What Exactly Is Mortgage APR?

What Exactly Is Mortgage APR?

pen resting on mortgage APR document

Mortgage interest rate and mortgage APR (annual percentage rate) while related, are not the same. You’ll see both listed for mortgages. For example, you may see a 30-year fixed-rate mortgage with an interest rate of 4.250% and an APR of 4.385%. The interest rate is the interest you pay on your home loan. The APR is the interest rate plus other fees and costs associated with buying a home. APR is really what you’ll pay on top of the principal. It’s sometimes called the percentage rate.

The federal government supports the annual percentage rate (APR) disclosure as the benchmark barometer of a loan’s cost when mortgage shoppers begin their quest to find a good deal on a home loan. For this reason, it’s important to understand what goes into a mortgage APR and to harness this knowledge to find the best loan for you.

APR Decoded

The APR you pay on your mortgage includes:

If you have a higher APR, then you can expect to make higher monthly for the term of your loan. You also want to really compare APRs and not just the flat interest rate. You want a better interest rate and APR, but the APR is really what you’ll pay, so the better the APR, the better your mortgage.

APR Versus Interest Rates

The interest rate is a percentage against the total loan amount that the mortgage lender charges each year in exchange for loaning the money the borrower.

The APR, on the other hand, is that interest, plus some other charges. With a home, those charges include the items listed above. APR is used primarily for fixed-rate mortgages.  The APR on an adjustable-rate mortgage (ARM) is a forecast only, which is often inaccurate.

Say you loan your nephew $500 to buy a new bike. In exchange, he agrees to pay you back in six months. You charge him a 5% interest rate—each month—for the favor. The interest and payments break down like this:

  • Interest Rate—5%
  • APR—0%
  • Monthly Payment—$84.55
  • Total Cost—$507.32
  • Interest Payments—$7.32

So your nephew’s interest is $7.32. That’s simply the money he’ll pay you for your loaning him the money.

Using your loan to your nephew as an example. Let’s say, you’re a tough uncle or aunt and you tell your nephew that you’re going to charge him a $20 fee on top of the interest in exchange for giving him the loan. The interest doesn’t apply to that $20 charge, but that charge is paid out over the course of the loan as part of the monthly payment rather than up front or when the loan is paid off. The payments with APR breaks down like this:

  • Interest Rate—5%
  • APR—18.6916%
  • Monthly Payment—$87.93
  • Total Cost—$527.61
  • Interest Payments —$7.61

The same scenario applies to your home loan. You pay interest and you pay APR. But what you really pay is the APR, which includes the interest and is your total cost of borrowing.

Keep in mind that there are charges that don’t go into the APR category, such as closing costs, which aren’t included in APR.

How APR Affects Your Mortgage

The APR helps you evaluate the true cost of borrowing the money for buying your home. It actually also helps you spread the costs of that purchase out.

Let’s look at your nephew again. Say, he buys at the bike under the 18.6916% APR scenario. He decides after two months to sell it. At that point. He’s paid you $175.86 toward the loan, $6.76 of which covers the $20 fee you’re charging him for the loan. He sells the bike for $400. He pays you the remaining principal left on the loan, which is $334.72. But, because he spread the $20 fee out over the life of the loans, he’s actually saving $13.24 compared to if he had paid that and upfront $20 fee.

The moral of the story is that APR helps spread costs out across your monthly mortgage payments for the long haul and it benefits you if you if you end up selling your home earlier. You could pay less interest if you paid all the fees associated for the loan up front, but if you need to sell early, you lose money.

Knowing the APR lets you measure how much interest you end up paying in the long run. It also lets you compare loan products and fees to see how you can save money over the term of your loan.

APR Tips and Tidbits

APR is disclosed for a new loan or credit products. You won’t, however, see APR on your monthly mortgage loan statement as the APR is used as a cost measure when you first apply.  The sole purpose of APR disclosure is to make mortgage shopping easier. The APR doesn’t change the amount you borrow.

A loan calculator, or amortization schedule calculator, offers a simple way to estimate your monthly loan payments. It also shows how much of each of your payments go to the interest of the mortgage loan as well as the principal (the actual amount you borrowed).

Be attentive if the APR is more than 0.25% higher than the interest rate for a loan. If you receive disclosures that show a substantially higher APR than the interest rate and you don’t understand the disparity between the ARP on your disclosures and/or mortgage quote versus the interest rate, ask your loan officer. Don’t be afraid to ask questions even if they seem silly or redundant.

Keep in mind that one of the biggest factors in what determines the interest rate you end up paying is your credit score. Taking some time before applying for a mortgage to build a good credit score can save you thousands over the life of your loan from a lower interest rate. You can check your credit score for free on Credit.com to see where you stand and use the free credit report card that comes with your score to improve your score over time.

Ready to Shop for a Mortgage Rate?

You can browse and compare home loan rates and terms right here on Credit.com.

More on Mortgages and Homebuying

This article was last published May 20, 2015, and has since been updated by another author.

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What Does Your Relationship Mean for Your Credit?

What Does Your Relationship Mean for Your Credit?

couple is dealing with their finances and the effect on relationship

Relationships and finances seem to intermingle no matter how hard you may try to separate the two. The truth is that not very many of us like to talk about finances, especially during the early stages of our relationships. You shouldn’t avoid talking about finances though. Your relationship can help build or ruin your credit score.

How Different Types of Relationships Affect Your Credit

Think about it, how much student debt do you have? Nationwide, that number stands at an astounding $1.5 trillion. Most of this debt is held by Millennials who are now thinking about getting into serious long-term relationships and marrying. You or your partner can bring a whole lot of debt into a union. This will inevitably marry your finances as well as your romance.

While you can have excellent credit as an individual with separate accounts, getting married to and co-signing loans with a partner who has bad credit or bad spending habits can eventually negatively impact your good credit. Here are some common ways your relationships can affect your credit score:

Dating

It’s only natural that you want to impress your new partner during the dating phase. This means:

  • Going out to restaurants on dates
  • Splurging on gifts for their birthday, Christmas and so on
  • Giving yourself a makeover to show them that you have style

There are other things that you may even do such as paying some of their bills to show that you are capable and are a provider or helping them out by co-signing on a loan. This can be a financial strain. Also, if they default on the loan, you’ll be responsible for it and your good credit will suffer. Not to mention, if the relationship doesn’t last, you’ll end up deeper in debt.

Marriage

Once you get married, things get a little bit more complicated. The good news is that getting married doesn’t affect your credit score. You and your spouse continue to have separate credit reports and scores.

The problems often come when you decide to apply jointly for a credit card or a loan because this is when both your credit scores are checked. If one of you has bad credit, then your joint application will either be denied or the interest rates you get will be higher based on your spouse’s bad credit.

Additionally, the mere fact that running a home can be expensive will in one way or another affect your credit especially if one of you is not as financially responsible. The history pertaining to any joint accounts you have appears on both yours and your spouse’s credit reports. Should that account become delinquent, both your credit scores go down.

Divorce

Unfortunately, 40 – 50% of all marriages end in divorce. If you end up getting a divorce, your finances will be affected one way or another, even if your marriage ends on good terms. If you aren’t careful, it could also negatively impact your credit score in the following ways:

  • You can’t pay your bills on time. Since you now only have one income, you may find that some of your bills don’t get paid on time or at all because of your reduced financial capacity.
  • You had shared accounts. Joint accounts might go unpaid because the person responsible for them as determined by the judge doesn’t pay it. As such, both your credit scores will suffer because at the time the account was opened, you’re both responsible for it.
  • You have a vindictive ex. If you have a nasty split and your ex decides to harm you financially, they could max out any shared credit cards and maybe even clean out your joint accounts, financially crippling you.

How to Protect Your Credit Through a Relationship

It may seem like the logical thing to do to keep your finances separate from your partner and to avoid having any joint accounts. Bur you may not be able to do this, especially if you’re married. There are several steps you can take to ensure that your finances don’t suffer as a result of your relationships:

  • Have a candid conversation with your partner about your financial habits.
  • Maintain your financial discipline by managing money even through the dating phase. If you find that you can’t do that, then find a new source of income to offset the increased spending.
  • Let the spouse with the best credit score apply for loans and borrow money to get the better rates.

You can also decide to apply for joint accounts and pay higher interest rates with the aim of improving your spouse’s credit score in the long run. You can refinance later for a better interest rate.

Ideally, you should have a candid conversation with your partner. You both need to be honest with each other about your financial weaknesses, strengths and debt. Once you have everything out in the open, you can come up with a plan to ensure that neither of you is making poor financial decisions.

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The Perks of Online Banking

The Perks of Online Banking

online banking offers lots of convenient perks

A recent survey  found that at least two-thirds of American adults primarily use online banking. If you are one of those Americans, then the chances are that you enjoy online banking because of the convenience it offers. Through an online banking portal, you can:

  • Pay your bills
  • Set up a savings account
  • Transfer money between accounts
  • See your account statements

Best of all, you can get an overview of your finances without waiting in line at the bank or waiting for statements in the mail. While these are the basic services you expect your bank to offer, technological advances have led to a demand for online banking, making everything more efficient. Here are some additional perks of online banking that you may not know about.

The Benefits of Online Banking

Using an online bank as opposed to a brick and mortar bank leads offers more convenience and less stress. With online banking, you can do just about anything you can do at a traditional bank.

Apply for a Loan Online

When applying for a loan, you would have to go to the bank and wait or stand in line to speak to a loan officer. Sometimes, you even had to set up an appointment. Speaking to a loan officer can still be a good idea because they can give you advice about getting loans approved. However, the truth is that if you know what you’re doing, you can apply for a loan online and don’t have to talk to someone in person.

Sync Your Accounts with Money Applications

You may already have any one of the following applications on your phone:

  • An app to help you save money
  • An app to help you stick to a budget
  • An app to help you keep track of all your payments
  • An app to help save for a particular big purchase in the future

There is a money app for almost anything you want to do. One of the tools that many online banks provide you with is the ability to sync your bank account to your money apps automatically. Being able to sync your bank account to these apps makes the process of sticking to your budget and saving goals much easier and more streamlined.

You Can Make Check Deposits from Home

There are a host of online banking tools that you have at your disposal depending on your bank. One of the most convenient tools offers you the ability to deposit checks from the convenience of your home using a computer and a scanner. Here is how it works:

  • You scan or take a picture of the checks you want to deposit.
  • You load that information onto your computer and send it electronically through your bank’s online banking portal.

After this, the funds are deposited into your account just as they would had you gone to the bank. Not only is this deposit more convenient, it’s also more secure and minimizes the chances of check fraud. Many banking apps are also equipped with the technology needed to easily scan the checks and upload them to your account without the need for any special tools or hardware.

You Can Link Multiple Accounts

Most banks allow you to link accounts together if they’re all with the same bank through their online banking portal. Linking multiple accounts together can help you keep better track of your finances.

With online banking, you can also set up automatic payments for your monthly bills, loans, and credit cards. You can also automate your savings.

We live in an extraordinarily busy world. Online banking can take the stress away from managing your finances.

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5 Things to Know About Mortgage Loans and Bad Credit

5 Things to Know About Mortgage Loans and Bad Credit

surprised couple learning they got a mortgage with bad credit

Believe it or not, your credit doesn’t have to be stellar to get a mortgage. Many banks and mortgage lenders only extend mortgage loans to applicants with at least a 640 credit score. However, not all lenders are created equal. And it is possible to get a home loan with what a score below 600, which is considered bad credit. The “but,”bad credit is going to cost you in higher interest payments.

What Credit Score Do I Need to Get a Mortgage?

The answer depends on the mortgage. There are two main types of mortgage loans:

  • Conventional loans—loans not secured by a government agency and issues by private lenders
  • Federal Housing Administration, or FHA loans—loans issued by private lenders but guaranteed by the Federal Housing Administration

Some lenders offer conventional mortgages to consumers with a credit score of just 620. Other lenders go even lower, but the process for getting a mortgage with a low credit score can be difficult and involve thorough explanations of your credit history.

For FHA loans, some lenders go as low as 580, with just 3.5% in equity. However, some folks can get a new mortgage or even do a cash-out refinance with a credit score as low as 550—but there’s a catch. You’ll need at least a 10% equity position meaning you need 10% down when buying a home or 10% equity when refinancing.

Keep in mind, though, not all lenders extend a home loan to someone with a bad credit score. Whether they do or not depends on the lender’s tolerance for risk. From an underwriting perspective, poor credit indicates a higher risk of default or not paying the loan. The more risk a bank is willing to take on, the higher your chances of getting approved with a not-so-hot score. You can see where you currently stand by viewing your free credit score on Credit.com.

Here are some things to keep in mind if you have a low credit score and are shopping for a mortgage.

1. It’s a Good Idea to Build Your Credit if Needed

If your credit score is below 620, you may want to build it up before starting yoru mortgage approval process. If your score is at least 620, you’ll have an easier time getting a mortgage. Hitting that threshold—and above—also gives you access to better mortgage rates and terms. Plus, it will keep you from going through the type of scrutiny a lower credit score bracket can require. You can generally improve your credit score by disputing errors on your credit report, paying down high credit card balances and getting any delinquent accounts back in good standing.

2. Down Payment Assistance Will Be Hard to Come By

Down payment assistance programs gives borrowers access to money to use for a down payment on a new home as long as they qualify for the program. To be eligible for down-payment assistance, a borrower typically needs a credit score that falls between 620 and 660. To qualify for down payment assistance of 5% of the home value, the credit score needs to be 661 or higher. You can expect this across the board with most banks and lenders.

It’s reasonable to assume you’re ineligible for assistance programs if your credit score is less than 620.

3. Previous Short Sales, Bankruptcies or Foreclosures Are Subject to “Seasoning Periods”

Having a short sale, bankruptcy or foreclosure on your credit report impacts your ability to get a mortgage. There’s typically a three-year waiting period—also known as a “seasoning period”—before you can qualify for a mortgage after you’ve been through a foreclosure or short sale. The waiting time after bankruptcy is two years. There are some loan programs that have shorter seasoning periods. For instance, VA loans can get approved two years after a foreclosure.

4. Higher Debt-to-Income Ratios Make It Harder

FHA loans allow for debt-to-income ratios that exceed 54%. That’s if your credit score is 640 or higher. That’s not to say a credit score of 620, for example, won’t work qualify for an FHA loan. It’s almost a guarantee, though, that if your credit score is less than 600, you’re going to have a difficult time getting a loan approved if your debt-to-income ratio is any higher than 45%.

5. Cash-Out-Refinancing Is On the Table

This is a big one. If you already own your home, you can use your home equity to improve your credit. How? With a cash-out refinance with your home. A cash-out-refinance lets you pay off installment loans and credit cards, which often carry higher interest rates than a home loan. Wrapping installment loans into a home equity loan payment can save you significant money, and it’s an option for borrowers with lower credit scores. Some lenders will do a cash-out refinance for borrowers with a credit score as low as 550, as long as they have at least 10% equity in the house.

However, if this is something you’re considering, be sure to read the fine print and crunch the numbers to determine if you’ll come out ahead. Cash-out re-fis require you to pay closing costs. And bad credit might not merit a low enough interest rate to make this move worthwhile. You’ll also want to make sure a new or higher monthly mortgage payment is something you can handle.

Mortgage Lender Options for People with Bad Credit

Rocket Mortgage and Quicken Loans. Quicken Loans requires a minimum credit score of 580 with a 3% down payment. It’s a great option for borrowers who would rather do mortgage loan research online. Quicken Loans offers FHA, VA and USDA loans and can tell you how much you qualify for in just minutes through its self-service system. They don’t offer home equity loans.

CitiMortgage. If you want a more traditional lending option, consider CitiMortgage. It offers down payment options and flexible credit guidelines for those with low or subprime credit scores. If you’re a Citibank member, you also have access to discounts. CitiMortgage offers mortgages in all fifty states. There’s an application fee along with origination fees and you can’t complete the entire loan process online.

J.G. Wentworth. J.G. Wentworth requires a minimum credit score of 580 with a minimum down payment of 3%. It offers an automated way to secure a mortgage online for those with less-than-perfect credit. Its soffer FHA, VA and USDA home loans with a variety of term options. It doesn’t offer equity loans or lines of credit and only has physical locations in 14 states.

Navy Federal. Another national mortgage lender, Navy Federal is reserved for military veterans and their families. It takes FICO scores into consideration as well as rent, utility and credit card payments, went approval mortgage loans. It offers lower minimum loan amounts and there’s an online application available for convenience. You can’t apply for a mortgage loan through the mobile app and you can’t track or secure uploaded documents.

Subprime Mortgage Loans

A subprime mortgage loan comes with a much higher interest rate than you can get with conventional loans, which are accessible only to people with higher credit. Conventional loans can also be set up to be adjustable rate mortgages (ARMs) with promotional interest rates that are lower than they will be after the promotional period is over.

Be wary of the change in interest rate that can come with an ARM. While the promotional introductory rate might be nice. After it’s over, the monthly payments can become too much to handle. It’s in your best interest as a borrower with less-than-perfect credit to stay away from loans that put you at financial risk. Instead, opt for mortgage lenders that work with your credit score and offer you financing at lower interest rates.

Remember, just because you can technically get a mortgage with bad credit, doesn’t mean it’s the best move for you. You may want to improve your credit standing, lower your debt-to-income ratio and bolster your down payment funds before hitting up the housing market. If you’re currently looking for a home loan, be sure to ask prospective lenders or mortgage brokers lots of questions to find the best deal you can get.

Image: AntonioGuillem

This article was last published May 19, 2017, and has since been updated by another author.

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What You Need to Know About Filing Taxes Jointly

What You Need to Know About Filing Taxes Jointly

couple filing taxes jointly

As a married couple, you and your spouse have the option of filing taxes jointly or separately. The IRS does encourage you to file your income tax returns jointly by providing a host of resources and incentives to do so. There are a lot of advantages to filing taxes jointly. However, there are also some instances where doing so might not be the best idea for your circumstances. Here are some things to know about filing taxes jointly and what it means for your finances.

What Does Filing Taxes Jointly Mean?

The IRS allows you to file taxes jointly as a married couple if you are married by the final day of the tax year-the 31st of December. Even if you are in the process of divorcing but haven’t finalized it by December 31st, you’re still considered married.

As a married couple filing under the “Married Filing Jointly” status, both of you can record:

  • Both your incomes
  • Each of your exemptions
  • Each of your deductions

Experts agree that filing your taxes jointly only works if one of you has a significantly higher income. However, if both of you work and have itemized deductions that are both large and unequal, then it may be a better idea to file separately.

However, the IRS considers you unmarried if the following conditions apply to your union:

  • You and your spouse lived apart from each other for at least the last six months of the year-business trips, military service, school and medical care are not taken into consideration.
  • You were the primary shelter provider for your dependents for at least the last six months of the year.
  • You paid over half the cost of upkeep for your home in the last six months of the year.

Whenever you choose to file your income taxes jointly, you need to realize that both of you are legally responsible for both the taxes and returns. If one of you understates the taxes due or tries to trick the system, then both of you are held liable for the penalties that are incurred. That is, unless one of you can prove that he/she wasn’t aware of what the husband/wife was doing and did not benefit in any way from the deceit. Proving this can be difficult because your finances are intertwined.

Tax law is tricky. If you and your spouse are having a difficult time determining your tax liability, it would be best to talk to an experienced tax preparer to ensure that you file your income tax return correctly. Whenever you file your taxes under married filing jointly, both of you will use the same tax return to report your income, credits, exemptions and tax deductions.

What Kind of Tax Credits Are Available for People Who File Jointly?

Several advantages come with filing taxes jointly. Primarily, these advantages come in the form of tax credits for couples who choose to file jointly. Some available tax credits include:

Earned Income Tax Credit

The Earned Income Tax Credit is one of the most substantial credits you can get from filing jointly. Generally speaking, this tax credit offsets some of your Social Security taxes. Your eligibility as well as the amount of credit is determined by your gross income, investment income and earned income. Here are some of the associated eligibility terms:

  • You have to be at least 25 years old but younger than 65 years.
  • Both of you must have valid Social Security numbers.
  • Both of you must have lived in the country for more than six months.

If you are married but decide to file separately, you don’t qualify for this credit.

American Opportunity Tax Credit

Formerly known as the Hope Credit, the American Opportunity Tax Credit helps families pay for four years of post-high school education. As a married couple filing jointly, the full American Opportunity Tax Credit is available if your adjusted gross income is $160,000 or less. The students in question must be enrolled for at least half-time and be in the school for at least one academic year. The best part is that this credit is offered on a per-student basis.

Lifetime Learning Credit

Similar to the American Opportunity Tax Credit, the Lifetime Learning Credit was also set up to help pay for post-secondary education. The main difference is that the LLC is available for many years of post-secondary education as opposed to just the first four as is the case with the American Opportunity Tax Credit. As a married couple filing jointly, you could get up to $2,000 per-student if you make less than $114,000 jointly.

Child and Dependent Care Credit

If you have to pay for childcare for kids under 13 years of age, then the Child and Dependent Care Credit is there for you. The credit is also available if you’re caring for a spouse or a dependent who is either physically or mentally incapable of taking care of themselves. The credit gives you up to 35% of qualifying expenses.

Savers Tax Credit

Formerly known as the Retirements Savings Contribution, the Savers Tax Credit is available to you if you have a qualified investment retirement account such as a 401(k) and other specific retirement plans. When filing jointly, you can get up to $2,000 in credit.

The Pros and Cons of Filing Taxes Jointly

Typically, the benefits of filing jointly tend to outweigh the cons. Here are some advantages of filing taxes jointly:

  • You can use your spouse as a tax shelter and save money.
  • Your jobless spouse can have an IRA.
  • You can greatly benefit from the tax credits that come with filing jointly.
  • Filing together can take less time and cost you less.

As is the case with everything that has a positive side, filing jointly also has its negative side:

  • Both spouses are responsible for the returns.
  • Your refunds can be blocked if one of you has a garnishment for unpaid child support or loan.

How Filing Taxes Jointly Works for Same-Sex Marriage

The Treasury and the IRS announced that all legally married same-sex couples must adhere to the same rules and laws as married heterosexual couples. That means that you can either file taxes jointly or separately.

When it comes to income and gift and estate taxes, they’re be treated the same as any other couple filing a joint tax return. It also applies to their filing status, their exemptions, standard deduction, employee benefits, IRA contributions, and the earned income and child tax credits.

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Creative Ways to Save this Valentine’s Day

Creative Ways to Save this Valentine’s Day

save money this valentine's day

Valentine’s Day is quickly approaching, and hopeless romantics are likely thinking of ways to show how much they love their significant other. If you have someone special in your life, you probably want to show them your affection by buying them a gift or taking them out for a fancy dinner. Whatever you decide to do, it involves spending money. But if you have to dip into your savings, is it worth it?.

How Much Do Americans Spend on Valentine’s Day?

According to the National Retail Federation, Americans spend around $19.6 billion on Valentine’s Day.

Statistics show that more than half of Americans-approximately 55%-spend about $143.56. A huge chunk of that money goes toward jewelry. Approximately $4.7 billion is spent on earrings, bracelets and necklaces. The most popular gift though is candy. About $1.8 billion is spent on chocolate and other sweet treats.

How to Save Money on Valentine’s Day Spending

It’s nice to show your loved one that you care about them and you can do so without digging yourself into debt. Sometimes, it really is the thought that counts. But if you want to save money and still do something romantic, we have some great ways to make Valentine’s Day really special without overspending.

Custom Make Your Valentine’s Day Card

When we think of Valentine’s Day, we think of Hallmark cards. These cards can cost $7 or more. You can save money by personalizing your valentine’s card. If you don’t think you’re creative, don’t worry about it. All it takes to make a wonderful card is a piece of paper and some heartfelt words. There is a very good chance that your loved one will appreciate personalized words more than they would a generic card that was created and mass produced.

Customize Your Gifts

You can also customize your loved one’s gift as opposed to spending hundreds of dollars. Your loved one will probably appreciate your labor of love. If you aren’t the creative type, here are some ideas you can to customize your gift:

  • Make a collage of your favorite pictures
  • Make a video of your happiest moments together
  • Create a scrapbook of memories that you have shared

You can never really go wrong with something that showcases your loving and happy moments together. The best part is that through websites and platforms such as Pinterest, you can easily customize gifts that your special partner will love.

Take a Cooking Class Together

If you have a busy schedule, then there’s a good chance that you don’t have many opportunities to spend quality time with your loved one. Why not take the opportunity to spend Valentine’s Day together by doing something with your hands? Taking a cooking class together is a wonderful way to spend quality time with each other and learn something new.

Make Them Breakfast in Bed

It’s the little things that you do that show your partner that you love them. Why not start Valentine’s Day off on the right foot and surprise them with breakfast in bed? In fact, why not go above and beyond and take care of everything for the day? Giving your significant other a day off on Valentine’s Day is a great way to show them that you value their contribution and that they are loved. It’s also a wonderful way to save money.

Don’t Go On a Traditional Date

Traditionally, many couples go out for dinner on Valentine’s Day at a fancy restaurant. All the nice restaurants know that they’ll be busy, so they’ll try capitalizing on the demand. Instead of waiting at a busy restaurant and spending lots of money, why not do something different?

  • Take your partner out for lunch instead-maybe even a picnic
  • Visit a museum
  • Go to the zoo
  • Stroll the local park

You can even go camping for the day and have some peace and quiet. Most of these will cost you less than what you would typically pay for a table at a fancy restaurant on Valentine’s Day. The bonus aside saving money is that you’ll have more quality time and do something more meaningful together.

The Importance of Having a Savings Account

All the money you save on Valentine’s Day doesn’t have to go toward frivolous activities or spending. You need to save as much as you can for emergencies. One of the best ways to do this is to open a savings account with a trusted bank. The right savings account offers you the following advantages:

  • You can earn interest from your savings.
  • It keeps your money safe.
  • You can set up automatic deposits to keep yourself from using the money before you save it.

A personal savings account does can come in handy at the worst times. It gives you the advantage of financial security. And, it gives you a chance to save for a romantic vacation later on, which is even better than a Valentine’s date.

Instead of spending all that money on Valentine’s Day this year, why not find different ways to save money and put the extra cash away in a savings account? Use these creative money saving tips to reach your financial goals.

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How Do I Redeem Credit Card Rewards?

How Do I Redeem Credit Card Rewards?

happy woman redeem credit card rewards

From getting free gift cards to getting free trips, you can redeem credit cards to save money. The trick to redeeming rewards for what you like is to know which credit card account offers you the best kinds of rewards for where you spend the most money.

If you travel a lot, you might want to find a travel rewards credit card that awards miles or discounts on airline tickets. If you don’t travel, then a rewards program that offers cash back or points may be a better option for you instead.

Here are some tips to help you get the most out of credit card reward programs.

What Are Credit Card Rewards?

Credit card rewards are the incentives you get for using your credit card. The more you charge your card, the more rewards you get. This is a way that credit cards encourage you to use your card.

The most common types of rewards come in the form of point, mile, or cash back.

Cash Back

Cash back is pretty simple. You usually earn cash back on every purchase that you make with your credit card. Cash back can either be awarded as a statement credit or cash deposited into your bank account.

When you redeem your rewards for a statement credit, the amount is put back on your credit card.

Some credit cards require you to accumulate a certain dollar amount before you can redeem cash back. Other credit cards have no minimum, so you can redeem any amount you want. Be sure to check your credit card’s terms and conditions.

Points

Reward points are often awarded based on each dollar you spend. Usually one dollar equals one point. But some credit cards offer more points for purchases in certain categories such as gas or groceries.

The specific value of each point depends on the card issuer. One point may only be worth one cent but it varies between card issuers. The card issuer also determines how and where you can redeem the points. In many cases, you can redeem points for gift certificates or cash back. They can also be put toward travel expenses.

Points also have a different value based on how you redeem them. They may have more value if you redeem them for gift cards than for a plane ticket. It’s important to check the terms and conditions so that you know what value you’re getting for your points.

 

Miles

Some credit cards awards miles as rewards. You can put miles toward plane tickets, baggage fees, and other travel-related expenses. Some travel rewards credit cards are co-branded, like the Gold Delta Skymiles Credit Card from American Express. This means that you only earn miles with one airline and can only use them with that airline.

Some travel rewards cards are more flexible, and you can earn miles for any type of purchase. You can also redeem these miles with any airline, such as with the Capital One Venture Rewards Credit Card.

If you’re loyal to one particular airline, then a co-branded credit card may be right for you. If you prefer something more flexible, then you may not want to get a co-branded credit card.

How Can You Redeem Your Credit Card Rewards?

Credit card rewards programs work different ways. How a program works depends on the credit card issuer.

Usually, you register you credit card on the issuer’s website or rewards platform. After that, you can monitor how many rewards you’re earning. Most platforms allow you to redeem rewards online.

You can use rewards to:

  • Pay for merchandise. Some online retailers let you use points to shop on their websites.
  • Buy gift cards.
  • Redeem for cash, either as a statement credit or deposit it into an account.
  • Pay for hotel stays or airline tickets.
  • Book a cruise.
  • Donate to charity.

If you redeem your rewards for gift cards or cash back, then you can either have it mailed to you or use it online. Most rewards platforms are pretty flexible like Chase Ultimate Rewards and American Express Travel.

If you’re not sure how to redeem rewards now, that’s ok. You can continue accumulating them and decide what to do later. Most rewards are good as long as your account is open, but again, you’ll want to check with your credit card issuer.

If you want to apply for a new credit card and start earning rewards, Credit.com can help you. We offer lots of different credit cards through our trusted partners. You can also sign up to check your credit score for free to help you know where you stand.

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How Often Do Consumers Use ATMs?

How Often Do Consumers Use ATMs?

Woman uses ATM

You may agree that there are very few things in this world as annoying as your money costing you money. That’s precisely what happens when you use an ATM to make a withdrawal, deposit or check your bank account balances. The fees are pretty high when you use an ATM that isn’t operated by your bank or financial institution.

In most cases, you’ll have to deal with fees charged by both the bank whose ATM you use and by your bank for using an outside ATM.

Common Fees Associated with Using ATMs

ATM banks vary from bank to bank and country to country. The following are informed estimates of what you may expect to pay when you use an ATM in and outside of the United States:

  • The ATM operator’s fee. Whenever you use an ATM that isn’t operated by your bank or isn’t part of its network, you can expect to pay an operator’s fee. The machine often highlights the fees associated with whichever transaction you want to make. Most banks charge non-customer fee of about $2.00 – $3.00.
  • Fees associated with your bank’s non-network fee. Unfortunately, your bank may also charge you a fee for using an ATM that isn’t part of their network. The fee for this type of transaction is a non-network fee. The charges for this fall between $2.00 and $3.50 depending on the bank and the kind of transaction you make.

The problem with this non-network fee is that you probably won’t be told about it during the transaction. It just shows up on your bank statements.

  • The international transaction fee. ATM transactions in other countries usually cost a lot as well. These fees typically fall around $2.00 to $7.00 combined with a percentage of the amount The amount withdrawn often comes out to be approximately 3% of the amount you withdraw.

There are, however, some banks that offer to waive these fees if the client has a huge balance in higher-tier savings or checking accounts. Some banks also reimburse these fees.

Tips on How to Avoid ATM Fees

When you go through your bank statement, you may see lots of ATM charges. Now that you know about those little $2.00 charges, you’ll start feeling them. If you want to reduce or eliminate these costs, there are some things you can start doing today. You may even want to re-think your ATM usage.

Here are some tips that will help you cut your ATM fees:

  • Make it so that you only use your bank’s ATMs or those that fall under its network.
  • Use your bank’s app to find ATMs that are under its network.
  • Make fewer cash withdrawals. One way to do this is to decide how much cash you’ll need for the week or month.
  • Choose the cash back option when you pay with your card at a store.
  • Use other services to make your payments like Google or Apple Pay.

Why Not Go Online?

You could also do all your banking online. Many online bank accounts do offer ATM access. They usually fall under an ATM network of an affiliated bank or financial institution. You still have access to your money and don’t have to worry about extra ATM fees.

Trying to minimize paying ATM fees can help you save some money. And since you’re saving money, why not invest in an online savings account? Online savings accounts usually pay more in interest, which can help your savings grow even more. Plus, you’ll still have access to your money without paying some of those pesky ATM fees, as long as you use ones within your bank’s network.

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My Mortgage Was Denied – Now What?

My Mortgage Was Denied – Now What?

homebuyer's mortgage was denied

According to data from the Federal Bureau of Consumer Financial Protection, about one out of every nine loan applications to buy a new house (10.8%) and more than one in every four loan applications to refinance a home were denied in 2018. There are lots of reasons someone may be denied for a mortgage.

It’s not the end of the world if your mortgage loan application was denied but it can be jarring. It may take time, but you may still be able to buy a home.

 

Reasons Your Mortgage Application Might Get Denied

The reason for a mortgage loan denial isn’t always something as simple as being overextended on your current loans or having several accounts in collections.

In many cases, an application can be denied because of small things. Here are some common reasons why you could get denied for a mortgage:

You Recently Received a New Credit Card or Applied for a Personal Loan

Getting a new credit card, applying for a personal loan or taking on any new debts before putting in an application for a mortgage can decrease your chances of getting the loan approved.

This is because mortgage lenders look at your debt to income ratio. Your debt to income ratios is calculated by adding up all your monthly debt payments and dividing that number by your monthly gross income. Mortgage lenders want to see a ratio that’s 43% or less.

Taking on new forms of debt six months before applying for a mortgage can increase your debt to income ratio. A high debt to income ratio is a red flag to mortgage lenders because it indicates that your budget isn’t capable of taking on a new debt responsibility.

 

You Recently Changed Jobs

Most lenders like to see stability. One way they check for stability is by looking at your employment history. Working for the same employer for the last two years or more can help your loan application. If you recently lost or changed jobs, it might make some lenders nervous.

If you just started a new job, you may need to ask your current employer to submit your offer letter or several pay stubs to increase your chances of qualifying for a mortgage loan.

 

You Recently Accepted Money from Unknown Sources

Some people get the money for their down payment through sources such as their parents or other friends and relatives. The problem with this is that some lenders may see those large unknown deposits as red flags.

It’s often a good idea to have a paper trail showing where the money came from. If a relative or friend gifts you the money, then you’ll want to ask them to write a letter stating this.

In some cases, the lender has to deem the monetary gift as acceptable. In many cases, you’ll find that the Federal Housing Authority has no issues with these deposits provided you are applying for an FHA loan. This may not be the case with a conventional home loan, but you’ll want to ask your lender.

 

You Forgot to Include Crucial Information on Your Application

Your loan officer is going to go through your application with a fine-tooth comb. All the information that you might think is irrelevant, or things that you accidentally omit could mean rejection. Sometimes it’s mistakenly omitting a zero from your income. Or it could be more glaring mistakes like not mentioning that you owe the IRS some money.

It’s important to disclose all pertinent information up front, so the loan officer can help you find ways to work around whatever might be hampering your mortgage application.

 

What to Do If Your Mortgage Loan Application Is Denied

If you do everything right and still get denied for a mortgage, then there are several steps you can take:

  • Find out why you didn’t get approved. If your application is denied, lenders have to tell you why. Ask the loan officer for their advice on what you can do to ensure that it doesn’t happen again. If you don’t understand what something means, don’t be afraid to ask questions.
  • Pay down debt. If your debt to income ratio is too high, see what you can do about paying down debt. Once you’ve paid down more debt, you can consider reapplying again.
  • Find ways to earn more. In addition to your regular job, you could find other ways to earn more more money. You can get a side gig or see if you can make a compelling enough case to get a raise at work.

If you give it some time and manage to fix whatever got your loan application denied, you may be able to reapply and get approved next time.

 

How to Get a Loan Even If Your Mortgage Was Denied

If you have done all of the above and your mortgage is still denied, then you might consider doing one of the following:

  • Make a bigger down payment down payment
  • Put up collateral for the loan
  • Get a cosigner

If all else fails, you can try applying through a different lender. However, if you aren’t in a particular hurry, you could consider opening a savings account. You can watch your investment grow from higher than average interest rates and save up a bigger down payment more quickly.

If you want to improve your credit, sign up for a free account with Credit.com now. We offer two credit scores and tips to improve different parts of your credit so that you can get in shape to buy your dream home.

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How Can I Earn Extra Credit Card Rewards This Year?

How Can I Earn Extra Credit Card Rewards This Year?

woman shopping to earn extra credit card rewards

The average American spent approximately $850 on gifts during the 2018 holiday season. While it’s true that the holiday season is one of the most fun times of the year, it’s also one of the most expensive. If you spend wisely, you can earn lots of cash back by taking advantage of your credit card rewards.

Credit card rewards are a great way to make the most of your spending any time of the year if you know how to use them. Chase Ultimate Rewards, for example, lets users earn extra cash back for by making purchases through participating retailers online.

Most people look at interest rates when shopping around for credit cards but rewards should also be at the back of your mind when shopping for a new credit card. Many cards offer rewards in the form of:

  • Points
  • Miles
  • Cash back

Some even offer a combination of all three depending on how you use the card.

What’s the Difference Between Miles, Points and Cash Back?

Credit card issuers offer different types of rewards. These rewards usually come in the form of miles, points or cash rewards. Rewards are redeemed in different ways depending on the credit card issuer’s rewards program.

Miles are usually associated with travel rewards. The miles you accumulate are usually redeemable for air travel and hotel stays. You can still redeem them for other things like cash back or credit cards, but the value of the miles will usually decrease.

Cards that offer cash back allow you to earn money back on purchases. The money is either credited back to your credit card or deposited into a savings or checking account.

Rewards points are versatile and can be used in a variety of ways:

  • Use points for travel expenses
  • Convert points to cash back
  • Make purchases with points
  • Redeem for merchandise or gift cards

When you apply for a credit card, you should check the terms and conditions of the card’s rewards program. That way you can understand how you can redeem your rewards, what value they have, and how long they’re good for. Additionally, remember that you should only make purchases you can pay in full at the end of the month so that you’re not charged interest.

How to Earn More Rewards with Your Credit Card This Year

With the right kind of strategy, you can make your credit card work for you by accumulating the maximum amount of rewards points. Here are some strategies to help you earn more rewards this year:

Choose a Card That Gives Rewards for Your Type of Spending

Are you loyal to a certain airline? If so, then a co-branded credit card may be a good option for you. Choosing a card that rewards where you spend the most money can help you get the most rewards possible. If you don’t travel, you won’t benefit much from a travel rewards credit card.

In order to figure out what you spend the most money on, it’s a good idea to go through your credit card statements from the last few years. This should help you pick a credit card that will let you maximize your rewards.

Pay Attention to the Sign up Bonus

Most cards offer sign up bonuses as a way to attract new customers. It’s a great way to quickly accumulate lots of rewards. If a sign up bonus looks appealing to you, make sure you understand the terms of the bonus. In order to earn the sign up bonus, you need to spend a certain amount of money in a certain amount of time.

Just be sure that you’re able to pay off what you spend if you’re going for that sign up bonus. If you don’t, the points might not be worth if you’re paying interest. Also, be sure to understand what purchases qualify for the bonus offer. Some things, like balance transfers won’t, depending on the credit card.

Use Your Card for Your Everyday Expenses

Using your card for your everyday expenses is another good way to help you get lots of rewards. You don’t have to think about whether or not you’re earning points. You can use the card to pay for things you would have spent money on anyway such as:

  • Utility bills
  • Grocery shopping
  • Gas
  • Streaming services

These things already likely fit into your monthly budget. There are even credit cards that give you extra rewards for some of these spending categories. For example, the Blue Cash Preferred Card from American Express offers 6% cash back at U.S. supermarkets (up to $6,000 spent each year) and 3% cash back at U.S. gas stations. This card does come with an annual fee though.

In many cases, cards that offer more rewards come with an annual fee. Make sure that the annual fee is worth the amount of rewards that you’re getting.

Add Authorized Users to Your Card Account

Adding an authorized user can also help your rewards add up. Usually, people will add family members like a child or a spouse. It’s important to remember though that you are responsible for paying off the purchases your authorized user makes. Your authorized user should be someone you trust.

Look for Opportunities to Earn Extra Rewards

Some credit cards like Chase Freedom and Discover it Cash Back have revolving quarterly categories that offer 5% cash back. These cash back categories include restaurants, gas stations, whole sale clubs, and rideshares. If you have a credit card that offers cash back on some of these categories, you can try planning your spending throughout the year to get more rewards.

Some rewards portals, like Chase Ultimate Rewards also let you earn extra cash back if you purchase through online retailers when you link your Chase credit card to their sites. There are plenty of opportunities to earn more!

Earning more rewards this year can be easy and put more money back in your pocket. Credit cards that offer great rewards usually require a good to excellent credit score. If you want to know where your credit stands so that you can apply for a new card, sign up for a free Credit.com account today. We offer two free credit scores as well as a summary on your credit report. Know what credit cards you may qualify for and start earning rewards today.

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