MagnifyMoneyhttps://www.magnifymoney.com/blogThe Fine Print Blog and NewsFri, 21 Sep 2018 18:57:18 +0000en-CAhourly1https://wordpress.org/?v=4.9.8Student Loan Officials Warn of New Phishing Scamhttps://www.magnifymoney.com/blog/news/student-loan-officials-warn-of-new-phishing-scam/Fri, 21 Sep 2018 18:57:18 +0000https://www.magnifymoney.com/blog/?p=86397A new phishing scam is targeting students entitled to financial aid refunds, the Department of Education warned in a statement. Multiple colleges and universities have reported to the department that students have received emails seeking information necessary to gain access to student portals. Attackers who gain access change direct deposit information so that financial aid refunds … Continue reading Student Loan Officials Warn of New Phishing Scam

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A new phishing scam is targeting students entitled to financial aid refunds, the Department of Education warned in a statement.

Multiple colleges and universities have reported to the department that students have received emails seeking information necessary to gain access to student portals. Attackers who gain access change direct deposit information so that financial aid refunds are sent to the attacker’s accounts.

Fraudulent emails target student sites

Students targeted by the phishing scam receive an email sent through password-protected student websites. The email appears to come from their college or university, the department said in the statement, dated Aug. 31 but not widely reported until the Washington Post published coverage of it Saturday. The Post said the authorities it spoke with had declined to identify which schools reported the attacks.

A sample email provided by Federal Student Aid, an office of the Department of Education, asks students to confirm their updated 2018 bill to avoid late fees. The nature of the emails suggests attackers have researched the targeted academic institutions to understand their communication practices, the statement said.

Redacted sample phishing email posted by the Department of Education (Source: Federal Student Aid)

When students fall victim to the scam, attackers can use their provided information to redirect financial aid refunds to the attacker’s accounts by changing direct deposit information. Many students are entitled to financial aid refunds if they receive loans in larger amounts than necessary to cover tuition, room, and board. The school refunds this excess aid to students so they can use it to pay living expenses.

The Department of Education has warned that federal aid funds distributed inappropriately may become the responsibility of the institution that disbursed the funds.

Student aid portals at colleges and universities are vulnerable to this type of phishing scam because enough do not use two-factor or multifactor authentication to verify that login attempts are legitimate. The Department of Education has urged higher education institutions to impose more stringent security measures, such as requiring students to answer security questions or to provide a PIN number in addition to a username and password.

The department is also urging institutions subject to the attack to consider freezing refund requests or blocking changes to direct deposit information. Taking precautions is essential, as evidence suggests attackers are refining their scheme and may target more institutions as financial aid refunds are distributed in large volumes as the school year gets underway.

Students should also protect their account security by refraining from clicking email links or providing personal identifying information in response to email requests. Instead of using links, always visit websites directly by typing the site’s address into your browser to avoid falling victim to this or any phishing scam.

Federal Student Aid said it would “continue to monitor this situation and will send out additional information as appropriate. That information may include additional examples of the phishing emails, training resources, and best practices about how to avoid falling victim to phishing attacks.”

Beware of other scams, too

The phishing attack on loan refunds is one of many scams aimed at student loan borrowers. These can range from the notorious “Obama student loan forgiveness” scam popular during the previous presidential administration to promises that your loan can be discharged if you’re disabled.

Watch out for red flags such as unnecessary fees or requests for excessive information. And if you do think you’ve fallen victim to a scam artist, follow these steps to protect yourself from further harm.

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Personal Loans vs. Credit Cards: Which is Right for You?https://www.magnifymoney.com/blog/personal-loans/personal-loans-vs-credit-cards/Fri, 21 Sep 2018 17:36:17 +0000https://www.magnifymoney.com/blog/?p=85942If you need to borrow money and pay it back over time, you may want to consider an unsecured credit card or a personal loan. Neither option requires you to put down collateral, and you can spend the money however you want. Before you choose between a personal loan or a credit card, however, it’s … Continue reading Personal Loans vs. Credit Cards: Which is Right for You?

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If you need to borrow money and pay it back over time, you may want to consider an unsecured credit card or a personal loan. Neither option requires you to put down collateral, and you can spend the money however you want.

Before you choose between a personal loan or a credit card, however, it’s smart to take a close look at both options to see which one might leave you better off. The best option for your situation will probably depend on how you plan to use the money, how much you need to borrow, and how long you need to pay your loan back.

How do personal loans work?

Personal loans allow consumers to borrow money with a fixed interest rate, a fixed monthly payment, and a fixed repayment schedule. This means you’ll know exactly how much you need to pay each month as well as the date you’ll pay your loan off.

Most personal loan companies let you borrow up to $35,000, although some companies do extend higher amounts to those who qualify. Generally speaking, these loans are best for individuals who need to borrow a large amount of money and pay it back over a longer timeline.

Personal loan benefits

Personal loans can work well for a variety of situations, whether you need to borrow money to consolidate debt, pay for a major home repair, or cover unexpected medical bills. The main benefits of personal loans include:

  • With a fixed repayment plan, you know exactly when you’ll pay your loan off.
  • Securing a fixed interest rate means you will never have to worry about interest charges ballooning out of control.
  • Having a fixed monthly payment can make budgeting for your personal loan easier.
  • Interest rates on personal loans can be lower than other forms of debt, depending on your credit score.

Drawbacks of a personal loan

Personal loans can provide you with the cash you need, but that doesn’t mean they’re perfect. These loans come with costs you need to be aware of as well as their own share of downsides. For example:

  • Personal loans often come with fees, such as an origination fee of 1% to 8% of your loan balance.
  • You may not qualify for the best interest rates if you have poor credit.
  • You have to borrow a set amount upfront, versus credit cards that offer a line of credit you can borrow against.

Qualifications for approval

To qualify for a personal loan with the best rates and terms, you usually need good or excellent credit. Some personal loan companies will accept consumers with credit scores as low as 580, but only if they pay a higher interest rate.

In addition to having the credit to qualify, you also need to be able to prove your ability to repay by presenting pay stubs or other proof of employment. Since lenders prefer to loan money to borrowers who aren’t overly strapped for cash, you’ll also need a debt-to-income ratio that isn’t too high.

Your debt-to-income ratio is determined by taking your total monthly debts and dividing them by your monthly income. If you have $2,000 in total monthly recurring debt and your monthly income is $4,000, your debt-to-income ratio would be 50%. According to Discover Personal Loans, consumers with debt-to-income ratios below 36 percent may qualify for personal loans with the best rates and terms.

If you don’t meet the criteria to qualify for a personal loan on your own, you may be able to qualify with the help of a co-signer.

When is a personal loan better than a credit card?

A personal loan may be better than a credit card in the following situations:

  • You need several years to repay your loan and prefer a fixed interest rate and monthly payment you can count on. While credit cards also let you borrow money to make purchases, most come with variable interest rates and monthly payments that can go up and down based on interest rates and the amount you owe.
  • You need to borrow money to pay expenses you can’t pay with a credit card, such as repaying a family member you borrowed money from. A credit card can be a valuable tool, but it’s not ideal if what you really need is cash. A personal loan is better if you need cash deposited in your bank account.
  • You want to consolidate debt at a lower interest rate but need several years to pay it off. Some credit cards offer 0% interest on purchases or balance transfers for up to 21 months, but the interest rate will be reset after the introductory offer is over. If you need more time to pay off debt at a lower interest rate, a personal loan could make more sense.

Where to find the best personal loans

While you can check local banks and credit unions to compare their personal loan options, an easy way to research and assess offers is by doing it online. MagnifyMoney offers a comprehensive list of the best personal loan offers that makes it easy to see how each one stacks up.

Remember that the best way to find your ideal personal loan is to compare offers from several lenders, not just one. Make sure to compare loan terms, fees, and interest rates to find the best deal. LendingTree, the parent company of MagnifyMoney, allows you to compare mutliple offers at once without hurting your credit score. Use our table below!

LendingTree
APR

5.99%
To
35.99%

Credit Req.

Minimum 500 FICO

Minimum Credit Score

Terms

24 to 60

months

Origination Fee

Varies

LEARN MORE Secured

on LendingTree’s secure website

LendingTree is our parent company.... Read More

How do credit cards work?

A credit card provides you with a line of credit you can use to make purchases, transfer a balance, or take out a cash advance. Credit cards usually come with variable interest rates, and interest is charged daily on your balance. If you pay your balance in full every month, however, you can avoid interest charges and use your line of credit over and over again.

Since the amount you borrow with a credit card will vary depending on the purchases you make, your payment can vary from month to month. However, you’re required to make a minimum monthly payment each month, which may be as low as 2.5% of your balance.

Benefits of a credit card

A credit card can be a valuable tool you can use to your advantage, particularly if you need to make a smaller purchase you can pay off in a short amount of time. The main benefits of credit cards include:

  • Some credit cards offer 0% APR on balance transfers and purchases for a limited time, usually 12 months or longer.
  • You pay no interest fees if you pay off the card in full every month.
  • Some credit cards offer rewards on your purchases, such as cash back or travel rewards.

Drawbacks of a credit card

Credit cards can be ideal if you get a 0% offer or can pay off a large purchase quickly, but there are downsides that come with them compared to personal loans. Some of the drawbacks include:

  • Even though some credit cards offer 0% interest for a limited time, credit cards charge an average interest rate of 15.5%.
  • Your monthly payment may be harder to plan for since it is based on a variable interest rate, as well as your credit card balance.
  • Some credit cards charge annual fees. You may be charged other fees as well, such as late fees, over-the-limit fees, cash advance fees, foreign transaction fees, and balance transfer fees.

Qualifications for approval

The qualifications to get approved for a credit card are typically the same as the ones for personal loans. You need good or excellent credit to qualify for a credit card with the best interest rates and terms, for example. You also need to be able to prove your ability to repay with proof of employment and a reportable income. Finally, you need to have a reasonable debt-to-income ratio since the bank won’t want to let you borrow more than you can afford. According to Experian, many lenders prefer a debt-to-income ratio below 36%.

If you’re curious to see whether you could get a credit card of your own, there are also several ways to check if you’re pre-qualified.

When is a credit card better than a personal loan?

While personal loans can make sense when you need to borrow money, there are times when a credit card can be a better deal. Examples include:

  • You can qualify for a 0% APR offer and repay your balance before your card’s introductory offer ends. If you only need to borrow money for a few months, a zero interest credit card can work as an interest-free loan.
  • You’re unsure how much you need to borrow and prefer a line of credit over a loan. Since credit cards only require you to repay amounts you borrow, they can make more sense if you need a line of credit to borrow against as needed.
  • You have the cash to repay your balance and avoid interest, so you want to rack up rewards. If you have the cash on-hand to repay amounts you borrow right away, a rewards card will let you earn points or miles for each dollar you spend. Keep in mind, however, that it’s a bad idea to pursue rewards if you plan to carry a balance, since the interest you’ll pay is likely more than the rewards you’ll earn.

Where to find the best credit cards

Credit cards are easy to apply for online, which is why it makes so much sense to start your research on the internet. MagnifyMoney breaks down the best credit cards in every category, which makes comparing cards and their benefits a simple task. Make sure to compare all factors before you decide on a card, such as the interest rate, 0% APR offer and terms, and any applicable fees.

Credit cards vs. personal loans

 

Credit Cards

Personal Loans

Average Interest Rate

The average annual percentage rate (APR) of credit cards is currently about 15.5%. However, credit card APRs can range from as low as 9.9% to as high as 29.99%

Personal loan rates can range from 5.99% to as much as 35.99% APR, depending on the borrower's credit history. For those with “good” credit (a FICO score between 680-720), APRs currently range from 10 to 13%.

Terms

Credit cards typically charge a variable rate. Credit card interest rates can change based on market rates and can change to a penalty rate if you miss payments.

Personal loans typically come with a fixed interest rate, fixed monthly payments, and a fixed repayment term.

Monthly Payments

Your monthly payment will depend on your balance and your interest rate. Formulas for minimum monthly payments differ among credit card issuers, but they can be as low as around 2.5% of the outstanding balance.

Your monthly payment is a fixed amount based upon the amount you borrow, the length of your loan, and your interest rate.

Average Loan Limit

Your credit limit depends on several factors, including your income and your debt-to-income ratio.

Many lenders offer personal loans up to $35,000, but some offer bigger loans to those who qualify.

Fees

Credit cards can come with annual fees. You may also have to pay late fees, over-the-limit fees, cash advance fees, and foreign transaction fees. Consumers who transfer a balance pay an average balance transfer fee of 3.46%.

Personal loans have an origination fee of 2% to 5% of the amount borrowed (some can go as low as 1% or as high as 8%). Not all lenders charge origination fees, however.

Personal loans vs. credit cards: Which one is right for you?

Before you decide between a personal loan and a credit card, think long and hard about why you need to borrow money and what kind of terms you’d require to pay it back. Some questions to ask yourself as you continue your research include:

  • What do you need the funds for? While personal loans can work better if you need actual cash to spend, a credit card could also work if you need a line of credit to make a purchase.
  • How much can you afford to repay every month? If you can only afford to repay a set amount of money each month, a personal loan with a fixed monthly payment could be ideal. To find out how much you could borrow and still get a monthly payment you can afford, check your options with this personal loan calculator.
  • Are you consolidating debt? If you’re consolidating debt, you need to be able to qualify for a lower interest rate than the average rate you’re paying now. Compare credit cards and personal loan offers to see which ones offer the lowest interest rates for your credit score and situation.
  • How much do you need to borrow? A personal loan could be better if you need to borrow a larger amount and pay it back over several years.
  • How long do you need to repay your loan? If you believe you can repay borrowed funds within the span of a year or slightly longer, a balance transfer card that offers 0% on purchases and balance transfers could work as an interest-free loan. Keep in mind, however, that you may need to pay a balance transfer fee if you transfer a balance, depending on the card you apply for.

The bottom line

Should you get a personal loan or a credit card? At the end of the day, only you can decide. Both options can work well in the right situation, but your specific financial needs will determine which one is best. As always, make sure you read through the terms and conditions along with the fine print before you sign up for any financial product.

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Status Money Reviewhttps://www.magnifymoney.com/blog/reviews/status-money-review/Fri, 21 Sep 2018 16:08:54 +0000https://www.magnifymoney.com/blog/?p=86321Would knowing what other people are doing with their money affect how you save, spend and invest your money? Status Money, a New York City-based fintech company, is betting you’ll make a change for the better if you can see exactly where you stand compared with your peers and millions of other people. Status Money’s … Continue reading Status Money Review

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Would knowing what other people are doing with their money affect how you save, spend and invest your money? Status Money, a New York City-based fintech company, is betting you’ll make a change for the better if you can see exactly where you stand compared with your peers and millions of other people.

Status Money’s founders are data scientists who hope the information their platform provides — like how much the average person your age spends dining out — puts your finances in context. Ideally, you can then use those insights to make improvements.

What is Status Money?

Status Money is a free financial management and budgeting service, similar to Mint or Personal Capital but with the added benefit of being able to compare your financial standing with about 15 million other people in the U.S. Like other personal finance services, Status suggests financial products or services, based on its analysis of your accounts and other financial information you provide.

You can access it online at StatusMoney.com, and a mobile app is in the works, slated for Apple and Android devices by the end of 2018. The service launched in September 2017 and, as of this writing, Status is only available to users based in the U.S.

Here’s a breakdown of what Status Money offers, as well as my experiences with the service since using it in May 2018.

Peer comparisons

Status’ major standout feature is the anonymous peer comparisons it provides — something none of its competitors in the fintech space do. Status collects and sorts data from millions of public and private records — including the U.S. Census report, credit reporting bureaus and the like — and organizes it for you in easy-to-read charts and graphs so you quickly see how you stack up compared with millions of others.

Source: statusmoney.com

“The information itself should be available. There is no rhyme or reason in the world that the information isn’t available for free for everybody,” said Majd Maksad, Status Money co-founder. “It has to be useful and it just has to be out there.”

On Status, you can see in real time how every detail of your financial picture compares with your peers and either the national average, income range, your age group or a random sample.

Your peer group comprises of people in your age range (e.g. 18 to 29), your income range (e.g. $50,000 to $65,000), your area (e.g. the NY/NJ/PA area), the type of location you live in (urban versus rural), your credit score and whether you pay rent or own your home. All of those factors are taken into account for an accurate peer comparison.

Status provides analytics for just about every financial aspect from your spending habits broken down by category, to your net worth, credit score and the interest rate you pay on your debt.

Insights

Status provides algorithmically derived, real-time insights about how your data compares with your peers’ and lets you know about opportunities for improvement. For example, Status may recommend you consolidate your credit card debt with a personal loan at a lower rate if it notices you pay more interest on your debt compared with your peers.

Source: statusmoney.com

Status recently added an entirely separate “Opportunities” tab where you can not only see recommended financial opportunities, but also how well you match with the opportunity. Maksad told MagnifyMoney the match was developed with Netflix in mind. It’s based on your financial behavior and your peers. It takes into account things like your financial situation, the financial institutions you use, your previous interaction with similar opportunities and opportunities your peers may have taken advantage of.

Source: statusmoney.com

Spending tracker

You can use the monthly tracker feature in Status as a budgeting tool. You can set a spending limit by category for the month overall, and Status will send you an alert when you go over your intended spending limit. You’ll receive an email, for example, if you spend $110 on expenses in the transportation category for the month when your limit was $109.

You can also see your projected spending in the current month for that category, your historical spending habits broken down by category and how your spending compares to your peer group and a second group you have selected (either the national average, income range, your age group or a random sample).

Source: statusmoney.com

Is Status Money secure?

You might be wondering: With the ability to compare your financial stats with those of 15 million other people, is your information secure?

“Security and privacy have been our focus areas since the beginning,” said Maksad. “From day one we had to buckle down on privacy and security.”

Status says it encrypts and stores personal information using security technology independently rated by BitSight, a top security agency.

What about my data?

Status doesn’t sell your information to anyone but it may share your personal information with its partners that help it provide its service. That means Status won’t try to make money off your data, but it would share some of the information you provide with TransUnion in order to access your credit reporting data so you can use it with Status Money to help make financial decisions.

If Status is free and doesn’t sell data, how does it make money?

Status makes money through ads for products advertised to you based on your profile, as many of its competitors do.

What we like about Status Money

Peer pressure through information

Status money gives you information about the people most similar to you, and research has shown that knowing what your peers do may influence your behavior.

In a study released this year, researchers at the University of Chicago’s Booth School of Business and the University of Maryland Smith School of Business analyzed the spending habits of 6,000 Status Money users from September 2017 to April 2018.

The study found the average Status Money user reduced their spending as a percentage of monthly income by about 7% after joining. When people realized they were spending more than their peers, they reduced their spending by an average 23%, or $600 per month, regardless of income level. Those who realized they were underspending increased spending by an average 1%.

The university researchers approached Status to conduct the research and were not incentivized in any way.

Reviewer’s take: I was shocked to see I spent thousands less than my peers on average, and that made me feel good. So good, in fact, that I started paying more attention to my spending habits so I could stay ahead of the curve.

I was also surprised to see I have $10,000 more in debt on average than the 34 million others in my age group, but I was I was pleasantly surprised to know I have competitive rates on all my credit cards and student loans.

And seeing that I don’t have as much in assets as my peers do motivated me to rebalance my retirement funds, increase my retirement contribution and get serious about my emergency fund.

Actionable information

Status doesn’t simply tell you that you’re paying more in credit card interest than your peers do. It will show you opportunities to reduce your costs, like debt consolidation. Just keep in mind that the products Status shows you may not be your only options, and you should shop around before opening any new accounts to make sure you’re getting the best deal.

Reviewer’s take: I didn’t personally take advantage of the Opportunities tab, but I thought they were fairly accurate and I’m interested in moving forward with some of them when I’m ready.

I thought it was interesting that one Opportunity was saving on things to do in NYC with Groupon. I already use Groupon for self-care services like massages and facials, but didn’t really think to use it for entertainment, although I do spend a fair amount of money on live events. It made me feel the options were very personalized — more tailored to my tastes than recommendations from other budgeting apps.

Multiple levels of comparison

You can compare yourself in just about every way to your peers, and either the national average, income range or your age group on Status. Here are a few examples of what you can compare with Status:

  • Monthly income
  • Credit score
  • Debt as a whole
  • Debt, broken down by type
  • Interest rate on debt
  • Overall monthly spending
  • Monthly spending by category
  • Overall savings
  • Monthly savings
  • Overall net worth
  • Net worth, broken down by debt and assets
  • Overall assets
  • Assets, broken down by type
  • Historical home and car values

Maksad told MagnifyMoney the service aims to add comparison categories like marital status, household size, education level and gender in the future.

Important insights, all in one place

Like most of its competitors, Status allows you to see your net worth, track your spending and manage your budget, using a single platform. These are crucial components of any personal financial management system.

Reviewer’s take: The app was pretty good about categorizing my transactions, but I did have to routinely go in and recategorize some of them. This was a minor hassle since editing transactions is quick and easy. I’d spend a few minutes a week reviewing the transactions.

Free

You get all of the insights, comparisons, budgeting features and financial opportunities Status provides, for free. There is no paid version of Status Money and there might never be, Maksad told MagnifyMoney.

Downsides to Status Money

No mobile app

Status says it plans to release iOS and Android mobile apps in 2018. Maksad said the app will also be free once it’s released.

Reviewer’s take: This bothered me because it’s not my natural inclination to type a web address into a web browser when I’m on my phone. Also, I absolutely abhor having to manually enter my login information. If it doesn’t say “continue as Brittney” or use FaceID, I’m not logging in. I didn’t try creating a shortcut prior to writing this review, but I am considering the switch. Again, it’s putting in the effort. For now, I can’t wait for Status to roll out the app for iOS so I can log in more regularly.

No bill pay

As of this writing, Status doesn’t offer bill pay, but that’s on par with competitors.

No investing

As of this writing, Status doesn’t offer wealth management or investing features, which some competitors do (for a fee).

Who Status Money would be best for

Status may be a good tool for anyone who wants to see where they stand financially in reference to others, track their budget or monitor and build their wealth.

The service’s tech-savvy design and use of peer comparisons to influence spending behavior make it a better money-management app for the younger generations (millennials and Generation Zers).

Several studies have shown that peers are more influential to younger people. As we age, our peers have less and less influence on our beliefs and behaviors. On top of that, millennials and Gen Z are the first generations to grow up with social media. They are the demographics that have been conditioned to want to know what their peers are doing and care about keeping up with trends in the groups they identify with.

If you aren’t interested in what your peers are doing and would prefer to have access to bill management or investment features, you may want to try out a different budgeting and financial management service.

How to sign up for Status Money

To sign up for Status Money, you provide the usual personal information (name and email) and set a password to create an account.

Source: statusmoney.com

Then Status requires you to enter more detailed personal information that’s needed to track your finances, set your peer group and pull your credit information like your income, housing status, Social Security number and assets like your car or home. When all of that’s done, you can link your financial accounts and access Status Money’s services.

Status says it can connect to more than 12,000 financial institutions. If your institution isn’t available, you can email Status and request to have it added. It took me about 20 minutes to link all of my accounts, but it could have taken less than 10 minutes if I had all of my passwords on hand. For that reason, I recommend you gather all of your login information for all of your accounts ahead of time.

After that’s handled, you’re all set. You will see a dashboard with various options to see high-level and more detailed financial information and comparisons.

How Status Money compares with competitors

Status Money has something no other fintech service provides: anonymous peer comparisons. But the service also lacks features its peers offer like access to a human financial adviser, and Status doesn’t yet have a mobile app.

Here’s a breakdown of how Status Money fares against its main competitors: Mint and Personal Capital.

Status Money vs. Mint vs. Personal Capital

Feature

Status Money


Status Money

Mint


Mint Budgeting APP

Personal Capital


Personal Capital App

Peer comparisons

Yes

No

No

Budgeting/spending tracker

Yes

Yes

Yes

Credit score monitoring

Yes

Yes

Yes

Credit report information

Yes

Yes

Yes

Spending alerts

Yes

Yes

Yes

Bill pay

No

No

No

Bill management

No

Yes

No

Mobile app

No. iOS and Android apps to be released by the end of 2018

Yes. Apps for iOS and Android.

Yes, but only for budgeting features. Apps for iOS and Android.

Website/web app

Yes

Yes

Yes

View net worth

Yes

Yes

Yes

Paid version

No

Yes

Yes, 0.49%-0.89% of what you invest, if you want to use wealth management features

Investing/wealth management

No

No

Yes, charged as a percentage of invested funds

Retirement planning

No

No

Yes

Tax preparation assistance

No

Yes

No

Customer service

Email

Email

Phone 24/7 & Email

The bottom line

The lack of a mobile app is pretty annoying, but I’m hoping Status stays on track with its plan to release apps for iOS and Android soon. Overall, I feel having the comparison in front of me motivated me to become more mindful about how I use my money so that I could “win” in my financial life. I know that is technically impossible, but it feels like a competition and if you are competitive, you will be driven to do better than your peers, too.

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Everyone Can Now Freeze Their Credit Reports for Freehttps://www.magnifymoney.com/blog/news/everyone-can-now-freeze-credit-reports-free/Fri, 21 Sep 2018 14:10:37 +0000https://www.magnifymoney.com/blog/?p=86247If you have been holding off on freezing your credit report because you’d have to pay a fee, wait no longer. Today — one year and 14 days since Equifax originally announced hackers had exposed the sensitive information of more than 146 million consumers — a federal law making it free for consumers to freeze and … Continue reading Everyone Can Now Freeze Their Credit Reports for Free

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iStock

If you have been holding off on freezing your credit report because you’d have to pay a fee, wait no longer. Today — one year and 14 days since Equifax originally announced hackers had exposed the sensitive information of more than 146 million consumers — a federal law making it free for consumers to freeze and thaw their credit reports goes into effect.

The provision rolled into the federal Economic Growth, Regulatory Relief and Consumer Protection Act makes it free to place, lift and permanently remove a freeze on your credit report with credit reporting agencies, regardless of the state you live in.

How will the new law affect me?

Before the law went into effect, it cost consumers anywhere from $2 to $12 to freeze, thaw or permanently remove a freeze a credit report depending on the law in the state they lived in. Only three states (Indiana, Maine and South Carolina) allowed free credit freezes.

Barring protected consumer status or proven identity theft, a consumer generally needed to pay a fee to each of the three major credit reporting bureaus — Equifax, Experian and TransUnion — to complete each credit freeze-related action. For example, it could have cost someone living in Colorado $30 to simply freeze their credit reports (paying $10 to each reporting bureau) and another $36 to thaw or permanently lift the credit freeze on each report.

Now, the big three credit reporting bureaus and other smaller credit reporting agencies are required by federal law to allow all consumers to freeze, thaw and permanently unfreeze their credit reports, free of charge.

Under the law, a reporting agency must notify a consumer of the placement or removal of a credit freeze within one business day if the request was made online or over the phone and within three business days if the request was made by mail.

The new law also applies the following changes:

  • The credit reporting bureaus must also provide a webpage that allows consumers to request a credit freeze or place a yearlong fraud alert on their credit report. Prior to the law, initial fraud alerts lasted 90 days.
  • The webpage must also allow a user to opt out of sharing their information with companies for the purpose of advertising credit or insurance.
  • The Federal Trade Commission must also set up a webpage that will list the links to the credit freeze pages for each credit reporting agency.
  • The law requires credit reporting agencies to provide free electronic credit monitoring to all active duty members of the U.S. military.

What is a credit freeze?

A credit freeze, or security freeze, restricts access to a consumer’s credit report. This prevents others from using your information to commit financial fraud.

Neither you nor fraudsters will be able to open new accounts in your name while the credit freeze is in effect. If you are applying for new credit, you can temporarily lift the freeze from your credit report, which is also referred to as thawing the freeze.

A credit freeze does not affect your existing creditors’ access to your credit report if the creditor is conducting account activities like credit monitoring and credit line increases or if they need to place the account in collections.

A warning: The credit freeze doesn’t prevent thieves from using your information to commit all forms of identity theft. The credit freeze only protects against forms of fraud that require access to your credit report.

The credit freeze also won’t stop you from getting prescreened credit offers. However, the new law requires reporting agencies to allow you to opt out of sharing information with companies for the purpose of advertising credit or insurance to you.

How to freeze your credit report

To freeze, thaw or permanently unfreeze your credit report you need to notify each of the three major credit reporting agencies separately. You can contact each bureau online, via phone or by mail.

Online

Equifax
Experian
TransUnion

Phone

Equifax: 1-800-685-1111 (1-800-349-9960 for New York residents)
Experian: 1-888-EXPERIAN (1-888-397-3742). Press 2.
TransUnion: 1-888-909-8872

Mail

Send a letter to each credit bureau by certified mail requesting the freeze. Here are the addresses.

Equifax: Equifax Security Freeze/P.O. Box 105788/Atlanta, GA 30348
Experian: Experian Security Freeze/P.O. Box 9554/Allen, TX 75013
TransUnion: TransUnion LLC/P.O. Box 2000/Chester, PA 19016

Mobile app options exist to put restrictions on consumer’s credit report information, as well:

Note: A credit report lock isn’t exactly the same thing as a credit freeze, though they serve the same purpose. Freezing your credit reports can only be done by phone, mail or the online portals above. Lock/unlock services allow you briefly grant or prohibit access to your credit report using online and mobile apps.

TrueIdentity app by TransUnion — Allows those enrolled in free True Identity service to instantly lock and unlock credit reports.

Lock & Alert by Equifax — Allows consumers to lock and unlock credit reports for free.

IdentityWorks by Experian — Allows those enrolled in IdentityWorks Plus or IdentityWorks Premium services to lock and unlock credit reports. The IdentityWorks Plus and CreditWorks Premium services charge fees.

The post Everyone Can Now Freeze Their Credit Reports for Free appeared first on MagnifyMoney.

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M.Y. Safra Reviews: Checking, Savings, CD, Money Market, and IRA Rateshttps://www.magnifymoney.com/blog/reviews/my-safra-bank/Thu, 20 Sep 2018 21:39:58 +0000https://www.magnifymoney.com/blog/?p=78751In this article, we’ll cover: M.Y. Safra Bank’s checking account options M.Y. Safra Bank’s savings account options M.Y. Safra Bank’s money market account options M.Y. Safra Bank’s CD rates M.Y. Safra Bank’s IRA rates M.Y. Safra Bank’s overall review M.Y. Safra Bank’s checking account options [MYSafraBankpersonalinterestchecking]Basic Checking Account[/MYSafraBankpersonalinterestchecking] Earns interest but not enough to make … Continue reading M.Y. Safra Reviews: Checking, Savings, CD, Money Market, and IRA Rates

The post M.Y. Safra Reviews: Checking, Savings, CD, Money Market, and IRA Rates appeared first on MagnifyMoney.

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Year Established2000
Total Assets$0.4B

M.Y. Safra is a small, boutique bank located in New York City. Though they only have one physical bank branch on Park Avenue in Manhattan, accounts can be opened from anywhere in the United States.

Not to be confused with Safra National Bank of New York, M.Y. Safra is a high-end bank focused on delivering personal service for their clients, especially those with larger accounts. As part of their high-end image, M.Y. Safra Bank offers several promotions where if your initial deposit is large enough, you will receive a gold bar or silver coin as a signup bonus. More detail on the bonus below.

For personal banking, M.Y. Safra offers a range of checking, savings, CD, money market and IRA accounts. We reviewed each account so you can decide if this is the right place for your money. As part of this review, we pulled the most recent interest rates from their website, the ones they use nationwide on all their accounts. However, rates can frequently change, so make sure to get the most recent terms before making your decision.

M.Y. Safra Bank’s Most Popular Accounts

APY

Account Type

Account Name

Compare Rates from Similar Accounts

0.25%

Savings

M.Y. Safra Bank Personal Savings

1.90%

Goldman Sachs Bank USA High-yield Online Savings Account

on Goldman Sachs Bank USA’s secure website

1.70%

CD Rates

M.Y. Safra Bank 12 Month Classic CD

1.90%

Goldman Sachs Bank USA High-yield Online Savings Account

on Goldman Sachs Bank USA’s secure website

2.30%

CD Rates

M.Y. Safra Bank 36 Month Classic CD

2.50%

Ally Bank High Yield 12-Month CD

on Ally Bank’s secure website

2.65%

CD Rates

M.Y. Safra Bank 60 Month Classic CD

2.70%

Synchrony Bank 36 Month CD

on Synchrony Bank’s secure website

3.10%

Goldman Sachs Bank USA High-yield 5 Year CD

on Goldman Sachs Bank USA’s secure website

M.Y. Safra Bank’s checking account options

[MYSafraBankpersonalinterestchecking]Basic Checking Account[/MYSafraBankpersonalinterestchecking]

Earns interest but not enough to make up for the unavoidable monthly maintenance fee.

APY

Minimum Balance Amount



0.05%

$0 - $5,000

0.05%

$5,000 - $25,000

0.10%

$25,000 - $50,000

0.10%

$50,000 - $100,000

0.10%

$100,000 - $250,000

0.15%

$250,000 - $1,000,000

M.Y. Safra Bank requests that you contact them for a personal quote

Over $1,000,000

  • Minimum opening deposit: $25
  • Monthly account maintenance fee: $3
  • ATM fees: None for the first 8 transactions per month. $1 per transaction after that.
  • ATM fee refunds: Fee refunds on 10 transactions up to a maximum cost of $30.
  • Overdraft fees: $35 per transaction, up to three items per day.

The M.Y. Safra Bank Basic checking account is suited for people who only want to keep a small balance. You can open this account for only $25 and there is no minimum balance requirement to keep the account open.

What’s nice about the Basic checking account is it offers the exact the same banking services as the bank’s Silver and Gold accounts: an ATM card, online banking, the ability to order checks and a limited refund on ATM fees worldwide.

However, this account has a couple significant downsides. First, it charges a $3 monthly maintenance fee no matter what. They don’t waive the fee for a minimum account balance. Also, this account only offers eight free transactions per month, including ATM withdrawals, checks and purchases with the debit card. The bank charges a $1 fee for every transaction over the monthly limit.

To open a basic checking account, you can visit the New York branch in person or you can complete and mail in their new account form. However, you cannot open this account online. The new account form will ask to list your personal information, fill out a W-9 for taxes and provide a government-issued ID.

[MYSafraBankSilverChecking]Silver Checking accounts[/MYSafraBankSilverChecking]

While better than M.Y. Safra Bank’s Basic account — and comes with a silver coin, to boot — the Silver account is still not great compared to other accounts on the market.
  • Minimum opening deposit: $100
  • Monthly account maintenance fee: $10 (waived when certain criteria is met)
  • ATM fees: None
  • ATM fee refunds: Fee refunds on 10 transactions up to a maximum cost of $30.
  • Overdraft fees: $35 per transaction, up to three items per day.

If you can meet the average balance requirements, the M.Y. Safra Silver checking account is a significant upgrade over the Basic checking account. This account gives you three ways to avoid the $10 monthly maintenance fee:

  • Keep an average monthly balance of at least $1,500;
  • Make at least one direct deposit of any amount during the statement cycle; or,
  • Maintain a balance of at least $25,000 in your combined M.Y. Safra Bank accounts

This account also lets you make unlimited transactions per month without being charged a fee. Finally, if your opening deposit is at least $250 and you sign up for direct deposit, M.Y. Safra Bank will give you a one-oz silver coin.

While that’s an interesting perk, keep in mind that the value of silver was only about $16 an ounce as of this writing. Also, this is not an interest bearing account.

To open a Silver checking account, you can visit the New York branch in person or you can complete and mail in their new account form. The new account form asks to list your personal information, fill out a W-9 for taxes and provide a government-issued ID. However, you cannot open this account online.

[MYSafraBankGoldChecking]M.Y. Safra Gold checking account[/MYSafraBankGoldChecking]

The bar of gold sign-up bonus is tempting but not enough to justify the high balance requirements.
  • Minimum opening deposit: $100
  • Monthly account maintenance fee: $15 (waived when certain criteria is met)
  • ATM fees: None
  • ATM fee refunds: Fee refunds on 10 transactions up to a maximum cost of $30.
  • Overdraft fees: $35 per transaction, up to three items per day.

The M.Y. Safra Gold checking account is nearly identical to the Silver checking account, with the same services. The main perk with this account is if you open with an initial deposit of at least $2,500 and set up a recurring direct deposit of at least $500, you will receive a 2.5-gram bar of gold. With a current price of about $40 per gram as of this writing, that gold bar is worth about $100.

In exchange, this account has larger balance requirements if you want to avoid the $15 monthly maintenance fee. To avoid the fee, you can:

  • Keep an average monthly balance of at least $2,500 in this account;
  • Make at least one direct deposit of at least $500 during the account cycle; or,
  • Maintain a combined average balance of at least $50,000 in all of your M.Y. Safra Bank accounts

If you can’t meet any of these three requirements, the high maintenance fee will quickly wipe out the value of the gold bar. This is also a non-interesting bearing account.

To open a Gold Checking account, you can visit the New York bank branch in person or you can complete and mail in their new account form. The new account form asks to list your personal information, fill out a W-9 for taxes and provide a government-issued ID. However, you cannot open this account online.

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How M.Y. Safra Bank’s checking accounts compare

Of the three M.Y. Safra checking accounts, Silver and Gold look the best. The Basic account is not a good option because of the unavoidable maintenance fee and the monthly limit on transactions.

Compared to the competition, the Silver and Gold checking accounts do have some positive features. They let you make unlimited withdrawals and have limited rebate ATMs fees from withdrawals anywhere in the world. The silver coin or gold bar signup bonuses are also a unique welcoming gift if you qualify.

Still, there are online checking accounts out there that offer a much better combination of higher interest rates, smaller balance requirements and lower fees while also including free ATM access around the world.

M.Y. Safra Bank’s savings account options

[MYSafraBankPersonalSavings]M.Y. Safra Silver Savings Account[/MYSafraBankPersonalSavings]

A better-than-average interest rate with a low, avoidable monthly fee. Not a bad combination.

APY

Minimum Balance Amount



0.25%

$0 - $5,000

0.25%

$5,000 - $25,000

0.25%

$25,000 - $50,000

0.25%

$50,000 - $100,000

0.75%

$100,000 - $250,000

0.75%

$250,000 - $1,000,000

M.Y. Safra Bank requests that you contact for a personal quote

Over $1,000,000

  • Minimum opening deposit: $100
  • Monthly account maintenance fee: $5 (waived when certain criteria is met)
  • ATM fees: None
  • ATM fee refunds: Fee refunds on 10 transactions up to a maximum cost of $30.
  • Overdraft fees: $35 per transaction, up to three items per day.

The M.Y. Safra Silver savings account offers an interest rate that is a clear step up from the bank’s checking accounts. The interest rate stays the same for all account balances up to $100,000, before increasing significantly after you have more than $100,000.

This account charges a low $5 monthly maintenance fee which you can avoid by:

  • Keeping an average monthly balance of at least $1,000 in your savings account; or,
  • Having a balance of at least $25,000 combined in all of your M.Y. Safra accounts

Since this is a savings account, Federal Reserve rules limit you to six pre-authorized withdrawals per month, which includes checks, debit purchases, telephone, fax and internet transfers. However, you can make unlimited ATM withdrawals with this account. If you go over the six-transaction monthly limit, M.Y. Safra bank will charge a $15 fee per transaction.

To open a Silver savings account, you can visit the New York branch in person or you can complete and mail in their new account form. The new account form asks to list your personal information, fill out a W-9 for taxes and provide a government-issued ID. However, you cannot open this account online.

LEARN MORE 

Member FDIC

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How M.Y. Safra Bank’s savings accounts compare

If you plan on keeping at least $1,000 in your account, the M.Y. Safra Silver savings account is worth a look. It offers a much better interest rate compared to accounts at large national banks, but unfortunately that’s not saying much. There are other savings accounts that offer an even better rate and have lower balance requirements than what is available at M.Y. Safra Bank.

On the plus side, the account gives you unlimited ATM access and only charges a $5 monthly fee if you fall below the minimum balance requirement. Since this account keeps the same interest rate for all account balances up to $100,000, it’s a better deal for smaller accounts versus larger ones. Someone who deposits $80,000 will not receive a higher return than someone who has $800 to put in.

M.Y. Safra Bank’s money market account options

[MYSafraBankPersonalMoneyMarket]M.Y. Safra Platinum Money Market Account[/MYSafraBankPersonalMoneyMarket]

This money market offers a hefty gold coin for six-figure deposits but that’s still not enough to make up for the low interest rates.

APY

Minimum Balance Amount



0.25%

$0 - $5,000

0.25%

$5,000 - $25,000

0.25%

$25,000 - $50,000

0.25%

$50,000 - $100,000

0.75%

$100,000 - $250,000

0.75%

$250,000 - $1,000,000

M.Y. Safra Bank requests that you contact for a personal quote

Over $1,000,000

  • Minimum opening deposit: $100
  • Monthly account maintenance fee: $20 (waived when certain criteria is met)
  • ATM fees: None
  • ATM fee refunds: Fee refunds on 10 transactions up to a maximum cost of $30.
  • Overdraft fees: $35 per transaction, up to three items per day.

The interest rates on the M.Y. Safra Platinum money market account are disappointing. They are exactly the same as what’s offered on the Silver savings account. And yet, this account has much higher balance requirements and fees. This account charges a $20 monthly maintenance fee that can only be avoided if:

  • You have a minimum average monthly balance of $5,000 in your Platinum money market account
  • You have at least $100,000 combined in all M.Y. Safra Bank accounts.

The Platinum money market account also has the Federal Reserve restriction of six pre-authorized transactions per month, but allows unlimited ATM access. If you go over the six-transaction monthly limit, M.Y. Safra Bank will charge a $15 fee per transaction.

The one clear advantage of this account is it’s eligible for another gold sign-up bonus. If you deposit at least $100,000 in the Platinum Money Market account, then open a Gold Checking account with $2,500 and set up recurring direct deposits for at least $500 and M.Y. Safra Bank will give you a 0.25-oz gold coin.

To open a Platinum money market account, you can visit the New York branch in person or you can complete and mail in their new account form. The new account form asks to list your personal information, fill out a W-9 for taxes and provide a government-issued ID. However, you cannot open this account online.

LEARN MORE 

Member FDIC

[MYSafraBankMYSBDirectOnlineMoneyMarket]MYSB Direct Online Money Market Account[/MYSafraBankMYSBDirectOnlineMoneyMarket]

No gold coin bonus but this account comes with a much better interest rate.

APY

Minimum Balance Amount



1.26%

$0 - $5,000

0.20%

$500,000 +

  • Minimum opening deposit: $100
  • Monthly account maintenance fee: $20 (waived when certain criteria is met)
  • ATM fees: None
  • ATM fee refunds: Fee refunds on 10 transactions up to a maximum cost of $30.
  • Overdraft fees: $35 per transaction, up to three items per day.

The MYSB Direct Online money market account offers a substantially better interest rate than the Platinum Money Market account. It has the same account rules as Platinum except you can only sign up for this account online.

The sign-up process asks for the same information as the manual new account opening process. Once that’s done, you can only fund the account with a maximum initial deposit of $20,000 through the platform but can add more later through wire transfers or check.

This account charges a $20 monthly maintenance fee that can only be avoided if:

  • You have a minimum average monthly balance of $5,000 in your MYSB Direct Online money market account
  • You have at least $100,000 combined in all M.Y. Safra Bank accounts.

The MYSB Direct Money Market account also restricts you to six pre-authorized transactions per month but allows unlimited ATM access.

LEARN MORE 

Member FDIC

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How M.Y. Safra money market accounts compare

Of the two M.Y. Safra Bank money market accounts, MYSB Direct Online is a much better deal thanks to its far-higher interest rate. Though it does not come with the gold coin sign-up bonus, you will likely earn more in interest than the value of the coin within a year.

While the MYSB Direct interest rate is solid and better than a lot of the competition, it is still not the very best rate in the country. Also, the higher interest rate only applies on accounts up to $500,000. Anything above $500,000 earns a much lower rate. If you’d like to deposit more than this limit, you may want to look elsewhere.

Be sure to check out these other top money market accounts in the country before making a decision.

M.Y. Safra Bank’s CD rates

[MYSafraBankClassicCD]M.Y. Safra Classic CDs[/MYSafraBankClassicCD]

Terrific interest rates but watch out for the steep penalty on early withdrawals.

Term

APY


30 days

0.75%

90 days

1.10%

6 months

1.20%

9 months

1.30%

12 months

1.70%

18 months

1.60%

24 months

2.10%

36 months

2.30%

48 months

2.35%

60 months

2.65%

84 months

3.20%

  • Minimum opening deposit: $5,000
  • Minimum balance amount to earn APY: None, but a $3 per month penalty will be charged on balances lower than $5,000.
  • Early withdrawal penalty: For closing the account, the greater of either all interest earned to that point or 90 days worth of interest. For a withdrawal, it depends on the CD terms.

The M.Y. Safra Classic CDs offer excellent variety, with terms that range from as short as 30 days to as long as seven years. The interest rates are also extremely competitive at every CD term.

However, where the M.Y. Safra Bank Classic CDs can get costly is with their early withdrawal penalty. If you close your account before the end of the term, you forfeit all the interest earned up to that point, or a minimum penalty of 90 days worth of interest. That means if you close a CD within 90 days of opening the account, you will lose some of your original deposit.

For early withdrawals, the penalty depends on the length of the CD term, how early you decided to take money out and how much money you withdraw. They calculate the penalty at the time of your withdrawal request. If your balance falls below $5,000 after the withdrawal, you will keep earning interest but M.Y. Safra Bank will start charging a $3 per month penalty.

You can open a M.Y. Safra Bank Classic CD online, by mailing in their new account form or by visiting their branch in New York City. You will need to list your personal information, fill out a W-9 for taxes and provide a form of ID to get things set up.

LEARN MORE 

Member FDIC

[MYSafraBankJumboCD]M.Y. Safra Jumbo CDs[/MYSafraBankJumboCD]

The rates are still good but not much better than Classic, despite the six-figure jumbo deposit requirements.

Term

APY


30 days

0.75%

90 days

1.15%

6 months

1.25%

9 months

1.35%

12 months

1.75%

18 months

1.65%

24 months

2.15%

36 months

2.35%

48 months

2.40%

60 months

2.70%

84 months

3.25%

  • Minimum opening deposit: $100,000
  • Minimum balance amount to earn APY: None, but a $3 per month penalty will be charged on balances lower than $5,000.
  • Early withdrawal penalty: For closing the account, the greater of either all interest earned to that point or 90 days worth of interest. For a withdrawal, it depends on the CD terms.

The M.Y. Safra Jumbo CDs offer a small increase in the interest rate compared to their Classic CDs. It’s not much of a bump but still better than nothing if you were thinking of depositing over $100,000.

The Jumbo CDs also have the same costly early withdrawal penalty. If you close your account before the end of the term, you forfeit all the interest earned up to that point, or a minimum penalty of 90 days worth of interest. That means if you close a CD within 90 days of opening the account, you will lose some of your original deposit.

For early withdrawals, the penalty depends on the length of the CD term, how early you decided to take money out and how much money you withdraw. They calculate the penalty at the time of your withdrawal request. If your balance falls below $5,000 after the withdrawal, you will keep earning interest but M.Y. Safra Bank will start charging a $3 per month penalty.

You can open a M.Y. Safra Bank Jumbo CD online, by mailing in their new account form or by visiting their branch in New York City. If you open an account online, the largest CD you can open is up to $250,000. You will need to list your personal information, fill out a W-9 for taxes and provide a form of ID to get things set up.

LEARN MORE 

Member FDIC

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How M.Y. Safra Bank CDs compare

The M.Y. Safra Bank’s CDs are some of the best in the country. They offer a wide variety of terms along with top interest rates for all their CDs. If you plan on depositing at least $5,000, the minimum deposit for a Classic CD, this bank is worth seriously considering.

However, their biggest downside is the steep early withdrawal penalty. Before you sign up for a M.Y. Safra Bank CD, make sure you won’t need your money until the end of the term because an early withdrawal will cost you all your interest earnings.

If you are unsure about whether you will need money early, you could check out these other top CD options to find one that gives you more flexibility for taking money out while still offering a high interest rate.

M.Y. Safra Bank’s IRA rates

[MYSafraBankClassicIRACD]M.Y. Safra Classic IRA Rates ($5,000 minimum)[/MYSafraBankClassicIRACD]

Fantastic interest rates for an IRA CD.

Term

APY


30 days

N/A

90 days

N/A

6 months

1.20%

9 months

1.30%

12 months

1.70%

18 months

1.60%

24 months

2.10%

36 months

2.30%

48 months

2.35%

60 months

2.65%

84 months

3.20%

[MYSafraBankJumboIRACD]M.Y. Safra Jumbo IRA Rates ($100,000 minimum)[/MYSafraBankJumboIRACD]

Term

APY


30 days

N/A

90 days

N/A

6 months

1.25%

9 months

1.35%

12 months

1.75%

18 months

1.65%

24 months

2.15%

36 months

2.35%

48 months

2.40%

60 months

2.70%

84 months

3.25%

  • Minimum opening deposit: $5,000 ($100,000 for Jumbo rates).
  • Minimum balance amount to earn APY: None, but a $3 per month penalty will be charged on balances lower than $5,000.
  • Early withdrawal penalty: For closing the account, the greater of either all interest earned to that point or 90 days worth of interest. For a withdrawal, it depends on the CD terms.

The M.Y. Safra IRAs use the same interest rates as their non-IRA CDs. The only difference is you cannot use a 30-day or 90-day CD in a M.Y. Safra IRA.

If your total account balances at M.Y. Safra Bank add up to less than $5,000, they will charge a $3 monthly maintenance fee on your IRA. This $5,000 minimum includes funds in the IRA as well as any other deposit account at M.Y. Safra Bank.

The IRA CDs also have the same costly early withdrawal penalty. If you close your account before the end of the term, you forfeit all the interest earned up to that point. The minimum penalty is 90 days worth of interest so if you close a CD within 90 days of opening the account, you will lose some of your original deposit.

For early withdrawals, the penalty depends on the length of the CD term, how early you decided to take money out and how much money you take out. They calculate the penalty at the time of your withdrawal request

To open a M.Y. Safra IRA account, you can visit the New York branch in-person or you can complete and mail in their new IRA account form from home. However, you cannot open this account online. The new account form will ask to list your personal information, fill out a W-9 for taxes and provide a form of ID.

LEARN MORE 

Member FDIC

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How M.Y. Safra Bank’s IRA CDs compare

The M.Y. Safra IRAs are excellent because they offer the same top-notch interest rates as the non-IRA CDs. If you’d like to open an IRA CD, you could get one of the best rates in the country through M.Y. Safra Bank for accounts ranging from six months all the way to seven years.

The main downside of these accounts is it takes at least $5,000 to open an IRA CD and the CDs have very expensive early withdrawal penalties. If you are looking to open a smaller IRA CD or want one that might give you the ability to take money out early, these are some of the other top IRA CDs on the market.

M.Y. Safra Bank’s overall review

If you are looking for a CD or IRA CD, M.Y. Safra Bank is one of the best in the business thanks to their high interest rates and variety of CD terms. Their online money market also offers a competitive interest rate for someone who needs more access to their money.

However, the M.Y. Safra Bank checking, savings and Platinum money markets are not at this same high standard. Their balance requirements and fees are too high considering their low interest rates. To be sure, if you make a large enough deposit in a M.Y. Safra CD or IRA CD, they will waive the monthly maintenance fee on a checking or savings account. In this case, you might want to accept the free account to transfer money in and out of the CD. Otherwise it’s not worth setting one up.

And as a final note, don’t get too excited about their gold and silver coin sign-up bonuses. They are an unusual marketing touch but not valuable enough to go out of your way for.

The post M.Y. Safra Reviews: Checking, Savings, CD, Money Market, and IRA Rates appeared first on MagnifyMoney.

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Review of the Chase Sapphire Bank Accounthttps://www.magnifymoney.com/blog/reviews/chase-sapphire-bank-account/Thu, 20 Sep 2018 17:52:32 +0000https://www.magnifymoney.com/blog/?p=84513Chase Bank’s newest offering is its premium Sapphire Banking, which replaces its Premier Platinum checking option. Although the account requirements will remain basically the same, Sapphire Banking comes with a number of new-and-improved features and perks. Check out the handy chart for an overview of how Chase’s new banking solution stacks up with its now-defunct … Continue reading Review of the Chase Sapphire Bank Account

The post Review of the Chase Sapphire Bank Account appeared first on MagnifyMoney.

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Chase Bank’s newest offering is its premium Sapphire Banking, which replaces its Premier Platinum checking option. Although the account requirements will remain basically the same, Sapphire Banking comes with a number of new-and-improved features and perks.

Check out the handy chart for an overview of how Chase’s new banking solution stacks up with its now-defunct [Chart-ChasePremierPlatinumChecking]Chase Premier Platinum account[/Chart-ChasePremierPlatinumChecking]. Next, dive deep and explore everything you’ll get with a [ChaseSapphireChecking]Chase Sapphire account[/ChaseSapphireChecking]. Finally, decide if maybe a Chase Sapphire Bank account is a good solution for your financial needs.

Chase Sapphire vs. Chase Premier Platinum

Chase Sapphire Bank Account Details


Sign-up bonus


60,000 Ultimate Rewards points when you bring in $75,000 in qualifying deposits and investments

Monthly service fee

$25 or $0 w/ $75,000 or more in combined, qualifying deposits/investments

Foreign transaction fee

$0

Domestic wire transfer

$0

ATM fee

$0 for Chase ATMs; Chase refunds fees from non-Chase ATMs

Overdraft fee

$0 for up to four insufficient funds or returned item occurrences per 12 months

Online stock and ETF trades

$0

The differences between Chase’s new Sapphire Banking checking account and its old Premier Platinum Checking include Sapphire Banking’s $0 ATM fees worldwide, 0% foreign transaction fees and $0 outgoing wire transfer fees. In addition, Sapphire bank account holders receive free stock and ETF trades through JP Morgan’s new investing service, You Invest.

Besides no ATM fees and free, online investing, Sapphire Banking comes with a host of perks. You’ll get premier relationship rates when you link your checking to a Chase Premier savings account; access to experts who can help you with mortgage lending, banking, and small business needs; and a dedicated, 24/7 customer service line.

You’ll also get fun perks like VIP access to entertainment and sports lounges, special seating and early ticket available for sports and entertainment events and $0 monthly service fee if you link your checking account to qualifying deposit or investment accounts. All of these add up to an account that packs a lot of value — if you don’t mind the $25 service fee each month when your average balance dips below a whopping $75,000.

Who the Chase Sapphire Bank account is best for

For narrow cases, Chase Sapphire Banking might make sense, according to Ken Tumin, editor in chief of DepositAccounts, a LendingTree subsidiary. The features are only worth it if you can avoid charges, especially the $25 monthly fee.

“It’s definitely not wise to maintain a deposit account balance of $75,000+ at Chase, however, because you can get much higher interest rates elsewhere, especially at internet banks. Even if you put $75,000 in a Chase Premier Savings account you’d earn only a 0.07% APY. That $75,000 could be easily earning 1.85% APY at one of several internet savings accounts. That’s a difference of about $111 per month,” said Tumin.

However, if a Sapphire Banking client maintains $75,000+ in a J.P. Morgan brokerage account, and that money is in stocks or ETFs, that can be a way to get the features and perks without an opportunity cost. Your J.P Morgan ETF would have the same return as one from another brokerage, Tumin said.

How to open a Chase Sapphire Banking account

If you previously had a Chase Premier Platinum account, you’ll automatically be enrolled in the new Chase Sapphire Banking account. You can open a new Chase Sapphire Banking account by visiting a local branch or sign up online; if you choose the latter, the application takes only a few minutes. Follow these steps to open a Chase Sapphire Banking account:

  1. Have your personal data on hand, including your Social Security number, driver’s license or state-issued ID email address and phone number.
  2. Visit the Chase website and click on “Next.”
  3. Fill out the form with your personal data and click on “Next.”
  4. Fund your account by using a debit card or making a transfer from another Chase account.

LEARN MORE Secured

on Chase Bank’s secure website

Chase Sapphire Banking vs. the competition

So how does Chase Sapphire Banking stack up against the competition? To find out, take a look at how it compares with Bank of America’s Interest account and Wells Fargo’s Portfolio account.

Chase Sapphire Banking vs. Bank of America Checking vs. Portfolio by Wells Fargo

Chase Sapphire Banking

Bank of America Interest Checking

Portfolio by Wells Fargo

APY

0.01%

0.01%
for less than $50,000; 0.02% for $50,000 to $99,000; 0.02% for $100,000 and more

0.01% for $0 to $4,999 and 0.05% for $5,000 or more

Min. balance required to waive fees

$75,000 in combined, eligible deposits and investments

$10,000

$25,000 in linked bank deposits or $50,000 in linked bank, brokerage and credit balances

Monthly service fee

$25

$25

$30

Foreign transaction fee

$0

3%

3%

Domestic wire transfer fee

$0

$0 for incoming; $30 for outgoing

$15 incoming; $30 outgoing

ATM fee

$0

$0 for BOA ATMs; $2.50 for non-BOA ATMs

$0

Overdraft fee

$0 for 4 within 12 months

$35

$35

Account perks

Free, online investing; special rates when you link checking to savings; VIP access to sports and entertainment tickets, lounges and seating; dedicated 24/7 customer service

$0 maintenance fee for up to 4 savings accounts linked to your primary Interest Checking account; free standard checks; cash-back deals with BankAmeriDeals

Annual fee waiver on 1 home equity line of credit; interest rate discounts on loans; special credit card benefits, ATM reimbursements for non-Wells Fargo ATMs; bonus interest rates on qualifying savings products; access to online investing guidance from Wells Fargo Advisors

Chase Sapphire Banking vs. Bank of America Interest Checking

Bank of America’s Interest Checking account is closest to the Chase Sapphire Banking account, for comparison’s sake.

Although you’ll get a higher APY for higher balances with a Bank of America Interest Checking account, it goes only as high as 0.02%, which isn’t that much better than Chase Sapphire Banking’s APY of 0.01%. The biggest difference is that you need significantly less to qualify for free monthly maintenance from Bank of America than for Chase Sapphire Banking.

That said, Bank of America charges fees where Chase Sapphire Banking does not. The BofA account’s 3% foreign transaction fee, $35 overdraft fee, $30 fee for incoming domestic wires and $2.50 charge for using non-BOA ATMs can really add up. You don’t have to worry about any of those charges with the Chase Sapphire banking, unless you have more than four overdrafts in 12 months.

The winner depends largely on how much money you have to sock away, how often you plan to use the account internationally and also whether or not you’ll take advantage of Chase Sapphire’s additional perks.

Considering the fact that these are checking accounts and experts recommend you use credit cards when making purchases abroad, there’s no real tangible benefit to Chase Sapphire Banking’s 0% foreign transaction fee and no real threat from the fact that Bank of America’s Interest Checking comes with a 3% fee. But if you don’t want to use your debit card abroad, there are plenty of credit cards that are safer to use for international purchases and they don’t charge a foreign transaction fee.

If you don’t want to sock away $75,000 to avoid Chase’s monthly service fee and don’t care about the free investing perks that come with it, then the Bank of America Interest Checking account is probably the better bet — you can avoid the fee with far less money in the bank.

Chase vs. Portfolio by Wells Fargo

Another strong Chase Sapphire competitor is the Portfolio by Wells Fargo. Once again, comparing this mega-bank to Chase is a good way to gauge what’s out there in big-bank checking.

Wells Fargo offers a 0.05% APY on account balances in excess of $5,000, which beats Chase Sapphire by a country mile. Its qualifiers to waive the monthly maintenance fee are also cheaper: $25,000 in linked bank deposits or $50,000 in linked bank, brokerage and credit balances. But Wells Fargo charges a pesky 3% foreign transaction fee, plus $15 for incoming domestic wires and $30 for outgoing ones. And if you happen to overdraw your account, you won’t love the $35 overdraft fee.

Some of the perks are pretty nice with the Portfolio by Wells Fargo account, though. This includes an annual fee waiver on a home equity line of credit, interest rate discounts on loans and bonus rates on qualifying savings products. When push comes to shove, we would say that this account ties with the Chase Sapphire Banking account. Each has its pros and cons, but when you compare them they come out pretty even overall.

Are premium checking accounts ever worth it?

In general, premium checking accounts are for high-balance customers. You get most of the perks and benefits when your balance is high. If you meet that balance requirement via a brokerage account, that’s one thing. But if you just let that much cash sit in your account so your monthly fee is waived and you get special perks, consider parking it in a high-yield savings account instead.

The post Review of the Chase Sapphire Bank Account appeared first on MagnifyMoney.

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Consumers Pay a Price for Trump’s Tariffs on $200 Billion in Chinese Importshttps://www.magnifymoney.com/blog/news/consumers-pay-a-price-for-trump-tariffs/Thu, 20 Sep 2018 13:33:52 +0000https://www.magnifymoney.com/blog/?p=85967President Donald Trump made good on his threat of imposing tariffs on $200 billion worth of Chinese-made goods when he announced Monday that a 10% duty will take effect Sept. 24, rising to 25% by the beginning of next year. The silver lining: The later timing avoids Christmas morning meltdowns from kids who missed out … Continue reading Consumers Pay a Price for Trump’s Tariffs on $200 Billion in Chinese Imports

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iStock

President Donald Trump made good on his threat of imposing tariffs on $200 billion worth of Chinese-made goods when he announced Monday that a 10% duty will take effect Sept. 24, rising to 25% by the beginning of next year.

The silver lining: The later timing avoids Christmas morning meltdowns from kids who missed out on trendy electronic gadgets due to increased prices. The bad news? This may not be the end of the trade war. China reacted to Monday’s announcement with talk of retaliation, which led President Trump to threaten further tariffs on another $267 billion worth of Chinese imports. That would bring the total value of Chinese goods subject to tariffs to more than $500 billion, virtually all Chinese imports.

Tariffs Explained: What They Are, How They Work, Why It Matters

For now, the administration removed nearly 300 items from the original proposed list, a nod to U.S. companies’ concerns since Trump first threatened tariffs this summer. Popular consumer electronics products such as smartwatches and Bluetooth devices are among those that dodged the higher tariffs. Some consumer safety products, such as bicycle helmets, baby car seats and playpens also were taken off the list.

It could be worse for consumers, but …

The tariffs account for nearly 40% of the $505 billion in Chinese items the U.S. imports annually. Although they will start at a more subdued 10% level, eventually, American consumers will keenly feel the pain from the swath of stiff tariffs on thousands of goods as varied as fish, baseball gloves, luggage, dog leashes, furniture, lamps and mattresses.

“What the tariffs will do is basically cause many people to pay more for whatever they buy in the stores,” said Gary Hufbauer, economist and nonresident senior fellow at the Peterson Institute for International Economics. “It could be worse … 25% is a lot different than 10%.” The PIIE is a nonprofit, nonpartisan economics research institution in Washington, D.C.

“[They thought they might have to pay] $8 for that new T-shirt, they may pay $7, whereas previously it was $5,” Hufbauer said, giving an example.

Before excluding the 300 items, almost 23% of the targeted items on Trump’s $200 billion list were consumer products, according to a July PIIE analysis. By comparison, consumer products made up just 1% of the initial $50 billion worth of Chinese products Trump put into place earlier in the summer.

Why Trump takes a step back

Delaying the full 25% duty is an attempt to mitigate potential political and economic consequences ahead of the midterm election, said Hufbauer.

For one, Hufbauer said, Trump does not want to see the stock market tank before November.

“Many of his supporters own shares, and they would blame him because they thought the stock market was dropping because of his foreign policy, his trade wars,” Hufbauer said.

The U.S. stock market on Tuesday closed higher as investors shrugged off escalating trade tensions.

There is also a concern that if high tariffs are slapped on Chinese imports, American manufacturers that import components from China may have to pay higher prices for those parts or worse, lay off workers as a result. Even though consumers don’t buy parts directly, they end up being incorporated or assembled into products that consumers eventually buy. Manufacturers must either pass along the increased cost to consumers or find other ways to cut expenses.

“Those stories are not good for a person going into an election,” Hufbauer said.

What’s at stake

When the tariffs are at the 25% level, economists estimate that consumers will have to bear about half — 12.5% to 15%— while the rest is absorbed by the producer or manufacturer.

Those who have purchased washing machines this year may have already understood how tariffs affect consumer product prices. The price of imported washing machines shot up 16.4%, three months after the Trump administration imposed 20%-50% tariffs in February, according to the American Enterprise Institute, a Washington, D.C.-based conservative think tank.

There are also indirect impacts, which may emerge more slowly, as 47% of the $200 billion tariff list comprises tens of billions of dollars of intermediate inputs — those parts and components of final products we mentioned earlier — imported from China. Consumers will likely have to spend more on items assembled with parts imported from China that are subject to high tariffs.

What’s next

Trump has been tough on trade since he was on the presidential campaign trail. He has accused China of practicing unfair trade policies, such as forcing U.S. firms to transfer technology to Chinese counterparts. Supporters of the new tariffs hope it will persuade China to play fairer on trade. Even critics agree that China has in some ways stymied growth in U.S. industries, but they also criticize Trump’s protectionist trade policy and say it will ultimately hurt industries and individuals in both countries.

It’s possible Trump will act on his rhetoric and continue to wage a trade war against China, economists said. But Hufbauer thinks Trump is trying to pressure China into making concessions ahead of the upcoming trade talks between Beijing and Washington.

If Beijing is willing to make concessions on some of the main issues Trump raised, the trade tensions could be dialed back a bit, Hufbauer said. “I don’t think we’re going to get into a happy friendly time,” he said. “But I think we could reduce the confrontation a lot if China decides to make some concessions.”

However, if 25% tariffs are imposed on total trade in both directions, then we would enter a full-blown trade war we haven’t seen since the 1930s. In that case, economists said American companies that rely on global supply chains will hold off on investment decisions due to the uncertainty around global trade, which will negatively affect the U.S. economy and eventually cause the unemployment rate to swing up.

“Using the terminology of war, Trump’s misguided trade war is generating lots of collateral damage and friendly fire that is putting [America’s] companies, workers and consumers at great risk,” said Mark Perry, an economics policy scholar at the American Enterprise Institute and professor of finance and business economics at the University of Michigan-Flint.

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How Fed Rate Hikes Change Borrowing and Savings Rateshttps://www.magnifymoney.com/blog/news/fed-rate-hikes-change-borrowing-savings-rates/Thu, 20 Sep 2018 12:31:08 +0000https://www.magnifymoney.com/blog/?p=74593Since late 2015, the Federal Reserve has raised the upper limit of its target federal funds rate by 1.75 percentage points, from 0.25% in December 2015, to 2.00%. The Fed is expected to raise rates another 25 basis points on Sept. 26. MagnifyMoney analyzed Federal Reserve rate data to illustrate how the rates consumers pay … Continue reading How Fed Rate Hikes Change Borrowing and Savings Rates

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Since late 2015, the Federal Reserve has raised the upper limit of its target federal funds rate by 1.75 percentage points, from 0.25% in December 2015, to 2.00%. The Fed is expected to raise rates another 25 basis points on Sept. 26.

MagnifyMoney analyzed Federal Reserve rate data to illustrate how the rates consumers pay for loans and earn on deposits have changed since the Fed started raising them two and a half years ago. In short, we find Fed rate changes have wide-ranging implications for consumers.

  • Credit card borrowers are currently paying $110 billion in interest annually, up $31 billion from the annual $79 billion they paid prior to the first Federal Reserve interest rate hike in December 2015, making introductory 0% APR deals all the more attractive.
  • Meanwhile, depositors earned significantly more from savings accounts. In the 12 months ending in June 2018, depositors earned $26.8 billion in interest on their savings accounts, up $16.8 billion from the $10 billion they earned in 2015.
  • According to our analysis, credit card rates are most sensitive to changes in the federal funds rate, almost directly matching the rate change with a 1.92 point increase since December 2015. Credit card rates will continue to rise in line with the Fed’s rate increases, and if the Fed raises them again, the average household that carries credit card debt month to month will pay over $150 in extra interest per year compared with before the rate hikes began. MagnifyMoney estimates 122 million Americans carry credit card debt month to month.
  • Student loan and auto loan rates have also risen sharply, but only half as much as credit card rates, in part because they are long-term forms of lending that are less reliant on the short-term federal funds rate. Federal student loan rates are set based on the 10-year Treasury note rate each May.
  • Savers at big banks have seen little change, with the average savings and CD account passing through only a fraction of the rate increase. However, that masks a big opportunity for savers who shop around and move deposits to online banks. Online banks have aggressively raised rates, and now offer rates in the 2% range, versus just 1% in 2015. That’s over 20 times what typical accounts pay.

Let’s take a closer look at how the Fed rate hike impacts different financial products:

Credit cards

Most credit cards have a rate that’s directly based on the prime rate, for example, the prime rate plus 9.99%. As a result, card rates tend to move almost immediately in line with Fed rate changes. In the current cycle, the rates on all credit card accounts tracked by the Federal Reserve have increased 1.92 points, roughly in line with the Fed’s increase of 1.75 points.

That said, consumers can still find attractive introductory rate offers.

For example, 0% balance transfer offers have continued to have long terms even as the Fed hiked rates, with offers still available for nearly two years at 0%.

Credit card issuers make up for the rate hike with the automatic rise in variable back-end rates, as well as the increasing spread between the prime rate and what consumers pay on new accounts. They can also increase other fees, like late payment fees or balance transfer fees to keep long 0% deals viable.

The Federal Reserve tends to hike up interest rates gradually over time. And people in credit card debt will barely notice the rate increase in their monthly statement. When rates are increased by 0.25%, the monthly minimum due on a credit card will increase $2 for every $10,000 of debt.

The danger of such a small increase in the monthly payment is complacency. Remember that by paying the minimum due, you could be in debt for more than 20 years.

Rates are expected to keep rising, so it makes sense for consumers to lock in a low rate today. The best ways to lock in lower rates are by leveraging long 0% balance transfer deals or by consolidating into fixed rate personal loans.

Savings accounts

On average, savings account rates haven’t changed much since the Fed started raising rates. That’s largely because big banks with the biggest deposits and large branch networks have less incentive to offer higher rates, and this skews national data on rates earned because most savers don’t shop around to find higher rates at online banks and credit unions.

Consumers who shop around can find much higher savings account rates than three years ago, and shopping around for a better rate on your deposits is one of the best ways to make the Fed’s rate hikes work in your favor.

Back in 2015, it was rare to see savings accounts pay 1% interest.

Today, many online banks are competing for deposits by offering savings account rates approaching 2%, flowing through about half of the Fed’s rate hike into increased rates for depositors. These rates will continue to rise as the Fed hikes rates. The increases are already apparent in the data: In the 12-month period ending June 2018, depositors earned $26 billion in interest on their savings accounts, versus the $10 billion they earned in 2015.

CDs

CD rates have moved faster than savings rates, up 0.19 points for 12-month CDs since the Fed started raising rates. That’s in part because they are a more competitive product that forces consumers to rate shop when they expire at the end of their 6-month, 12-month or longer term.

But that rate rise doesn’t fully reflect what some smaller banks are passing through, as the banks with the largest deposits have been slow to raise rates.

The rates on 1- and 2-year CDs at online banks have been increasing rapidly, and are now well over 2%, reflecting much of the Fed’s rate increases since 2015.

The rates on 5-year CDs have not been increasing as quickly. As a result, the rate curve has been flattening.

A reasonable strategy would be to invest in short-term (1- and 2-year) CDs. If competition on the short end continues, you can get the benefit in a year on renewal.

And if long-term rates start to rise, you can redeploy or build a ladder in a year.

Student loans

Federal student loan rates are set based on a May auction of 10-year Treasury notes, plus a defined add-on to the rate. Today, rates for new undergraduate Stafford loans stand at 5.05%, up from 4.30% before the federal funds target rate began to rise.

Since student loan rates are determined by the 10-year Treasury rate, rather than a short-term rate, they are less directly related to changes in the federal funds rate than some shorter-term forms of borrowing like credit cards. Instead, future market views of inflation and economic growth play a role. Federal student loan rates are capped at 8.25% for undergraduates and 9.5% for graduate students.

For private refinancing options, rates depend on secondary markets that tend to follow longer-term rates, rather than the current federal funds rate, but in general, a rising rate environment could mean less attractive refinancing options.

Personal loans

Personal loan rates tend to be driven by many factors, including an individual lender’s view of the lifetime value of a customer, funding availability and credit appetite. Most personal loans offer fixed rates, and in a rising rate environment overall, we expect these rates will go up, making new loans more expensive, so consumers on the fence should consider shopping for a good rate sooner rather than later. Since the end of 2015, rates on 2-year personal loans tracked by the Federal Reserve have increased by 0.65 basis points.

Auto loans

Prime consumers who shop around for an auto loan can still find very low rates, especially when manufacturers are offering special financing deals to move certain car models.

But the overall rates across the credit spectrum have gone up since the Fed raised rates, in part due to the rate hikes and because of recent greater than expected delinquencies in some parts of the auto lending market.

Mortgages

Since the Fed started raising rates in late 2015, the average 30-year fixed mortgage rate has increased from approximately 3.9% to 4.6% as of Sept. 13. The mortgage market tends to follow trends in longer term bond markets, like the 10-year Treasury, since mortgages are a longer-term form of borrowing. That shields them from the impact of Fed rate increases, and it’s not unusual for mortgage rates to decline during some periods when the Fed is raising rates.

What can consumers do

Rates are only going to go up. That means life is going to get more expensive for debtors, and more rewarding for savers.

If you are in debt, now is the time to lock in the lowest rate possible. There are still plenty of options at this point in the credit cycle for people to lock in lower interest rates.

If you are a saver, ignore your traditional bank and look online. Take advantage of online savings accounts and CDs to earn 20 times the rate of typical big bank rates.

The post How Fed Rate Hikes Change Borrowing and Savings Rates appeared first on MagnifyMoney.

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Understanding the Risks of Short-Term Loanshttps://www.magnifymoney.com/blog/personal-loans/understanding-the-risks-of-short-term-loans/Wed, 19 Sep 2018 13:30:10 +0000https://www.magnifymoney.com/blog/?p=83269If you’re in need of quick cash but might have trouble borrowing money through traditional means, a title or payday loan might sound like the light at the end of the tunnel — neither requires a stringent approval process and you can get the money quickly. Although you can easily access these short-term loans, they … Continue reading Understanding the Risks of Short-Term Loans

The post Understanding the Risks of Short-Term Loans appeared first on MagnifyMoney.

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If you’re in need of quick cash but might have trouble borrowing money through traditional means, a title or payday loan might sound like the light at the end of the tunnel — neither requires a stringent approval process and you can get the money quickly.

Although you can easily access these short-term loans, they come with a high level of risk. The biggest risk is that like many payday loan borrowers, you could end up in a nightmare debt cycle, having to pay fees and interest charges that would quickly eclipse the amount of cash you borrowed in the first place.

Keep reading to learn more about the risks and costs associated with some common short-term loans. Next, discover alternatives that can help you get through your financial crisis.

Common types of short-term loans

When you need financing quickly, there are several options to choose from. Before you take out a short-term loan, be sure you understand how long you have to repay the funds, how much you can borrow, and, of course, how much it will cost you.

Payday loans

Typical Term LengthAvg. Loan AmountAvg. Financing Charge

14 days

$500

$10 to $30 per $100 borrowed

Payday loans are high-cost, small-dollar personal loans that become due in a lump sum — typically on your next payday. You can find these types of loans from storefront or online payday lenders.

Many states set limits on the amounts of payday loans lenders can offer, according to Consumer Financial Protection Bureau, and the most common payday loan amount is $500. Loans are available above and below that, depending where you live.

Lenders generally require you to write a predated check for the amount you want to borrow — including fees — or they might ask you for authorization to electronically withdraw money from your bank account.

The lender gives you the funds, then holds the check until the loan is due. If you can’t repay it on deadline, the lender can cash the check or take money out of your account. You can choose to extend the loan term — but that’s when the debt trap begins. You’ll likely incur additional charges each time you roll over your debt for another payday period, making it that much more difficult to pay off the balance.

The average loan term ranges from two to four weeks. Many states have laws that cap payday loan fees, which generally range from $10 to $30 for each $100 borrowed. A typical, two-week payday loan with a $15-per-$100 financing fee translates to an annual percentage rate of almost 400%.

Check out this map by Center for Responsible Lending showing interest rates on the typical payday loan in each state. CRL is a nonprofit, nonpartisan research and policy group.

Stuck in a payday loan trap? Here are the ways out.

Short-term installment loans

Typical Term LengthAvg. Loan AmountTypical APR

Two weeks to several years

$1,291

197% to 369%

Installment loan borrowers typically get fixed-rate loans with fixed payment schedules.
Understand that many small-dollar installment loans are really high-cost payday loans in disguise. In recent years, payday lenders have moved into the installment loan business to skirt heightened regulations regarding payday loans. Instead of issuing high-cost payday loans, these lenders might offer installment loans, but charge high upfront fees to get around interest rate caps set by state regulatory bodies.

The CFPB reports that the average size of installment loans borrowers take is $1,291 and APRs range from 197% to 369%. Installment loan terms are longer than payday loans and can have terms of up to several years.

According to the Pew Charitable Trusts — an independent, nonprofit policy think tank — lenders in 19 states issue short-term, payday installment loans: Alabama, California, Colorado, Delaware, Idaho, Illinois, Kansas, Missouri, New Mexico, North Dakota, Ohio, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia and Wisconsin.

Car title loans

Typical Term LengthTypical Loan AmountsTypical Financing Charge

15 to 30 days

$100 to $5,500
(25% to 50% of the vehicle’s value)

25% per month

A title loan is another kind of expensive, short-term loan, but it’s secured, which means you have to put up collateral to get the loan. For example, title lenders use your car’s title as a collateral.

You typically have to own your car outright to be eligible for a title loan, but some lenders offer them if you have equity in the vehicle or even a clear title — you just need to have enough car equity to cover the loan. Car title lenders usually make loans that equal 25% to 50% of the car’s value. Title loan term lengths generally run 15 or 30 days. On average, the loan amounts range from $100 to $5,500, but some lenders will issue these loans for $10,000 or more, according to the Federal Trade Commission.

Lenders charge an average of 25% as a monthly financing fee, which adds up to an APR of at least 300%, according to the FTC. You also might be on the hook for additional fees, depending on the lender.

Like payday loans, if you can’t repay a single-payment title loan on time, you might choose to extend your loan term, which will result in more fees. Some car title loans have longer loan terms and you can repay them in installments. Vehicle title installment loans are available in 18 states, some of which allow both single-payment and installment loan structures, according to the CFPB. If you can’t repay the loan at all, you risk losing your car — the lender can legally repossess to recoup the money you owe.

Pawn shop loans

Typical Term LengthTypical Loan AmountsTypical Financing Charge

30 to 90 days

$150

36% to 100%

Pawn shops offer collateral-based loans. You bring in something of value — think jewelry, musical instruments, tools or other household or personal item — and the pawnbroker lends you money based on the value of your collateral. He or she holds onto your collateral until you repay the loan.

The average pawn shop loan amount is $150, according to the National Pawnbrokers Association. Borrowers typically have 30 to 90 days to pay back their loans and get their items back. The cost of these loans varies, depending on state law cap rates and individual shops’ practices. Some pawn shops charge storage fees and insurance fees. Christopher Peterson, director of financial services and senior fellow at the Consumer Federation of America, estimated that on average, these loans’ APRs range from 36% to 100% — or more.

Peterson said pawn shop loans’ APRs are consistently lower than payday loans’, but well-above average credit card interest rates of 15.5%. If you can’t repay your pawn shop loan in full, you lose your collateral, but your loan will be marked as paid.

Learn more: Why are short-term loans risky?

You’re likely entering the danger zone if someone offers a short-term loan that comes with an APR higher than 36% — the benchmark for affordable small loans — no matter how the loan is structured.

Here are just a few reasons to be wary of short-term loans:

They can quickly balloon over time

Payday, title and payday installment loans are often called predatory loans because they are very different from healthy, small-dollar loans that provide wealth-building opportunities or income-smoothing possibilities — these risky, short-term loans are designed to profit based on borrowers’ inability to repay them. That way, high-cost lenders can keep charging fees.

“There’s no shortage of personal stories or accounts of individuals taking out a few hundred dollars, like $200 or $300, and actually end up paying over $1,000 just in fees,” said Scott Astrada, director of federal advocacy for CRL. “And their principal has never even [gone] down by a dollar.”

Here’s an example of what can happen with these types of loans: Say you need $500 today and you take out a loan with a $15-per-$100 finance charge. That means you owe $575, which is due on your payday in two weeks.

“A person who doesn’t have a $500 today is not going to have $575 in two weeks,” said Ed Mierzwinski, senior director of the Federal Consumer Program at U.S. PIRG, a grassroots consumer program.

If you keep rolling it over by paying another $75 every two weeks, three pay periods later you’ll end up incurring a shocking $225 fee on a $500 loan, which equates to a 391% APR. “That’s a debt trap,” Mierzwinski commented.

Installment loans might sound like a safer bet because you’re making fixed monthly payments over a set period of time. But they can also be unaffordable, Peterson said.

“You could have a 500%-interest-rate-two-week payday loan that you just pay the interest on and you roll over multiple times, or you can have a 500%-interest-rate-year-long installment loan where you just pay interest and never decrease the principle,” Peterson said. “If you just take the money and don’t pay attention to the labels or the ink on the paper for the contract, these are essentially the same loan.”

The CFPB study found that nearly a quarter of payday installment loans end up in default. Of all the short-term products, online payday installment loans have the highest default rate — 41%.

Your bank account might be at risk

Short-term loans might have a domino effect on your financial security.

“It’s not uncommon for the debt trap not only to threaten the financial security of the borrower, but to have far-reaching, devastating effects on the whole financial life of the borrower,” Astrada said.

To take out a payday loan, you have to have a bank account; often, you have to give lenders access to your bank account to withdraw your payments (or give them a predated check). Lender is entitled to cash your predated check if you don’t pay them back. That could lead to overdraft fees, bounced check fees, your bank closing your account — all of which could significantly damage your credit. Some risky loan borrowers even end up in bankruptcy.

You could lose your possessions

To get a short-term title loan, your collateral is your car. Keep in mind that you lender is within his or her legal rights to take possession of your vehicle if you default on the loan.

“For $200, $300 or $500 that you need, you are putting your car that could be worth $2,000 or $3000 at risk of being repossessed by the high-cost predatory lender,” Mierzwinski said.

Moreover, if a lender takes possession of your car, you won’t be able to get to work, which will eventually affect your ability to repay the loan. Approximately 22% of car title installment loans end in default, and lenders repossess about 8% of those, according to the CFPB.

When you take out a pawn loan, you might risk losing your collateral, but at least nothing will happen if you walk away from the debt. That’s why pawn loans are relatively safer than other high-cost short-term loans. Peterson suggested that if you want to take out a loan from a pawn shop you select the collateral that you can live without — think twice before you pawn a family heirloom.

When can short-term loans be a good idea?

There are countless reasons — many beyond your control — you might need money fast. Medical emergencies, unexpected job loss or car repairs can easily send your finances spiraling. Before you take out a short-term loan, first ask yourself whether it’s necessary to borrow some quick cash for the expenses. For example, it’s not a good idea to take out short-term loan for a want, rather than a need, like a lavish vacation.

“If you’re taking out small-dollar loans that just simply pushes the problem forward in terms of having more expenses and income, that’s a dangerous situation because then you’re not actually addressing the issue,” Astrada said.

You should consider short-term loans only when it’s absolutely necessary, such as for a true emergency. If you do decide on a short-term loan, avoid the high-cost, predatory ones. Instead, shop for the lowest APR you’re eligible for and borrow only as much as you need. Read on to find some better, safer alternatives options with reasonable interest rates.

Where to find a good short-term loan

Start with your local credit union or community bank

Plenty of community banks and credit unions offer personal loans or small-dollar loans with much lower interest rates than payday or title loans. In addition, these types of financial institutions are much better regulated than high-cost lenders.

For example, all federal credit union loans have an 18% interest cap, with one exception — Payday Alternative Loans, which have interest rates capped at 28%.

Look for credible, online lenders that offer lower-APR loans

Some banks and nonbank, online lenders also make decent installment loans, even for people with not-so-great credit scores. There are decent personal loans for people with bad credit. Online lenders typically offer loans to borrowers with minimum scores of 600. The higher your score, the better rates you’ll likely get. The exact products lenders offer you can depend on your credit score, credit history, income and where you live, but the APR should not exceed 36%.

Compare lenders on our personal loan marketplace.

When considering a short-term loan, there are a few things you must avoid. Because you don’t want to get into a bad cycle of debt, consider these points when you’re choosing a loan product:

1. The total loan cost
The main difference between a small-dollar loan that’s predatory and one that’s beneficial to a consumer is the interest rate. “Anything over 36% is very, very high-cost credit,” Astrada said.

2. How many questions the lender ask you
Risky loan lenders don’t ask for much information about your finances and the process is quick and easy. Legitimate financial institutions, however, have strong underwriting standards and typically access your personal and financial information to determine your ability to repay.

“[The lack of strong underwriting], where you can click three buttons online, walk through a store and walk out in five minutes. Yes, it’s more convenient, but it’s also like the bait of getting into one of those debt traps,” Astrada said.

3. Additional fees
Be wary of a host of tangential loan charges, such as prepayment, membership, convenience or origination fees. The loan itself might be small, but if a lender includes points and fees in the APR, your cost of borrowing can skyrocket.

4. Transparency
Steer away from products that don’t offer disclosure on rates and terms. If the lender is not transparent or ambiguous about additional fees, loan terms and your APR, consider it a red flag.

Alternatives to short-term loans

You might not have to take out a payday loan if you take certain actions. Consider these:

Contact your creditor to make a payment plan. If you know you might miss payments or have already missed some, don’t panic. Contact your creditors first. Some might work out a payment plan with you, especially if you have an emergency. For example, many utility companies and hospitals offer lower interest — even 0% — payment plans to make sure that you can pay past due balances over the course of several months.

Shop around for the lowest-cost loan. Check with credit unions and community banks to see if you qualify for a small-dollar personal loan. Also search for credible financial companies offering installment loans with lower APRs.

Ask friends and family for help. Don’t be embarrassed to ask friends or family if you need a quick, short-term loan. A Pew Charitable Trusts study found that many borrowers trapped in payday-loan debt cycles eventually got help from friends and families. You’re way better off asking for help from them instead of getting in over your head with a predatory loan.

Take a credit card cash advance. When you borrow cash against your credit card’s line of credit on your credit card, it’s called a cash advance. Unfortunately, cash advances often come with high interest rates and additional fees.

In fact, a cash advance APR is typically 5% higher than the APR for purchases. On top of that, you’ll incur a 3% or 5% fee on the amount of each cash advance you take. It’s not an ideal solution, but still likely cheaper than a payday or title loan in the long run.

Make a budget and save for emergencies. Look at your income and expenses and make sure you don’t spend more than you earn. Avoid unnecessary spending. At the same time, build some savings so that next time an emergency arises, you have a cushion to fall back on instead of turning to credit for help.

The bottom line

Say no to costly short-term loans. Don’t fall for the convenient, quick money — those predatory loans can cost you a great deal in the long run. If you do a need short-term loan, shop around for the lowest-cost one you can find. Try local banks, credit unions and credible financial companies. If you can’t secure a loan because your credit is bad, you have no income and you don’t own anything that qualifies for collateral at a pawn shop, you may need to seek alternatives as mentioned above, but a three-digit, payday or title loan isn’t going to fix your problem.

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Credit Card Consolidation Loanshttps://www.magnifymoney.com/blog/pay-down-my-debt/credit-card-consolidation-loan/Tue, 18 Sep 2018 20:55:09 +0000https://www.magnifymoney.com/blog/?p=83257If you’re having a hard time paying down your credit card debt, you may want to consider consolidating with a credit card consolidation loan, better known as a personal loan. This is one strategy that can help give you the extra time you need to pay down several debts, especially if you’re struggling to manage … Continue reading Credit Card Consolidation Loans

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If you’re having a hard time paying down your credit card debt, you may want to consider consolidating with a credit card consolidation loan, better known as a personal loan. This is one strategy that can help give you the extra time you need to pay down several debts, especially if you’re struggling to manage multiple monthly payments. If you’re able to find a credit card consolidation loan with a low APR, you’ll be able to slash your interest charges, too, and potentially pay your debts off even faster. Use our comparison widget below to find the best loan for you!



Compare Credit Card Consolidation Loans

That being said, taking out a loan to pay off a credit card is not always the best option for everyone. It’s smart to consider the pros and cons to help determine whether a credit card consolidation loan is right for you.

In this article, we’ll cover everything you need to know about consolidating your credit debt with a loan.

What is a credit card consolidation loan?

A credit card consolidation loan is a personal loan that can be used to consolidate your credit card debt. An unsecured personal loan allows you to take out money without collateral. However, these loans can sometimes have higher interest rates because they are a risk to lenders. These types of loans can provide a fixed loan amount (what you want to borrow) with a fixed monthly payment and a fixed term. This helps you to know what you’ll pay each month and how long it will take to pay off the loan.

Personal loans can also have fixed-interest rates, meaning they won’t likely change throughout the length of your loan. These rates usually depend on your credit history. Those with good credit can usually receive lower rates than those with poor credit.

When should you consolidate?

People consolidate for many reasons and at various times. However, high-interest rates on current debt can be a major deciding factor. A credit card debt consolidation loan can possibly offer lower interest rates and provide one easy monthly payment.

Paying off your balance can often seem impossible, especially when you’re only making minimum payments each month. This might be a good time to consider consolidating your debt. With a credit card consolidation loan, you have a set period of time to pay off your debt (unlike with a credit card) so you can possibly get it paid off sooner.

If you consolidate your credit card debt with a loan, that debt is paid off. You no longer need to worry about high-interest rates and fees on your credit card accounts. Instead, you’ll only have one monthly loan payment to focus on.

While there are many good reasons to use a  loan to consolidate your debt (we will get to a couple below!), there are times when this might not be ideal. For example, if you don’t have enough income to cover the cost of your loan payment each month or if you have extremely high debt-to-income ratio, taking out a loan may not be the best option.

Why should I pay off a credit card with a loan?

There are many benefits when consolidating your credit card debt with a loan.

  • Have one monthly payment instead of multiple payments, and can possibly receive a lower interest rate and lower monthly payment.
  • Have a fixed term to pay off your loan so you can get your debt paid down faster.
  • Without several accounts to worry about each month, you can focus on paying just one.
  • By having a fixed monthly rate on a fixed schedule, you can get in the habit of paying your bill on time every month, which can help improve your credit score.
  • A loan can also help minimize your credit utilization rate. This is the rate that determines how much of your credit limit you utilize and is one of the major determining factors for your credit score. To retain a good credit score, your credit utilization rate should remain below 30%.
  • You’ll also improve your score by adding an installment loan to your credit report. Credit mix is part of calculating your credit score and it’s good to have a variety of revolving credit types.

How to qualify

When applying for a credit card consolidation loan, lenders look at certain aspects, including credit history and income. You’ll be more likely to qualify for a lower rate if you have good credit. If your credit is poor, you may want to consider a cosigner with good credit.

The lender also takes into consideration your income level to ensure you have the finances to pay your loan. Most lenders look for borrowers that have a lower debt-to-income ratio, so they know borrowers have the funds to pay.

Fees and fine print to watch out for

While consolidating your debt with a loan can be smart, it’s not perfect. There are certain things to watch out for, including fees, penalties and the annual percentage rate (APR), which can vary with each lender.

Origination fee. Some lenders may charge an origination fee of 1% to 8% to process your personal loan application. This type of fee is generally included in the APR and deducted from the loan amount. That means if you borrow $10,000 and you’re charged a 2% origination fee, you’ll walk away with a loan of $9,800. An origination fee can be a percentage of the loan amount itself or charged as a flat rate.

Rates. The annual percentage rate (APR) is usually based on the borrower’s credit score. If a borrower has good credit, there is a better chance of receiving a lower rate. It’s essential to shop around to find the best rate for your needs.

Prepayment penalties. While most lenders don’t charge a prepayment penalty, it can happen. This is a fee to the borrower if they decide to pay off their personal loan early.

Precomputed interest. A certain way some lenders calculate interest on a personal loan that can have you paying a higher interest rate if you pay off your loan before the term is up.

Credit card consolidation loan vs. balance transfer

Consolidating your credit card debt with a credit card consolidation loan might be a good option, but it’s important to look over all other prospects to know for sure.

 Credit Card Consolidation LoanBalance transfer

Types of debt you can consolidate

Personal loans can be used to pay off different types of unsecured debt, including medical bills not covered by insurance, along with credit cards.

Credit card debt only. Can’t transfer debt from cards of the same issuer.

Credit required

Bad-excellent

Good

Rates

Up to 35.99% or higher depending on credit/lender

0% intro APR; variable APR once promo period ends

Term lengths

24-84 months

Promo periods typically last 12-21 months; balance can revolve indefinitely after that.

Fees

1%-8% origination fee; some lenders charge no origination fee.

3%-5% balance transfer fee; some offers do not charge a fee.

– Learn more about using a balance transfer to pay down debt here

Shopping for credit card consolidation loans online

Finding consolidation loan offers online is a relatively easy process and you’ll be able to compare different options all at once.

How to find them
Get started by having a firm grasp on how much you want to borrow and the amount of time you’ll likely need to pay back your loan. Keep an eye on your credit history so you know your score and can attest all information is correct.

Search and compare credit card consolidation loans online with the help of our easy-to-use online comparison tool at the top of this article. You can shop different borrowers at once with only a soft credit inquiry that will not impact your score.

LendingTree, our parent company, also has a convenient debt consolidation calculator that can help determine your estimated monthly payments by simply entering your consolidation loan amount.

What to compare
When shopping for a credit card consolidation loan, it’s important to compare the rates to find the best one that fits your budget. You want to ensure you’ll be able to pay for the monthly payments and that you are getting a better rate than the one you already have with your credit cards. You’ll also want to keep an eye on the loan terms and the loan amounts offered as each can vary. It’s also important to look for any possible fees, including origination fees that can sometimes be tacked onto personal loans.

Consolidating your credit card debt with a loan may be a good idea, but it’s smart to do extensive research to make certain it’s the right choice for you.

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