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Freshmen, here’s what to buy (and not buy) for college

Filed under: Student on August 28, 2015 @ 9:07 am

As summer gives way to fall, a new crop of college freshmen are stocking their dorm rooms and awaiting orientation. Retailers try to convince students and their parents to buy an endless array of gadgets and other goodies for their college dorm, but the truth is you don’t need a pimped out dorm room to have a great college experience. In fact, you probably need a lot less than you think.

Before I left for college, I bought bookshelves, shoe racks and all kinds of stylish décor pieces with a friend before flying across the country for freshman orientation. My parents paid to ship those items 3,000 miles — only to realize once we arrived that there was no space for them!

Fortunately, my mother saved the receipts and returned my beloved shoe rock, but we still lost shipping costs. I’m likely not the first person to make this mistake, as many national retailers now allow you to select dorm items in your local store and pick them up at a store closer to campus for free.

Here are my tips on what to buy—and what not to buy for your dorm. 

What to buy:

  • Extra set of extra-long twin sheets: Most dorm room beds are extra-long twins, and it’s easy to find extra-long sheets during back-to-school season. While you’re shopping, grab an extra set. That way you’ll have clean sheets even if you spill on them or if you’re too busy for laundry during mid-terms and finals.
  • Bed risers: Most dorm rooms are short on storage space, so bed risers are a cheap and easy way to add more space for clothes, sporting equipment, or whatever else you need to stash. Now there are even bed risers with built-in power strips, or you could create DIY bed risers.
  • Noise-canceling headphones: If you’re sensitive to noise, you’ll want a good pair of noise-cancelling headphones to block out the sound of your drunk roommate or your neighbor’s music while you’re trying to study or watch a movie.
  • Power strips: Electricity is included in the cost of most dorms, but you may have limited outlets for charging your phone, computer and other electronics. Bring at least one power strip so you and your roommates won’t have to fight over outlets.

What not to buy:

  • A car: Kiplinger lists cars on its 13 things college students don’t need, and I completely agree. It’s not just the expense of gassing up the car and keeping it running, but also parking and the fact that when you have a car, you’ll inevitably get roped into chauffeuring around your carless friends and get constant requests to borrow your keys. Nissan and Enterprise recently announced a college car rental partnership so that college students can get cars on demand rather than bringing their own. Unless you’re commuting to a job or internship on a regular basis, car-sharing could make a lot more sense than bringing your own. Inexperienced drivers are also expensive to insure so that’s another cost to consider.
  • An iron and ironing board: Aside from students who intern at a bank or law firm, very few undergrads wear clothing that requires ironing. If you need to iron a shirt for a job interview or a date, chances are someone in your dorm will lend you their iron and ironing board.
  • A TV: With tons of apps that allow you to watch TV shows and movies on your smartphone, tablet or computer, why waste money and space on a TV for your dorm room? If you have a TV in your room, it’s all too easy to get sucked into mindless reality shows instead of studying or leaving your room to meet new people. For those times when you do want to unwind with a movie or show, your dorm probably has a lounge with a TV anyway. I remember (and this might date me) watching “Will & Grace” on Thursday evenings in my dorm’s common room and socializing during commercial breaks.
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Buying vs. renting: One year later

Filed under: Budgeting on August 20, 2015 @ 2:48 pm

Many millennials have postponed home ownership in favor of paying down debt or enjoying a more mobile, experience-centered lifestyle. As a millennial myself, I rented for nearly a decade post-college. Finally, last year my almost-husband and I decided to take the plunge into home ownership before we tied the knot (also a millennial trend).

We’d saved up for a down payment, built up our credit histories and yearned to put down roots and feel settled rather than being forced to move when the rent skyrocketed or the building we lived in sold.

Now, a little over a year later, I can reflect on the pros and cons of buying our first condo.

Pros

  • Ability to customize our space: One of the major downsides to renting is not feeling like the space is really your own (that was especially true when we lived in a furnished rental with someone else’s furniture and decor). We didn’t like the carpet in our condo’s bedroom, so we had it replaced. Now I smile every time I feel the soft new carpet on my feet. We’re also thinking about mounting our TV on the living room wall and upgrading our kitchen countertops, which we couldn’t do in a rental (though some of these changes do require approval from the condo association). Even if our landlord let us alter their space, it wouldn’t be worth sinking our own money into fixing up someone else’s property.
  • Freedom to have pets: Back when we were renters, we really wanted a dog, but a lot of landlords and management companies don’t allow them or even charge pet rent to tenants with animals (in addition to pet deposits). Now that we own a condo in a dog-friendly building, we rescued an adorable Chihuahua and don’t have to worry about losing our pet deposit or paying pet rent for him.
  • Potential to improve credit: My credit is already strong, but lenders like to see a mix of revolving and installment loans. and because I’ve never had a car loan or a student loan, my credit score reflects only payments on credit cards. Types of credit in use accounts for 10 percent of your FICO score, so making timely payments on a mortgage should help improve my score by showing lenders that I can handle different types of credit lines.
  • Less reliance on lease cycles: Renters often have to plan their lives around lease cycles. In one case when I needed to move before the end of my lease, the landlord agreed to let me find a subletter. In another case, my partner and I had to move for his job and wound up paying three months’ rent on an empty apartment because we moved mid-lease and the management company claimed they couldn’t find any new tenants in the off-season (they refused to let us show the apartment ourselves or sublet). Now, if our circumstances change and we need to move, we could in theory rent out our condo (which is allowed by the association) rather than pay for an empty apartment or put the condo on the market. We also know what our mortgage payments will be for the foreseeable future instead of getting sticker shock when our lease comes up for renewal and the landlord announces a rent hike.

Cons

  • Special assessments: Our building has not had any special assessments, but a friends’ condo building did recently. Renters don’t have to worry about ponying up extra cash to replace building’s roof or elevator if needed, but owners do in some cases (in others, the building’s contingency fund might cover it). If we had a special assessment in the future, it could easily run into the five figures, so that’s a good reason to maintain a cash cushion just in case.
  • Maintenance: Our condo is a little over a decade old, so we haven’t had any major repair problems (knock on laminate flooring). When the flush handle broke off the toilet, plumbers quoted us around $100 to replace it. That wouldn’t have broken the bank, but after a $10 trip to Home Depot, we managed to fix it ourselves! As the appliances and our condo age, we may have bigger repair expenses in the future, which we wouldn’t have to shoulder as renters. And I’ll admit, every time we scratch the walls moving a piece of furniture or otherwise damage our most expensive purchase (our condo), I cringe a lot more than I did as a renter.
  • Bigger commitment: While waiting out a lease cycle is a pain, paying the mortgage on a home that no longer fits your needs is even bigger burden. It’s hard to predict where we’ll be personally or professional five or 10 years from now, and it’s likely that a one-bedroom condo won’t be our forever home. But rather than buying (and paying for) a bigger home than we need right now and growing into it, it made sense to us to buy something that fit our current lifestyle and plan on selling or renting it later if needed. That strategy may backfire on us, but at least we’re not overextended and have a home we enjoy now.
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How I’m maximizing card rewards for my wedding

Filed under: Credit Tips on August 12, 2015 @ 9:08 am

My wedding is just one month away. My fiancé and I have been strategizing about how best to accumulate and use credit card rewards to subsidize some of the costs of our wedding and honeymoon.

The average cost of a wedding was over $30,000 in 2014, reports wedding site TheKnot.com. With a smaller guest list (about 50 people compared to the average of 136) and some savvy rewards use, we hope to trim that cost while still creating beautiful memories with our friends and family.

Here are some of our strategies.

  1. Invitations and guest book. Naturally, I ordered our invitations and guest book online using a discount code and paid for them using a credit card that earns travel rewards (as CreditCards.com points out, paying for wedding expenses with a credit card also gives you purchase protection). But to sweeten the deal even further, I also used a cash-back savings portal. Once we get our wedding photos from our photographer, I plan to order thank you cards using the same strategy.
  2. Venue. We chose a beautiful venue that could host both the ceremony and the reception, so there’s no transportation costs in between, and they handle all the rentals for things such as tables, chairs and china. We put down a small deposit to reserve our date and the balance is due closer to the wedding. But once I opened a new credit card with a generous points bonus for spending $3,000 in the first three months, I made another deposit towards our balance at the venue. Instead of making lots of little transactions to meeting the spending requirement (or worse, missing out on the bonus altogether), I met it in a single transaction. Since we knew we’d have to pay that money eventually, we figured we might as well time it to get the most rewards and avoid a giant bill the month of the wedding.
  3. Honeymoon. Our honeymoon in Europe is heavily subsidized by Delta Skymiles and Marriott points. (In case you’re curious, Hack Your Honeymoon shares a pretty sweet around-the-world honeymoon that costs less than $1,000!) Since my fiancé travels frequently for work, he had more than enough Skymiles for a round-trip ticket. I, on the other hand, was a few thousand miles short, so I made up the difference by purchasing things I’d buy anyway through Skymiles Shopping. I also synched up my credit cards with Skymiles Dining so that I earn miles when I pay with those cards at participating restaurants. The miles don’t show up overnight, so I started building them up a few months in advance. Once we arrive, we’ll be paying for things using a rewards card with no foreign transaction fees as much as possible and enjoying how far our dollars can go in Europe. Then we’ll pay off the balance as soon as possible to avoid interest charges.

One strategy we haven’t used (because we plan to use our rewards for future travel) that could be helpful is redeeming points for gift cards to cover wedding costs. For instance, a Nordstrom gift card might cover wedding attire, while a Michaels gift card (paired with a mobile coupon, of course) could buy craft supplies for wedding décor or favors. Getting a little creative is a great way to save money and personalize your wedding!

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“I cut up my credit cards” experiment

Filed under: Credit Card Tips on August 4, 2015 @ 9:13 am

What would it take to make you do something as extreme as cutting up every piece of plastic in your wallet? When one of my friends announced on Facebook that she was doing that very thing, I had to know why. So she agreed to tell me and let me share her story.

First some background… Maria admits she’s always been a bit of an impulse shopper. “If I want something, I buy it, and then figure out how to pay for it later,” she says. While that’s not exactly the approach that personal finance experts would recommend, she’s always managed to keep debt manageable. “I’ve never had too much credit card debt. When it started to get a little high, I’d cut back and pay it off before getting it back up again.”

The last straw
I had assumed it was a giant bout with debt that got Maria fed up with credit cards, but when I found out that wasn’t the case, I became even more intrigued. Here’s what did it: At the end of May, Maria noticed two charges on her statement that she knew she didn’t make. “I called up and got those resolved, but it left me with such a sour taste in my mouth,” she says. Anyone who has been through this knows the feeling — having your personal financial information violated is creepy and scary.

Maria took the fraud attempt as a sign that she was ready to break up with plastic for a while. But for her, she knew it wasn’t enough to simply leave her cards in a drawer at home. She wanted to make a clean cut — literally.

“I have a friend who uses only cash — no debit or credit cards — and I was curious if I would be able to do the same. So I decided to cut up the cards and see if I could do without them, too,” she explains.

The big day
Thinking it and doing it are two very different things, says Maria. When the day came when she was ready to take a scissor to several of her major credit cards and store cards, she was nervous and had some second thoughts. “I thought, what if something happens and I need a credit card?”

That’s a valid concern since not having any accessible credit can pose challenges down the line. So while Maria got ready to snip, she didn’t actually call to close out the accounts. In fact, after doing the deed, she actually called one of her credit issuers to ask for a replacement card to keep at home in case of an emergency.

The most surprising thing for Maria was that after posting the photo of her cards in pieces on Facebook, most people told her she had made a mistake. “Of course, this was on Facebook, where everyone has an opinion and no one is scared to share it,” she says.

The game plan
After the big card cut-up, Maria’s plan was to use either cash or debit to pay for everything. She knew she’d be missing the added layer of security credit cards offer, but that was something she could live with. “I know there is the risk of someone hacking my debit card, but I am very careful about where I use it, so that isn’t a concern to me,” she says.

It also forced her to think before she swipes. “I’ll admit, it’s hard not buying something just because I want to. I remember walking into TJ Maxx and seeing a beautiful Dooney & Bourke bag on sale, but I couldn’t buy it because I didn’t have a credit card and didn’t really have the money right then and there,” she says. In the end, though, she was happy she didn’t buy it. “It does make me think more about the purchases I’m making, that’s for sure.”

Second thoughts
Two weeks into her experiment, Maria had to call a chimney repairperson to her house to fix the chimney liner. “I had just run out of checks and was still waiting for delivery of the new ones, so I had to go to the bank to make out a certified check to pay the balance,” she explains. She didn’t want to pay almost $3,000 in cash. Had she had a credit card, she wouldn’t have had to make the trip to the bank or pay the certified check fee.

Other than that, Maria says she does miss having access to cardholder-only sales, such as when certain store cards allowed her to save an extra 10 percent. “That 10 percent adds up over time,” she says.

The verdict
So far, other than spending less on impulse items (which is probably a good thing!), Maria has adjusted well.

As for whether or not she plans to ever use credit again, Maria says she probably will, but definitely not in the same way. “This has forced me to be more thoughtful about my purchases. But ultimately, I do feel more secure paying with credit cards than debit cards. So while I don’t regret trying this, I don’t think I’ll keep it up.”

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Survey reveals recent grads’ biggest financial regrets

Filed under: Finances on July 29, 2015 @ 8:02 am

With graduation season behind us, many newly minted grads are now juggling bills and full-time paychecks for the first time. Personal finance bloggers have offered advice to these young adults and share their own money regrets. For instance, Robert Bell at Money Rebound says he regrets not buying when home prices were lower and not paying more attention to money. Jessica Horton at Money Management International regrets overspending. Even successful entrepreneurs like Tony Robbins have regrets (not doing his own research on a potential investment, in Robbins’ case), as Business Insider reports.

MagnifyMoney surveyed over a 1,000 recent college graduates to uncover their biggest financial regret since graduation — and not surprisingly, several of these regrets relate to credit cards and debt. Nearly a quarter (23 percent) said they regret not being more careful about loans and debt, while roughly one in five (19 percent) said they regret not establishing credit sooner.

I can relate to the latter.

After growing up in a credit-wary family, I signed up for one credit card during my senior year of college (this was the era when it was still possible to get several credit cards your freshman year, but thankfully I resisted all those free t-shirts and beer cozies). The crazy thing is, I almost never used that credit card out of fear of getting in over my head, so it didn’t help me build a positive payment history.

Finally, a friend noticed my habit of always paying with cash or a debit card and pointed out that with my strong sense of discipline and frugal ways, I wouldn’t fall into debt by charging my groceries and the occasional item of clothing (usually purchased on sale).

He encouraged me to open a rewards card (and thankfully my credit score was high enough to qualify), and I’ve since enjoyed several free flights and other rewards perks while boosting my credit score and without paying a cent in interest. I got credit-savvy by my mid-20s, but I wish I’d understood credit cards even earlier to start reaping the benefits and building credit. Feeling more in control of my finances rather than fearing credit would have been nice as well.

Two more credit-related regrets from MagnifyMoney’s survey: 12 percent said they regret getting hit with fees and 10 percent regret missing payments. Both mistakes can cost you money, but missing payments can have a double whammy of costing you fees and damaging your credit score.

However, the biggest regret, according to nearly a third of respondents, was failing to save enough. When you’re fresh out of school, it’s easy to make excuses, such as “I barely make enough to live on” and “retirement is 40-plus years away, so why worry about it now?” (My first job out of college was at a nonprofit, so I know these excuses well, but fortunately, the HR person convinced me to enroll in the retirement account anyway and get the employer match.) But here are three important reasons for new grads to start saving now:

  1. Time is on your side and the power of compound interest will help build your savings, even if you’re only saving a little at a time.
  2. Saving even small amounts now will help get you into the habit of saving.
  3. You think it’ll be easier to save later when you’re making money, but you may also have also have more financial responsibilities, such as a mortgage, kids and a higher standard of living eating up your paycheck.

The truth is, you can always find reasons not to save if you don’t make it a priority. But if you commit to responsible money management (even when there’s not much money to manage) you’ll do your future self a huge favor.

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3 credit rules I still break (and why)

Filed under: Credit Tips on July 28, 2015 @ 8:14 am

I’ve been writing about using credit cards responsibly for about five years, so one would probably assume that I’m a super debt-free credit user, earning lots of rewards points and maximizing credit products.

One day I hope to be in the position to utilize all of the great expert advice I’ve shared with you in my articles, but I’m not quite there.

In fact, I sometimes break the very rules that my sources have advised readers to follow. The fact is, I’m in the same boat as many of you, dear readers — someone who lived paycheck to paycheck for many years thanks to the high cost of living in my area.  In addition to being what some might refer to as “house poor,” I’m also guilty of occasionally enjoying things slightly above my means (hey, I’m human, after all).

On the positive side, I do take pride in my pretty high credit score and always pay my bills on time (except for one time). I paid off my student loans years ago and am saving for retirement. It took me years to get to this point, but I can still do better. If only I’d stop breaking these credit rules…

Carrying a balance. I confess. I’m guilty. Although conventional wisdom says it makes sense to use savings (earning barely no interest) to pay off high-interest card debt, I’ve been a rebel in this regard. I’m not super deep in debt (thankfully), and my utilization ratios aren’t too bad, but I’m a few thousand dollars away from a clear credit conscious. The thing is, as a fairly new full-time freelancer, I like knowing that I have a few months of living expenses socked away as a cushion just in case I hit a dry spell. The credit card writer in me knows that I’m foolishly losing money to interest payments, but the paranoid worst-case-scenario mom in me wants to make sure my bills are covered — just in case.

What I’m doing right: I always make sure to pay more than the minimum on my balances, which has helped me cut my debt in half in the last year or so. And whenever I come into a lump sum of money, I make sure to allocate a portion of it toward debt. My article research has also taught me to be more strategic about my payoff plan, so I learned to tackle the account with the highest interest first, and that’s helped me make progress.

Overusing my debit card. I’m not sure why, but the “money burns a hole in my pocket” idea is true for me. Therefore, I tend to rarely carry cash. As a result, I’m a serial swiper, and the debit card is my tool of choice. The problem with this plastic preference is that it’s not really a secure way to pay. Every time I get gas for my car or go to a restaurant and forget to bring cash, I’m probably putting my financial information at risk for fraud. It’s something I only recently realized when I started writing about the topic. Since then, I try to have cash on hand for certain kinds of purchases, but I do slip.

What I’m doing right: I’ve stopped using my debit card for online purchases. It’s a miracle I’ve never had my information stolen when I think of all the websites that used to have my debit card number on file. The silver lining about being a debit shopper is that I keep very close tabs on my bank account balance — probably every day — so that if fraud were to happen, I’d catch it and report it immediately.

Not being a strict budget follower. I know that if I really put my mind to it, I can be debt free by the end of this year. But that would mean giving up things like my gym membership (which I actually use), cutting back on entertainment spending and not taking a summer vacation. Instead, I’ve chosen to follow the “life is too short” mindset in which I splurge on outings with my kids, the occasional concert with girlfriends or an expensive dinner with my husband. It might take me an extra few months to reach my debt-free goal, but the good times I’ve had have been worth every extra penny of interest payments.

What I’m doing right: While I do spend money on experiences that could otherwise be put toward my debt, I’ve evolved into someone who’s no longer a buyer of frivolous things. When it comes to shopping — whether it’s for clothing or groceries — I wait for sales, cut coupons and often make the decision to go without. As such, I can’t remember the last time I had a case of buyer’s remorse, and I can stretch a buck when I need to.

If I’ve learned anything over the past few years, it’s that it is important to have a smart game plan to get your financial house in order. And as long as you’re making progress, it’s not the end of the world if you choose to break a few rules along the way.

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Love and money: Where boomer, millennial couples stand

Filed under: Finances on July 24, 2015 @ 2:36 pm

I love when couples and money studies come out because that’s one area in which I feel as if my husband and I have a pretty good handle. Recently, TIME Money released the results of its Boomers vs. millennials poll, and while I don’t fall into either of those categories (I’m a Gen Xer), it’s always interesting to get in the heads of other couples and learn from them.

The big takeaway is that couples who manage their money well together are more likely to be maintain marital bliss. It even goes as far as saying that financial compatibility is sexy, and might be integral to helping couples stay connected in the bedroom. 

That does seem like a bit of a leap, but it makes sense. Money arguments are very common in marriages. Couples who don’t fight about money probably fight less than other couples. And couples who fight less probably enjoy each other’s company a bit more, which leads to intimacy. In short, finding ways to work through the tough money conversations can actually bring you closer, as the ReadyforZero blog points out.

Here are some other observations from the poll that were no-brainers:

  • Younger couples are more tolerant of poor credit and bad money management than older couples. For instance, when meeting a potential mate with $50,000 in student loan debt, 20 percent of millennials said it would be a deal breaker versus 30 percent of boomers who said the same. But that makes sense — if you’re over 50 and have that much student loan debt, it’s a sign of bigger financial problems.
  • When it comes to extravagant spending, 69 percent of boomers are turned off completely, while millennials are slightly more tolerant at 49 percent. The older set is also more likely to find someone who has a lot of debt unattractive (61 percent vs. 41 percent of millennials).
  • What millennials are looking for in a mate, however, is income potential — 32 percent said it’s an important quality in a partner versus 18 percent of boomers. Again, with the biggest earning years in front of the younger group and boomers being near retirement, the disparity here is expected.
  • Finally, millennials argue more (47 percent) about money than boomers (37 percent). One would hope this to be the case. After a certain point, couples will either learn to respect each other’s money styles or give up the fight.

Now, for what surprised me
Sixty-two percent of millennials think it’s perfectly fine to join their finances before marriage, and think they’ll have a stronger relationship because of it, while only 43 percent of boomers feel the same. I’ve always thought of this younger generation as more credit savvy and financially educated (thanks to learning from the mistakes of my generation), so to see non-married young couples coupling their cash seems off to me. Then again, in the expensive world we live, maybe they’re onto something — combining incomes might be the only way to achieve home ownership or live a certain lifestyle, but they don’t necessarily want to rush into the foreverness of marriage.

And finally, my one gripe
What about Gen Xers like myself? It seems as if we’re the forgotten middle child when it comes to generational studies lately, but then again, maybe I’m better off not knowing where we stand. When I went searching online to see how my fellow X-couples might compare, I stumbled onto the 2015 Fidelity Investments Couples Retirement Study. Apparently, my generation is the most clueless when it comes to being on the same financial page as our partners. When the survey asked respondents how much money their spouses earned, 4 in 10 couples got it wrong and 1 in 10 were off by $25,000 or more. Of all the generations that took part in the study, Gen X couples had the most discrepancies. Not having any inkling as to what your spouse earns means you probably have no idea what they spend, or what they have saved up for retirement either. Scary thought!

No matter which generation you’re part of, if you’re part of a couple, it’s important to communicate and compromise. As this blogging couple at TheSimpleMoneyBlog explain, there’s no right or wrong way to handle money in your marriage the key is finding a method on which you both agree.

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FICO piloting new program for ‘unscoreable’ consumers

Filed under: Credit Score on July 22, 2015 @ 2:58 pm

Credit reports are used for many reasons: qualifying someone for a cellphone, an apartment, a new credit card or a car loan to name a few. Prospective employers and insurers also sometimes check credit histories to assess risk. This puts the estimated 53 million Americans without a FICO score at a pretty significant disadvantage, complicating otherwise simple tasks you or I might take for granted.

Often, those without a credit score are recent graduates, immigrants or those who prefer not to use credit. But thanks to growing awareness about the challenges faced by consumers without credit, things may be shifting. 

FICO, the company behind FICO scores, which are used by most lenders to assess creditworthiness, launched a pilot program in early spring in which 12 major U.S. card issuers are extending credit to consumers based on an alternative FICO score. This alternative score will use data such as property records and telecommunications and utility information.

“They’re making decisions about whether to give cards to people using this alternative data score,” FICO spokesman Jeffrey Scott says. “This is not designed to replace the traditional FICO score; it’s completely separate. The alternative score is being used for consumers who do not have a traditional credit score.” The hope is that once someone has access to credit, they would use it responsibly and build a credit history to the point where they can qualify for other credit products if needed.

When a consumer who doesn’t have a FICO score applies for a credit card with one of the 12 participating issuers, the issuer could look at the consumer’s alternative data instead of flat out rejecting them for lack of a traditional credit history. From the consumer’s point of view, the process isn’t any different from a regular credit card application. “As the consumer, you don’t select the type of credit score,” Scott says. “The lender pulls whatever.”

The goal of the initiative is to “find a way to give these people the same kind of access to credit products that everyone else enjoys,” Scott says. “Some of them are young adults so they’re new to credit; some of them have recently come to the United States. Some of these people just don’t use credit voluntarily. They’ve just decided to live on cash. Other people maybe used credit in the past, but ran into some tough times, and they can no longer access credit.”

I remember getting rejected the first few times I applied for credit cards (and for a cellphone), not realizing I should have applied for a student credit card instead of a regular one, so I can certainly see how this might help others in a similar position access credit for the first time or rebuild their credit.

FICO plans to wrap up the pilot program by the end of the year and hopes to roll it out more generally to other lenders sometime this year or early next year. “We want to open things up to these people, levelling the playing field and giving everyone an opportunity,” Scott says.

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Joint vs. authorized user: Which is best if you’re married?

Filed under: Banking on @ 2:49 pm

In an earlier blog post, I described the delicate balance of managing money together without feeling as if you’re micromanaging. Another area for newlyweds to consider is whether they want to open a joint credit card, add one spouse as an authorized user to the other spouse’s card or keep the credit cards entirely separate. This is a conversation my soon-to-be husband and I recently had, and we settled on a combination of joint and separate credit cards plus with one card where I added him as an authorized user.

Here’s a look at the differences between joint credit cards and authorized users.

Joint cards
The main difference between being a joint card holder and an authorized user is that “when two people are on a card as a joint user, they are both jointly liable for the debt no matter who actually ran it up,” says Manisha Thakor, author of ” Get Financially Naked: How to Talk Money with Your Honey” and director of wealth strategies for women at Buckingham and the BAM Alliance.

A couple might choose a joint card for the sake of creating a sense of equality and long-term partnership. However, if you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin), you can be held liable for debt your spouse acquires after you marry even if your name is not on the credit card agreement.

It’s important to note that even if you and your spouse open a joint card account, you still have separate credit scores and credit reports. The payment history and balances on your joint card will show up on both spouses’ credit reports. A spouse with a lower score may mean that you have a harder time qualifying for joint credit such as a mortgage or auto loan, but simply marrying someone with a lower credit score doesn’t automatically lower yours.

Authorized users
“In the case of an authorized user, the primary card holder has the legal obligation to pay back the debt,” Thakor explains. “The authorized user has no legal requirement whatsoever.” (Again, there are more wrinkles in community property states as mentioned above.) So, in theory, a spendthrift spouse could charge up the card as an authorized user and leave you holding the bag. But couples might still choose this option if one spouse needs help building credit or if being an authorized user would give them access to credit card perks such as cash back or airlines miles. (We did the latter so we can both get access to airport lounges when we travel!)

For couples who choose this approach, Thakor suggests that the primary cardholder set up email alerts on purchases. That way you can get “immediate notification when your authorized user is doing anything and address it with them real time or insist that they return the item,” she says.

Finding what works
There’s no one-size-fits all approach to money, so the right framework might depend on a couple’s age, financial situation and how complex or simple they want their finances to be.

Since we’ve already gotten used to paying our own credit card bills, a combination of joint and separate credit cards works for us. This is an approach that Thakor calls a “financial three-way” where couples have a joint account and also maintain separate accounts. They would use a joint credit card for joint costs where you “want to share the liability and you’ve agreed to partner on those expenses,” Thakor explains. You’d then pay individual expenses using your individual credit cards, allowing yourselves some autonomy while still assuming joint responsibility for joint expenses.

An outdated approach that’s becoming less common is to have all of the credit lines in one spouse’s name (typically the husband’s). Even if one spouse has no income, both spouses should have some credit in his or her own name. If one spouse dies or the relationship ends in divorce, the spouse without a credit history could find herself at a significant disadvantage when it comes to buying or renting a home, a car and other big-ticket items.

Whether you choose joint or separate cards or add your spouse as an authorized user, communication and collaboration are key to managing credit together.

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6 times when it’s smart to call your card company

Filed under: Credit Card Tips on July 17, 2015 @ 1:30 pm

No one likes calling their credit card companies, but sometimes, it can pay off.

Here are six times when calling your issuer is worth the effort:

1. When you forget a payment

It happens to the best of us — even people whose job it is write about credit cards. In fact, I was guilty of this just last month. I recently opened up a line of credit with Home Depot to buy a new dryer and figured I might as well take advantage of the six-month interest-free period rather than take a big chunk from my savings. As I waited for that first bill to come, I kind of forgot about it until I found it stuck to another piece of mail I had put aside. The due date had passed.

What to do: I called and explained about my embarrassing mistake, promised it wouldn’t happen again and said I planned to make a payment above the minimum. The customer service person let me know that they have a one-time forgiveness for a new account and that the late fee would be waived. Because it was only three days late, it wasn’t reported to the credit bureaus. Whew — crisis averted! Once the call was done, I set up my auto payments so that the balance will be paid off before the introductory period of zero interest is over.

Your mea culpa will also make it less likely that the issuer will impose an extra penalty, like hiking up your interest rate.

2. Before you go on a trip or huge spending spree

A friend of mine recalled the time she went to Ireland and had her card declined when she tried to rent a car. It was because the bank flagged the activity as a possibly fraudulent charge since she was out of the country. She was able to resolve the problem on the spot, but it cost her a hefty fee for the international call she had to make from her cellphone.

What to do: Before you’re about to use your card in a way that’s not typical for you, take a minute to alert your card issuer so that it can make a note on your account. Let the issuer know in advance your travel dates or if you’re planning to make a very large charge on the account .

3. If you’re confused

Whether you’re having trouble redeeming points or don’t know what kind of rental car coverage you have, just call.

What to do: Make a list of questions and get them all answered. You might just find out that you have thousands of unredeemed points or that you can stop paying for extended warranties because your card covers you.

4. To cash in on your good behavior

If you’ve been a loyal customer, and your credit score is in better shape than it was when you opened the card, don’t wait around for a gold star. Ask if you qualify for a lower interest rate or can get your annual fee waived. A recent CreditCards.com survey found that 65 percent of people who asked for a rate reduction got it.

What to do: Explain that you’d love to continue using the credit product, but are hoping the issuer will consider lowering your interest rate because of your strong history of on-time payments and stellar credit. Trent Hamm of The Simple Dollar offers a simple step-by-step on how to get creditors to say yes.

5. If you’re facing a crisis

It could be worthwhile to reach out to your creditors if you’re going through financial difficulty. Right after Super Storm Sandy, my mother’s card company sent an email blast to customers in her geographic area since it was hit hard, saying to contact them if they needed assistance. My mom, who had significant damage to her home, called and the card issuer ended up offering her several months of zero interest on any purchases made on appliances or other items she needed to replace. This saved her a nice amount of money since she was able to get what she needed, and then pay off the balance once her insurance claim came through.

What to do: If you come on rough times, be forthright with your creditor. It may be able to offer a small gesture such as giving you a one-time due date flexibility or waiving a late fee if, for instance, you were in the hospital and missed a payment. Every little bit helps.

6. If you suspect something fishy is going on

The minute you see a charge you don’t recognize, don’t hesitate to call. First, though, track back through your spending to see if there was a purchase you forgot about (maybe something auto-renewed, for instance). Particularly take note of small charges — scammers hope you won’t notice.

What to do: Someone in the fraud department can help you determine if further action needs to be taken.

Picking up the phone is often the biggest hurdle. But in my experience, if you’re pleasant to the person on the other line, they’ll be more than happy to help you resolve your issue. As for the cheesy hold music, you’ll just have to deal with it.

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