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How To Get A Credit Card When You Have Bad Credit

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Bad credit can happen to good people. A low credit score doesn’t mean you’re any less intelligent or important than someone with good credit. But it does often make life harder, whether you want to borrow money, rent an apartment or open a cellphone account.

One of the best ways to build good credit is to use a credit card. But how are you supposed to qualify for a credit card when your credit’s in rough shape? You might be surprised to learn it is possible.

Are There Credit Cards For Bad Credit?

Traditional credit cards aren’t completely off-limits just because you have bad credit, said Jacob Lunduski, an industry analyst at Credit Card Insider. Your credit score is just one piece of the puzzle.

“Card issuers take several elements into account when deciding if you’ll be approved or not, including your income, if you own a home or if you’re employed,” he said.

Lunduski recommends the Journey Student Credit Card from Capital One, which is a rewards card designed for people with lower credit scores or a limited credit history. Unlike other student credit cards, you don’t have to be going to school to apply.

But not all credit cards for bad credit are a smart choice. Most are actually terrible products, said Michael Cetera, a credit analyst for FitSmallBusiness.com.

“They’re full of fees and other gotchas,” he said.

“When shopping for a credit card for bad credit, steer clear of any card that charges a processing fee to open the card, a monthly fee or a sliding annual fee,” Cetera said. He also warned against applying for any card that charges interest rates north of 30 percent.

In fact, if you have bad credit, a traditional credit card might not be the way to go. But that doesn’t mean you’re out of options.

Try A Secured Credit Card

Cetera said your primary goal should be to find a card that allows you to use it responsibly without digging a bigger hole. A secured credit card could help you do just that.

These cards are designed for people with less-than-great credit and can be easier to qualify for than a traditional credit card. Instead of receiving a line of credit that you borrow against, a secured card requires you to pay a deposit upfront, thereby securing a line of credit with collateral.

The deposit on secured cards is usually at least $250, said Ashley F. Morgan, a debt and bankruptcy attorney in northern Virginia. “The lending institution then gives you a credit card with a credit limit of $250,” she explained. “You use this card like a normal credit card, spending and paying the bill every month.”

In many cases, this activity is then reported to the three major credit bureaus and helps build your credit over time. Not all secured cards report to the bureaus, though, so it’s always a good idea to double-check.

“After about a year of paying on time and using the card responsibly, most lenders will re-evaluate your situation and either up your credit limit with no additional deposit, convert your card to an traditional unsecured card or offer one of their unsecured cards,” Morgan said.

Lunduski recommends the Discover it Secured credit card, which lets you earn rewards on your spending. For example, you can earn 2 percent cash back at restaurants and on gas. Plus, the card will double your cash back at the end of your first year, Lunduski noted. Another bonus is that there’s no annual fee.

Get Your Credit Back In Shape

Of course, getting your hands on one of these cards is only a good idea if you manage it well and use it to improve your credit over time.

“You have to think of a credit card as a tool to build your credit, not a tool for spending,” Morgan said. “If you don’t follow that mentality, a credit card can be dangerous.”

So how can you use your credit card to your benefit?

Limit your spending. Keep your card at home and in a place that’s difficult to access, Morgan suggested. This can keep your spending low and help you avoid racking up more debt that you can handle. “Set up one or two bills to be paid on the credit card each month, and then authorize auto payment from your bank to your credit card,” she said.

Never miss a payment. Your payment history is the most important factor that affects your credit, accounting for 35 percent of your total score. Just one late or skipped payment can have a serious, negative impact on your score. “Pay your credit card bill by the due date,” Cetera said. “Every. Time. Maintain a positive track record of on-time payments, and watch your score rise over time.”

Pay off your whole balance. Your credit card bill will indicate a minimum amount you’re required to pay, but it’s a good idea to pay your bill in full if you can. “If you can keep the amount you owe versus how much credit you have available relatively low, this will help improve your credit score,” Cetera said. That’s because the amount you owe relative to your available credit ― known as your credit utilization ― makes up 30 percent of your score. Ideally, you should keep your utilization below 30 percent.

Watch out for low credit limits. Most secured cards and credit cards for bad credit come with fairly low limits, but try to avoid cards with extremely low ones. “You should look for a secured card that offers enough credit for your needs,” Cetera said. “Some come with a credit limit as low as $50. A limit that low could make it difficult for you to build up your credit score.”

Again, you want to maintain low credit utilization. “If you have a $50 credit limit and you use $25 worth of it, you’re using half of your available credit limit. … If you have a $500 credit limit and you use $25 worth, you’ll see the difference in your score,” Cetera added.

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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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