Why Don’t I Always Have to Sign for Credit Card Purchases?

Between deliveries, bank transactions, and contracts large and small, scribbling your John Hancock is practically an everyday event. But have you ever wondered why you sometimes don’t have to sign for a credit card purchase? The answer is a little more complex than you might expect. Curious? Take a look at the details below!

In general, this is why you sign for credit card purchases

Before discussing when you need to sign for a credit card purchase and when you don’t, let’s review the reasons you sign for plastic transactions in the first place.

The first is identity verification. One of the reasons you’re required to sign the back of your credit card is so that merchants can check the signature on your card to the signature on your receipt. If they don’t match, this is one way to catch a credit card thief. Of course, it’s pretty rare that a store clerk will actually take this step, but it could theoretically happen.

The second is to protect all parties involved (you, the merchant, and the credit card company) in the event that a purchase is disputed. For example, if you spot a transaction your credit card statement that you didn’t make, the credit card company can demand a signed receipt from the merchant to prove you it was you who swiped the card. If he can’t, your case is bolstered. But alternatively, if he can, he’s protected from having to refund the cash.

When you need to sign, and when you don’t

Signatures are all well and good, but in today’s world we have a need for speed. The two major credit card networks (Visa and MasterCard) recognize this, and have started to reduce the signature burden on retailers. Consequently, whether or not you have to sign for a purchase mostly boils down to how much you’ve spent.

As of October 2012, MasterCard doesn’t require signatures for most transactions under $50. Likewise, Visa no longer requires signatures for transactions under $50 at grocery stores and discount stores, or purchases under $25 at most other retailers. This explains why your morning stop at the local coffee shop doesn’t involve signing for your latte.

But keep in mind that there are exceptions to these guidelines. Visa and/or MasterCard require signatures on purchases of any size from certain merchant categories, including: quasi-cash, gambling, direct marketing, money transfer, automated fuel dispensers, and financial institutions.

Also, just because Visa and MasterCard don’t require signatures on small transactions doesn’t mean that the merchant you’re shopping with is onboard with ditching autographs. Remember, signing for a purchase protects the retailer in the event that you dispute a purchase. Some merchants aren’t willing to take the risk of losing out on profits if they end up in a scuffle with your credit card company.

Will signing go away with the transition to EMV?

By now you’re probably wondering about the fate of signatures when the U.S. migrates to EMV credit cards in late 2015. Honestly, the answer to this question is unclear. There’s the possibility we could all soon start punching in PINs when we use our cards, which would eliminate the need for a signature altogether. And chip-and-PIN technology has the advantage of being one of the most hack-proof payment systems out there today.

But the reality is that we’ll probably shift to chip-and-signature, not chip-and-PIN – at least initially. It’s been a struggle to get U.S. consumers, retailers and credit card issuers to make the move to EMV, so going from simplistic magnetic strip payments directly to the more complicated chip-and-PIN might be too big a leap to make overnight. And with chip-and-signature transactions, the same autograph rules Visa and MasterCard set out for swipe-and-sign purchases remain in place (see above). Overall, holding onto signatures is less disruptive to our usual way of doing business.

So keep practicing that signature – you’ll probably still need it for large credit card purchases for quite a while!

Signature on receipt image via Shutterstock

Source Article http://ift.tt/1y39EC7

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Why Don’t I Always Have to Sign for Credit Card Purchases?

Between deliveries, bank transactions, and contracts large and small, scribbling your John Hancock is practically an everyday event. But have you ever wondered why you sometimes don’t have to sign for a credit card purchase? The answer is a little more complex than you might expect. Curious? Take a look at the details below!

In general, this is why you sign for credit card purchases

Before discussing when you need to sign for a credit card purchase and when you don’t, let’s review the reasons you sign for plastic transactions in the first place.

The first is identity verification. One of the reasons you’re required to sign the back of your credit card is so that merchants can check the signature on your card to the signature on your receipt. If they don’t match, this is one way to catch a credit card thief. Of course, it’s pretty rare that a store clerk will actually take this step, but it could theoretically happen.

The second is to protect all parties involved (you, the merchant, and the credit card company) in the event that a purchase is disputed. For example, if you spot a transaction your credit card statement that you didn’t make, the credit card company can demand a signed receipt from the merchant to prove you it was you who swiped the card. If he can’t, your case is bolstered. But alternatively, if he can, he’s protected from having to refund the cash.

When you need to sign, and when you don’t

Signatures are all well and good, but in today’s world we have a need for speed. The two major credit card networks (Visa and MasterCard) recognize this, and have started to reduce the signature burden on retailers. Consequently, whether or not you have to sign for a purchase mostly boils down to how much you’ve spent.

As of October 2012, MasterCard doesn’t require signatures for most transactions under $50. Likewise, Visa no longer requires signatures for transactions under $50 at grocery stores and discount stores, or purchases under $25 at most other retailers. This explains why your morning stop at the local coffee shop doesn’t involve signing for your latte.

But keep in mind that there are exceptions to these guidelines. Visa and/or MasterCard require signatures on purchases of any size from certain merchant categories, including: quasi-cash, gambling, direct marketing, money transfer, automated fuel dispensers, and financial institutions.

Also, just because Visa and MasterCard don’t require signatures on small transactions doesn’t mean that the merchant you’re shopping with is onboard with ditching autographs. Remember, signing for a purchase protects the retailer in the event that you dispute a purchase. Some merchants aren’t willing to take the risk of losing out on profits if they end up in a scuffle with your credit card company.

Will signing go away with the transition to EMV?

By now you’re probably wondering about the fate of signatures when the U.S. migrates to EMV credit cards in late 2015. Honestly, the answer to this question is unclear. There’s the possibility we could all soon start punching in PINs when we use our cards, which would eliminate the need for a signature altogether. And chip-and-PIN technology has the advantage of being one of the most hack-proof payment systems out there today.

But the reality is that we’ll probably shift to chip-and-signature, not chip-and-PIN – at least initially. It’s been a struggle to get U.S. consumers, retailers and credit card issuers to make the move to EMV, so going from simplistic magnetic strip payments directly to the more complicated chip-and-PIN might be too big a leap to make overnight. And with chip-and-signature transactions, the same autograph rules Visa and MasterCard set out for swipe-and-sign purchases remain in place (see above). Overall, holding onto signatures is less disruptive to our usual way of doing business.

So keep practicing that signature – you’ll probably still need it for large credit card purchases for quite a while!

Signature on receipt image via Shutterstock

Source Article :http://bit.ly/1u7d3Nt

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Bank Hacked Prescription: Take These Steps for Self-Protection

Consumers concerned about the safety of their bank and credit accounts should take defensive and proactive steps right away to protect their financial well-being if hackers have attacked.

And these days, that seems to include just about everybody. Last year alone, more than 13 million Americans were victimized by identity fraud, according to Javelin Strategy & Research in Pleasanton, Calif. More recent data breaches at major U.S. financial institutions and retailers have exposed potentially millions more. Russian hacker attacks on JPMorgan Chase and at least four other banks in August resulted in the loss of gigabytes of customer information, according to Bloomberg News.

While Bloomberg said Chase plans to contact customers who might be affected by the latest breach, there’s no reason not to take the following steps now, even if your bank or credit provider hasn’t been hacked – it just may not know it yet.

Change logins and passwords

It’s a chore but an easy one and may prevent much bigger headaches later: Change all logins and/or passwords for each bank and credit account, and consider changing personal identification numbers (PINs) as well. Some safety experts advise taking this step at least once every six months to protect against fraud even if you don’t think the accounts have been exposed. It’s good medicine.

Examine recent statements

Go through account statements line by line and verify each transaction. Even a tiny discrepancy should be reported immediately. Thieves often start by making a small test purchase before engaging in larger fraud, so catching them early counts.

Check balances frequently

Mobile or online banking users in particular should check statements frequently to ensure that no suspicious charges crop up unnoticed. Consider setting up email or text alerts each time a transaction occurs in an account, if that option is available.

Flag suspicious activity

Report any unauthorized charge or suspicious activity to the bank or credit provider immediately. At some providers, tardy reporting leaves the account holder exposed to greater losses that the company won’t cover.

Be wary of queries

Banks generally never ask for account information such as a password or PIN by telephone or email, so don’t trust official-looking inquiries seeking personal information to verify accounts or for other purposes. It could be a “phishing” expedition by fraudsters looking to prey on the unsuspecting. Don’t bite! But if there’s a compelling reason to make sure everything is okay, go on the company’s website to check. Don’t click on links or pop-ups suspicious emails may contain.

Understand liability

Find and review any account agreements and policies to make sure what you may be liable for and what the company will do in the event of fraud or other unauthorized activity, as well as your reporting obligations. In general, banks and credit providers won’t hold customers accountable for losses tied to theft or identity fraud, provided they are reported in a timely manner.

Fraud alerts

Ask the three major credit-rating companies – Equifax, TransUnion and Experian – to provide fraud alerts so that lenders know your information may be compromised. These notices require extra steps to verify a would-be borrower’s information and identity before doing business with them. Consumers can also tell the raters to lock up their credit reports, effectively blocking the creation of new accounts.

Extra authentication

Some companies have adopted two-factor authentication systems to provide an extra level of protection for account access. Some require users to respond to a text message while others ask for the identification of a preset symbol or picture before a user can log in.

Banks are required to alert customers when data has been breached, but it can take weeks to determine what was exposed. So don’t wait – take these steps now to protect your financial health.

JPMorgan Chase image via Shutterstock

Source Article :http://bit.ly/1qGdJdb

Read More

Bank Hacked Prescription: Take These Steps for Self-Protection

Consumers concerned about the safety of their bank and credit accounts should take defensive and proactive steps right away to protect their financial well-being if hackers have attacked.

And these days, that seems to include just about everybody. Last year alone, more than 13 million Americans were victimized by identity fraud, according to Javelin Strategy & Research in Pleasanton, Calif. More recent data breaches at major U.S. financial institutions and retailers have exposed potentially millions more. Russian hacker attacks on JPMorgan Chase and at least four other banks in August resulted in the loss of gigabytes of customer information, according to Bloomberg News.

While Bloomberg said Chase plans to contact customers who might be affected by the latest breach, there’s no reason not to take the following steps now, even if your bank or credit provider hasn’t been hacked – it just may not know it yet.

Change logins and passwords

It’s a chore but an easy one and may prevent much bigger headaches later: Change all logins and/or passwords for each bank and credit account, and consider changing personal identification numbers (PINs) as well. Some safety experts advise taking this step at least once every six months to protect against fraud even if you don’t think the accounts have been exposed. It’s good medicine.

Examine recent statements

Go through account statements line by line and verify each transaction. Even a tiny discrepancy should be reported immediately. Thieves often start by making a small test purchase before engaging in larger fraud, so catching them early counts.

Check balances frequently

Mobile or online banking users in particular should check statements frequently to ensure that no suspicious charges crop up unnoticed. Consider setting up email or text alerts each time a transaction occurs in an account, if that option is available.

Flag suspicious activity

Report any unauthorized charge or suspicious activity to the bank or credit provider immediately. At some providers, tardy reporting leaves the account holder exposed to greater losses that the company won’t cover.

Be wary of queries

Banks generally never ask for account information such as a password or PIN by telephone or email, so don’t trust official-looking inquiries seeking personal information to verify accounts or for other purposes. It could be a “phishing” expedition by fraudsters looking to prey on the unsuspecting. Don’t bite! But if there’s a compelling reason to make sure everything is okay, go on the company’s website to check. Don’t click on links or pop-ups suspicious emails may contain.

Understand liability

Find and review any account agreements and policies to make sure what you may be liable for and what the company will do in the event of fraud or other unauthorized activity, as well as your reporting obligations. In general, banks and credit providers won’t hold customers accountable for losses tied to theft or identity fraud, provided they are reported in a timely manner.

Fraud alerts

Ask the three major credit-rating companies – Equifax, TransUnion and Experian – to provide fraud alerts so that lenders know your information may be compromised. These notices require extra steps to verify a would-be borrower’s information and identity before doing business with them. Consumers can also tell the raters to lock up their credit reports, effectively blocking the creation of new accounts.

Extra authentication

Some companies have adopted two-factor authentication systems to provide an extra level of protection for account access. Some require users to respond to a text message while others ask for the identification of a preset symbol or picture before a user can log in.

Banks are required to alert customers when data has been breached, but it can take weeks to determine what was exposed. So don’t wait – take these steps now to protect your financial health.

JPMorgan Chase image via Shutterstock

Source Article http://ift.tt/1y39EC7

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Millennials Often Feel `Extreme Financial Stress,’ Survey Shows

About a decade out of school and still finding the going tough, economically speaking? You’ve got company. More than one in five Americans 24 to 34 struggle to make ends meet, saying they’re under “extreme financial stress” in a survey released by TD Bank, while two thirds say they wished they were better prepared for major financial events like going to college, having a child or buying a car.

Among older millennials, the top source of financial stress is covering bills, including mortgage and student loan payments, cited by 45% of respondents, according to the Cherry Hill, N.J.-based bank. While more than half – 55% – say they have a hard time “finding financial happiness,” a third say they’re “frustrated” by inadequate funds, whether because of limited incomes or an inability to save anything.

“Many factors can contribute to millennials’ financial stress,” says Nandita Bakhshi, who heads consumer banking for the company.

For one thing, getting a job is harder. Unemployment rates are higher for 25- to 34-year-olds, rising to 6.6% in July from 6.5% in June, according to U.S. Department of Labor statistics. That compares with a 6.2% average U.S. jobless rate. For younger millennials, those 20 to 24, the rate climbed to 11.3% from 10.5%. Meanwhile, the financial burden of earning a college degree continues to grow heavier, rising to about $33,000 on average for this year’s graduates, according to Edvisor, a website focused on college financing. So it should be no surprise that many young adults feel they’re under unrelenting financial pressure.

Yet most don’t turn to professionals for advice when confronting major life events – they reach out to family and friends instead. When evaluating college costs, 45% consulted with family, while 28% attended classes or seminars and a quarter talked with friends, according to the poll of 1,006 young Americans. Fewer than 15% either visited a bank website or spoke with a banker or financial adviser. Most – 67% – say they wished they’d been more financially proactive in preparing for the move.

Homebuyers differ

Contacting a bank only tops family or social connections when it involves decisions about buying a home. When seeking information about financial products, 65% of millennials speak with family and friends while fewer than a third consult with a banker, according to the survey. About a fifth say they didn’t need to take a formal seminar on the topic, while more than a quarter say they don’t have the time and more than a third, 37%, say the thought of taking a course or class on it never occurred to them.

“Millennials need to be proactive in finding education that fits their needs so they can be more prepared for the events they will experience throughout their lives,” says Bakhshi.

Apparently, that idea often only sinks in after the fact.

Broke consumer image via Shutterstock

Source Article http://ift.tt/1y39EC7

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Millennials Often Feel `Extreme Financial Stress,’ Survey Shows

About a decade out of school and still finding the going tough, economically speaking? You’ve got company. More than one in five Americans 24 to 34 struggle to make ends meet, saying they’re under “extreme financial stress” in a survey released by TD Bank, while two thirds say they wished they were better prepared for major financial events like going to college, having a child or buying a car.

Among older millennials, the top source of financial stress is covering bills, including mortgage and student loan payments, cited by 45% of respondents, according to the Cherry Hill, N.J.-based bank. While more than half – 55% – say they have a hard time “finding financial happiness,” a third say they’re “frustrated” by inadequate funds, whether because of limited incomes or an inability to save anything.

“Many factors can contribute to millennials’ financial stress,” says Nandita Bakhshi, who heads consumer banking for the company.

For one thing, getting a job is harder. Unemployment rates are higher for 25- to 34-year-olds, rising to 6.6% in July from 6.5% in June, according to U.S. Department of Labor statistics. That compares with a 6.2% average U.S. jobless rate. For younger millennials, those 20 to 24, the rate climbed to 11.3% from 10.5%. Meanwhile, the financial burden of earning a college degree continues to grow heavier, rising to about $33,000 on average for this year’s graduates, according to Edvisor, a website focused on college financing. So it should be no surprise that many young adults feel they’re under unrelenting financial pressure.

Yet most don’t turn to professionals for advice when confronting major life events – they reach out to family and friends instead. When evaluating college costs, 45% consulted with family, while 28% attended classes or seminars and a quarter talked with friends, according to the poll of 1,006 young Americans. Fewer than 15% either visited a bank website or spoke with a banker or financial adviser. Most – 67% – say they wished they’d been more financially proactive in preparing for the move.

Homebuyers differ

Contacting a bank only tops family or social connections when it involves decisions about buying a home. When seeking information about financial products, 65% of millennials speak with family and friends while fewer than a third consult with a banker, according to the survey. About a fifth say they didn’t need to take a formal seminar on the topic, while more than a quarter say they don’t have the time and more than a third, 37%, say the thought of taking a course or class on it never occurred to them.

“Millennials need to be proactive in finding education that fits their needs so they can be more prepared for the events they will experience throughout their lives,” says Bakhshi.

Apparently, that idea often only sinks in after the fact.

Broke consumer image via Shutterstock

Source Article :http://bit.ly/1tCLPit

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Why Isn’t My Credit Score Listed On My Credit Report?

So there you are expecting your credit score to show up as you pull your credit report from one of the big credit bureaus and … it isn’t there. You are probably annoyed that you took the time and perhaps spent money in the hope of finding your credit score on that credit report. It makes sense that the credit score should appear on your credit report, so why doesn’t it and what can you do about this?

Credit score background

The first thing to understand is that credit reports and credit scores are two totally different products.

The FICO score is a proprietary credit scoring system that was created back in the 1950s. The company that developed it – Fair, Isaac and Company – then sold the scoring system. At first, there were other scoring systems that competed with it.

However, once Equifax started using it as a general purpose credit score, it pretty much caught on as the standard.

In other words, the company that invented the FICO Score was so successful with it that the entire credit industry adopted it as a standard method of determining creditworthiness. It is a product the credit bureaus subscribe to in order to evaluate you, and it is a product you buy to see where you stand.

Credit report: What’s in it?

The credit report is just that – it lists your entire credit profile so that creditors can examine it and evaluate your creditworthiness, both independent of the FICO Score and in conjunction with it. You can order your credit score though the bureaus as well, and they also have their own scoring system which will mean little to you.

Credit score: It’s not free, mostly

Your FICO score is rarely offered for free. Those sources may offer you a free FICO score, but then you’ll be signed up for a monthly recurring charge in some kind of membership program involving credit, or credit monitoring, or as a value-add by using a certain credit card (like Discover, which offers a free score on your statement every month). These might be worth it, depending on various circumstances.

However, the Fair Credit Reporting Act gives consumers access to their credit report for free – one report from each of the three big credit bureaus (Experian, Equifax, Transunion) once per year. This data is provided from a centralized source, http://ift.tt/o2j1vQ.

In addition, the FCRA entitles you to a free credit report if a company or creditor takes what’s called “adverse action” against you. This includes denying an application for credit. You may also get one if your report is inaccurate because of fraud.

You can dispute errors or you may have found a case of fraud. You want to do this not only so everything is correct, but because it will effect your FICO score.

Confused man image via Shutterstock

Source Article http://ift.tt/1y39EC7

Read More

Why Isn’t My Credit Score Listed On My Credit Report?

So there you are expecting your credit score to show up as you pull your credit report from one of the big credit bureaus and … it isn’t there. You are probably annoyed that you took the time and perhaps spent money in the hope of finding your credit score on that credit report. It makes sense that the credit score should appear on your credit report, so why doesn’t it and what can you do about this?

Credit score background

The first thing to understand is that credit reports and credit scores are two totally different products.

The FICO score is a proprietary credit scoring system that was created back in the 1950s. The company that developed it – Fair, Isaac and Company – then sold the scoring system. At first, there were other scoring systems that competed with it.

However, once Equifax started using it as a general purpose credit score, it pretty much caught on as the standard.

In other words, the company that invented the FICO Score was so successful with it that the entire credit industry adopted it as a standard method of determining creditworthiness. It is a product the credit bureaus subscribe to in order to evaluate you, and it is a product you buy to see where you stand.

Credit report: What’s in it?

The credit report is just that – it lists your entire credit profile so that creditors can examine it and evaluate your creditworthiness, both independent of the FICO Score and in conjunction with it. You can order your credit score though the bureaus as well, and they also have their own scoring system which will mean little to you.

Credit score: It’s not free, mostly

Your FICO score is rarely offered for free. Those sources may offer you a free FICO score, but then you’ll be signed up for a monthly recurring charge in some kind of membership program involving credit, or credit monitoring, or as a value-add by using a certain credit card (like Discover, which offers a free score on your statement every month). These might be worth it, depending on various circumstances.

However, the Fair Credit Reporting Act gives consumers access to their credit report for free – one report from each of the three big credit bureaus (Experian, Equifax, Transunion) once per year. This data is provided from a centralized source, http://1.usa.gov/1nbIDEH.

In addition, the FCRA entitles you to a free credit report if a company or creditor takes what’s called “adverse action” against you. This includes denying an application for credit. You may also get one if your report is inaccurate because of fraud.

You can dispute errors or you may have found a case of fraud. You want to do this not only so everything is correct, but because it will effect your FICO score.

Confused man image via Shutterstock

Source Article :http://bit.ly/1spi56R

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Preparing for Military Deployment? Get Financially Ready With These 5 Essential Steps

If you’re a member of the military gearing up for a deployment, you’re probably scrambling to tie up loose ends before you head overseas. Part of the process is making sure your finances are in order – a task that leaves a lot of soldiers feeling overwhelmed.

Luckily, the Nerds are here to help. Take a look at the details below for the 5 essential money moves you should make to get prepared for your deployment:

1. Analyze your budget – and how it will change

You probably already have a budget in place for your civilian income, but you may need to make adjustments for the money you’ll be earning while you’re deployed. In many cases, members of the military see an uptick in pay while they’re serving, so it’s important to decide before you’re away from home how the extra funds will be used.

If you have a family, you should consider allocating some of your excess pay to the home front. This will help ease the burden that managing additional household tasks will place on your spouse. For instance, if you’re usually in charge of mowing the yard, using some of your hazard pay to hire a lawn care service will go a long way toward making your partner’s life at home a little smoother.

The important thing is to figure out how your income and expenses will change while you’re deployed and put a plan in place. Doing so will mean one less thing to worry about when you’re thousands of miles from home.

2. Make a plan for how every bill will get paid

Our financial lives are complex – there are so many bills to pay! Before you’re out of your usual routine, make a list of every monthly bill you have and make a plan for how it will get paid.

One option is to automate your payments. But if this isn’t possible, create detailed payment instructions for someone else to follow and go over it with him or her while you’re still at home. This person should be someone you really, really trust and have given certain legal power to (see No. 5 below).

Even if you expect to manage your bills online while you’re gone, writing out payment directions and handing them off to someone you trust is a good idea. This way, if you find yourself without an Internet connection, you won’t have to worry about missing a payment.

3. Start allocating extra to savings

Unfortunately, many members of the military experience a stretch of unemployment when they return home from deployment. If you find yourself in this situation, it’s helpful to have some extra funds in the bank to tide you over.

One way to make this happen is to start allocating extra to savings before you’re deployed. As you rethink your monthly budget (see No. 1 above), bump up your savings a bit so that you and your family will be protected if you have a hard time finding work when you get home.

4. Know (and exercise) your rights under the Servicemembers Civil Relief Act

If you’re dealing with debt, it pays to exercise your rights under a piece of legislation known as the Servicemembers Civil Relief Act (SCRA). According to Curtis Sheldon, president and lead planner at C.L. Sheldon and Co., a financial planning agency located in Alexandria, Va.:

“If a reservist is called to Active Duty, contact your creditors and apply for relief under the Servicemembers Civil Relief Act. The act limits the interest charged on debt entered into prior to entering active duty to 6%.”

The provisions of the SCRA can make your payments much more manageable while you’re serving overseas. Reduced interest rates are also a good opportunity to work on paying debts off for good, which will make the financial transition to civilian life easier.

5. Get your legal affairs in order

A deployment means you’ll be away from your safe, regular home life for quite a while. As a result, having your legal affairs in order before you head out will put your mind at ease.

At bare minimum, you should have a will and power of attorney in place. Most people are familiar with wills, but power of attorney is commonly overlooked. This legal document gives someone else the authority to make certain decisions for you for a specified period of time; financial decisions are included here, so choosing someone who will act in your best interest is essential.

If you’re having a hard time with the logistics of getting your legal affairs squared away, reach out to resources available on base. Help is out there if you know where to look!

Military image via Shutterstock

Source Article :http://bit.ly/YUvWtw

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Preparing for Military Deployment? Get Financially Ready With These 5 Essential Steps

If you’re a member of the military gearing up for a deployment, you’re probably scrambling to tie up loose ends before you head overseas. Part of the process is making sure your finances are in order – a task that leaves a lot of soldiers feeling overwhelmed.

Luckily, the Nerds are here to help. Take a look at the details below for the 5 essential money moves you should make to get prepared for your deployment:

1. Analyze your budget – and how it will change

You probably already have a budget in place for your civilian income, but you may need to make adjustments for the money you’ll be earning while you’re deployed. In many cases, members of the military see an uptick in pay while they’re serving, so it’s important to decide before you’re away from home how the extra funds will be used.

If you have a family, you should consider allocating some of your excess pay to the home front. This will help ease the burden that managing additional household tasks will place on your spouse. For instance, if you’re usually in charge of mowing the yard, using some of your hazard pay to hire a lawn care service will go a long way toward making your partner’s life at home a little smoother.

The important thing is to figure out how your income and expenses will change while you’re deployed and put a plan in place. Doing so will mean one less thing to worry about when you’re thousands of miles from home.

2. Make a plan for how every bill will get paid

Our financial lives are complex – there are so many bills to pay! Before you’re out of your usual routine, make a list of every monthly bill you have and make a plan for how it will get paid.

One option is to automate your payments. But if this isn’t possible, create detailed payment instructions for someone else to follow and go over it with him or her while you’re still at home. This person should be someone you really, really trust and have given certain legal power to (see No. 5 below).

Even if you expect to manage your bills online while you’re gone, writing out payment directions and handing them off to someone you trust is a good idea. This way, if you find yourself without an Internet connection, you won’t have to worry about missing a payment.

3. Start allocating extra to savings

Unfortunately, many members of the military experience a stretch of unemployment when they return home from deployment. If you find yourself in this situation, it’s helpful to have some extra funds in the bank to tide you over.

One way to make this happen is to start allocating extra to savings before you’re deployed. As you rethink your monthly budget (see No. 1 above), bump up your savings a bit so that you and your family will be protected if you have a hard time finding work when you get home.

4. Know (and exercise) your rights under the Servicemembers Civil Relief Act

If you’re dealing with debt, it pays to exercise your rights under a piece of legislation known as the Servicemembers Civil Relief Act (SCRA). According to Curtis Sheldon, president and lead planner at C.L. Sheldon and Co., a financial planning agency located in Alexandria, Va.:

“If a reservist is called to Active Duty, contact your creditors and apply for relief under the Servicemembers Civil Relief Act. The act limits the interest charged on debt entered into prior to entering active duty to 6%.”

The provisions of the SCRA can make your payments much more manageable while you’re serving overseas. Reduced interest rates are also a good opportunity to work on paying debts off for good, which will make the financial transition to civilian life easier.

5. Get your legal affairs in order

A deployment means you’ll be away from your safe, regular home life for quite a while. As a result, having your legal affairs in order before you head out will put your mind at ease.

At bare minimum, you should have a will and power of attorney in place. Most people are familiar with wills, but power of attorney is commonly overlooked. This legal document gives someone else the authority to make certain decisions for you for a specified period of time; financial decisions are included here, so choosing someone who will act in your best interest is essential.

If you’re having a hard time with the logistics of getting your legal affairs squared away, reach out to resources available on base. Help is out there if you know where to look!

Military image via Shutterstock

Source Article http://ift.tt/1y39EC7

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Apply for a Business Credit Card? Here Are 5 Things You Need to Know

Did you just apply for a business credit card? Nice work! You’ve taken an important step in your career as an entrepreneur.

But if you’ve never used business plastic before, you’re entering new and unknown territory. Take a look at the details below for five things you should know about your new card.

1. You’re now in a good position to keep business and personal expenses separate

As your company grows, it’s important to start separating personal and business finances. Here’s why: An expanding business is going to incur lots of expenses, and you’ll need to diligently track them to keep your venture profitable. If you mingle personal and business purchases, this task becomes nearly impossible.

But keeping a credit card just for business purchases makes it much easier to keep tabs on your company’s spending. Plus, when tax time rolls around, you’ll have a handy backup record of exactly what can be written off (you should also be keeping detailed notes about this, of course). Win-win!

2. You’ll probably get a bevy of business perks – use them!

If you shopped around carefully for a business credit card, you probably applied for one that offers a host of perks that will benefit your business. These often include:

• High spending limits


• Ability to issue cards to employees (see below)


• Extra rewards on office supplies and services


• Expense tracking features


• Travel benefits, such as priority boarding and extra rewards on travel spending

Be sure to take advantage of the great extras your card offers. If you find that you’re not getting a lot of value out of them, don’t hesitate to shop around for a different business credit card. With so many on the market these days, there’s bound to be one that’s a better fit!

3. You don’t have the same protections as with your consumer card

The CARD Act of 2009 put an end to a lot of questionable issuer practices, such as jacking up interest rates without warning and charging excessive late fees. However, it’s important to remember that the new protections we’re enjoying only apply to consumer credit cards – they won’t apply to your new business credit card.

Assuming that you pay your bills on time and in full every month, you probably won’t notice that your business credit card isn’t subject to the rules laid out in the CARD Act. But it’s something to be aware of; keep a close watch on your account and contact your issuer if you see something about your card’s terms (such as the interest rate) suddenly changes.

4. You probably made a personal guarantee to pay the bill

Getting a credit card in your business’s name and using it for company purchases establishes an important boundary between your personal and professional finances. But it’s crucial to recognize that you probably made what’s known as a “personal guarantee” when you signed on to your business credit card. This means that if the company flounders and you can’t pay the bill from its profits, you’ll be expected to use your personal funds to do so.

Again, assuming that you’re careful with your spending and your business’s finances, this probably won’t be something you’ll ever have to worry about. But in the event that your business goes under, you won’t necessarily be off the hook for the credit card bill.

5. You can now issue cards to employees

One of the best things about getting a business credit card is that you can easily issue additional cards to your employees. This makes tracking their spending on purchases and travel a breeze, and frees up some of your time. Now you don’t have to be the only one doing the business purchasing!

Choosing which employees to give a card to is a decision that should be taken very seriously. Although you’ll be able to see what they’re charging, it could still cause a lot of headaches to give a card to a worker who’s not totally trustworthy.

And once you’ve carefully selected who gets a card, it’s a good idea to explicitly lay out your rules about what employees are permitted to charge to the company and what they’re not. Being clear from the outset will help prevent misunderstandings before they arise.

Business credit card image via Shutterstock

Source Article http://ift.tt/1y39EC7

Read More

Apply for a Business Credit Card? Here Are 5 Things You Need to Know

Did you just apply for a business credit card? Nice work! You’ve taken an important step in your career as an entrepreneur.

But if you’ve never used business plastic before, you’re entering new and unknown territory. Take a look at the details below for five things you should know about your new card.

1. You’re now in a good position to keep business and personal expenses separate

As your company grows, it’s important to start separating personal and business finances. Here’s why: An expanding business is going to incur lots of expenses, and you’ll need to diligently track them to keep your venture profitable. If you mingle personal and business purchases, this task becomes nearly impossible.

But keeping a credit card just for business purchases makes it much easier to keep tabs on your company’s spending. Plus, when tax time rolls around, you’ll have a handy backup record of exactly what can be written off (you should also be keeping detailed notes about this, of course). Win-win!

2. You’ll probably get a bevy of business perks – use them!

If you shopped around carefully for a business credit card, you probably applied for one that offers a host of perks that will benefit your business. These often include:

• High spending limits


• Ability to issue cards to employees (see below)


• Extra rewards on office supplies and services


• Expense tracking features


• Travel benefits, such as priority boarding and extra rewards on travel spending

Be sure to take advantage of the great extras your card offers. If you find that you’re not getting a lot of value out of them, don’t hesitate to shop around for a different business credit card. With so many on the market these days, there’s bound to be one that’s a better fit!

3. You don’t have the same protections as with your consumer card

The CARD Act of 2009 put an end to a lot of questionable issuer practices, such as jacking up interest rates without warning and charging excessive late fees. However, it’s important to remember that the new protections we’re enjoying only apply to consumer credit cards – they won’t apply to your new business credit card.

Assuming that you pay your bills on time and in full every month, you probably won’t notice that your business credit card isn’t subject to the rules laid out in the CARD Act. But it’s something to be aware of; keep a close watch on your account and contact your issuer if you see something about your card’s terms (such as the interest rate) suddenly changes.

4. You probably made a personal guarantee to pay the bill

Getting a credit card in your business’s name and using it for company purchases establishes an important boundary between your personal and professional finances. But it’s crucial to recognize that you probably made what’s known as a “personal guarantee” when you signed on to your business credit card. This means that if the company flounders and you can’t pay the bill from its profits, you’ll be expected to use your personal funds to do so.

Again, assuming that you’re careful with your spending and your business’s finances, this probably won’t be something you’ll ever have to worry about. But in the event that your business goes under, you won’t necessarily be off the hook for the credit card bill.

5. You can now issue cards to employees

One of the best things about getting a business credit card is that you can easily issue additional cards to your employees. This makes tracking their spending on purchases and travel a breeze, and frees up some of your time. Now you don’t have to be the only one doing the business purchasing!

Choosing which employees to give a card to is a decision that should be taken very seriously. Although you’ll be able to see what they’re charging, it could still cause a lot of headaches to give a card to a worker who’s not totally trustworthy.

And once you’ve carefully selected who gets a card, it’s a good idea to explicitly lay out your rules about what employees are permitted to charge to the company and what they’re not. Being clear from the outset will help prevent misunderstandings before they arise.

Business credit card image via Shutterstock

Source Article :http://bit.ly/YKmtVx

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`Masquerading’ Wire Fraud Targets Gullible Executives

Financial fraud is constantly evolving and becoming a more and more difficult to fight, whether companies or consumers are targeted. Recently, a relatively sophisticated scheme has emerged that uses “spoofing,” a type of identity theft, to trick business people into telling their bankers to send corporate cash to scammers.

These new email and wire-fraud techniques, dubbed “masquerading” by David Pollino, the fraud prevention officer at San Francisco-based Bank of the West, usually siphon money from the victimized business’s account and have it sent electronically (by wire) to a phony offshore firm. Often, the thief poses as a high-level officer – such as the chief executive or the chief financial officer – of the targeted company.

Wire fraud incidents rose last year, affecting 14% of businesses in a payments fraud survey by the Association of Financial Professionals, up from 11% in 2012. Losses for some victims topped $800,000, according to federal authorities. Pollino says businesses can take steps to prevent such schemes from succeeding. But first they need to understand how they work.

The masquerade

Typically, fraudsters must do some homework first.

“For example, criminals might go through social media to figure out who the CEO is of a construction company,” Pollino says.

Then they hack into the business’s email system. After gaining access, the scammer, using the name of a high-level executive, sends an authentic-looking message through the company’s computers to a subordinate with access to the cash, such as the controller or a financial manager, ordering a wire transfer from the firm’s bank to a third-party account. Even if the bank raises questions, it is often ignored because the email that prompted the order is regarded as genuine, Pollino says.

The fraudsters “try to scam or fool the person internal to the company,” Pollino says. Often, the order is marked confidential, making it harder for the recipient to raise questions, he says.

The scammer will create a fake email address that is only slightly different from the CEO or CFO’s real e-mail address – perhaps just a character changed or added – so the employee doesn’t notice that it’s phony. Typically, the bogus message will include an attachment with the wire transfer instructions. Moving funds this way tends to work well for thieves because custody of the money changes in an instant, putting the cash out of the victim’s reach before the scheme is discovered.

On average, businesses have lost about $55,000 when these and similar schemes succeed, but some have reported losing more than $800,000, according to the federal Internet Crime Complaint Center. The scams appear to be Nigerian-based, and most of the victims are from the U.S., U.K. and Canada, according to a recent fraud alert.

Whether there’s any chance for the business to recoup such a loss may depend on its insurance and/or any agreements it has with the financial services provider regarding the handling of wire transfers.

“Each case is unique and if a loss is incurred, it might be up to the individual arrangement that the business has with the bank” to determine who is liable, Pollino says.

Masquerade prevention

With spoofing attacks like these on the rise, companies should put together a strong business process to ensure all wire transfers are legitimate, Pollino says.

“An e-mail should not be enough for a large financial transaction to take place – or even a phone call claiming to be from the CEO,” Pollino says. “There should be additional processes in place to ensure the details of the transaction – the amount, the timing and its legitimacy – are authorized.”

Other good preventive measures to take include verifying the source of the email ordering the transfer, double or even triple-checking email addresses, and establishing a multi-person approval process for transactions above a certain amount, Pollino says. Be suspicious of confidentiality, he adds, as it often masks a fraud attempt.

“With good supplemental business processes, it should be easier for companies to detect this type of masquerading,” Pollino says. Strengthening procedures should also help prevent mistakes and errors, like sending an incorrect amount or addressing it to the wrong account, and internal fraud.

If your business has been victimized, the Federal Trade Commission says to call the money transfer company immediately to report it, then file an online complaint with the agency.

Wire fraud image via Shutterstock

Source Article http://ift.tt/1y39EC7

Read More

`Masquerading’ Wire Fraud Targets Gullible Executives

Financial fraud is constantly evolving and becoming a more and more difficult to fight, whether companies or consumers are targeted. Recently, a relatively sophisticated scheme has emerged that uses “spoofing,” a type of identity theft, to trick business people into telling their bankers to send corporate cash to scammers.

These new email and wire-fraud techniques, dubbed “masquerading” by David Pollino, the fraud prevention officer at San Francisco-based Bank of the West, usually siphon money from the victimized business’s account and have it sent electronically (by wire) to a phony offshore firm. Often, the thief poses as a high-level officer – such as the chief executive or the chief financial officer – of the targeted company.

Wire fraud incidents rose last year, affecting 14% of businesses in a payments fraud survey by the Association of Financial Professionals, up from 11% in 2012. Losses for some victims topped $800,000, according to federal authorities. Pollino says businesses can take steps to prevent such schemes from succeeding. But first they need to understand how they work.

The masquerade

Typically, fraudsters must do some homework first.

“For example, criminals might go through social media to figure out who the CEO is of a construction company,” Pollino says.

Then they hack into the business’s email system. After gaining access, the scammer, using the name of a high-level executive, sends an authentic-looking message through the company’s computers to a subordinate with access to the cash, such as the controller or a financial manager, ordering a wire transfer from the firm’s bank to a third-party account. Even if the bank raises questions, it is often ignored because the email that prompted the order is regarded as genuine, Pollino says.

The fraudsters “try to scam or fool the person internal to the company,” Pollino says. Often, the order is marked confidential, making it harder for the recipient to raise questions, he says.

The scammer will create a fake email address that is only slightly different from the CEO or CFO’s real e-mail address – perhaps just a character changed or added – so the employee doesn’t notice that it’s phony. Typically, the bogus message will include an attachment with the wire transfer instructions. Moving funds this way tends to work well for thieves because custody of the money changes in an instant, putting the cash out of the victim’s reach before the scheme is discovered.

On average, businesses have lost about $55,000 when these and similar schemes succeed, but some have reported losing more than $800,000, according to the federal Internet Crime Complaint Center. The scams appear to be Nigerian-based, and most of the victims are from the U.S., U.K. and Canada, according to a recent fraud alert.

Whether there’s any chance for the business to recoup such a loss may depend on its insurance and/or any agreements it has with the financial services provider regarding the handling of wire transfers.

“Each case is unique and if a loss is incurred, it might be up to the individual arrangement that the business has with the bank” to determine who is liable, Pollino says.

Masquerade prevention

With spoofing attacks like these on the rise, companies should put together a strong business process to ensure all wire transfers are legitimate, Pollino says.

“An e-mail should not be enough for a large financial transaction to take place – or even a phone call claiming to be from the CEO,” Pollino says. “There should be additional processes in place to ensure the details of the transaction – the amount, the timing and its legitimacy – are authorized.”

Other good preventive measures to take include verifying the source of the email ordering the transfer, double or even triple-checking email addresses, and establishing a multi-person approval process for transactions above a certain amount, Pollino says. Be suspicious of confidentiality, he adds, as it often masks a fraud attempt.

“With good supplemental business processes, it should be easier for companies to detect this type of masquerading,” Pollino says. Strengthening procedures should also help prevent mistakes and errors, like sending an incorrect amount or addressing it to the wrong account, and internal fraud.

If your business has been victimized, the Federal Trade Commission says to call the money transfer company immediately to report it, then file an online complaint with the agency.

Wire fraud image via Shutterstock

Source Article :http://bit.ly/1tzV6qC

Read More

Is Overdraft Protection Must-Have Coverage?

You don’t have to be broke or even bad at managing your money to occasionally overdraw your bank account. With 90% of American adults using checking services, overdrafts are relatively common. Despite this, new research indicates that many consumers remain confused about debit card overdrafts, the associated fees and whether they should opt for the coverage it provides.

One in 10 Americans who use a debit card tied to a checking account got slapped with at least one overdraft charge and another 5% paid a funds transfer fee to cover a transaction that exceeded their balance last year, according to The Pew Charitable Trusts. The costs stem from optional services that customers must agree to have applied to their accounts under rules regarding electronic funds transfers that took effect in 2010. Those regulations are supposed to make overdraft coverage and fees simpler to understand and less expensive for consumers who have debit cards, but confusion abounds as more than half of affected customers surveyed by Pew didn’t recall accepting the service, called “opting in.”

Protection versus coverage

When it comes to overdraft protection, there are three basic options:

1. Default setting: where the debit transaction is rejected by the bank or credit union because of nonsufficient funds in the account.


2. Overdraft protection: where the financial institution transfers money into the checking account from a linked fund, such as savings, to provide enough to cover the transaction when the balance is too low.


3. Overdraft coverage: where the bank or credit union pays on the transaction, producing a negative balance in the checking account – what amounts to a personal loan until it’s reimbursed.

Fees generally are charged for both overdraft protection and coverage, although some financial institutions offer accounts that provide the services at no charge. Generally, the fee for overdraft protection involving a funds transfer ranges from $10 to $12 per item. For coverage – when the bank pays for you – the fees are considerably higher, often as much as $35 or more per transaction. Also, if the negative balance persists for days or longer, many banks charge more until the condition is eliminated.

Neither of these overdraft services protect against rejected payments, which can happen when a deposit or share account contribution isn’t honored by the check’s issuer. In such cases, the amount will be deducted from your balance and a returned item fee, often from $12 to $19, will be charged.

Opt in or not?

The decision to accept overdraft protection or coverage should reflect how often you overdraw your account. In general, NerdWallet recommends declining, or staying with the default setting.

Typically, debit card purchases blocked at the point of sale aren’t worth the cost of the protection, according to 68% of the respondents to the Pew survey who have overdrawn an account. They said they would prefer to have such transactions refused rather than pay the fees associated with coverage. The median value of an overdraft for a debit card user is $24, according to the U.S. Consumer Financial Protection Bureau. The agency says those who opt in tend to have far more overdrafts than those who don’t accept the services.

While a declined charge for a cup of coffee or a fuel purchase may be easy to shrug off, more important transactions could be disastrous if rejected. So if the majority of activity in the account deals with important payments – for groceries, for instance – overdraft protection could be a good idea.

Keep in mind, personal checks and regularly recurring debits – like those bills scheduled for automatic payments­­ – will be subject to your financial institution’s regular procedures for handling overdrafts, whether or not you opted in for debit card coverage, and you may face charges that result if your balance isn’t adequate, according to the Federal Reserve.

Another option, particularly smart for those who may overdraw their account relatively often, is finding an online-only bank or a credit union that charges lower fees. Capital One’s 360 account, for example, treats overdrafts like a line of credit loan and charges interest on the balance outstanding until it’s refunded. It does, however, charge a $9 fee for bounced checks. Others, such as Grow Financial Federal Credit Union in the Tampa, Fla., area offer low-cost coverage through account transfers.

Check out NerdWallet’s checking account comparison tool for other options.

So if a low balance means nothing more than embarrassment at a favorite coffee shop on the rare occasion when a debit transaction is rejected, overdraft protection may not be worth the cost. But for those in more tenuous financial circumstances who sometimes need an extension of credit to stave off disasters like disconnected electricity, coverage may be more a necessity than a discretionary option. In such cases, it may pay to find a financial institution that won’t penalize you too severely for the protection it provides.

Fee-stung depositor image via Shutterstock

Source Article http://ift.tt/1y39EC7

Read More

Is Overdraft Protection Must-Have Coverage?

You don’t have to be broke or even bad at managing your money to occasionally overdraw your bank account. With 90% of American adults using checking services, overdrafts are relatively common. Despite this, new research indicates that many consumers remain confused about debit card overdrafts, the associated fees and whether they should opt for the coverage it provides.

One in 10 Americans who use a debit card tied to a checking account got slapped with at least one overdraft charge and another 5% paid a funds transfer fee to cover a transaction that exceeded their balance last year, according to The Pew Charitable Trusts. The costs stem from optional services that customers must agree to have applied to their accounts under rules regarding electronic funds transfers that took effect in 2010. Those regulations are supposed to make overdraft coverage and fees simpler to understand and less expensive for consumers who have debit cards, but confusion abounds as more than half of affected customers surveyed by Pew didn’t recall accepting the service, called “opting in.”

Protection versus coverage

When it comes to overdraft protection, there are three basic options:

1. Default setting: where the debit transaction is rejected by the bank or credit union because of nonsufficient funds in the account.


2. Overdraft protection: where the financial institution transfers money into the checking account from a linked fund, such as savings, to provide enough to cover the transaction when the balance is too low.


3. Overdraft coverage: where the bank or credit union pays on the transaction, producing a negative balance in the checking account – what amounts to a personal loan until it’s reimbursed.

Fees generally are charged for both overdraft protection and coverage, although some financial institutions offer accounts that provide the services at no charge. Generally, the fee for overdraft protection involving a funds transfer ranges from $10 to $12 per item. For coverage – when the bank pays for you – the fees are considerably higher, often as much as $35 or more per transaction. Also, if the negative balance persists for days or longer, many banks charge more until the condition is eliminated.

Neither of these overdraft services protect against rejected payments, which can happen when a deposit or share account contribution isn’t honored by the check’s issuer. In such cases, the amount will be deducted from your balance and a returned item fee, often from $12 to $19, will be charged.

Opt in or not?

The decision to accept overdraft protection or coverage should reflect how often you overdraw your account. In general, NerdWallet recommends declining, or staying with the default setting.

Typically, debit card purchases blocked at the point of sale aren’t worth the cost of the protection, according to 68% of the respondents to the Pew survey who have overdrawn an account. They said they would prefer to have such transactions refused rather than pay the fees associated with coverage. The median value of an overdraft for a debit card user is $24, according to the U.S. Consumer Financial Protection Bureau. The agency says those who opt in tend to have far more overdrafts than those who don’t accept the services.

While a declined charge for a cup of coffee or a fuel purchase may be easy to shrug off, more important transactions could be disastrous if rejected. So if the majority of activity in the account deals with important payments – for groceries, for instance – overdraft protection could be a good idea.

Keep in mind, personal checks and regularly recurring debits – like those bills scheduled for automatic payments­­ – will be subject to your financial institution’s regular procedures for handling overdrafts, whether or not you opted in for debit card coverage, and you may face charges that result if your balance isn’t adequate, according to the Federal Reserve.

Another option, particularly smart for those who may overdraw their account relatively often, is finding an online-only bank or a credit union that charges lower fees. Capital One’s 360 account, for example, treats overdrafts like a line of credit loan and charges interest on the balance outstanding until it’s refunded. It does, however, charge a $9 fee for bounced checks. Others, such as Grow Financial Federal Credit Union in the Tampa, Fla., area offer low-cost coverage through account transfers.

Check out NerdWallet’s checking account comparison tool for other options.

So if a low balance means nothing more than embarrassment at a favorite coffee shop on the rare occasion when a debit transaction is rejected, overdraft protection may not be worth the cost. But for those in more tenuous financial circumstances who sometimes need an extension of credit to stave off disasters like disconnected electricity, coverage may be more a necessity than a discretionary option. In such cases, it may pay to find a financial institution that won’t penalize you too severely for the protection it provides.

Fee-stung depositor image via Shutterstock

Source Article :http://bit.ly/1mrVrYh

Read More

I Make a Small Income – How Can I Qualify for a Credit Card?

Let’s face it: Prior to the 2008 recession, it was probably a little too easy to qualify for a credit card. Since then, issuers have definitely tightened up their standards.

But for responsible people who make a small income, trying to get approved for a credit card can be a frustrating experience. After all, you need to get credit to build credit – so what’s a consumer with a tiny paycheck to do? Don’t worry, the Nerds are here to help. Take a look at the details below!

Why income matters when you’re trying to get a credit card

When you’re applying for a credit card (or any other type of loan), one of the major factors banks look at is your income, and this has always been the case. Here’s why: They’re trying to determine if you have the means to pay back the money you’ve borrowed.

But remember, income isn’t the only thing they’re looking at. Other considerations that affect whether or not you’ll be approved include:

• Your credit score


• Your other monthly obligations


• Your employment status


• Your age (in the case of credit cards)

All of this is important, but credit card issuers were forced to start paying special attention to income after the passage of the CARD Act in 2009. It specifies that banks must now look at an applicant’s independent ability to pay when deciding whether or not to extend credit. In the past, it was acceptable to use an applicant’s household income in making that determination. As a result, people without a high, steady income of their own can no longer qualify for credit based on what others in their household are making.

Nerd note: A 2013 amendment to the CARD Act now makes it possible for stay-at-home spouses to qualify for a credit card in his or her own name. As long as the non-working spouse has “reasonable access” to household income and assets, banks are allowed to approve these applications.

There are options for those with small incomes

The income requirements for credit card applicants specified by the CARD Act are probably preventing some shaky borrowers from getting in over their heads. But these rules also make it difficult for some low-income folks to get a credit card. This, in turn, makes it hard for this population to build good credit.

But there are steps you can take to improve your chances of getting approved:

Get a cosigner – If someone in your life who has good credit is willing to cosign your credit card, this is probably the easiest way to qualify with a low income.

Accept a low limit (and manage it carefully) – In lieu of a cosigner, another option is to work with a few issuers to see if one of them will approve you for a card with a very low credit limit. This is a good way to get your foot in the door, but it’s important to manage this card very carefully. You should never use more than 30% of your available credit, and if your limit is low, this is an easy threshold to hit.

Consider a secured card – If you have the cash to put down an up-front deposit, a secured credit card is a good choice. You’ll be tapping a credit line, so your credit score will improve if you use the card responsibly. Eventually, you should be able to graduate to an unsecured card.

Bump up your income – Issuers aren’t just looking at your income from your primary job when they’re evaluating your application. If you can increase your income by starting a side business or getting a second job, this might be just the ticket.

A final word of advice

Aside from the tips above, it’s also worthwhile to head over to your local bank or credit union to see if they’re willing to work with you. Small lenders are often in a position to take on borrowers that big banks won’t consider; getting a credit card with one of these institutions might be an option if your income is preventing you from qualifying with other issuers.

Getting a credit card when you have a small income is a challenge, but it’s an important one to take on. Check back often with the Nerds for updates, tips and tricks – we’re always here to share our best advice about this important matter!

Frustrated credit card applicant image via Shutterstock

Source Article :http://bit.ly/1voghx9

Read More

I Make a Small Income – How Can I Qualify for a Credit Card?

Let’s face it: Prior to the 2008 recession, it was probably a little too easy to qualify for a credit card. Since then, issuers have definitely tightened up their standards.

But for responsible people who make a small income, trying to get approved for a credit card can be a frustrating experience. After all, you need to get credit to build credit – so what’s a consumer with a tiny paycheck to do? Don’t worry, the Nerds are here to help. Take a look at the details below!

Why income matters when you’re trying to get a credit card

When you’re applying for a credit card (or any other type of loan), one of the major factors banks look at is your income, and this has always been the case. Here’s why: They’re trying to determine if you have the means to pay back the money you’ve borrowed.

But remember, income isn’t the only thing they’re looking at. Other considerations that affect whether or not you’ll be approved include:

• Your credit score


• Your other monthly obligations


• Your employment status


• Your age (in the case of credit cards)

All of this is important, but credit card issuers were forced to start paying special attention to income after the passage of the CARD Act in 2009. It specifies that banks must now look at an applicant’s independent ability to pay when deciding whether or not to extend credit. In the past, it was acceptable to use an applicant’s household income in making that determination. As a result, people without a high, steady income of their own can no longer qualify for credit based on what others in their household are making.

Nerd note: A 2013 amendment to the CARD Act now makes it possible for stay-at-home spouses to qualify for a credit card in his or her own name. As long as the non-working spouse has “reasonable access” to household income and assets, banks are allowed to approve these applications.

There are options for those with small incomes

The income requirements for credit card applicants specified by the CARD Act are probably preventing some shaky borrowers from getting in over their heads. But these rules also make it difficult for some low-income folks to get a credit card. This, in turn, makes it hard for this population to build good credit.

But there are steps you can take to improve your chances of getting approved:

Get a cosigner – If someone in your life who has good credit is willing to cosign your credit card, this is probably the easiest way to qualify with a low income.

Accept a low limit (and manage it carefully) – In lieu of a cosigner, another option is to work with a few issuers to see if one of them will approve you for a card with a very low credit limit. This is a good way to get your foot in the door, but it’s important to manage this card very carefully. You should never use more than 30% of your available credit, and if your limit is low, this is an easy threshold to hit.

Consider a secured card – If you have the cash to put down an up-front deposit, a secured credit card is a good choice. You’ll be tapping a credit line, so your credit score will improve if you use the card responsibly. Eventually, you should be able to graduate to an unsecured card.

Bump up your income – Issuers aren’t just looking at your income from your primary job when they’re evaluating your application. If you can increase your income by starting a side business or getting a second job, this might be just the ticket.

A final word of advice

Aside from the tips above, it’s also worthwhile to head over to your local bank or credit union to see if they’re willing to work with you. Small lenders are often in a position to take on borrowers that big banks won’t consider; getting a credit card with one of these institutions might be an option if your income is preventing you from qualifying with other issuers.

Getting a credit card when you have a small income is a challenge, but it’s an important one to take on. Check back often with the Nerds for updates, tips and tricks – we’re always here to share our best advice about this important matter!

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California Law Paves Way for More Credit-Building 0% Loans

California broadened the reach of nonprofits that target low-income borrowers who lack the credit standing needed to obtain a traditional loan, enacting a law that lets the organizations lend as much as $2,500 interest free without a license.

Clients of groups like the San Francisco-based Mission Asset Fundare often unbanked, underbanked or have low credit scores. Under the new law, payments must be reported to companies that create the rankings, such as Experian and Equifax. By repaying in full and on time, borrowers can create the track record they need to qualify for regular loans.

A few nonprofit groups around the U.S. provide low- or no-interest micro loans to people whose financial options are limited and may otherwise turn to payday lenders, leading to a mire of mounting debt at exorbitant rates. The U.S. Consumer Financial Protection Bureau estimates 12 million Americans use payday lenders and says most get trapped into rolling over a two-week loan at least once before paying it off at annualized interest rates that can surpass 400%.

“Everyone in California, regardless of their income level, and regardless of their background, deserves access to the financial mainstream,” state Sen. Lou Correa, a Santa Ana Democrat who introduced the measure, said in a statement. The law, signed Aug. 15 by Gov. Jerry Brown, “gets government out of the way, and provides needed flexibility to nonprofits that are offering a bridge to Californians whose incomes or credit scores have limited their access to affordable financial products,” the senator said.

Credit-builder loans

The statute clarifies the legal standing of nonbank organizations that make small loans to help borrowers create or enhance their credit rating. According to legislative research, more than 12 million payday loans were made in California during 2012, compared with about 265,000 unsecured consumer loans of under $2,500. The Mission Asset Fund ‘s lending program, begun in 2008, has facilitated more than $3 million in debt and helped borrowers to an average 168-point improvement in their credit scores, the research shows.

The San Francisco fund works with 19 nonprofit organizations, including three in Los Angeles and others in states such as Nevada, Oregon, Massachusetts and Minnesota. Organizations in several other states also operate credit-building loan programs, according to Consumer Action, although some charge interest.

Under the California law, nonprofits can get a lending license exemption to make unsecured personal installment loans at 0% interest and with origination fees initially capped at 7% or $90, whichever is smaller. Late payment fees can’t exceed $10. Loan terms can’t exceed 90 days for amounts less than $500, 120 days for up to $1,499 and 180 days for debt between $1,500 and $2,500. The borrower’s debt to income ratio can’t top 50%, or 25% for those with unverified income, and the payments made must be reported to at least one credit bureau.

So now more Californians can skip payday lenders and get interest-free, credit-building loans thanks to a law that lowers the barriers to people helping each other reach a better future.

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California Law Paves Way for More Credit-Building 0% Loans

California broadened the reach of nonprofits that target low-income borrowers who lack the credit standing needed to obtain a traditional loan, enacting a law that lets the organizations lend as much as $2,500 interest free without a license.

Clients of groups like the San Francisco-based Mission Asset Fundare often unbanked, underbanked or have low credit scores. Under the new law, payments must be reported to companies that create the rankings, such as Experian and Equifax. By repaying in full and on time, borrowers can create the track record they need to qualify for regular loans.

A few nonprofit groups around the U.S. provide low- or no-interest micro loans to people whose financial options are limited and may otherwise turn to payday lenders, leading to a mire of mounting debt at exorbitant rates. The U.S. Consumer Financial Protection Bureau estimates 12 million Americans use payday lenders and says most get trapped into rolling over a two-week loan at least once before paying it off at annualized interest rates that can surpass 400%.

“Everyone in California, regardless of their income level, and regardless of their background, deserves access to the financial mainstream,” state Sen. Lou Correa, a Santa Ana Democrat who introduced the measure, said in a statement. The law, signed Aug. 15 by Gov. Jerry Brown, “gets government out of the way, and provides needed flexibility to nonprofits that are offering a bridge to Californians whose incomes or credit scores have limited their access to affordable financial products,” the senator said.

Credit-builder loans

The statute clarifies the legal standing of nonbank organizations that make small loans to help borrowers create or enhance their credit rating. According to legislative research, more than 12 million payday loans were made in California during 2012, compared with about 265,000 unsecured consumer loans of under $2,500. The Mission Asset Fund ‘s lending program, begun in 2008, has facilitated more than $3 million in debt and helped borrowers to an average 168-point improvement in their credit scores, the research shows.

The San Francisco fund works with 19 nonprofit organizations, including three in Los Angeles and others in states such as Nevada, Oregon, Massachusetts and Minnesota. Organizations in several other states also operate credit-building loan programs, according to Consumer Action, although some charge interest.

Under the California law, nonprofits can get a lending license exemption to make unsecured personal installment loans at 0% interest and with origination fees initially capped at 7% or $90, whichever is smaller. Late payment fees can’t exceed $10. Loan terms can’t exceed 90 days for amounts less than $500, 120 days for up to $1,499 and 180 days for debt between $1,500 and $2,500. The borrower’s debt to income ratio can’t top 50%, or 25% for those with unverified income, and the payments made must be reported to at least one credit bureau.

So now more Californians can skip payday lenders and get interest-free, credit-building loans thanks to a law that lowers the barriers to people helping each other reach a better future.

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Personal Checks Run Out? There Are Actually Alternatives to Reordering

Even though personal checks accounted for less than $20 billion in U.S. transactions in 2012 – down from $40 billion in 2000 – many people still rely on that old-fashioned payment method, particularly in certain situations, like paying rent or sending money to family and friends. That can get expensive when the blank drafts run out, though.

For those who only write one or two checks a month, online-only banks like Simple as well as financial institutions and companies like Venmo, PayPal and Square offer alternatives to ordering 80 or 100 checks at a time. Here are some of the options to buying box-loads of the documents:

The single check

Simple, a Portland, Ore.-based online bank founded in 2009, provides a creative solution to customers who need to write occasional checks. To request a draft, an account holder simply fills out the information through the website, and the bank sends a printed check to the payee, signature and all, for free. The entire process takes about three to five business days, though, so it requires a little planning ahead. As another payment alternative, the bank also offers free electronic funds transfers, which clear in two days.

The cashier’s check

Many banks and credit unions let customers buy cashier’s checks with no service fee. The only difference between one of these bank-issued drafts and a personal check is that the issuing financial institution backs the face value of cashier’s checks it has issued, while a personal draft relies on the account holder to back the payment.

Find out which banks give users access to free cashier’s checks and what the monthly limits are before fees are applied (for some banks and credit unions, it’s three checks; for others, 10). In most cases, getting a cashier’s check must be done in person. However, some institutions allow consumers to order online.

The wire transfer

Sending money electronically between financial institutions is old hat, but today many banks and credit unions have reciprocal relationships, allowing customers to move funds from one account to another online. Some banks don’t impose fees for this service, while others may charge as much as $80, depending on the amount being transferred, and the receiving bank may also hit you with additional costs. Generally, international wire transfers require the recipient’s name, account number and the bank routing number of that person’s bank or credit union. For electronic transfers between accounts in U.S. banks, simply providing the receiving party’s mobile phone number or email address can be all that’s needed, and it’s often free.

Not only is this more affordable than purchasing checks – it’s also less of a hassle. Payments may take a few days to clear, so it’s a good idea to submit the transfer early on to avoid being late.

The third-party transfer

For sending money to friends and family, consider using a third-party vendor like PayPal instead of sending a personal check or electronic transfer. Users only need to supply the recipient’s email address to complete a transaction. The only caveat: PayPal charges a service fee of about 3% when debit or credit cards are used. The fee is waived, however, for domestic bank transfers and when the money comes out of a PayPal account. While 3% isn’t a lot when the amount involve is small – just $3 for a $100 transfer – it can add up quickly for larger sums.

Square, the money-transferring app, offers a cost-effective alternative: for electronic transfers under $250 per week, there’s no fee. Users can verify their identity and upgrade their accounts to increase that limit to $2,500. With sophisticated encryption and anti-fraud algorithms, Square’s online transfers can offer even more security than checks.

With Venmo, a mobile app, users can also transfer money free of charge with only an email or phone number. Although customers pay a 3% fee for credit card payments, transfers between banks and most debit cards are free. This payment system isn’t made for all transactions, though; Venmo is designed for personal payments among acquaintances, not between consumers and merchants.

Heading into history

As consumers gravitate towards plastic and online payments, personal checks are becoming artifacts of the past. So why buy them by the box? Finding effective paperless alternatives can unclutter your financial life while saving a little money on the side. But if you do need a paper draft, you still have some free options.

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How Do I Financially Transition to Civilian Life?

If you’re nearing your separation date from the military, you probably have a lot of questions. How am I going to find a new job? How will my finances change as a civilian? What should I do about health insurance? To help you out, here are 10 steps to help you transition from military to civilian life.

1. Build a cash buffer for your transition

Ideally, you’ll leave the service on Friday and walk into your new job on Monday. However, this may not be realistic. Save up a cash buffer to cover your expenses while you’re looking for work and during your first few weeks on the job in case there’s a lag in paychecks. Speaking of saving …

2. Save for emergencies

Make sure to save up an emergency fund of three months to one year of expenses. Military jobs are relatively stable, so you probably weren’t concerned about a lack of cash flow while you were in the service. However, job security is very much a thing of the past and having money put away to tide you over in case you lose your job might come in handy. This fund can also pay for other unexpected emergencies, like a major medical issue when you have a high-deductible insurance plan.

The amount you should save in the account will vary depending on your life circumstances. If you live in a dual-income household without children, three months of expenses should be adequate. If there’s only one income earner and three kids in the household, one year of expenses is probably a better idea.

3. Create a budget

As a civilian, your budget will be different from what it was while you were enlisted. For one thing, you need to budget taxes, insurance and savings — things you may not have had to budget for while in the military. And things like tax-free housing allowances? You may have to say goodbye to those as well (provided you aren’t eligible for or taking advantage of the Post-9/11 GI Bill — more on that later).

Assume you’ll pay for housing, utilities, health and life insurance, transportation and its related expenditures, food, entertainment, gifts and a slew of miscellaneous expenses that are bound to crop up. Depending on your situation, you may also have to pay for child and/or pet costs, including food, supplies, care and medical. In addition, you’ll have to pay taxes, save up for emergencies, retirement and other goals, and pay off existing debt. This should all be taken into account in your budget.

The other big part of the equation is income. Your take-home pay should cover all of your expenses. If your expenses exceed your income, you’ll need to cut your expenses or increase your income. Your savings and debt payments should be at least 20% of your budget, limiting your life expenses to 80% or less of your income.

4. Seek further education

If you’re eligible, the Post-9/11 GI Bill covers your education expenses for up to 36 months. In addition, you may be able to receive a monthly housing allowance, a stipend for books and supplies, and a one-time rural benefit payment. If your school participates in the Yellow Ribbon Program, you may be eligible for more funds to assist you in furthering your education. Some military members will even be able to transfer unused benefits to their dependents.

5. Apply for new jobs

If you don’t yet have a resume, you’ll need to create one. Monster.com has an entire section dedicated to the military, including a resource on how to write a military-to-civilian resume. Better yet, the Transition Assistance Program (TAP) provides a curriculum on transitioning to civilian life, including information on creating a resume, tips on interviewing and networking, and advice on finding a new job. TAP is required for all separating members of the military as of 2011, when President Obama signed into law the Veterans Opportunity to Work (VOW) to Hire Heroes Act.

For veterans seeking government jobs, USAJOBS is a great resource.

If you’re more of an entrepreneurial spirit, there’s an elective program called Boots to Business that’s offered as a part of the TAP. At the end of the program, participants will have the knowledge necessary to identify a business opportunity, create a business plan and start a company.

6. Evaluate potential new jobs

There are a few things to think about when evaluating potential gigs. First, remember that your salary needs to cover your increased taxes. Check your state tax rates so you know what to expect.

Your salary also needs to cover your housing, which may have been covered previously by a tax-free housing stipend. Housing is generally the most expensive line item of most people’s budgets. As a rule of thumb, you should keep all housing expenses under one-third of your take-home pay. This will be more difficult in high cost-of-living areas, but it will make your financial life much less stressful.

You should also examine your benefits package. Health insurance is infinitely cheaper when purchased through an employer, and the same likely goes for basic life insurance coverage. Another nice bonus is an employer-sponsored retirement plan with a match. If your employer offers this benefit, always contribute enough to get the full company match. Otherwise, you’re turning down free money.

7. Get health insurance

People who retire from the military after 20 years will be qualified for insurance in retirement. However, military members who don’t serve for at least 20 years will need to replace their insurance. The likely cheapest solution is getting a job with health insurance benefits or getting on your spouse’s employer health insurance plan. Keep in mind, though, most jobs require that you pay at least part of your premium — generally pre-tax, automatically withdrawn from your paycheck.

If you don’t have health insurance through work, you can sign up for the military version of COBRA — which is the Continued Health Care Benefit Program (CHCBP) — within 60 days of leaving the military. This coverage can be costly and is only available to you for 18 months. Other options include signing up for health insurance on your own or getting VA health care coverage, if eligible. You can apply for VA health benefits on the VA website.

If you opt for signing up for insurance on your own, you can compare quotes through the eHealthInsurance website. High-deductible plans will be the cheapest option, and many people will be eligible for a Health Savings Account (HSA). An HSA can be contributed to pre-tax, up to a certain limit, and used to pay for medical expenses. Unlike a flexible spending account (FSA), this isn’t a “use it or lose it” account. You can use it for medical expenses tax-free whenever you want, and withdraw the balance tax-free after the age of 65, if desired.

8. Get life insurance

Your cheap life insurance through the military expires 120 days after you leave the service. From there, you have two major options. You can convert to Veteran’s Group Life Insurance or search for policies on your own. VGLI is typically more expensive than finding your own coverage, but it’s a good option for those with health issues that would drive up the price of regular life insurance. You have one year and 120 days to convert to VGLI, but if you do it in the first 120 days, you won’t have to submit evidence of good health.

If you opt to get life insurance other than VGLI, you can compare plans online. Try accuquote.com for term life insurance options. You could also get life (or medical, vision and dental) insurance through USAA — a bank for military members and their families. USAA also offers investing, mortgage and banking services to current and past military families.

9. Evaluate your Thrift Savings Plan (TSP)

You have a few options with your TSP. You can either leave it alone, or roll it into an individual retirement account (IRA) or employer-sponsored retirement plan. The best option is likely to leave it alone, as TSPs are invested in index funds with extremely low expense ratios.

If you choose to roll it over, consider an IRA over an employer-sponsored plan like the 401(k). That’s because you’ll have more control over the investments and fees with an IRA. You can open an IRA with any broker you choose. A good option is Vanguard — an online broker with very low expense ratios.

10. Evaluate your retirement plan

Whether military or civilian, everyone wants the option to retire at some point. If you’ve served in the military for a certain number of years, you’ll receive retired pay. Upon separating, you can calculate your retired pay and use this calculation to determine how much more you’ll need to save to retire comfortably.

With or without retired pay, you’ll likely want to save for retirement during your civilian life in either an employer-sponsored plan, IRA and/or self-employed retirement plan. To calculate the amount of money you’ll need to retire, check out this NerdWallet article on how much you should save for retirement. Remember, this money isn’t only for long, leisurely days on the golf course. It can also help pay for possible medical bills in your old age. To reduce those as much as possible, practice healthy habits and stay in shape.

Bottom line: Your financial life will change quite a bit during your transition to civilian life, but following these 10 steps will make the process easier. Good luck on your new endeavors and thank you for your service!

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