Best Credit Cards That Waive Annual Fees for the First Year

Avoiding credit card fees whenever you can is always a smart idea. Luckily, there are a lot of great cards on the market these days that waive their annual fees for the first year you have your account open.

Not sure which one is best for you? Take a look at the Nerds’ top picks below:

Best overall: Chase Sapphire Preferred® Card

Apply Now

on Chase's

secure website

The Chase Sapphire Preferred® Card has a slight edge over the other cards that waive their annual fees for the first year because of its powerful combination of a high signup bonus and stellar rewards earning power. Every time you use the card, you’ll be getting 2 points per dollar spent on dining in restaurants and travel and 1 point per dollar spent on all other purchases.

Generally, Sapphire Preferred points are worth one cent apiece. However, they’re worth 25% more when redeemed for travel through Chase Ultimate Rewards, which drives the value of each point up to 1.25 cents. Plus, you’ll also have the option to transfer your points at a 1:1 ratio to participating frequent traveler programs. Not too shabby!

And don’t forget about that sky-high signup bonus: Earn 40,000 bonus points after you spend $3,000 in the first 3 months. Assuming you redeem through Chase Ultimate rewards, that’s $500 toward your next vacation.

Also, the Chase Sapphire Preferred® Card is a good choice for international travelers since it charges no foreign transaction fee and comes chip-enabled. This makes overseas swiping convenient and inexpensive.

Remember, there’s an Introductory Annual Fee of $0 the first year, then $95. But if you spend a lot on dining and travel, it’s probably a worthwhile expense when you have to start paying it.

Best for budget travelers: Barclaycard Arrival Plus™ World Elite MasterCard®

Apply Now

on Barclays's

secure website

If you’re not skilled at using frequent flyer programs to squeeze a lot of value out of credit card rewards points, the Barclaycard Arrival Plus™ World Elite MasterCard® is probably the right option for you. With it, you’ll earn 2 miles for every dollar you spend. Since each mile is worth $.01, you’re earning a rewards rate of 2%. But you’ll also get 10% of your miles back every time you redeem for travel, which effectively drives the rewards rate up to 2.2%.

One of the best things about this card is its flexibility when it comes time to redeem. You simply book your travel however you normally would with the card, then pay yourself back in the form of a statement credit with your miles. This means you can shop for the best deal with any airline or hotel chain and still use your rewards.

Plus, if you’re dreaming of an overseas getaway, the Barclaycard Arrival Plus™ World Elite MasterCard® has you covered. It charges no foreign transaction fee and comes chip-enabled with PIN capability.

Like the Chase Sapphire Preferred® Card, the Barclaycard Arrival Plus™ World Elite MasterCard® comes with a hefty signup bonus: Earn 40,000 bonus miles when you spend $3,000 or more on purchases in the first 90 days from account opening. Its annual fee is $89 - Waived first year, of course. All in all, it’s a great travel card to consider.

Best for hotels: Starwood Preferred Guest® Credit Card from American Express

If you stay in hotels frequently, adding the Starwood Preferred Guest® Credit Card from American Express to your wallet is something to consider. With it, you’ll earn up to 5 Starpoints per dollar spent at Starwood hotels and resorts and one Starpoint per dollar spent on all other purchases. When redeemed at hotels, the Nerds value Starpoints at a whopping 2.3 cents apiece.

However, using your Starpoints for hotel stays isn’t your only option. You can also use the “nights and flights” option to get airline miles and a few free nights in a hotel, or transfer your Starpoints to participating frequent traveler programs. The list of frequent traveler programs you can move your Starpoints to is impressive, so be sure to check it out.

The Starwood Preferred Guest® Credit Card from American Express comes with an exciting signup bonus: Earn up to 25,000 bonus points: 10,000 after your first purchase and another 15,000 after you spend $5,000 within the first 6 months of Cardmembership. There’s a $0 introductory annual fee for the first year, then $65. But keep in mind that it does charge a foreign transaction fee of 2.7%. If you travel abroad a lot, you’ll want to keep another card hand to avoid this charge.

Best for people who spend a lot on gas: Wells Fargo Propel 365 American Express

Apply Now

on Wells Fargo's

secure website

So far, we’ve only discussed credit cards that are good for people who travel frequently. But if most of your transit takes place behind the wheel, the Wells Fargo Propel 365 American Express is a great choice.

With this card, you’ll earn 3 points per dollar spent at gas stations, 2 points per dollar spent on dining out, and 1 point per dollar spend on all other purchases. Each point is worth $.01, and there’s no limit to the points you can earn. Plus, if you’re a Wells Fargo banking customer, you could also score an additional points bonus of 10%, 25% or 50%, depending on the type of account you have and your total assets.

When it comes time to redeem, you can cash in your points for travel, merchandise, gift cards, or cash back. No matter which option you choose, your points will hold their value; this adds a layer of flexibility to this card that many others lack.

The Wells Fargo Propel 365 American Express will get you started with a signup bonus: 20,000 points when you spend $3,000 in net purchases in the first 3 months. Its annual fee is waived the first year and 45 every year thereafter, and it charges no foreign transaction fee. If you frequently make purchases online from overseas retailers, this is something to consider.

A few other options

If none of the cards described above seem like a good fit, there are several other options out there that waive their annual fees for the first year. Here are a few to check out:

• Wells Fargo Propel World American Express


• United MileagePlus® Explorer Card


• Citi ThankYou® Premier Card


• Citi® / AAdvantage® Platinum Select® MasterCard®


• U.S. Bank FlexPerks® Travel Rewards Visa Signature® card

Happy swiping!

Waving image via Shutterstock

The post Best Credit Cards That Waive Annual Fees for the First Year appeared first on NerdWallet Credit Card Blog.

Source Article :http://bit.ly/1x5zUKM

Read More

7 Ways Your Credit Card Will Come in Handy This Fall

Admit it: Fall is your favorite time of year. And who could blame you? With the leaves creating beautiful scenery and a refreshing chill in the air, it’s easy to say goodbye to the sunburns and mosquito bites of summer.

To make the most of the season, keep your credit card within reach – it’ll likely come in handy more than once. In fact, here are 7 ways your plastic will be especially useful this fall:

1. You’ll earn double points with your Chase Sapphire Preferred® Card with every pumpkin spice latte you buy.

If you like to mark the beginning of fall with a pumpkin spice latte (or two), be sure to use your Chase Sapphire Preferred® Card to buy it. With this card, you’ll earn 2 points per dollar spent on travel and dining out, and 1 point per dollar spent on all other purchases. Because Starbucks counts as a restaurant, you’ll earn double points with every seasonal beverage you enjoy.

Nerd tip : If you’re not looking forward to the cold months ahead, save up all the bonus points you’re earning with the Chase Sapphire Preferred® Card for a tropical winter getaway. Just be sure to book through the Chase Ultimate Rewards portal – each of your points will be worth 25% more!

Chase Sapphire Preferred® Card
Apply Now on Chase's secure website starstarstarstarstar	Earn 40,000 bonus points when you spend $3,000 on purchases in the first 3 months from account opening. That's $500 in travel when you redeem through Chase Ultimate RewardsSM. Earn 5,000 bonus points after you add the first authorized user and make a purchase in the first 3 months from account opening. 2X points on travel and dining at restaurants & 1 point per dollar spent on all other purchases No foreign transaction fees, plus Chip and Signature enabled for international travel. 1:1 point transfer to leading frequent travel programs at full value — that means 1,000 Ultimate Rewards points equal 1,000 partner miles/points. 24/7 direct access to dedicated customer service specialists Introductory Annual Fee of $0 the first year, then $95		thumbsupPros No foreign transaction fee thumbsdownCons Has annual fee

Annual Fee	Signup Bonus	APR , Variable*	APR Promotions
Introductory Annual Fee of $0 the first year, then $95.	Earn 40,000 bonus points after you spend $3,000 in the first 3 months.	15.99% (Variable)	Purchase: None Transfer: None

2. The weather is getting chilly, so use your card to renew your Netflix subscription.

No one has time for a Netflix binge in the summer – there are pools to swim in, beaches to visit, suntans to work on. But as fall’s cold weather rolls in, cozying up in front of the TV for a House of Cards marathon starts to sound like fun. Use your card to renew your Netflix subscription, and you’ll rediscover a great way to while away the hours.

3. If your year-old leaf blower bites the dust, your credit card might be able to help.

Dealing with fall leaves in your yard can be quite a chore. If your year-old leaf blower quits halfway through the job, you might have a few choice words for it.

But if you purchased it with your credit card, you’re in luck. Since most cards offer extended warranty protection, there’s a chance you might not be out the any extra cash. Check with your issuer to see if your purchase is eligible – you’ll be back to leaf clearing in no time (hooray?).

4. If you’re taking a road trip to see the fall colors, your card has you covered.

If your family takes an annual road trip to see the fall colors, you can rest assured that if you rent a car, your credit card has you covered. All of the major networks (Visa, MasterCard, American Express and Discover) offer some type of rental car insurance. No need to buy a supplemental policy from the rental agency – use what you’ve saved to pick up a few extra souvenirs along the way.

5. You’ll earn extra cash back with your Blue Cash Preferred® Card from American Express as you shop for your Thanksgiving feast.

When October rolls around, many people start stocking up for their Thanksgiving recipes. If this sounds familiar, be sure to use your Blue Cash Preferred® Card from American Express. With it, you’ll earn 6% cash back for every dollar spent at supermarkets, up to $6,000 spent per year. You’ll also earn 3% cash back at gas stations and select department stores, and 1% cash back on all other purchases, all at an annual fee of $75.

Scoring a serious return when you buy the ingredients for your famous cranberry sauce amounts to picking the right card, so be sure to go with Blue Cash Preferred® Card from American Express every time.

6. Just bought the perfect fall boots, only to find them cheaper elsewhere? Call in your card for help.

Fall fashion can be expensive, so it’s seriously annoying when you find an item you just bought at a lower price from a different retailer. But again, your credit card might be able to help.

Several issuers and networks offer price protection, which means you may be eligible for a refund of the difference between what you paid and the better price. Be sure to check your card’s terms and conditions for more details.

7. Getting an early jump on holiday shopping? The right card will earn you extra rewards.

When it comes to holiday shopping, you can never start too early. Fall is the perfect time to hit the mall and knock a few gifts off your to-buy list, and using the right card could mean earning serious rewards.

For instance, in the fourth quarter of 2014, you’ll earn 5% cash back with the Chase Freedom® at select department stores, up to $1,500 spent. Plus, you’ll earn 1% cash back on all other purchases. That could really go far toward easing the budget burden of holiday shopping, so think about applying for the Chase Freedom® today.

Chase Freedom®
Apply Now on Chase's secure website starstarstarstarstar	Earn a $100 Bonus after you spend $500 on purchases in your first 3 months from account opening Earn a $25 Bonus after you add your first authorized user and make a purchase within this same 3-month period 0% Intro APR for 15 months on purchases and balance transfers. After the intro period, a variable APR of 13.99%-22.99% 5% Cash Back on up to $1,500 in combined purchases between October 1 — December 31, 2014 at Amazon.com, Zappos.com and select department stores You'll enjoy new 5% categories every 3 months like gas stations, restaurants and Amazon.com. It's free and easy to activate your bonus each quarter! Unlimited 1% Cash Back on all other purchases No annual fee and rewards never expire		thumbsupPros Bonus cash back categories No annual fee 0% for 15 mos on transfers

Annual Fee	Signup Bonus	APR , Variable*	APR Promotions
$0	Get a $100 Bonus after spending $500 on purchases in your first 3 months from account opening.	13.99% - 22.99% (Variable)	0% APR for 15 months on purchases and balance transfers

Autumn leaves image via Shutterstock

The post 7 Ways Your Credit Card Will Come in Handy This Fall appeared first on NerdWallet Credit Card Blog.

Source Article :http://bit.ly/1tCGoC6

Read More

Don’t Let Your Favorite Pastime Wreck Your Credit Score

In our busy and hectic world, finding a way to relax is essential. Picking a hobby you enjoy and engaging in it regularly is a great way to wind down from a tough week.

But if you’re not careful, there’s a chance your favorite diversion could hurt your credit score. Below are four popular pastimes that could put your score in jeopardy if you make the wrong moves. Be sure to use our tips to keep your credit on the straight and narrow, no matter how you like to spend your free time.

1. Traveling

If exploring an exotic locale is your favorite way to get away from it all, you’re probably planning for your next trip right now. Figuring out where to go, finding the best deal on a flight, learning about the local culture of the destination you’re headed to – it’s a great way to while away the hours after work.

When it’s finally time to take off on an adventure, the temptation to forget about life back home is hard to overcome. This is why a case of wanderlust can potentially hurt your credit score: It’s easy to neglect a bill payment when you’re out of your usual routine.

Since payment history makes up 35% of your FICO credit score (the score most widely used in the United States), failing to pay your bills on time could cause it to drop substantially. To avoid this fate, it’s wise to set up email or text reminders for your billing due dates so that you’ll know when it’s time to pay, no matter where you are in the world. You could also opt into automatic payments – this will take the matter out of your hands entirely and make it easier to enjoy your time away.

2. Shopping

Fashionistas agree: Shopping for a funky new outfit and then scoring a great deal on it provides a lot of creative satisfaction. And with the advent of the Internet, it’s easy to engage with this hobby whenever the mood strikes.

But this can be a blessing and a curse when it comes to your credit. Thirty percent of your FICO score is determined by amounts owed, and a data point that heavily influences this category is your credit utilization ratio. This is calculated by dividing the outstanding balance on your cards by the total amount of credit you have available. Most experts recommend keeping it below 30%.

If you’re doing so much shopping with your credit cards that your credit utilization ratio meets or exceeds this threshold at any point during the month, your credit score could take a hit. Your best bet is to monitor your balance carefully and make a payment if it’s getting too high.

Another option is to spread your monthly spending between a few cards so that your utilization on each one stays low. Just be sure to pay them all off in full by their billing due dates to avoid interest charges.

3. Reading

Getting lost in a good book is a popular pastime for many. And if you’re in the habit of borrowing your weekly read from the local library, good for you – you’re saving a bundle on book purchases.

Just be sure to return your books on time. It has become common practice for libraries to turn large, unpaid overdue fees over to collections agencies. If this happens, there’s a good chance that the collector will report your lack of payment to the credit bureaus. This will put a black mark on your credit report that could affect your credit score for up to seven years.

Although most credit scoring models ignore collections accounts of less than $100, it’s not impossible that an avid reader could rack up a fine in excess of that amount. If you do, pay the fee promptly. Otherwise, your credit score could be at risk.

4. Gardening/home improvement

If working on your home or garden is your favorite way to relax, you’re probably making frequent trips to the major home improvement warehouse stores. If so, you’ve probably considered applying for the retail credit cards offered by these big-box merchants. While in some cases it might make sense to do so, it’s a bad idea to finance a big project by opening several cards at once – this could spell trouble for your credit.

Ten percent of your FICO score comes from new credit applications. Too many in the span of a few months is problematic because it’s perceived as a signal you’re in financial trouble. Waiting about six months between credit card applications is wise for most people. If your score isn’t in good shape to begin with, you might be better off putting as much as a year between new requests. Follow this guideline to keep a kitchen remodel or a backyard overhaul from demolishing your credit.

Reading hobby image via Shutterstock

The post Don’t Let Your Favorite Pastime Wreck Your Credit Score appeared first on NerdWallet Credit Card Blog.

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

Read More

Don’t Let Your Favorite Pastime Wreck Your Credit Score

In our busy and hectic world, finding a way to relax is essential. Picking a hobby you enjoy and engaging in it regularly is a great way to wind down from a tough week.

But if you’re not careful, there’s a chance your favorite diversion could hurt your credit score. Below are four popular pastimes that could put your score in jeopardy if you make the wrong moves. Be sure to use our tips to keep your credit on the straight and narrow, no matter how you like to spend your free time.

1. Traveling

If exploring an exotic locale is your favorite way to get away from it all, you’re probably planning for your next trip right now. Figuring out where to go, finding the best deal on a flight, learning about the local culture of the destination you’re headed to – it’s a great way to while away the hours after work.

When it’s finally time to take off on an adventure, the temptation to forget about life back home is hard to overcome. This is why a case of wanderlust can potentially hurt your credit score: It’s easy to neglect a bill payment when you’re out of your usual routine.

Since payment history makes up 35% of your FICO credit score (the score most widely used in the United States), failing to pay your bills on time could cause it to drop substantially. To avoid this fate, it’s wise to set up email or text reminders for your billing due dates so that you’ll know when it’s time to pay, no matter where you are in the world. You could also opt into automatic payments – this will take the matter out of your hands entirely and make it easier to enjoy your time away.

2. Shopping

Fashionistas agree: Shopping for a funky new outfit and then scoring a great deal on it provides a lot of creative satisfaction. And with the advent of the Internet, it’s easy to engage with this hobby whenever the mood strikes.

But this can be a blessing and a curse when it comes to your credit. Thirty percent of your FICO score is determined by amounts owed, and a data point that heavily influences this category is your credit utilization ratio. This is calculated by dividing the outstanding balance on your cards by the total amount of credit you have available. Most experts recommend keeping it below 30%.

If you’re doing so much shopping with your credit cards that your credit utilization ratio meets or exceeds this threshold at any point during the month, your credit score could take a hit. Your best bet is to monitor your balance carefully and make a payment if it’s getting too high.

Another option is to spread your monthly spending between a few cards so that your utilization on each one stays low. Just be sure to pay them all off in full by their billing due dates to avoid interest charges.

3. Reading

Getting lost in a good book is a popular pastime for many. And if you’re in the habit of borrowing your weekly read from the local library, good for you – you’re saving a bundle on book purchases.

Just be sure to return your books on time. It has become common practice for libraries to turn large, unpaid overdue fees over to collections agencies. If this happens, there’s a good chance that the collector will report your lack of payment to the credit bureaus. This will put a black mark on your credit report that could affect your credit score for up to seven years.

Although most credit scoring models ignore collections accounts of less than $100, it’s not impossible that an avid reader could rack up a fine in excess of that amount. If you do, pay the fee promptly. Otherwise, your credit score could be at risk.

4. Gardening/home improvement

If working on your home or garden is your favorite way to relax, you’re probably making frequent trips to the major home improvement warehouse stores. If so, you’ve probably considered applying for the retail credit cards offered by these big-box merchants. While in some cases it might make sense to do so, it’s a bad idea to finance a big project by opening several cards at once – this could spell trouble for your credit.

Ten percent of your FICO score comes from new credit applications. Too many in the span of a few months is problematic because it’s perceived as a signal you’re in financial trouble. Waiting about six months between credit card applications is wise for most people. If your score isn’t in good shape to begin with, you might be better off putting as much as a year between new requests. Follow this guideline to keep a kitchen remodel or a backyard overhaul from demolishing your credit.

Reading hobby image via Shutterstock

The post Don’t Let Your Favorite Pastime Wreck Your Credit Score appeared first on NerdWallet Credit Card Blog.

Source Article :http://bit.ly/1DW90Hu

Read More

Small Business Loans 101: Calculating the True Cost of Borrowing

If you’re starting a business and you need some funding to get off the ground, a small business loan may be the way to go. Entrepreneurs can get loans from traditional banks, credit unions and third-party alternative lenders.

But borrowing from these institutions isn’t like borrowing from your mom and paying her back when you have the cash. When you repay a small business loan, you’ll end up paying more than the amount borrowed because of interest, amortization and fees.

Loan Rates

All small business loans come with interest that the borrower pays to the lender. Loans guaranteed by the Small Business Administration (SBA) are low-interest, but alternative small business lenders can charge high interest rates, especially for short-term loans. Loan rates can be varied or fixed. A borrower should choose a rate based on the market conditions at the time they get the loan.

Variable rates change over time as market interest rates shift. If market rates are high, a variable rate is a good idea because the loan rate will decrease if market interest rates drop.

Fixed rates lock in the market interest rate at the time a borrower takes out the loan. If market rates are low, it’s wise to get a fixed rate and maintain that low interest rate throughout the duration of the payment schedule.

Amortization Schedule

The loan’s term, or how long it takes to pay off, affects the overall cost of the loan because it determines how long a borrower pays interest. A payment schedule, or amortization schedule, is a plan for paying back a loan in regular monthly increments. Each payment consists of principal, or the actual cost of the loan, and interest.

For example, say an entrepreneur takes out a $100,000 loan for five years with a 5% interest rate. Each month for 60 months, she’ll repay $1,887.12 in principal and interest.

At the beginning of the term, a larger percentage of the payment is interest because lenders want to get their payments sooner to minimize risk. In this case, $416.67 of the first payment is interest and $1,470.46 is principal. With each payment, the percentage that is interest decreases and the part that is principal increases. In the final month, the borrower would pay just $7.83 in interest and $1,879.29 in principal.

Sample amortization schedule

Month	Interest	Principal	Total Payment	Loan Balance
1	$416.67	$1,470.46	$1,887.12	$98,529.54
2	$410.54	$1,476.58	$1,887.12	$97,052.96
3	$404.39	$1,482.74	$1,887.12	$95,570.22
4…57
58	$23.39	$1,863.73	$1,887.12	$3,750.79
59	$15.63	$1,871.50	$1,887.12	$1,879.29
60	$7.83	$1,879.29	$1,887.12	$0.00

Source: amortization-calc.com

Fees

On top of monthly payments, borrowers have to pay loan fees. Most common are origination and guarantee fees, but some lenders will tack on additional costs. Borrowers have to pay interest on the fees that are added to the loan rate, so avoid high fees at all costs.

Origination fee – Lenders charge borrowers this fee for processing a loan application and other administrative work involved. It’s taken as a percentage of the total loan, for example, 1% of a $100,000 loan.

Guarantee fee – For SBA-guaranteed loans, lenders pay the government a portion of the amount guaranteed. Many lenders pass on part of this cost to the borrower.

To fully understand the long-term cost of your loan, look at the effective annual percentage rate (EAPR), which includes the fees and compounded interest you’ll pay each year. Like apples-to-apples, this number is helpful to compare loans from different lenders to determine the loan package that’s best for your wallet.

---

Seed money illustration via Shutterstock.

The post Small Business Loans 101: Calculating the True Cost of Borrowing appeared first on NerdWallet Credit Card Blog.

Source Article :http://bit.ly/1pbL9mc

Read More

Mobile Apps Build Financial Inclusion Among Unbanked Americans

If you’re among the unbanked in America and you own a smartphone, that little device could be your onramp to the financial mainstream. Mobile apps may encourage the use of traditional banking services, according to a Federal Deposit Insurance Corp. survey.

Smartphones are changing how people approach banking, most significantly among the underbanked, which includes those households that have an account at a financial institution but use alternative service providers such as check-cashing stores or payday lenders, the FDIC said in reporting the survey results. The agency says that about 30% of underbanked households use mobile devices to get into their accounts, compared with almost 22% of fully banked households.

“Mobile technologies might also become useful tools for bringing unbanked households into the financial mainstream,” the agency said. “Innovations such as mobile account opening could play a role in expanding access to banking for the unbanked.”

Smartphone tools

Access to smartphones is a chief reason mobile banking rates have increased. Almost one in four households reported using mobile devices with their accounts. Most often, that meant monitoring a balance or reviewing recent transactions. About a quarter of households used mobile apps to deposit a check. More than half of underbanked households said they used mobile text alerts compared to less than 45% of fully banked households.

The primary way people still gain access to their accounts is through tellers or online portals – about two out of three households listed one or the other as their usual way. Even though mobile apps are becoming more popular, these methods are still, by and large, most commonly used by the underbanked, the survey shows.

Mobile and online banking methods tend to supplement banking, rather than substituting for it entirely, according to the survey, which is done every other year. Those who primarily used online or mobile apps to access their accounts said they typically used additional methods as well, such as cash machines and branch visits.

Employment effects

The number of unbanked households dropped last year to 7.7%, representing more than 25 million Americans, from 8.2% in 2011 according to the survey, which measures the underserved population. The FDIC cited improving economic conditions and changing household demographics as the main contributing factors to this decrease. An unbanked household doesn’t hold an account at an insured financial institution, the agency said.

About one in five households, with more than 67 million people, were underbanked last year, according to the FDIC. The category is for those that have an insured account but that used an alternative service at least once in the past year. The proportion of underbanked households was unchanged from 2011.

Income and employment were the top factors in determining whether households held bank accounts. Slightly less than half of the unbanked previously had an account, but closed it following a job loss or a significant drop in income. About 10% reported becoming unbanked in the previous 12 months.

About 35% of unbanked households cited not enough money as the main reason they didn’t have an account. Dislike or distrust of banks as well as high or unpredictable account fees also were given as reasons for being unbanked.

Unbanked Americans increasingly use prepaid debit cards as a payment method and as an alternative to holding a bank account, the report shows. Prepaid card use grew to 27% of unbanked households last year from 12% in 2009.

Just as losing a job can lead to becoming unbanked, landing a new job and particularly the need for direct deposit of a payroll check often spurred unbanked households to open bank accounts, the agency said. Of the 1.6% of households that became banked in the previous 12 months, almost a quarter reported that a new job figured in the decision. More than a third – nearly 35% – said setting up a way to receive direct deposits was the main reason they opened a bank account.

Households with the highest unbanked rates included non-Asian minorities, people with lower incomes, and younger and unemployed residents, according to the survey. While the rates for most were fairly unchanged from 2011, the rate for Latino households dropped to about 18% last year from 20% in 2011. Higher levels of employment, income and education accounted for much of the decline.

Future possibilities

It’s more likely that currently unbanked households will open an account in the future if they’ve recently had a bank account – about 75% say they probably will as opposed to 25% among those who’ve never held an account and 43% that last had one more than a year ago.

There’s no doubt about it, mobile apps are helping to entice even the most wary among us back to banks. These apps showcase some of the most convenient and popular services, such as checking and savings account monitoring, making payments to your pals, finding a cash machine, depositing a check and paying bills. So if you’re part of the underbanked or unbanked population and own a smartphone, you may want to use it to change the way you manage your money – if you haven’t already.

---

Mobile baking photo via Shutterstock.

The post Mobile Apps Build Financial Inclusion Among Unbanked Americans appeared first on NerdWallet Credit Card Blog.

Source Article :http://bit.ly/1pbL6GV

Read More

Small Business Loans 101: Calculating the True Cost of Borrowing

If you’re starting a business and you need some funding to get off the ground, a small business loan may be the way to go. Entrepreneurs can get loans from traditional banks, credit unions and third-party alternative lenders.

But borrowing from these institutions isn’t like borrowing from your mom and paying her back when you have the cash. When you repay a small business loan, you’ll end up paying more than the amount borrowed because of interest, amortization and fees.

Loan Rates

All small business loans come with interest that the borrower pays to the lender. Loans guaranteed by the Small Business Administration (SBA) are low-interest, but alternative small business lenders can charge high interest rates, especially for short-term loans. Loan rates can be varied or fixed. A borrower should choose a rate based on the market conditions at the time they get the loan.

Variable rates change over time as market interest rates shift. If market rates are high, a variable rate is a good idea because the loan rate will decrease if market interest rates drop.

Fixed rates lock in the market interest rate at the time a borrower takes out the loan. If market rates are low, it’s wise to get a fixed rate and maintain that low interest rate throughout the duration of the payment schedule.

Amortization Schedule

The loan’s term, or how long it takes to pay off, affects the overall cost of the loan because it determines how long a borrower pays interest. A payment schedule, or amortization schedule, is a plan for paying back a loan in regular monthly increments. Each payment consists of principal, or the actual cost of the loan, and interest.

For example, say an entrepreneur takes out a $100,000 loan for five years with a 5% interest rate. Each month for 60 months, she’ll repay $1,887.12 in principal and interest.

At the beginning of the term, a larger percentage of the payment is interest because lenders want to get their payments sooner to minimize risk. In this case, $416.67 of the first payment is interest and $1,470.46 is principal. With each payment, the percentage that is interest decreases and the part that is principal increases. In the final month, the borrower would pay just $7.83 in interest and $1,879.29 in principal.

Sample amortization schedule

Month	Interest	Principal	Total Payment	Loan Balance
1	$416.67	$1,470.46	$1,887.12	$98,529.54
2	$410.54	$1,476.58	$1,887.12	$97,052.96
3	$404.39	$1,482.74	$1,887.12	$95,570.22
4…57
58	$23.39	$1,863.73	$1,887.12	$3,750.79
59	$15.63	$1,871.50	$1,887.12	$1,879.29
60	$7.83	$1,879.29	$1,887.12	$0.00

Source: amortization-calc.com

Fees

On top of monthly payments, borrowers have to pay loan fees. Most common are origination and guarantee fees, but some lenders will tack on additional costs. Borrowers have to pay interest on the fees that are added to the loan rate, so avoid high fees at all costs.

Origination fee – Lenders charge borrowers this fee for processing a loan application and other administrative work involved. It’s taken as a percentage of the total loan, for example, 1% of a $100,000 loan.

Guarantee fee – For SBA-guaranteed loans, lenders pay the government a portion of the amount guaranteed. Many lenders pass on part of this cost to the borrower.

To fully understand the long-term cost of your loan, look at the effective annual percentage rate (EAPR), which includes the fees and compounded interest you’ll pay each year. Like apples-to-apples, this number is helpful to compare loans from different lenders to determine the loan package that’s best for your wallet.

---

Seed money illustration via Shutterstock.

The post Small Business Loans 101: Calculating the True Cost of Borrowing appeared first on NerdWallet Credit Card Blog.

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

Read More