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5 Simple Ways To Take Advantage Of Low Interest Rates

By //  by Khaleef Crumbley

Many people are disappointed because of the low interest rates available today. They look at the fact that their bank accounts are paying pennies per year in interest, and conclude that they cannot get ahead financially. However, there are things that you can do to take advantage of low interest rates.

Refinance Your Mortgage With Low Interest Rates

This is one of the most common ways to take advantage of low interest rates. This is because most mortgages involve hundreds of thousands of dollars and span across multiple decades. Even a small change in the interest rate of your loan can have drastic effects on your monthly payments.

The best time to refinance your mortgage is when you owe at least 20% less than the appraised value of your home. This way, you won’t have to worry about private mortgage insurance when you refinance.

Low Interest Rates

If you do decide to refinance, make sure you perform an analysis to see if the expected savings outweigh the points, fees, and other expenses associated with the refinance to make sure it is actually going to save you money.

A great way to pay off your mortgage early is to refinance at a lower rate, secure a lower monthly payment, but continue to pay the higher amount. This way you will be able to pay a few hundred dollars extra on your mortgage each month, without having to change your current budget. Just make sure that your additional payments are applied to the principle of your loan.

Negotiate Lower Rates

When you notice that interest rates are going lower, that should be a signal to you that it’s time to negotiate lower rates with your creditors. Give your credit card companies a call and ask them to lower your interest rate.

If you have an excellent payment history with that company and you have good credit, you should be able to get them to lower your interest rate. In fact, even if we aren’t in a low-interest-rate environment, you should be able to secure a lower rate if you have those credentials!

Consolidate High-Interest Debt

If your individual credit card companies and banks aren’t willing to give you a lower interest rate, a consolidation may be in order. Actually, depending on my situation, I may try to consolidate my debt first!

When dealing with high-interest credit cards, there are typically two ways in which you can consolidate your debt. First, you can apply for a consolidation loan. This is usually an unsecured, personal loan that you use to pay off all of your debt. The main benefit here is – hopefully – a lower interest rate, and only having to worry about making one payment each month.

The second way to consolidate your debt is to move all of your debt onto a single credit card. If you can find a card that has a balance transfer offer – such as 0% for the next year – then this can be a great move. Usually, you will have to pay a fee in order to process a balance transfer – just make sure that this fee is less than the money you plan to save by the reduced interest rate.

Refinance Your Car Loan

Many people only think of refinancing a mortgage when faced with low interest rates. However, with the price of a new car easily exceeding $30,000, you can save thousands of dollars by refinancing your car loan!

I would make the same recommendation to pay it off early. Refinance the loan in order to have a lower mandatory monthly payment, but continue to pay the same amount that you are paying today. If this amount is going directly toward the principle of the loan, you will finish paying it off much faster!

Make Prepayments To Secure A Lower Purchase Price

There are a number of financial agreements which we enter into, that will allow us to pay a reduced price if we pay the bill in full up front. The most common charge that I can think of which fits this description is car insurance. Most companies charge a fee for breaking your premium up into monthly payments; thus giving you a discount for paying the full charge up front.

Sometimes landlords will be willing to give you a discount on your rent if you pay up front. The discount may increase as you add more months to your initial payment. Paying your rent a year in advance can lead to real savings.

The same is true for many other arrangements where there is an option to pay over a long period of time versus paying the entire amount due in the beginning of the agreement.

You may be thinking to yourself, “I can make prepayments at any time! This has nothing to do with interest rates”. However, the reason why this is tied to low interest rates is because you have less incentive to put out $15 – $20,000 all at once, if rates are high.

If you can earn a high interest rate by putting your cash in a savings account or CD, then you will not be inclined to pay your rent a year in advance, unless the savings in rent are more than what you would earn in interest. Therefore, low interest rates make it financially feasible to make prepayments in order to secure a reduction in your purchase price!

photo by jscreationzs

A Few Questions About Low Interest Rates

  1. Do you take advantage of low interest rates to reduce your debt payments?
  2. Have you ever taken out a consolidation loan?
  3. Do you feel more justified in living above your means (borrowing money to pay for expenses) in a low interest rate environment?

 

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Filed Under: Credit Cards, Debt Management, Personal Finance Tagged With: collateralized mortgage obligation, credit card, Credit Cards, debt consolidation, finance, financial disaster, interest, interest rates, low interest, low interest rates, low rate, lower monthly payment, monthly payment, mortgage, mortgage acceleration, Personal Finance, private mortgage insurance, refinancing, take advantage

Sponsored Video – When Credit Cards Can Help You

By //  by Khaleef Crumbley

The following post has been sponsored by Capital One, but all thoughts & experiences are my own. In fact, the great thing is that I’ve been a very happy customer of Capital One for years – with my business account (the account/card mentioned in the video below)!

As most of you already know, I’m no stranger to expensive car repairs. Keep in mind that anything over about $150 is expensive in my mind (one of the consequences of being broke and in debt). Well, we had to spend another $600 recently – this time on our SUV. Since we are trying to use every extra penny to pay off our debt and also build up an emergency savings account, we were putting off the repairs until they were absolutely necessary.

We had to get the air temperature door actuator replaced on our Ford Explorer – apparently, this is a common problem. We were originally told that it would cost about $750; mainly due to the labor involved – the center console and part of the dashboard had to be removed. Going through the winter without any heat is difficult in New Jersey, so once the temperature dropped down to the low 20s consistently (hitting the teens on a couple of days), we knew we couldn’t put it off any longer.

We have a credit card that is dedicated for car repairs. If our repair bill is over $299, then we have 6 months to pay off the balance before any interest is charged. So, in this case, our credit card has saved us from prematurely depleting our emergency fund or taking from our monthly budget, while allowing us to put heat in our vehicle!

We definitely plan to pay off the credit card before the 6 months are up – something that we have done each time we’ve used it – so we aren’t expecting to pay any interest for this loan. If we aren’t able to save enough in the 6 months by reducing our expenses (not likely since we don’t have many variable expenses), then we will still be in a better position to take money from our savings.

If we weren’t in debt, we would probably use credit cards for everything. We already use it for any online purchase (for security) or any other payment where we aren’t completely comfortable (like some gas stations, restaurants, etc.). Between the added security, the rewards, and the possible cash back, I am a big fan of credit cards.

Now obviously, this love only goes as far as the benefit gained combined with the responsibility of the user. To be fair, this can be said about most good things. Too much or a misuse of a good thing can easily make it detrimental. Someone once said that a credit card is like fire…useful, but handle with care.

photo credit: freedigitalphotos.net

Filed Under: Credit Cards Tagged With: A Credit Card, business, capital one, credit, credit card, Credit Cards, Debits And Credits, debt, Emergency Fund, finance, Personal Finance, personal finances, spending, using credit cards, video

Cash – Your Best Defense Against Identity Theft

By //  by Kevin M

Amid all the internet clamor over the lowest rate credit cards, zero interest transfers, and of course, rewards points, it’s often easy to forget the fact that good, old fashioned cash is your best defense against identity theft. That alone is a compelling reason to use it as much as possible.

Sure credit and debit cards offer various forms of fraud protection, but cash keeps identity theft from happening in the first place.

Theft Of Money Is Nothing Compared To Identity Theft

Identity Theft Protection

We can agonize over the potential for the loss of cash in a bank account as a result of a lost or stolen debit card, or of the potential for a thief to tap out the remaining balance on a credit line. But neither of those potential losses comes close to the outright theft of our identity. And each carries a limit of loss anyway.

If all we could lose in an identity theft situation was a limited amount of money, it wouldn’t be nearly so terrifying. But if access to a single account is stolen, a thief could take over and plunder every account we’re connected with, and a whole lot more.

With sufficient information, a thief could become “you“ – for financial purposes – and do some or all of the following:

  • Empty your bank accounts and investment accounts
  • Max out your credit cards and credit lines
  • Get employment in your name
  • Obtain new credit in your name
  • Apply for government benefits in your name
  • File a fraudulent income tax return and obtain a huge refund in your name
  • Commit other illegal acts in your name
  • Sell your identity to a third party for immediate cash

Sure, eventually you will remedy that situation, but it may take months or years, and that is disruptive. And if the theft is severe enough, you may even need to get a new Social Security number, and transfer all of your financial information from what ever the source. In a financial sense, that’s like having to create a whole new you!

[Find out how to protect yourself from identity theft while using Facebook & other social media!]

Credit And Debit Card Paper Trails

A generation or so ago, no one worried about identity theft. There are various reasons for this, but one of the most significant is the widespread use of credit and debit cards. Every time you use plastic in a transaction, a paper trail is created! That paper trail is a rich target for identity thieves.

As a result of a single transaction, a thief will know your bank, your account number, your signature and other important information, which may be all that’s needed to gain access to your account, and ultimately to your entire identity.

Back when most transactions were conducted in cash, this threat was non-existent. After all, cash leaves no paper trail. There’s a lesson in there somewhere.

“Inside Jobs”

A large percentage of identity theft is “an inside job” – it isn’t initiated by some shady looking dude with a wide brim hat hanging out in a dark corner of the store, but by an employee of the establishment. In fact, it is estimated that as much as 65 to 75% of identity theft is committed by employees.

And why not – employees are the ones with access to the paper trails! When we do business with any company, we’re supplying them with personal information that could be used to perpetrate identity theft. We’re relying heavily on the integrity of the employees of that company and on the hope that they won’t use that information to steal our identity or commit some other form of fraud.

But not all employees have integrity. Access to personal financial information – in combination with an employee’s need (or greed) for cash or other benefits – could cause them to cross the line to the dark side.

Transactions completed with plastic increase the possibility of this outcome. But if you pay with cash, there is no personal information supplied on your part. Identity theft thwarted!

Using Cash To Minimize Identity Theft

By paying in cash – especially for small purchases – you lower the chance of being a victim of identity theft. The last thing that you want to have happen is to become a victim of identity theft as a result of a purchase of a bottle of soda at a dollar store! Paying cash for small purchases is a way to minimize that outcome.

Plan to carry a certain amount of cash with you at all times, and establish guidelines for payment methods based on the amount and type of the purchase.

For example, you could decide that you will pay cash for any purchases under $50 – that would probably eliminate most credit/debit card transactions. Any transactions of a higher amount could be paid by either credit or debit card.

If that strategy cuts your use of plastic by 75%, it will also lower your chance of being a victim of identity theft by 75%!

Paying cash is a way of disarming would-be identity thieves. Cash is virtually “invisible” – it leaves no record of it’s users. That’s your single best protection against identity theft.

How common is cash as a payment method in your life?

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photo credit: freedigitalphotos.net

Filed Under: Commentary Tagged With: A Victim Of Identity Theft, credit card, Credit Cards, debit card, Debits And Credits, electronic commerce, Identity, identity theft, Identity Thief, Protect Yourself From Identity Theft, Protection Against Identity Theft, theft, Victim Of Identity Theft, Your Identity

How To Stop Infrequent Payments From Destroying Your Budget

By //  by Khaleef Crumbley

The topic of infrequent payments has been on my mind for the last couple of weeks now. My wife and I had a couple of infrequent payments, within our finances over the last month, and I even saw a video today from someone who’s debt snowball plan was sidetracked because of a couple of infrequent payments which she failed to account for in doing her budgeting.

Important Deadline

Infrequent payments, as the name implies, are any payments which are not due biweekly or monthly and so we tend to forget about them. These can be insurance premiums that are annual or semiannual, this can be quarterly tax payments, subscriptions to roadside assistance or magazines or other services, or even software license renewals.

So here are a few ways that I found works best for me to remember these infrequent payments, depending on what system I am using for my finances.

Set Up The Payment In Your Electronic Checkbook Register

I use Quicken Home & Business in order to manage our finances and in the software, I am able to go out into the future and set up a payment in the checkbook register. It is not as hard as it sounds – all you do is go to the first available space and type in the date, even if it’s a year in the future.

So what this does is every time you look at your finances, you are able to see this payment at the bottom of the current transactions, and you are even given what the available balance would be if that payment was to come out without any other transactions happening.

This is extremely helpful as you get closer to the payment date.

For a while I was actually using a Microsoft Excel spreadsheet that I set up to look like a checkbook. It will be no different in this case except you would have to cut and paste the transaction each time you wanted to insert more recent transactions. But the basic idea stays the same; you always have that transaction in your records so that as the date approaches, it becomes more relevant and it’s staring you in the face so you won’t forget.

Set Up A Recurring Expense In Your Software

Again, if you’re using financial software, you can set this up as a recurring payment the same thing should happen as in the case above when you manually enter it each time, except that you only have to enter it once.

It should still show up as you get closer to the date of that transaction and you should be able to modify your budget based on the reminder that set up the software. The great thing about setting it up this way is that if there are any changes to this payment (such as your auto insurance premiums increasing, decreasing) you can make the change one time and it will affect all future payments.

Set Up A Recurring Appointment In Your Calendar

Calendar Reminder

When I noticed that my wife and I were forgetting that we had a payment due every May for our auto club expenses, I decided to set up a recurring appointment on our calendar.

So this way every time we look at our calendar – when we look at May 23rd, for example – it always shows up that there is a payment due to the company that provides our roadside assistance.

With so many people using smart phones and also having Microsoft Outlook and other e-mail, scheduling, and calendar programs available to them, this can be done in a matter of seconds and you can have multiple people alerted to each payment due.

It was great the other day when my wife sent a message to me to say don’t forget that this payment has to be made as I was getting the same reminder on my phone and computer. So this way whether one of us switches phones, change email accounts or something happens to one of our computers, we still have the reminder in multiple places.

It will show up on both of my computers, my phone, my wife’s phone, and it will show up on her computer as well. There is a very, very small chance of all of those things failing at one time.

Set Up The Reminder Manually

If you don’t like any of these methods, you can always leave yourself a note. If you have a date book then you can go to the month before the infrequent payment is due and write a reminder for yourself telling you that the next month will include one of these expenses that seem to throw off most monthly budgets.

That way, not only are you reminded the day that the payment is actually due when you finally turn to that date in your calendar, but you’re also reminded in advance so that you have time to adjust your budget for the next month.

No matter which way you choose to manage your finances, make sure that you have reminders letting you know that the annual payment for your credit card, you quarterly insurance premiums, your gym membership, (this is actually an expense that should be put on the credit card because it makes it easier to cancel), or any other infrequent charge is due so that it does not throw off your budget.

 photo credit: Freedigitalphotos.net

Reader Questions

  1. What methods do you use to manage your finances?
  2. How do you keep track of these infrequent payments?
  3. Was there ever a time where you forgot to account for them and had to adjust your budget on the fly?

Filed Under: Budgeting, Personal Finance Tagged With: A Payment, Alternative Payments, Annual Payments, credit card, Future Payments, Infrequent, money, payment, Payment Date, Payment Due, Quarterly Tax Payments, Recurring Payments, Tax Payment

Dealing With Financial Stress Is Driving Us To Get Out Of Debt!

By //  by Khaleef Crumbley

I had a lot of crazy things happen to me this week financially with my business and my personal bank accounts and even credit cards.

My Poor Business Accounts

On the business side everything started off fine. I made a few purchases from Amazon.com and everything went through without a problem. Then all of a sudden I received an e-mail from Amazon telling me that the payment didn’t go through, and they needed me to adjust the payment information on the purchases.

Problems With My Business Credit Card

When I logged into my credit card account, it showed that I was late by two or three business days in making this most recent payment. Apparently the electronic notification got lost in a bunch of other e-mails in my inbox. Things have been so hectic lately and when I went to check on things, the payment was already late.

I guess it’s their policy that if you miss a payment by a couple of days they automatically shut down the credit card; Which on one hand I can understand – I think it’s a good thing (because if you’re having trouble making your payments you probably shouldn’t be extended any further credit), but on the other hand, it is definitely is a pain if it was an oversight (and not due to financial struggles), as was the case this.

So I immediately log into my business checking account to send over a payment so that I can clear this up immediately. Even though I use the same bank for my checking account (like this one from http://www.bbt.com) and the credit card, it still takes a couple days in order for them to process a payment.

Computer Problems

Did It Really Spread To My Business Checking?

Once I logged in to the checking account I noticed that the account was in overdraft. As I looked further to figure out what was going on, I noticed that there was a huge charge that hit my checking account through PayPal. Well, I had my PayPal purchases set to all go through my credit card, because I don’t like surprises popping up in my checking account. I had no idea why PayPal chose to my bank account rather than my credit card, since the credit card was still active at the time of the PayPal withdraw.

Unfortunately, there was nothing that I can do about that payment coming out of my bank account instead of the credit card, so all that was left for me to do was to try to put money in my bank account so that I wouldn’t be in the negative and so that I can pay my credit card.

Since the time of the PayPal debit (which was just a day or two) I had received money into my business PayPal account. I transfered that money over immediately, but of course, like all other electronic transfers it would take a couple of days to hit the checking account.

Slow Transfers Within The Same Bank…Ugh

Initially, I didn’t remember that I had set up another online account a while ago and connected it to a system that was set up for me to earn money for my business. Once I remembered, I had to go into that account and make a transfer; but before I could do that I had to connect the two accounts. This meant that this online bank account had to make two small deposits into my business checking account and then I had to log in and verify those payments, so that they would know that I had access to the business account.

What makes this crazy is that all of this is with the same bank; the credit cards, my business checking account, and also this online banking account (which was recently taken over by my business bank).

Unfortunately they don’t have their systems set up to where they recognize different segments of their company as being one in the same, so that I can have my money transferred immediately – if that was the case this whole problem would’ve been solved on the same day.

I love the bank and have had no problems with them and ultimately this was my fault, however if the sites were a little more up to date, this problem would have been taken care of immediately.

Riding In The Rain

I’m actually sitting in my car on a rainy Saturday morning dictating this into my voice recorder. I just came from another bank where we have an account set up for emergency purposes. I took money out of that account and then drove over to my business bank and made a deposit with them. Of course, since this is a Saturday I won’t see that deposit hit the account until Monday.

Once that happens I will be able to make the payment on my business credit card and free up that account.

Safeguards That I Will Put In Place

What I plan to do to avoid this is to set up reminders on my calendar that will prompt me to go check my credit card statement. I don’t like to have a balance at the end of the month on my business credit card, however over the last month or two I’ve had to make several large purchases, which I hope to have paid off over the next couple months.

I also plan to set up a business savings account so that I don’t have to keep relying on these online transfers that take two or three days or waking up driving out in the rain to take out cash and make deposits.

Problems With Our Personal Accounts, Too?

Stress Over Debt

As all that was going on, we also had a very tight month financially with our personal finances. Now, this was to be expected because the prior month we had to go over our budget in several categories because of different things that came up in life.

At the beginning of the month I projected our finances for the next couple of weeks (which I do with every paycheck), and I knew that we would be extremely tight for this entire month. However, we had a couple small things, that we had to take care of which were somewhat unexpected.

The other day I woke up to a low balance threshold alert from my bank. I’m glad that I set this up at some point in the past, so any time our checking account balance goes below $100 my wife and I are both sent an e-mail just to give us warning.

Fortunately I was able to log into our savings account and move some money over, because I know we have one annual payment that is due at some point this month.

Unfortunately, as I was doing our finances, I did notice that one of our credit card companies said that we had a late payment. This is quite odd, since I schedule all payments weeks in advance. When I looked at the e-mail that I  received from them when the statement was ready, I noticed something quite peculiar: the e-mail was sent on one particular day, and the payment was due 2 or 3 business days after they sent the e-mail!

Well, I go over our finances every Friday or Saturday, depending on my schedule, so if I received an e-mail on Monday saying there is a new statement I would just review it on that Friday or Saturday! Usually you are given about 20 or even 30 days in some cases before the payment is due, and I usually don’t worry about logging in on that same day.

Now that I think about it while I’m talking, I’m not sure if what they did was even legal. I think there was something in the credit card act  signed a few years ago that states that they have to give maybe 15 or 20 calendar days from the time that the statement comes out until your next payment is due (I just checked the article that I wrote back then…they have to give you 21 days). So I’m going to check that. And even if that isn’t a requirement, the fact that they gave me five calendar days of perhaps three business days is unacceptable my opinion and I definitely plan to fight any charges that may come.

More Reasons To Hate Debt!

This just furthers the biblical principle that debt is equivalent to slavery. It causes undue stress and it puts us under the rules and regulations of another person, financially. This is even more motivation for us to get out of debt and to have some freedom in our lives.

Filed Under: Personal Finance Tagged With: bank, banking, Business Account, capital one, Cause, credit card, Credit Card Account, Dealing, debt, electronic commerce, Financial Stress, Financial Struggle, online banking, Overdraft, Paypal, stress

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