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7 Financial Services You Should Never Pay For

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Few things feel worse than finding out you spent more than you had to. It’s easy to spot a sale you missed or coupon you forgot to redeem, but when it comes to the financial industry, it’s tough to know if you’re getting a deal or being ripped off.

Here are seven financial services you should never pay for, either because there are plenty of free alternatives or they’re outright scams.

1. Checking Accounts

Banks are businesses ― they exist to make money. And, as you probably know, one of the ways they do that is by charging fees. Lots of fees. As a result, free checking accounts have been dying a slow, painful death over the last several years as more financial institutions charge customers for the privilege of owning an account.

Even so, free checking hasn’t gone extinct yet. According to Bankrate, 38 percent of banks and 82 percent of the nation’s largest credit unions still offer free checking. For many others, the requirements for avoiding a monthly maintenance fee are fairly simple.

“There are many ways to qualify for free bank accounts, depending on the institution,” said Jirayr R. Kembikian, a certified financial planner and managing partner at Citrine Capital in San Francisco. Kembikian noted that when he worked in the banking industry, customers would pay anywhere from $5 to $30 just to have a checking account. “Sometimes the fix was as easy as having a bank associate link the [checking and savings] accounts properly to qualify for free banking.”

If your bank doesn’t offer a free checking option or you’re unable to meet its requirements for free checking, it’s time to switch to one that does.

2. Credit Monitoring

You should review your credit report every six to 12 months for accuracy, according to Kayse Kress, a certified financial planner who owns More With Less Financial Planning in Bristol, Connecticut. After all, it’s estimated that more than one in five credit reports has at least one error. And then there’s always the looming possibility of fraud.

However, you don’t have to pay to see it. In fact, you shouldn’t.

According to Kress, you can obtain a free copy of your credit report from each of the three major credit reporting agencies ― Experian, TransUnion and Equifax ― once per year at annualcreditreport.com. And by staggering your reports rather than requesting all three at once, “you can get a snapshot of your credit every four months,” Kress said.

The same goes for your credit score. There are many credit monitoring services that will provide ongoing access to your FICO score, along with fraud alerts and other credit monitoring services, for a monthly fee. However, most major credit card issuers now provide customers with their monthly FICO score free. It’s often printed on your statement as well as available through your online account.

Other free credit sites, such as Credit Karma, will show you educational scores, which are often updated on a weekly basis. “Credit Karma also offers free services such as ongoing credit monitoring and notification updates,” Kress said.

3. Rental Car Insurance

Rental insurance is expensive, costing up to $19 per day. But insurance policies can be confusing, and the thought of potentially getting in an accident is scary. So when the agent aggressively pushes rental coverage and expects you to make a decision on the spot, it can be tempting to err on the side of caution and pony up.

However, as you might have suspected, paying for additional insurance offered through the rental company is almost never a good deal.

Car rental companies are legally required to carry insurance on their vehicles, but renters are not required to purchase their own insurance. In fact, the insurance offered by rental companies is not insurance at all. Rather, it’s a product sold by the rental agency known as a collision-damage waiver (CDW) or loss-damage waiver (LDW).

If you already have your own car insurance, you should have, at minimum, liability coverage already. Most individual car insurance policies will cover rentals, too, as long as the car is being driven for personal use.

There’s also a good chance your credit card offers either primary (rare) or secondary (more common) rental coverage, which kicks in after your personal coverage ends. Just keep in mind that for this credit card benefit to take effect, you have to pay for the rental with it and decline the rental company’s coverage when you pick up the car.

And if you don’t own a car, you can purchase insurance through an online agency for about half of what the rental agency will charge you, though you might want to look into a non-owner’s policy first.

4. Student Loan Repayment Help

The world of student loans is downright absurd. The system is complex, the myths are plentiful and there are few places you can go for straight answers. So, of course, there are companies out there looking to prey on confused, desperate borrowers.

According to Justin Chidester, owner of Wealth Mode Financial Planning in Logan, Utah, you should never pay a third-party company to help you apply for any alternative repayment plans, such as income-driven repayment or direct loan consolidation.

“Many for-profit companies will imply that they have the authority or knowledge of how to broker or mediate options for you,” Chidester said. “They target unknowing recent college graduates who don’t realize that all these options are available to them [for free] and they simply need to communicate with their servicer about which one they want.”

In other words, none of these companies do anything that you can’t do for yourself. If you want to switch payment plans or consolidate your loans, talk to your student loan servicer about your options or apply directly through the Department of Education.

5. Assistance Setting Up A Business

Similar to student loan assistance scams, there are companies that charge fees to fill out paperwork you can take care of yourself ― free ― when getting your business set up.

“A lot of these companies charge [exorbitant] fees to fill out a single form from the secretary of state,” said Adam Beaty, a certified financial planner at Bullogic Wealth Management in Pearland, Texas. “These companies are not drafting operating agreements ― they are filling out LLC forms.”

In fact, Beaty shared that one of his clients paid $325 to simply obtain an EIN for his company ― something he could have requested directly from the IRS website. “They are free, they only ask a few simple questions and you will receive your tax ID instantly online,” Beaty said.

Launching your own company can seem like an overwhelming process, especially if you’ve never done it before. It’s no wonder entrepreneurs fall victim to these types of scams. However, while you might want to consult a professional when it comes to devising your business plan or deciding how to structure your company, know that the steps for registering a business are fairly straightforward and don’t require you to pay a third party.

6. Currency Exchange

When traveling internationally, it’s a good idea to keep some cash on hand. But don’t stop at a currency exchange kiosk to exchange your money for local currency.

“Using this service is rarely a good idea, as a combination of fees, commissions and unfavorable exchange rates can quickly lead to an expensive transaction,” explained Matthias Giezendanner, founder and wealth adviser at San Francisco Wealth Planning. For example, a kiosk could charge as much as $43.99 for a $300 transaction.

Giezendanner said that many banks now provide checking accounts with worldwide ATM fee reimbursement. “Bring cards for at least two banks and call the banks to let them know that you will be traveling beforehand so that they don’t freeze your account,” Giezendanner said. “On arrival, skip the currency exchange and withdraw directly from an ATM. It’s a good idea to keep the receipt so you can document exactly what the paid fee was.”

Another option is to exchange cash at your local bank a few days before your trip. Most major banks will allow you to order foreign currency over the phone or online, then pick it up at your branch a couple of days later. Keep in mind, this service often comes with a delivery fee on top of the exchange fee, but some banks will waive it for their best customers.

7. Budgeting Tools

“There are so many mobile apps and online tools available for free to anyone looking to create a personal budget,” said Samuel Wieser, CEO of Northman Financial, in Cheyenne, Wyoming. “Many of these offer account aggregation, which, if you understand and accept the risks of using, make tracking spending effortless.” Some of those apps include Mint, Wally and Clarity Money. Even the more robust, paid apps, such as YNAB, have free versions.

However, Wieser also suggested that you give a shot at creating your own personalized budget with software such as Excel, Numbers or Google Sheets. “I recommend many clients start with a manually created budget,” Wieser said. “It forces them to categorize and track their spending so they are more cognizant of where their money is coming from and where it is going on a daily basis.” Typically, Wieser advises that his clients manually track their spending for at least a month before switching to a more automated service.

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4 things kids need to know about money

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(NC) Responsible spending includes knowing the difference between wants and needs. Back-to-school season, with added expenses and expectations around spending, is the perfect time to not only build your own budget for the year ahead, but also to introduce your own children to the concept of budgeting.

The experts at Capital One break down four basic things that every child should know about money, along with tips for bringing real-life examples into the conversation.

What money is. There’s no need for a full economic lesson,but knowing that money can be exchanged for goods and services, and that the government backs its value, is a great start.
How to earn money. Once your child understands what money is, use this foundational knowledge to connect the concepts of money and work. Start with the simple concept that people go to work in exchange for an income, and explain how it may take time (and work) to save for that new pair of sneakers or backpack. This can help kids develop patience and alleviate the pressure to purchase new items right away that might not be in your budget.
The many ways to pay. While there is a myriad of methods to pay for something in today’s digital age, you can start by explaining the difference between cash, debit and credit. When teaching your kids about credit, real examples help. For instance, if your child insists on a grocery store treat, offer to buy it for them as long as they pay you back from their allowance in a timely manner. If you need a refresher, tools like Capital One’s Credit Keeper can help you better understand your own credit score and the importance of that score to overall financial health.
How to build and follow a budget. This is where earning, spending, saving and sharing all come together. Build a budget that is realistic based on your income and spending needs and take advantage of banking apps to keep tabs on your spending in real-time. Have your kids think about how they might split their allowance into saving, spending and giving back to help them better understand money management.

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20 Percent Of Americans In Relationships Are Committing Financial Infidelity

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Nearly 30 million Americans are hiding a checking, savings, or credit card account from their spouse or live in partner, according to a new survey from CreditCards.com. That’s roughly 1 in 5 that currently have a live in partner or a spouse.

Around 5 million people — or 3 percent — used to commit “financial infidelity,” but no longer do.

Of all the respondents, millennials were more likely than other age groups to hide financial information from their partner. While 15 percent of older generations hid accounts from their partner, 28 percent of millennials were financially dishonest.

Regionally, Americans living in the South and the West were more likely to financially “cheat” than those living in the Northeast and Midwest.

Insecurity about earning and spending could drive some of this infidelity, according to CreditCards.com industry analyst Ted Rossman.

When it comes to millennials, witnessing divorce could have caused those aged 18-37 to try and squirrel away from Rossman calls a “freedom fund”.

“They’ve got this safety net,” Rossman said. They’re asking: “What if this relationship doesn’t work out?”

As bad as physical infidelity

More than half (55 percent) of those surveyed believed that financial infidelity was just as bad as physically cheating. That’s including some 20 percent who believed that financially cheating was worse.

But despite this, most didn’t find this to be a deal breaker.

Over 80 percent surveyed said they would be upset, but wouldn’t end the relationship. Only 2 percent of those asked would end the relationship if they discovered their spouse or partner was hiding $5,000 or more in credit card debt. That number however is highest among those lower middle class households ($30,000-$49,999 income bracket): Nearly 10 percent would break things off as a result.

Roughly 15 percent said they wouldn’t care at all. Studies do show however that money troubles is the leading cause of stress in a relationship.

That’s why, Rossman says, it’s important to share that information with your partner.

“Talking about money with your spouse isn’t always easy, but it has to be done,” he said. “You can still maintain some privacy over your finances, and even keep separate accounts if you and your spouse agree, but you need to get on the same page regarding your general direction, otherwise your financial union is doomed to fail.”

With credit card rates hovering at an average of 19.24 percent APR, hiding financial information from a partner could be financially devastating.

But, Rossman adds, it’s not just about the economic impact but also the erosion of trust.

“More than the dollars and cents is that trust factor,” he said. “I think losing that trust is so hard to regain. That could be a long lasting wedge.”

Kristin Myers is a reporter at Yahoo Finance. Follow her on Twitter.

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7 Examples Of Terrible Financial Advice We’ve Heard

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Between television, radio, the internet and well-meaning but presumptuous friends and family, we’re inundated with unsolicited advice on a daily basis. And when it comes to money, there’s a ton of terrible advice out there. Even so-called experts can lead us astray sometimes.

Have you been duped? Here are a few examples of the worst money advice advisers, bloggers and other personal finance pros have heard.

1. Carry a balance to increase your credit score.

Ben Luthi, a money and travel writer, said that a friend once told him that his mortgage loan officer advised him to carry a balance on his credit card in order to improve his credit score. In fact, the loan officer recommended keeping the balance at around 50 percent of his credit limit.

“This is the absolute worst financial advice I’ve ever heard for several reasons,” Luthi said. For one, carrying a credit card balance doesn’t have any effect on your credit at all. “What it does do is ensure that you pay a high interest rate on your balance every month, neutralizing any other benefits you might get from the card,” Luthi explained. “Also, keeping a 50 percent credit utilization is a surefire way to hurt your credit score, not help it.”

Some credit experts recommend keeping your balance below 30 percent of the card limit, but even that’s not a hard-and-fast rule. Keeping your balance as low as possible and paying the bill on time each month is how you improve your score.

2. Avoid credit cards ― period.

Credit cards can be a slippery slope for some people; overspending can lead to a cycle of debt that’s tough to escape.

But avoiding credit cards on principle, something personal finance gurus like Dave Ramsey push hard, robs you of all their potential benefits.

“Credit cards are a good tool for building credit and earning rewards,” explained personal finance writer Kim Porter. “Plus, there are lots of ways to avoid debt, like using the card only for monthly bills, paying off the card every month and tracking your spending.”

If you struggle with debt, a credit card is probably not for you. At least not right now. But if you are on top of your finances and want to leverage debt in a strategic way, a credit card can help you do just that.

3. The mortgage you’re approved for is what you can afford.

“The worst financial advice I hear is to buy as much house as you can afford,” said R.J. Weiss, a certified financial planner who founded the blog The Ways to Wealth. He explained that most lenders use the 28/36 rule to determine how much you can afford to borrow: Up to 28 percent of your monthly gross income can go toward your home, as long as the payments don’t exceed 36 percent of your total monthly debt payments. For example, if you had a credit card, student loan and car loan payment that together totaled $640 a month, your mortgage payment should be no more than $360 (36 percent of $1,000 in total debt payments).

“What homeowners don’t realize is this rule was invented by banks to maximize their bottom line ― not the homeowner’s financial well-being,” Weiss said. “Banks have figured out that this is the largest amount of debt one can take on with a reasonable chance of paying it back, even if that means you have to forego saving for retirement, college or short-term goals.”

4. An expensive house is worth it because of the tax write-off.

Scott Vance, owner of taxvanta.com, said a real estate agent told him when he was younger that it made sense to buy a more expensive house because he had the advantage of writing off the mortgage interest on his taxes.

But let’s stop and think about that for a moment. A deduction simply decreases your taxable income ― it’s not a dollar-for-dollar reduction of your tax bill. So committing to a larger mortgage payment to take a bigger tax deduction still means paying more in the long run. And if that high mortgage payment compromises your ability to keep up on other bills or save money, it’s definitely not worth it.

“Now, as a financial planner focusing on taxes, I see the folly in such advice,” he said, noting that he always advises his client to consider the source of advice before following it. ”Taking tax advice from a Realtor is … like taking medical procedure advice from your hairdresser.”

5. You need a six-month emergency fund.

One thing is true: You need an emergency fund. But when it comes to how much you should save in that fund, it’s different for each person. There’s no cookie-cutter answer that applies to everyone. And yet many experts claim that six months’ worth of expenses is exactly how much you should have socked away in a savings account.

“I work with a lot of Hollywood actors, and six months won’t cut it for these folks,” said Eric D. Matthews, CEO and wealth adviser at EDM Capital. “I also work with executives in the same industry where six months is overkill. You need to strike a balance for your work, industry and craft.”

If you have too little saved, a major financial blow can leave you in debt regardless. And if you set aside too much, you lose returns by leaving the money in a liquid, low-interest savings account. “The generic six months is a nice catch-all, but nowhere near the specific need of the individual’s unique situation… and aren’t we all unique?”

6. You should accept your entire student loan package.

Aside from a house, a college education is often one of the biggest purchases people make in their lifetimes. Often loans are needed to bridge the gap between college savings and that final tuition bill. But just because you’re offered a certain amount doesn’t mean you need to take it all.

“The worst financial advice I received was that I had to accept my entire student loan package and that I had no other options,” said Gina Zakaria, founder of The Frugal Convert. “It cost me a lot in student loan debt. Now I tell everyone that you never have to accept any part of a college financial package that you don’t want to accept.” There are always other options, she said.

7. Only invest in what you know.

Even the great Warren Buffett, considered by many to be the best investor of all time, gets it wrong sometimes. One of his most famous pieces of advice is to only invest in what you know, but that might not be the right guidance for the average investor.

In theory, it makes sense. After all, you don’t want to tie up your money in overly complicated investments you don’t understand. The problem is, most of us are not business experts, and it’s nearly impossible to have deep knowledge of hundreds of securities. “Diversification is key to a good portfolio, and investing in what you know leads to a very un-diversified portfolio,” said Britton Gregory, a certified financial planner and principal of Seaborn Financial. “Instead, invest in a well-diversified portfolio that includes many companies, even ones you’ve never heard of.”

That might mean enlisting the help of a professional, so make sure it’s one who has your best interests at heart.

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