The most confusing part of dealing with credit card debt is the monthly statement. The only part of it that's easy to understand is the "payment due" – and that's just the way credit card companies seem to like it. In truth, there's a lot of information on there that can empower you as a consumer. You owe it to yourself to do the homework and find the best deal for your money.
One of those pieces of information is Annual Percentage Rate (APR). APR is the total cost of borrowing money, expressed as a percentage of the total owed, applied per year. Let's say you charged $1,000 for merchandise and your APR is 24%. In a year, you'd owe $1,240. That's the $1,000 you owe plus $240 in interest and fees (24% of $1,000).
Most commonly, APR is "compounded" – or applied – monthly. This can make the math a bit trickier. That means you're charged 2% each month. If you owe $1,000 at the end of your monthly statement period, you'd be charged $20 in interest. Your total due would be $1,020. If you made no payment, you'd be charged interest on the new balance, which is now $1,020. Interest and fees for the second month would be $20.40.
That extra $.40 might not seem like much, but it adds up over time. Lowering your APR means your monthly payments and total costs will be lower. In many cases, it also means getting out of debt sooner. Let's look at two options for lowering your interest rate and your payment:
If you wanted to buy a new blender, you'd do research, find out which one is the best, then compare prices to make sure you are getting the best price. Most people are willing to invest that much time and energy into a relatively minor household purchase. Frequently, financial tools don't get the same treatment.
Think of the APR like the price tag. If you want to put the costs in real terms, take the amount you currently owe and multiply it by the listed APR. That's the cost of the loan.
Federal law requires lenders to disclose their APR prior to any agreement. You can take that information with you and compare it to the rates offered by other lenders. Compare the rate you're getting to competitors and make sure you get the best price!
If you've got several high-APR loans, it might be time to investigate consolidation options. Consolidation can take several forms. You can get a debt restructuring loan to bundle all your debt into one monthly payment with an affordable APR. You might also be able to use the equity in your home to pay off your debt. Home loans tend to have the lowest APR because they are secured by the value of your house.
You might also be able to take advantage of low introductory APRs on new accounts to pay your balance quickly and avoid the powerful compounding interest. If you are looking to save on interest, take a look at our Holiday Financial Hangover personal loan special. With rates as low as 5.99% APR (click here for details & disclosures) you can consolidate to one simple payment, save money, and get a better handle on your debt. Just think of the stress that you'll eliminate! Visit mhvfcu.com/holidayhangover for details and to apply.
For those who are not familiar with the acronym, FOMO is stands for Fear Of Missing Out. It's that sensation in the back of your mind that makes you go out even when you're tired. It's the reason you can't stop checking your social media feeds. Something exciting could happen anywhere, and if you're not there to be a part of it, you'll be the one person who missed it.
Fighting FOMO is a serious challenge. It may be best to fight fire with fire and think about what you might be missing out on in the future. Let's look at three ways you can use the Fear Of Missing Out to feed your financial future — rather than your financial fears.
1) FOMO on retirement
Road tripping with friends across the country could produce some priceless memories. What could be even more priceless, though, is getting to take that trip with your spouse and family once you've retired. Cutting your travel budget now and putting the extra into an IRA is the difference between a retirement of leisure and being stuck at your desk into your 70's.
Don't think of it as not having wonderful experiences. Think of it as investing in future adventures. Consider opening a vacation club account to save for one great excursion a little bit at a time. You're not missing out on anything; you're saving for better experiences later in life. Besides, with your savings, you can make arrangements that don't include 16 hours in the seat of a sedan.
This savings emphasis doesn't mean giving up on travel or other fantastic events. It does mean you should save and plan for events that really matter. That round-the-world cruise you take with your family later on in life surely outweighs the weekend trip to the mountains right now. Also, consider opening a vacation club account to save for one great excursion a little bit at a time.
2) FOMO on home ownership
The biggest difference in wealth for older generations is time in home ownership. If you're renting, your housing money goes out the window each month. You don't build equity and you have to keep making that payment as long as you live there. With a mortgage, the money you pay each month stays with you as you build equity. Once you pay the mortgage off, your housing costs plummet.
Those opportunities may seem distant if you're burdened by student loans and credit card debt. Getting out of debt is the best way to ensure you can qualify for and pay a mortgage. That means cutting spending now and committing to paying off loans and credit cards with any extra money.
Don't think of the nights out that you won't have. Instead, focus on the wonderful experiences you'll have in your new home. Think of having a holiday meal at your kitchen table surrounded by family and friends. That's the experience you're investing in when you position yourself for homeownership.
3) FOMO on financial security
Setting aside money in an emergency fund can help you escape the constant cycle of living paycheck-to-paycheck. A few hundred dollars in a savings account can provide a great deal of peace of mind. It's a tremendous comfort to know that, even if an unexpected expense crops up, you've got rent and other basics covered.
Financial security is an experience just like going to a live show or festival. The difference is that it's an ongoing, long-lasting one. There is no closing time, and there is no last call. Being secure in your finances will make it easier to have the kind of experiences you want in life.
Fighting Fear Of Missing Out is a challenge. You only live once, as another acronym, YOLO, reminds us. Don't use that as an excuse to not think about the future. You only get one life to have the kind of experiences you want to have, but that doesn't mean you have to have them all right now. You can't go back and study harder or save more for retirement. Live an enthusiastic, out-loud life in a financially responsible way.
If you're interested in your financial future, get in touch with us. Our friendly, knowledgeable staff can help you plan for home ownership or retirement. Any great experience, whether it's living debt-free or retiring early, can be a little easier when you get help. Call, click, or stop by any MHV branch today, and get help overcoming financial FOMO.
The holidays are a time of family togetherness and celebration. They are also a time when most people tend to be distracted, busy, and emotional. Scammers know this and they tend to amp up their efforts during the holiday season. In the interest of keeping things in the holiday spirit, let's look at 12 scams of Christmas.
1.) Mobile malice
Be wary of "season-themed" apps that perform frivolous functions, yet demand top-level security access. An app that makes it look like there's snow on your background image doesn't need to send or receive texts. Such an app might send premium text messages and leave you holding the bill.
2.) E-card danger
Everyone with an email address will send these little flash programs. Scammers have designed some with malicious code. They can install data leaching programs on your computer and do untold damage. Don't click links in emails unless you know the sender. Even then, if it looks a little out of the ordinary, it probably is.
3.) Fake packages
You'll be receiving unexpected packages this season. Scammers know this and will send realistic-looking delivery failure notifications. They expect you to follow up with them and reveal personal identification information! Head to your local post office or call the parcel delivery service to check with a clerk before you hand over information on the Internet.
4.) Hotel "Lie"-Fi
The FBI issued a warning to this season's travelers about a malicious pop-up at hotel chains around the country. This scam requests people install a foreign program before connecting to a hotel Wi-Fi network. This foreign program turns out to be data-stealing malware. Remember, Internet connections you don't own or control can easily be used against you. Before you use the Internet at a hotel, ask yourself if it's worth the risk. If you do need access, be wary of what you're installing--there shouldn't be a need to install anything.
5.) Festive spam
We've all gotten used to filtering out spam in our email. Now prepare yourself for it to take on a more holiday-oriented theme. Messages will suggest that off-brand Rolex watches and cheap pharmaceuticals would make excellent gifts. Be careful, though, because these companies might just be in the market for your personal information.
6.) Bogus gift cards
There's a bonanza of savings to be had buying gift cards through second-hand retailers. Be careful, though, because many of these retailers might be a front for scammers. Gift cards may be invalid, used, or forgeries, and you'll be left holding the bill.
7.) Fake charities
These crop up every time there's a major disaster, but they also show up at the holidays. Leaflets and phone calls from organizations with familiar-sounding names will soon appear. To be safe, don't give to any charity with whom you didn't start the contact.
8.) Must-have gift scams
There will soon be an "it" gift. You'll know it by the high demand, low supply, and hugely inflated prices. Almost on cue, websites will pop up offering the rare widget at unbelievably low prices. This is a scam - the advertiser doesn't have the product and is only using the offer to harvest personal information or con you of your hard-earned money through sites like Craigslist or eBay, where they will seek payment through PayPal and never send the item you purchased.
9.) Christmas catfishing
"Catfishing" means pretending to be seeking a romantic partner on the Internet to dupe people. Scammers take advantage of the loneliness the holidays can evoke to trick people out of gifts or worse. As tempting as it is to believe in love stories at Christmas, keep your feet on the ground and practice safe Internet dating.
10.) Holiday vacation scams
If it's cold and miserable where you are, it's always tempting to go someplace tropical for a few weeks. If you're thinking about getting away, be careful of unrealistic prices or "too-good-to-be-true" travel offers. Scammers have been setting up phony travel sites to harvest personal information.
11.) Devious Christmas games
If you're facing a 5-hour flight and a 3-hour layover, it's fantastic to have a distracting mobile game to pass the time. Be careful, however, not to download the wrong one. Mobile games can harvest data from your phone or steal password information. Always do a quick search to check the validity of the app you're downloading and read the permissions carefully. A fun game should never ask for permission to send texts or send information to third parties.
12.) Free USB Tricks
Be careful with unsolicited gifts of "free" USB thumb drives. Security firm McAfee warns that many of these devices come pre-loaded with malware.
Protect your identity and accounts during the holidays and all year round with comprehensive coverage from MHV. Check out IDProtect™ as part of our Perks Package. With IDProtect™ you get 3-in-1 credit monitoring, credit report and score, alerts, insurance and dedicated fraud case management for just $3.95/month or for free. Click here for details.
Roberta Pescow is a writer for NerdWallet.com, a free financial literacy and cost comparison site for consumers.
Carrying a mortgage or other substantial debt? If your loan has been in place for a while or your credit score has improved, you might be paying a lot more than you need to. Refinancing often provides a way to reduce the interest rate and lower monthly costs. Find out why this is the perfect time to refinance debt and what options are available.
Interest rates for mortgages and other loans have been holding at near historic lows for quite some time, but these conditions won’t last forever. The Federal Reserve is already in the process of deciding when to push rates higher*, while experts say those steps may come sooner than previously expected. So borrowers wishing to reduce their interest costs by refinancing loans may have a limited window of opportunity before the advantage disappears.
Reduce mortgage payments
A mortgage constitutes the most substantial debt obligation most people will ever take on, and an interest rate on an existing loan that’s a percentage point or more higher than prevailing rates can translate to hefty extra monthly costs and a shocking amount of cash needlessly spent on interest alone over time. For this reason, homeowners carrying fixed rate mortgages with over 5% interest or variable rate loans that may soon become more costly each month would likely benefit from refinancing. Depending on the size of the mortgage, refinancing could easily put $100 or more in your pocket each month and save as much as five figures over the life of the loan. Even with closing costs factored in, chances are you’ll come out way ahead.
Car loans, credit cards
Mortgages aren’t the only source of expensive debt. If you feel trapped in high interest auto or student loans, or haven’t been able to wrestle a credit card balance to zero, you may also be in a good position to refinance and save.
For homeowners, using equity built up in your property is probably the least expensive option available for restructuring debt, since a home equity loan or line of credit uses the real estate as collateral. You may also get a tax benefit that can further reduce your final interest cost.**
With a home equity loan, the money is delivered to you as a lump sum at closing. This type of financing generally will provide one of the lowest interest rates available, and usually the rate is fixed for the term of the loan, so you know in advance what your monthly payment will be.
A home equity line of credit, or HELOC, is often for a shorter term, frequently 10 years, and at an interest rate that can vary based on some market index, like the prime lending rate. With a credit line, you generally arrange to borrow up to a certain amount and then can take the money in smaller portions during a window of time known as the draw period, often using checks drawn on the available balance.
On both, there may be some significant expenses involved for an appraisal, and application and filing fees. Also, what you can borrow is usually limited to a portion of the available equity you hold in the property used to secure the debt. These caps are based on the market value of the house and the amount owed on the primary mortgage as well as the new debt. Often, lenders set the maximum loan-to-value ratio at 80% or 85%.
Those who don’t own property or just aren’t comfortable using a home as collateral may opt for a personal loan to refinance high-interest debt. While the interest won’t be as low, and there’s no tax advantage, it should still help reduce monthly payments. Your financial institution may be able to pay debtors directly so you don’t have to, and for even greater savings, interest rates may be discounted in return for setting up automatic payments.
With interest rates still bumping along near historic lows, you still have a chance to capture what may be some significant cost savings by refinancing. So there’s no better time to check out your options before the Fed or the market takes them off the table.
-Roberta Pescow, NerdWallet
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