The Charge-It Blog

  • Dawn Papandrea

    Taking the payoff plunge with my cards

    A while back, I shared a couple of credit confessions with you, one of which was that I – a credit card writer – was carrying around a few thousand dollars in debt, divided between two credit cards. As I explained, this was partially by choice, since I did technically have the savings to pay off the cards, but am cautious about depleting that savings since I have the unsteady income of a freelance writer. 

    After coming into a lump sum of cash thanks to a few extra freelance writing projects this summer, however, I decided that enough was enough. It was time to say goodbye to my debt for good (well, almost). Here’s what I did:

    1. I paid off my highest interest card (hooray!). I probably shouldn’t admit this, but I was carrying a balance on a card with an interest rate above 20 percent. It happens to be a co-branded rewards card with a lot of perks, so that’s sort of typical, but it’s counterintuitive that I was paying interest on something designed to save me money. So, good riddance to that balance!
    2. But less than 24 hours after using my windfall to pay my creditor, my refrigerator died. I’d already fixed it once, so I knew it wouldn’t be worth it to call a repairman. For a second, I felt defeated. Here I am, finally paying off my credit card, and now I have to shell out hundreds for a new appliance. Luckily, because I’m a stickler about keeping my emergency fund intact, I was able to purchase a new refrigerator using cash.
    3. Because the payoff on card No. 1 and the unexpected refrigerator purchase wiped out my extra cash, I couldn’t put anything toward my remaining card balance. But I was determined to do something. Although card No. 2 has a less horrifying interest rate (13.99 percent), I’m really sick of wasting money on interest. I began shopping around to find a good balance transfer offer. Since I wanted to get a new card anyway (to replace that high-interest co-branded card I no longer want to use), the timing was perfect. As luck would have it, an offer came in the mail for 0 percent on balance transfers for 15 months; 12 months of 0 percent APR on regular purchases; and $250 cash back if I spend $1,000 in the first three months. After analyzing my spending habits, a card that rewards cash back on everyday purchases is the best way for me to really maximize my credit card usage since I’m not much of a traveler.
    4. So, I did it. I applied, was approved, and transferred my last remaining balance to the new card. This is not a decision I took lightly. I crunched some numbers to make sure I’d still save money even with the 3 percent balance transfer fee that was tacked on. If I pay off the transfer balance within the 0 percent interest rate period (I took the balance and divided by 15 to make sure it’s a number my budget can handle), it will be a good move for me. And, if I take advantage of the $250 cash back offer on the new card, it will more than cover the balance transfer fee. I can easily spend $1,000 in the first three months by using the card for groceries and gas. The key going forward, however, is that I intend to pay the balance in full each month on the new card (no more revolving balances for this girl!).

    The result: I’m moving forward with my financial goal to be debt-free (just like the inspiring bloggers I recently wrote about) and for the rest of that journey, I won’t be paying any more interest on my remaining debt. I also have a new credit product in my arsenal that I plan to use strategically.

    Yes, readers, I’m finally practicing what I preach about plastic, and it’s a great feeling.

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  • Dawn Papandrea

    Big life changes bring money anxiety

    Ahh, life’s big changes. They can be exciting, but also can induce financial worries. If money was no object, changing jobs or buying a new home would be less stressful. Nevertheless, Americans don’t seem to be letting money woes get in the way of their future plans.

    According to the Liberty Mutual Insurance New Beginnings study (which surveyed nearly 2,000 Americans over age 18), 42 percent of people said they were planning to make at least one major life change this year. Forty-four percent said they expected to move or undertake a major home renovation, while 22 percent were on the job hunt. Millennials, however, are the most focused on new beginnings, with nearly two-thirds saying they will be making a life change this year.

    But here’s the kicker: All of these plans for the future can bring lots of money anxiety. Those millennials with the big plans also happen to be the most stressed in terms of finances, with 89 percent saying they were most concerned about money. Boomers weren’t far behind with 73 percent of them saying the same.

    For the most part, I found these survey results encouraging, and on par with some of the emotions I’ve had in my own financial decision making over the past few years. A major life change should be accompanied by some apprehension – especially if it involves going into debt or the flow of your income. For instance, becoming a full-time freelance writer was hardly something I leaped into. I had been pondering the move for a few years, but worrying about not having a steady income prevented me from making the move. Ultimately, it was getting laid off by my full-time employer that gave me the kick I needed to make it happen. (So far, so good.)

    Here are a couple of other takeaways from the survey findings:

    • Americans are more aware that their financial standing matters and has a direct correlation to their quality of life. No longer are we a nation that throws caution to the wind, taking on mortgages we really can’t afford (actually, we won’t qualify to do that anymore even if we tried, which is why strong credit and overall financial health is so important). The economic recovery also is giving us more confidence to look for better job opportunities. In other words, we’ve adopted a positive but prudent outlook, which makes sense after having lived through the rocky economic downturn of the past few years.
    • When it comes to making big decisions, a little worry is a good thing. Concern over how much debt you can reasonably take on if you move or invest in a home, and how you’ll pay it back, will help you to make smarter borrowing decisions. The same should go for making smaller purchases, too. Likewise, weighing the pros and cons of a job change, and having a financial plan in place – even if that means saving up before you make the leap – will help protect you from a gap in income.
    • Be willing to invest your own time and effort in addition to money to achieve your goals. Today’s younger adults are the most willing to participate in their own home improvement projects. According to the survey, 9 in 10 millennials (and 7 in 10 overall) said they will put some DIY effort into their home renovations. And more than half (55 percent) of respondents are doing so to improve their home’s value – a wise investment.

    As Americans, we strive to advance our careers, own our own homes and be more self-sufficient. As per the survey, worrying about money comes with the territory. In my book, being more cash conscious is a good thing that will ultimately make us more financially prepared for the major life changes we seek.

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  • Susan Johnston Taylor

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

    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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  • Susan Johnston Taylor

    Buying vs. renting: One year later

    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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  • Susan Johnston Taylor

    How I’m maximizing card rewards for my wedding

    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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  • Dawn Papandrea

    “I cut up my credit cards” experiment

    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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  • Susan Johnston Taylor

    Survey reveals recent grads’ biggest financial regrets

    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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