses, all before you even start trying to perfect the skills you’ll need to perform your new job to your optimal ability.

Here are some things to keep in mind that will hopefully help you navigate those first tricky days in the real world, when everything might seem scary and totally brand new.

1. Have an open mind and be flexible

Probably far and away the trait that will help get you through the first couple months at your new gig is the ability to be flexible. So you were told you’d be reporting to two people and now it’s three, and the desk they showed you at your interview is actually half a mile from where you’ll actually be sitting (near the noisy kitchen facing a brick wall). Repeat after us: It’s all good. While there are certain things that won’t be okay to have pulled out from under you after you start working (like your salary and benefits, for example, but that’s why you get everything in writing before signing on the dotted line), the quicker you can realize that everything else is open to change, the quicker you’ll be able to adapt to the curveballs that surely will be thrown your way.

2. Be a team player

The sooner you can prove to the staff that you’re on their side and eager to be a part of the team, the sooner you’ll start winning people over and making strong, valuable first impressions. Of course being a team player doesn’t mean you sit back and only do what you’re told, but be strategic in terms of when and how you decide to share your own thoughts and opinions (which you absolutely should!). Taking the first couple of days to get the lay of the land and understand how work flows through the office before suggesting your 20-point plan for increasing productivity might be a good idea, for example.

3. Never be without a notepad

Those first couple of months at your new job will be chock full of things you’ve never done before, phrase you’ve probably never heard and people you’ve definitely never met. Keep a notepad and pen with you at all times and take diligent notes to avoid having to follow up multiple times on the same point. Having said that, always ask questions if you have them, rather than doing something incorrectly the first time and needing to fix it.

4. Be busy all the time

While it will probably take you a while to get into the groove of your new gig, and it might be hard for your boss to break away throughout the day to explain projects to you or help point you in the right direction, be sure that you’re using any down or free time you have to your advantage by tidying up where you see messes, researching on upcoming or past projects your company has undertaken or anticipating things your boss might need before he or she even has to ask (low on printer paper or toner? Work on getting those things refilled before your boss even notices.) It also doesn’t hurt to show up a little early and stay until you’re basically told to leave those first couple of weeks. A good first impression is everything.

5. Don’t be a stranger

Even though you’ll be pretty busy getting caught up those first couple of weeks, if you notice a group of co-workers hanging out in the kitchen during lunch, take a couple extra minutes to stop by and say hello, even if you can’t stay the entire time. The sooner your co-workers get to know your real personality, the sooner you’ll start to feel more like one of them, and less like ‘the new person’ in the office, which no one likes to be.

6. Be organized

Even if organization isn’t your strongest suit, make it your strongest, as least for the first couple of weeks. Keep your area tidy and familiarize yourself with where everything is kept that you might need at a moment’s notice (like that extra printer paper and toner we mentioned before). Do some practice runs on the copy machine and scanner, tidy up after yourself in the kitchen and refill the coffee pot if you finish it. Every little bit adds up, especially when you’re new.

7. Let your confidence shine through

The more you come across as confident, the more your boss and co-workers will see you that way. Being confident can be tough, since it often includes straddling the line for things that appear opposites of each other (take initiative but know when to ask questions or just follow orders; stand up for your own thoughts and opinions but know when to apologize for mistakes), but if you find yourself struggling, remember the golden rule that most people at work are following as well: fake it ‘til you make it. No one expects you to know or understand everything about your new job the first day or first few weeks you’re there, but put in a solid effort and always be present and make smart decisions, and soon enough you’ll catch on.

While we’re on the topic of jobs, check out this piece for suggestions on how to network like a pro, this one for three questions you should ask yourself before taking on a low-paying gig, and this one for six things you should do right away if you lose your job.

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News

Is It Possible to Earn Interest On Your Money These Days? Maybe.

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

Man Paying Bills With Laptop

When it comes to earning interest on your cash, for the most part you won’t get a whole lot of return without involving yourself in at least a little (and sometimes a lot) of risk. The question then becomes — just how much risk are you willing to take … and is it smart to do so?

Unfortunately, these days you’ll be hard-pressed to find a product that will provide you with a large return on your investment, whether there’s a large amount of risk involved or not. The following are some ways you may be able to grow your money, along with what type of return you could be looking at and how much risk you’ll need to be willing to take.

Remember — always do your research before investing your money, and depending on where you decide to put your cash, you may need to be willing to part with it for many years in order to reap the rewards.

Option 1: A high-yield checking account

Risk: Low
Yield potential: Low
The facts: If you’re interested in earning interest on your money, a checking account really isn’t where you’ll find the biggest rewards, but you’re also not going to find any risk, since a checking account with your bank will be FDIC insured. In actuality, it’s probably not worth wasting your time trying to earn money with a checking account, since most that offer interest ask for higher deposits to start off with, and the amount you’ll end up paying is almost never worth it. Still, if you’re interested in earning some extra money while your cash sits around, check out this link to compare checking account options.


Option 2: A high-yield savings account

Risk: Low
Yield potential: Low
The facts: Although interest potential is low for a high-yield savings account as well, you should be able to find a savings account that will provide you with higher dividends then you’d find with a traditional checking account. A couple things you’ll want to keep in mind when looking for a good savings account are that you stick within the realms of your account being FDIC insured (all US bank deposits are insured up to $250,000; if you deposit more, then open accounts at multiple banks not multiple accounts at one bank), that the interest compounds daily and that you follow the rules for withdrawals so as to not get caught paying extra fees. Check out this link for some smart savings account options.


Option 3: A myRA account

Risk: Low
Yield potential: Low
The facts: Traditionally this type of account has only been available to government employees, but in 2015 it was made available to the general public, as well. Any money you put into your myRA has a guaranteed rate of return backed by the Federal Government, so your risk is low, and you’ll can earn interest at rates more than double what you’ll find with even the best savings accounts these days (last years’ rate of return, for example, was 2.31%). As far as investments go, however, you’ll be able to find accounts that traditionally yield higher interest, but you’ll be starting to get into riskier territory. However, you may not be eligible based on your income. Click here for more information about the myRA.

Option 4: Treasury bonds

Risk: Low
Yield potential: Low
The facts: A treasury bond is a fixed-interest government bond issued by the U.S. Treasury, traditionally with a maturity of over 10 years. There are a few different ways of expressing how much a bond might return, but in general, the total return on a bond will include all the money its holder earns off the bond, to include annual interest and the gain or loss in market value, if there was any. In other words, when it comes to bonds, if you’re looking for a low-risk investment on money that you can hold off on cashing in on for at least 10-30 years, then treasury bonds might be worthwhile. You can click here for the average interest rates on bonds based on the month. (For example, returns in April on Treasury Bonds were at 4.543%.) 

Option 5: Lending Club

Risk: High
Yield potential: High
The facts: With median returns hanging out around 6.9%, you might think dipping your feet into funding people’s loans on Lending Club is a smart idea, but there’s plenty to consider before doing so. For starters, there’s no secondary market, says Nick Clements, a former banker and MagnifyMoney co-founder. “Once you buy a loan, you have to hold it until term,” he said. “There is limited performance data, too — losses will accelerate in a credit cycle or downturn, and it’s not clear how well the assets will perform.” In addition, you’d generally need to invest in at least 100 notes to get decent diversification, and you should probably invest even more if you expect high returns. 

Option 6: Index funds that target High Dividend Yields

Risk: High
Yield potential: Medium
The facts: Any time you invest your money in the market, you’ll be looking at dealing with the volatility that comes with those types of moves. Where there’s market risk, says Clements, you need to be willing to accept the fact that the price of your shares might decline. “You also need to be aware of dividend payouts,” Clements added. “In other words the company can reduce or eliminate the dividend at any time.” If you do decide to go this route, though, you could be looking at high dividend SEC yields of 3.17%.

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CreditScorecard: Free FICO Credit Scores from Discover, for Anyone

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

MagnifyNews-02-01

Discover has launched a new service which makes it possible for anyone to see their official FICO credit score for free. Called CreditScorecard.com, the service uses bureau data from Experian to provide you with your credit score and analysis of the key drivers of your score. This service is unique for a number of reasons:

  • Most free credit score sites offer VantageScore, not FICO: If you are a member of a website like CreditKarma or CreditSesame, you are not actually receiving your official FICO score. Although it looks a lot like a FICO, it is actually a generic credit score created by the credit reporting agencies as a competitor to FICO. Some people in the credit scoring industry refer to it as the “fake-o” because it is an imitation FICO score.
  • Most credit card companies offer free FICO scores only to their existing cardholders: Over the last few years, an increasing number of credit card issuers have started offering free FICO credit scores on statements and online. MagnifyMoney has put together a list of which credit cards offer free FICO scores here.

In this post, I will explain:

  • How to get your FICO score for free from Discover
  • What is the difference between this credit score, and other scores on the market
  • Why Discover is doing this

This is a great move for consumers, and we applaud Discover. With this launch, Discover is making it possible for everyone to have access to the most important generic credit score in the country. FICO is used in 90% of all lending decisions. If you want to know how lenders view your creditworthiness, looking at your official FICO is a good place to start.

How To Get Your Score For Free

The website has a simple 4-step process. Visit CreditScorecard.com to get going, and click on “Sign-up here.” You will then see this screen:

Real-Home

You will be asked to answer a series of questions, including your Social Security Number. After completing a simple one-page form, you will go through four steps.

In Step 3, you will need to verify your identity. During this part of the process, you will be asked questions from your credit bureau. Some of the questions are “trick questions,” and this is really the only painful part. For example, I was asked which company my auto loan came from, and I don’t have an auto loan. So, I had to answer “None of the Above.”

It should take you fewer than five minutes, and you will then be given access to your credit dashboard. Here is an example of the dashboard:

DashBoard-3-768x382

You will see a summary of your score and how you compare to the rest of the country. In addition, you will be able to click on a tab which explains the importance of each building block of your credit score.

You will be given tips on how to improve your credit score against each of the metrics. As we explain in our credit score guide, you shouldn’t over-complicate your approach to credit scores. In order to have the best score, you want:

  • To always pay on time.
  • To keep your credit card utilization low. We recommend below 10%.
  • To have some activity on your credit report every month. Making one purchase on one credit card – and paying it off in full and on time every month – is enough.
  • To check your credit report (which is different from your score, and can be done for free at AnnualCreditReport.com) annually to make sure that all of the information is correct. There are also ways to monitor your credit report more frequently.
  • To dispute incorrect information on your credit report. You can learn how to dispute your credit report online here.

Difference Between FICO And Other Scores

FICO is the original generic credit score, and was created in the 1980s. You should know your FICO credit score because it (or a variation of it) is used in 90% or more of all credit decisions made by banks and other lending organizations.

Just remember that your credit score “range” is much more important than the actual number itself. In the screen shot above, the credit score was described as “Exceptional.” That word is more important than the actual number. Why?

  1. Even though this is the official FICO credit score, it is most likely not the credit score that will be used by your lender. (I know this might sound confusing – but read further). Lenders often use the FICO credit score in combination with a custom scorecard, or they could use it as a variable in their custom scorecard. And to further complicate the situation, there are many types and versions of FICO credit scores. FICO creates different scores for auto loans, mortgages and credit cards. And each type of credit score has multiple versions. So there is no way of knowing which version of FICO score is being used, and how it is being used.
  2. In addition to credit scores, lenders have credit policies. For example, a lender might require three years of credit history, regardless of your credit score. There is no way to know those policies, because most lenders guard these secrets.

But just because it is complicated doesn’t mean you shouldn’t pay attention. I have spoken with many people at FICO over the years, and they always remind me that the range is most important. If you are “excellent” on one version of FICO, it is highly likely that you will be “excellent” on all other versions as well. Just focus on making on-time payments and keeping your utilization low, and everything should be fine.

Our general rules are:

  • Try to get an “Excellent” credit score before applying for a mortgage or auto loan. Lower credit scores can often be the most expensive on big mortgages.
  • If you want a credit card, use a credit card pre-approval tool to find the best deal without hurting your score.
  • If you want a personal loan, use the MagnifyMoney Personal Loan tool to shop around for the best deal without hurting your score.
  • If you want to build your credit, you should find the best secured credit cards (ironically, Discover has our favorite card as of the publishing date).

Why Is Discover Doing This?

We think Discover is doing this for two reasons:

  • Great branding: The credit card market continues to get more competitive. Discover is trying to set itself apart from the competition by focusing on financial education and customer service. For example, Discover regularly advertises that is has real people in America working in their call centers. They also talk about not charging you a late fee on your first missed payment and not raising your interest rate if you miss a payment. As part of this branding, offering a free FICO service makes a lot of sense.
  • Ability to recruit new customers: When people sign up, Discover will be able to learn a lot about them. If you qualify, you could be given offers. For example, I was given an offer for a Discover it Miles credit card. You are under no obligation to open a Discover card, but don’t be surprised to see offers on the website.

Final Thoughts

Not long ago, credit scores were considered innovations. Banks were slowly abandoning judgmental underwriting in favor of algorithms. But that made it more difficult for the average consumer, because people had no idea what happened inside that black box.

Fortunately, it is becoming much easier for a person to take control of their credit profile. By providing you with your FICO credit score for free, Discover is providing a real public service. It is now up to us to use it to get the best possible deals and save money.

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5 Options For Where to Stash Your Emergency Fund Money

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

Male hand putting coin into a piggy bank

Ah, emergency funds. Depending on your age and salary, you may think either:

  1. “I’ll never need that,” or
  2. “I’ll never be able to fund that.”

Of course both of those statements are false. While we all hope that we’ll never need to dip into our emergency savings, the very definition of the word “emergency” conjures up the image of surprise, which is exactly what your emergency fund is meant to help you out with — surprise costs. In terms of funding one, on the other hand, while that may take a little maneuvering on your part of determine how to best fit it into your budget, consider an investment in your emergency fund an investment in yourself … now doesn’t that make it sound so much more important?

Whatever you have to tell yourself to get to the point where you finally understand that you need an emergency fund, remember that experts suggest saving three to six months of your take-home pay in an easily accessible account. Before you let that number scare you off, remember that eventually you’ll hope to have that amount saved — for now your first step is to start saving at all.

Baby steps.

So where exactly should you start saving once you’ve determined that you actually are going to start saving? A few of the more common places people keep their savings include:

  1. Checking accounts: These types of accounts are convenient and easy to access, sure, but you’ll be hard-pressed to find a checking account that will score you any interest (or at least any interest worth considering), so we’d suggest keeping this as a last resort.
  2. Savings accounts: With higher interest rates than checking accounts and an FDIC backing of up to $250,000, savings accounts make a solid savings option. Check here to compare different savings account options, and here for five great online savings account options.
  3. Money markets: If you’re looking for something that’s insured and offers competitive interest rates, you can look into a money market, but these types of accounts will still offer lower rates than some other options.
  4. Certificate of deposit (or CDs): CDs are insured accounts with fixed interest rates (meaning if rates go up in general, yours won’t), and there is generally a minimum deposit required and penalties for early withdrawals. CDs don’t necessarily make the best options for an emergency account because of those penalties, since the point of an emergency fund is that it should be easy to access for free.
  5. Money market mutual funds: Although these accounts aren’t insured, there’s limited risk because of the short maturity of your investment, and they usually offer some checking privileges as well. Keep in mind most also usually come with minimal balance requirements, typically around $500 to $1,000 to start.

For more on the ins and outs of emergency funds, how to get started and some other options on where to keep your cash, check out this in depth piece about the ultimate guide for handling your emergency fund.

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The “Right” Way to Ask for Money

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

Young couple calculating their domestic bills

From time to time, you may find yourself in a situation where a little extra cash could really come in handy — we’ve all been there.

When these times come around, there are a couple different options you’ll have, one of which could be borrowing money from friends or family. If you’ve determined borrowing cash from someone could really help you out, consider taking the following steps to help ensure your relationship doesn’t suffer with your loan.

Step 1: Consider all other options first

Why it helps: Even if you have considered all other options and you’ve determined that borrowing money from someone is the best way for you to go, it’ll help when approaching the person you want to take money from to let them know that you’ve done your research and aren’t just taking the easy way out. What are your other options? Personal loans (click here to compare different personal loan options and here for information on how to get one with bad credit) and no interest credit cards (click here for nine no fee options) are popular ways to go, although a credit card won’t help you if it’s cash you need. If you wanted the cash to pay down credit card debt, on the other hand, you might consider a balance transfer. Whatever other options you’ve looked into, head into your meeting with your potential lender armed with the knowledge from the research you’ve done.

Step 2: Come with a plan

Why it helps: While it will be difficult to determine exactly what a repayment plan might look like before discussing all the details with your lender first, you can still put some serious thought into certain aspects of how you plan to borrow the money before approaching your friend or family member. For example, based on how much you want to borrow and your current financial situation, can you offer a pretty accurate suggestion in terms of when you’ll be able to pay back your lender in full? What about interest? Just because you’re borrowing money from friends or family and not a financial institution doesn’t mean you should assume the topic of interest is off the table. While your lender may decline to take you up on the offer, even bringing it up in the first place should at least let them know you’re serious about your request.

Step 3: Consider throwing something personal in the mix

Why it helps: While it doesn’t necessarily have to be a big fancy dinner together every single Friday night, the nice part about borrowing money from friends or family is that you can add a personal touch to the loan that shows the person you’re borrowing from how much you really appreciate the gesture. If you’ll be potentially borrowing from a sibling, for example, why not offer to babysit for free a couple times a month? If it’s your parents, offer to take that big basement or attic cleanup project off their hands, or invite a friend over once or twice a month to your place for a wine, cheese and movie night, hosted by you. Again, the gesture doesn’t have to be a big one — it’s the thought that counts.

Step 4: Get it in writing

Why it helps: While a friendly handshake over coffee might seem like an okay way to do business to you, in the real world, it really isn’t. Consider this transaction of borrowing money from your friend or family member an actual business deal, and it’s always smart to get all business transactions in writing. Writing down all the details of the deal while you’re actually both talking about it will also help ensure there isn’t any confusion down the road when one of you remembers the terms quite differently.

By the way, if you’re on the other end of this scenario — someone is asking you to borrow money — check out this piece about the ‘right way’ to lend money, too.

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