5 Credit Cards That Won’t Raise Your APR If You Pay Late

When children misbehave, their parents may resort to punishments like putting them in “time out” by having them stand in the corner. And that’s how many credit card users feel when they suddenly have a much higher penalty interest rate imposed due to failing to make a payment on time, slightly exceeding their credit limit or having a check returned.

But now, a major credit card issuer is ending penalty interest rates on one its most popular cards, joining a small but growing number of products that no longer seek to punish customers for what may just have been a single small mistake. Chase has just announced that its Slate cardholders will no longer be subject to penalty interest rates.

Chase’s Slate card has always been especially useful for cardholders who are trying to pay off debt, as it offers 15 months of 0% APR financing on both new purchases and balance transfers, and has been the only such offer for several years with no balance transfer fee (on transfers completed within 60 days of account opening). Slate cardholders receive a standard interest rate of 12.99% to 22.99% depending on their creditworthiness when they applied, which is a variable rate that can change with the prime rate. But starting immediately, for all new and existing cardholders, there will not be a penalty interest rate imposed.

So why the change to drop penalty interest rates? According to Rob Tacey, Chase’s vice president for public relations, “As with the recent addition of the credit score dashboard, we have made enhancements to Slate designed to help cardholders best manage their overall credit health.” Further, Chase cardholders can utilize its Blueprint program, which allows them to avoid interest on some charges by paying them in full, while carrying a balance on others. Blueprint also offers budgeting and goal-setting tools. There is no charge to use Blueprint, and no annual fee for this card.

1. Discover it. This card has never had a penalty interest rate. Currently, the Discover it card is offered in several versions including the it Chrome, it Miles and the new Discover it NHL card which features the logo of your favorite National Hockey League team. Other features common to all Discover it cards include a free monthly FICO score, 100% US based customer service, and cardholders first late payment fee waived. There are no annual fees for these cards.

2. PenFed Promise. PenFed stands for the Pentagon Federal Credit Union, which was created to provide financial services for members of several military, defense, and government organizations, as well as their families and household members. The PenFed Promise card offers a standard interest rate of 7.99% to 16.99% (variable), depending on the applicant’s creditworthiness, and no penalty interest rate. In addition, this card boasts having no annual fees, foreign transaction fees, cash advance fees or late fees.This card was even named the Best Simple Credit Card in America for its easy-to-understand fee structure. To apply, you must be a member of the credit union, which you can be eligible to join on the basis of your affiliation with one of many qualifying organizations, including some military support charities that require just a small fee to join.

3. Barclaycard Ring. This card allows customers to interact with the card issuer and help shape its terms and conditions. Community members propose new ideas and vote for ways to make the card better. In addition, cardholders can ask questions online directly to the three community managers. So not coincidentally, it also has a very simplified structure for its rates and fees. All cardholders receive a standard interest rate of 8% (not 7.99%), which applies to new purchases, balance transfers, and even cash advances, with no penalty interest rate. There is no annual fee for this card.

4. Citi Simplicity. Simplicity lives up to its name by offering no late fees and no penalty interest rates. But in addition, it also offers the longest promotional financing offer available — 21 months of 0% APR financing on both new purchases and balance transfers, with a 3% balance transfer fee. There is no annual fee for this card.

Whenever you plan to apply for a credit card, it’s good to know where your credit stands, since your credit score is a major factor in determining your interest rate. You can get copies of your free annual credit reports at AnnualCreditReport.com and you can check your credit scores for free on Credit.com to see where you stand.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

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This article originally appeared on Credit.com.

This article by Jason Steele was distributed by the Personal Finance Syndication Network.

Could This Mortgage Innovation Help You Buy a Home?

Would you buy a home for a discounted price if you had to surrender much of the gains when you sold it someday? That’s the premise behind an innovative new housing strategy called “shared equity.”

It sounds a bit like a hybrid between buying and renting. Buyers who couldn’t otherwise be able to afford a home get a big discount — perhaps $100,000 off the market price — in exchange for giving up a large portion of potential equity gains in the future. The entity that sells the home — usually a nonprofit organization — keeps the rest of the profits, using them to fund other affordable purchases. By essentially capping gains, the model keeps prices affordable for entire neighborhoods, suggests a report issued recently by the Urban Institute called “Homeownership for a New Era.”

“Because such programs recycle subsidies over time, they can cost-effectively promote homeownership for low- and moderate-income homebuyers,” the report says. It examined nine ongoing shared-equity experiments occurring across America. All of them are small — the report covers only a few hundred purchasers. Still, it offers a glimpse into a new housing model that’s being considered across the globe.

“Shared equity programs provide homebuyers with a way of bridging the gap between what they are able to afford to pay in a mortgage and the actual market cost to own a property,” the report says. While models differ, “they all share the same goal of providing homeownership options to low- and middle-income communities with mechanisms in place to preserve the affordability of these homes over time.”

To be sure, shared equity is complex and requires a lot of explanation. Sales prices are tricky to set: They must balance median income on one side with median prices on the other. Set too high and they’ll still be unaffordable. Set too low, and they put the nonprofit at risk. Generally, prices are set at between 60-100% of area median income.

The resale price calculation can be even more complex. Some programs cap appreciation at 1.5-3% annually. Resellers are allowed to keep a portion of the change in appraised value, sometimes only 25%.

There are other drawbacks to the programs. Buyers have less incentive to invest in improvements to their properties, since their capital gains are capped. Some programs add formulas to account for that.

Shared equity applicants are often less-than-ideal buyers, though the Urban Institute says they are often older than the median U.S. homebuyer (36 rather than 31), with a median credit score of 720, which is generally considered to be in the “good” range. (You can check your credit scores for free on Credit.com.) And they have saved an average of $6,000 towards a down payment — another indication that this group might be able to buy in a “normal” housing market. The most common barrier tends to be lower income, though they often work in stable industries. (This calculator can show you how much home you can afford.)

Still, because of their non-traditional makeup, the loans often cannot be resold on secondary markets, meaning nonprofits must keep them on their own balance sheets, which slows growth of the programs.

Similar programs being attempted in the United Kingdom and Spain have had some success. In Spain, shared home ownership is being developed in an attempt to match an excess of housing stock built during the housing bubble with would-be buyers who still can’t afford the empty homes. A report in Fortune magazine recently threw a bit of cold water on those countries’ programs however, which banks on buyers slowly working their way from the discount purchase to full equity ownership. Most buyers don’t, one research project found, frustrating both buyer and private seller.

In the U.S. programs studied by the Urban Institute, nonprofits maintained ownership in the homes, making deed and price restrictions on the property much easier to swallow. The Institute concludes the new model, warts and all, is ripe for further study, as it appeals to a segment of would-be buyers that other low- and moderate-income purchase plans don’t — namely strong buyers who simply can’t afford homes in areas where prices far outstrip incomes.

“Shared equity homeownership provides opportunities to low-income homebuyers that market-rate homeownership and other housing assistant programs simply cannot,” it concludes.

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This article originally appeared on Credit.com.

This article by Bob Sullivan was distributed by the Personal Finance Syndication Network.

5 Identity Theft Facts That Will Terrify You

Identity theft was the number one consumer complaint at the Federal Trade Commission last year. So far in 2015, the data breach problem that drives so many identity-related crimes has gotten worse. The massive compromises at Anthem and Premera alone put a combined 91 million records in harm’s way.

With more information “out there” than we can possibly know, identity theft has become the third certainty in life, right behind death and taxes. And because so many major compromises include Social Security numbers — the skeleton key to not only your financial life, but also your health care and many other aspects of daily life—the damage can be life-changing.

The bottom line: Be afraid, be very afraid.

1. A Billion Records Leaked

According to IBM, more than one billion records containing personally identifiable information were leaked in 2014 alone. An identity thief only needs a few data points like the kind found in many data breaches to tap into your financial life.

2. There Is No Anonymity

Science Magazine reported that “anonymized meta data sets” containing product purchase information were re-identified with the people who made the purchases by looking at Instagram posts and tweets that matched the purchases.

You can do everything right and still get “got.” The fraudsters out there mining the veins of personal data for financial gain are good at what they do. However, if you assume you are going to get got and take some proactive steps – including monitoring your bank and credit accounts regularly for signs of fraud – in many cases you can have a head start when it actually happens. (Keeping a tight rein on your social media posts and making them private can also help give fraudsters less access to you.)

3. Your Medical History Can Be Compromised

With more than 2.32 million victims thus far — 500,000 last year alone — medical identity theft is a crime on the rise. It can cause medical histories to get changed, and benefits fraudulently used by others can bar a victim from getting medical treatments – making it a dangerous crime.

Unlike credit card fraud where liability is often zero, a recent study by the Medical Identity Theft Alliance found that more than 60% of medical fraud victims had to pay an average of $13,500 to resolve the crime.

Your best bet is to check every statement that comes in, and make sure the treatments listed on your Explanation of Benefits summaries sent out by your insurer match the care you’ve received.

4. Your Tax Refund Is Under Attack

Early in the 2015, Intuit, the company behind TurboTax, had to shut down e-filing in several states after the company noticed an uptick in what appeared to be fraudulent tax returns.

Tax-related identity theft is a big-money crime, and the statistics prove it. The IRS stopped 19 million suspicious tax returns last year, and stopped more than $63 billion in fraudulent refunds. A whopping $5.8 billion in tax refunds were paid out to fraudsters. In 2012, the Treasury Inspector General for Tax Administration projected that fraudsters would net $26 billion into 2017.

For now, your best defense is to file your taxes as early as possible to avoid falling victim to tax-related fraud.

5. Even Kids Are at Risk

It’s long been known that children in the foster care system were more likely to become the target of identity-related crimes. This was due to the fact that when children move in with a new foster family, their personally identifiable information moves with them.

A less well known fact is that more than 30% of identity theft victims are scammed by family and close friends of the family. The key in these crimes is of course access to the necessary data. No one knows this better than Axton Betz-Hamilton, whose mother defrauded the entire family — father, grandfather and herself — for almost 20 years.

There are services available that protect a child’s credit. It’s also a very nice graduation present to check your child’s credit, and make sure there isn’t a history there.

While it is impossible to avoid some of the fallout from identity theft after it’s detected, it’s not possible to prevent these crimes. If you detect fraud early, it can be contained. And if you follow the three Ms of identity theft management (note that I didn’t say prevention), you can at least have a little piece of mind during this historic crime spree. Minimize, Monitor and Manage. Check your bank and credit card statements every day online to look for fraudulent transactions. You can sign up for free transactional monitoring alerts from your bank, credit union or credit card company for help in this. Check your credit reports regularly – you can get them for free annually on AnnualCreditReport.com, and you can get a free credit report summary every month on Credit.com – to look for unauthorized accounts or changes in existing account balances. File your taxes early, and keep an eagle eye on your medical insurance benefits. Report any suspicious activity immediately to the respective institution so that you can try to minimize the damage.

Make yourself a harder target and know what to do when you become one anyway.

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This article originally appeared on Credit.com.

This article by Adam Levin was distributed by the Personal Finance Syndication Network.

Court Finds Defendants in FTC’s Treasure Your Success “Rachel Robocalls” Case Liable for $1.7 Million

Universal Processing Services (UPS) of Wisconsin, LLC, a payment processor, and telemarketer Hal E. Smith and his company HES Merchant Services Company, Inc. (HES), defendants in the Federal Trade Commission’s case against a deceptive robocall credit card interest rate reduction scheme, were jointly ordered to pay $1,734,972 to the Commission by a Florida district court. The money will be used to provide refunds to defrauded consumers.

 “The defendants blasted thousands of people with illegal robocalls and lied about helping relieve their credit card debt,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Now they’re out of the robocall business. The court’s decision also shows that it’s bad business for payment processors to help scammers take people’s money.”

The final orders announced today against UPS, which did business as Newtek Merchant Solutions, Smith, and HES follow the court’s November 2014 order granting the FTC’s motion for summary judgment against these three defendants who took part in the Treasure Your Success (TYS) scheme. The rest of the defendants had previously agreed to final orders settling the agency’s charges against them.

The court held Smith and HES liable for 11 violations of the FTC Act and the Commission’s Telemarketing Sales Rule (TSR), based on their participation in a deceptive telemarketing scheme purporting to be a credit card interest rate reduction service that used robocalls to solicit consumers. The defendants failed to disclose the identity of the person(s) responsible for placing the robocalls and unlawfully calling numbers that had been registered on the FTC’s Do Not Call Registry.

In February 2015, the court entered a permanent injunction against Smith and HES that includes 20-year bans on robocalls, telemarketing, and marketing debt relief products or services. It also permanently prohibits Smith and HES from making misrepresentations in the sale or marketing of any product or service, including financial products or services, and imposes the $1.7 million judgment.

The court also found UPS liable for “assisting and facilitating” the TSR violations of the other defendants by providing the interface with the banks to handle credit card payments while knowing (or avoiding knowing) of the underlying TSR violations. Among other things, the court found that UPS had ignored numerous red flags that, if properly investigated, would have led UPS to decline TYS as a client. The court imposed the same $1.7 judgment million against UPS.

After the summary judgment ruling, UPS agreed to a settlement permanently barring the company from processing payments for clients whom it knows or should have known: 1) fall into certain categories that have received close industry attention, such as debt relief services; 2) make misrepresentations to consumers; 3) charge consumers without their authorization; and 4) otherwise violate the FTC Act or the TSR. It also requires UPS to put screening and monitoring provisions in place for use when accepting future clients.

The Commission vote approving the proposed stipulated final order against UPS was 5-0. The proposed stipulated final order was entered by the U.S. District Court for the Middle District of Florida, Orlando Division, and has now been signed by the judge.

The following defendants previously agreed to stipulated final orders settling the FTC’s charges against them:

  • On September 23, 2013, a permanent injunction against defendants Willy Plancher; Valbona Toska, WV Universal Management, LLC; Global Financial Assist, LLC; and Leading Production, LLC banning them from robocalling, telemarketing, and marketing debt relief products or services;
  • On October 6, 2014, a permanent injunction against Ramon Sanchez-Ortega  barring him from robocalling and telemarketing;
  • On November 19, 2014, a permanent injunction and $25,000 financial judgment against Derek Depuydt, UPS’s former president prohibiting him from acting as a payment processor, independent sales organization, or a sales agent for high-risk clients; and
  • Also on November 19, 2014, a permanent injunction against Jonathon E. Warren; Business First Solutions, Inc.; and Voiceonyx Corp. barring them from robocalling, telemarketing, and marketing debt relief products or services.

NOTE: Stipulated final orders have the force of law when approved and signed by the district court judge.

This article by the Federal Trade Commission was distributed by the Personal Finance Syndication Network.

6 Gifts That Actually Help to Launch Graduates

It’s that time of year again. Graduation season is in full swing, and everywhere you look there are top ten lists telling you the best gift you can give the graduate in your life.

While it’s always nice to receive presents, particularly when they commemorate the hard work necessary to earn a diploma or a degree, I would say the best gifts you can give your graduate can’t necessarily be wrapped in pretty paper and tied up with a bow.

If you really want to give a new college graduate a gift that will last him a lifetime, think about giving one of the following things:

1. Clear Boundaries

It used to be that college graduation marked the end of young adults considering their parents’ house to be home. But now the so-called Boomerang Generation is becoming the norm, and many families are finding that their young adult children are ending back in their childhood bedrooms.

This is a tough situation for everyone, and one of the best things that a parent can do for his returning graduate is to set up clear boundaries from the get-go. Let your child know how she is expected to contribute to the household, whether through rent, chores, or a continuing job search.

And, set up a plan together to eventually get her living on her own. It may feel awkward to discuss these matters, but feeling like a contributing and respected adult in a childhood home will make a huge difference to your graduate.

2. An Interview Suit

Landing that interview for the dream job can often be a source of stress for new graduates, rather than a cause for celebration. That’s because many students don’t have the right threads to impress HR in the interview, and are stuck either putting together a not-quite-appropriate outfit from what they already own or trying to borrow a suit from family or friends.

Take your graduate shopping to buy a good, perfectly-fit suit for the interview process. Not only will your grad look great, but he will also feel more confident during interviews.

3. Budgeting Help

For many people, the word budget has an unpleasant, if not frightening, connotation. But jumping into adulthood without this skill can set young graduates up for a great deal of stress in the future. If you know that a graduate in your life hasn’t been raised with a budgeting mindset, offer to help her figure out a basic one. This could be as simple as giving her a copy of a personal finance book, or as complex as setting aside some time with her to go over the details of her finances.

Obviously, this is not a gift you can present to a young adult you’re not close to—or one who is not interested in this kind of help. But if you know a graduate who is feeling overwhelmed with the financial aspects of adulthood, she will use and appreciate this gift for life.

4. Lunch with an Influencer

If you have friends in high places in your graduate’s field of choice, a great gift would be to take your friend and the grad out to lunch together. That will give the new graduate an excellent entrée into important networking within his field. All for the price of a nice lunch out.

5. The Gift of Planning

We all know now that retirement contributions made in your 20s have incredible power for growth. But how many of us really understood this in our 20s? Guiding a new graduate through financial planning will help her to know where she wants to go in life, and how she wants to get there.

This gift can be accomplished in a couple of ways: for example, you could sit down with your graduate and talk about her long term plans for career, travel, family, etc, and help her make a plan to get there. Alternatively, you could simply introduce your graduate to your financial advisor. Either way, you are helping her to map a financial course for her life.

6. Matching Retirement Contributions

While it is not possible to directly contribute to another person’s 401(k) or IRA (unless you are married to the recipient), you can still help incentivize your graduate’s retirement contributions by offering to match them—in cash. For his his first year of employment, offer to send a monthly check matching the amount of money that he puts aside in his 401(k) or IRA (up to a limit) to an interest-bearing savings account. At the end of the year, you will transfer the money (plus interest) over to the graduate.

This gift will spur him to get used to making larger retirement contributions and living on the somewhat reduced paycheck. With the power of compound interest, your relatively small gift now will pay off in spades over the next forty years.

One caveat: make sure you are aware of the gift tax when making this generous offer. The current annual limit for a gift to any one individual is $14,000. If you give more than that amount in one calendar year, the excess may be subject to federal tax.

The Bottom Line

Giving these kinds of practical gifts to a graduate might not make you the favorite aunt or uncle at the graduation party. But being a personal finance mentor is often the best gift you could ever give.

What’s your recommendation for an intangible gift for grads?

This article by Emily Guy Birken first appeared on PT Money: Personal Finance and was distributed by the Personal Finance Syndication Network.

Is a Biweekly Mortgage Payment a Bad Idea?

Biweekly mortgage payments certainly sound like a great idea. Paying half your mortgage every two weeks instead of a full payment once each month actually can save you many thousands of dollars over the life of a mortgage, and allow you to cut years off that 30-year loan. Sadly, as with many financial instruments that sound great, there’s a catch. In fact, there are many. A lawsuit filed by the Consumer Financial Protection Bureau this week against a firm selling biweekly mortgage payment programs highlights all the reasons that signing up for biweekly mortgage could be a very bad idea.

The CFPB sued Nationwide Biweekly Administration for selling a product the firm called “Interest Minimizer” that the CFPB says deceived many consumers, who ended up paying more in fees than they got back in interest savings.

But first, let’s get this out of the way. Conceptually, biweekly mortgages can work. Pay half a month’s mortgage every two weeks and you’ll make one full extra mortgage payment every year. Early payments lower your principal, which lowers your compound interest, so they have a virtuous impact. Here’s the key: You can make early mortgage payments yourself anytime. You do need to stay on top of your mortgage servicer and make sure the extra payments are applied correctly to your principal, but if you are the kind of person who makes extra mortgage payments, you are probably the kind of person who can stay on top of how those payments are applied.

Why You Might Not Want to Pay Early

You don’t need to pay a third party to manage biweekly payments for you. Some folks feel like signing an agreement ensures they’ll keep up with what amounts to a forced savings plan; that’s a personal choice. But know there’s a cheaper way to do it.

There are other reasons not to commit to a biweekly mortgage. It’s always good to maintain flexibility in case something unexpected occurs, such as a medical emergency. And while paying down a mortgage can feel good, it actually isn’t the slam-dunk financial choice many black-and-white financial advisers say it is. Huh? Here’s just one example: If you have a mortgage at 3.5%, you are going to miss it, and the cash you used to prepay it if — as many experts predict — interest rates on savings accounts soar past 3.5% during the next decade or so.

Back to biweekly payments, and things that can go wrong. The CFPB alleges that Nationwide Biweekly Administration and its owner Daniel Lipsky misrepresented the savings consumers enjoy from their biweekly program. In short, because of set-up fees and ongoing fees, consumers with a typical 30-year mortgage must make nine years of payments before they break even with the program. The CFPB says only 25% of all enrollees at the end of 2014 had even made four years’ worth of payments.

Meanwhile, Nationwide collected $49 million from consumers between 2011 and 2014.

Nationwide’s set-up fee is $995, and ongoing annual fees range from $84-$101. Scripts for nationwide sales representatives are designed to obfuscate the cost, the CFPB says; sales reps are also told to give homeowners the impression that Nationwide is affiliated with their mortgage company, also a deception, according to the CFPB.

“The defendants know that consumers will pay more in fees than they save in interest for the first several years in the program, and that many consumers will leave the program without saving any money at all,” the CFPB says.

Credit.com reached out to Nationwide Biweekly Administration for comment, but did not receive a response by press time. Lipsky denied the CFPB allegations, according to Cleveland.com.

“(Nationwide) recently analyzed their 100 oldest active customers and found that to mid-April 2015, they had saved a combined $3.5 million in interest charges with only a combined $128,000 in fees. This equates to about $27 in interest savings for every $1 in fees, a 2,700% return,” Lipsky said.

The firm also helps borrowers find bank errors in their mortgages, he said.

There is no dispute, however, that this logic holds true for every financial instrument: the higher the fees, the more the consumer benefit evaporates.

How You Can Do It Yourself

Biweekly mortgage programs with set-up fees and ongoing costs turn what could be a good idea into a bad one. The odds you’ll stay in your current home, paying your current mortgage for the next 10 years, are quite low.

So prepay your mortgage if you like. But do it on your schedule. Make it easy on yourself — divide your monthly payment by 12, and add that amount to every monthly mortgage payment you send. That will work almost as well as biweekly payments, and it’s free.

But do it only with money you absolutely, positively, unequivocally know you won’t need for another 20 or 30 years. Having a large emergency savings account, and cash piled up to buy a new car or other big purchase, should be higher priority than prepaying your mortgage. Why? Should an emergency arrive, you’ll never be able to borrow money at current mortgage-interest rates. Missing a mortgage payment because you can’t keep up with a biweekly payment schedule is never a good idea, since it can have a serious negative impact on your credit. You can get a free credit report summary every month on Credit.com to see how your payments are impacting your scores.

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

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This article originally appeared on Credit.com.

This article by Bob Sullivan was distributed by the Personal Finance Syndication Network.

I Loaned Money to a Friend & They Never Repaid. Can I Write It Off?

A reader, Gerard, reached out to us recently wondering if there was any way to recover any of the thousands of dollars loaned to a friend. At this point, he doubts the person actually intended to repay the loan. Here’s what he told us:

My mother and I lent a series of loans to a person we regarded as a close personal friend for business and personal reasons in the amount of more than $30,000. We have tried since August of last year to arrange repayment without any success. My mother is a senior citizen and we believe that the debtor never intended to repay loan. What can we do (generally) and regarding taxes?

We posed the question to Burton M. Koss, senior tax adviser at Cortés & Baker, an accounting firm in Hilliard, Ohio. Koss said it’s possible that the loss could be claimed on taxes, but first Gerard and his mother will have to do some investigating to conclude the debt is uncollectable. “If it is really a bad debt, it’s a capital loss,” he said.

“If the person who borrowed the money has any assets, or if they have a job and their wages could be garnished, then the debt may not be worthless,” Koss said. “You may be able to collect the money. You should consult an attorney to explore the possibility of filing a lawsuit.” If the borrower has assets or income, it may make sense to hire a lawyer to write a persuasive letter about repayment of the debt, he said.

The tax treatment depends on whether it’s a business loan. In Gerard’s case, Koss thinks it’s likely it’s a nonbusiness loan even though it was partly for business reasons. “A loan is only considered a business bad debt if the lender made the loan as part of the regular operation of the lender’s business,” he said. “If the lender is an individual who is not operating a business, then it is a nonbusiness bad debt.”

Taxwise, it would be similar to buying bonds in a company that went bankrupt. “It is essentially an investment that went bad, and the value of the investment is now zero,” Koss said. It is treated as a capital loss, which means you can deduct only $3,000 of the loss, unless you have a capital gain to offset. The remaining amount is carried forward to the following year. You can deduct up to $3,000 each year until it is used up.

The first step is to determine whether the debt is worthless. “If you are certain that you could not collect the money even if you filed a lawsuit and won, then the debt may be worthless. I recommend that you consult a professional tax adviser for assistance with the preparation of your tax return,” Koss said.

Making loans to family and friends can be a complex business. Though it can and sometimes does go well, it also has the potential to harm relationships if repayment doesn’t go the way people expected. Many experts recommend against lending money you cannot afford to give. (Or at the very least, you should be able to afford to make it a gift so that repayment is not required to make your own budget work).

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This article originally appeared on Credit.com.

This article by Gerri Detweiler was distributed by the Personal Finance Syndication Network.

6 Ways to Make Your Summer a Savings Success

It’s usually in January when we check in on our finances, set some goals and move on with our lives. By the time summer rolls around, many of us have fallen off track or gotten too caught up in the nice weather to remember where our priorities lie. But it’s not too late for those New Year’s resolutions and we have some tips to help you make this summer a savings success.

1. Travel Smarter

If you are planning any summer getaways, it’s important to know your budget. If you know where you want to go, it’s a good idea to try to search several flight, hotel and car price comparison sites for the best deals. You could also look for deals on summer entertainment like amusement parks, botanical gardens and sports destinations. If possible, let the available deals be your guide and shop around through discounted options for what suits you most.

2. Cut Back on Energy

High monthly bills can add even more to an already expensive time of year. But you can take some action to reduce energy costs. Since gas prices increase in summer to match demand, try to combine errands when you drive out of the home to save on gas and time. It can be a good idea to also use apps to get gas at the cheapest station on your route. Avoid driving in rush hour as much as you can.

To reduce other energy costs, it’s a good idea to adjust your air conditioning throughout the day to more accurately meet your needs. If you can, only use AC during the time of day you need it most and rely on fans the rest of the time. Some thermostats will allow you to program them to only turn on at certain times of day. It’s also important to make sure your filters and units are clean and that all blinds, windows and doors are closed when the air conditioning is on.

3. Eat Better

Summer is often a popular time to dine outside at restaurants. To avoid getting roped into eating out for every meal, you can make a point to always have foods in season and ready to eat at your home. It’s a good idea to go to the store with a plan. Try to create a loose menu for the coming week around a few main ingredients and buy only what you need. If you eat fresh and healthy, this will likely help you save money on healthcare down the line as well.

4. Patio Parties

Nice weather provides the chance to party at home in your outdoor living space. Invite friends over instead of meeting them out where you will have to pay a premium for the same products and experience. Instead of having an event catered or buying everything for the whole party, consider making the theme potluck and have everyone bring something to add to the party.

5. Plan Ahead

No matter what you are looking to do this summer, the earlier you plan the more time you have to search for deals. Beyond cutting back on entertainment or eating out for this season, it’s important not to forget about fall and winter. Remember that your year does not end at Labor Day, so it can be a good idea to re-evaluate your financial situation now and then set a reminder to do it again once fall comes.

This is a great time to set some solid goals too. If you want to get rid of your credit card debt by Labor Day, make a month-by-month plan that can actually get you there. (You can use this credit card payoff calculator to see how different payment timelines would work for you.)  Or maybe your summer goal is to build a better credit score so you can get a better interest rate on a car loan or mortgage. (You can check your credit scores for free every month on Credit.com to track your progress.)

6. Sell Your Stuff

While saving money is great, making money can really help you meet your financial goals. Consider having a yard sale out of your home with everything you do not really use or are ready to part with. You can also host auctions or participate in second-hand sales online. The key to actually making some money is setting the right price. You can do some research and even ask your friends what they would be willing to pay. It’s important to remember that people will likely want to haggle, so think about whether you are trying to get the best possible price or just trying to make some money with minimal effort.

With the right attitude and some discipline, we can stick to our goals and still enjoy everything summer has to offer.

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This article originally appeared on Credit.com.

This article by AJ Smith was distributed by the Personal Finance Syndication Network.

Do You Really Understand Your Mortgage APR?

Everyone wants to know they’re getting a fair and reasonable mortgage offer. The federal government supports the annual percentage rate disclosure (APR) as the benchmark barometer of loan cost when mortgage shoppers begin their quest to find a good deal on a home loan, which is why it’s so important to understand what goes into a mortgage APR and how you can harness this knowledge to find the best loan for you.

Quick APR Tidbits

The annual percentage rate is a disclosure seen in the origination of new credit or in advertisements of various credit products such as loans and credit cards. You won’t, however, see APR on a mortgage loan statement as the APR is used as a cost measure at application. APR is simply a function of the costs of the mortgage loan added to the interest rate and re-amortized based on the size of the loan you’re seeking over the loan term (e.g. 360 months for a 30-year fixed-rate mortgage). The sole purpose of APR disclosure is to make credit shopping easier.

  • The APR does not change your loan amount.
  • The APR does not change your payment.
  • Your note rate is what determines your principal and interest mortgage payment.

Why Your APR Is Higher Than Your Note Rate

The annual percentage rate is higher than the note rate because APR takes into consideration the fees (whether or not you are actually paying them) adds them to your loan amount and re-calculates the figure over the loan term, thus the APR rate disclosure is higher. This rate vs. APR relationship can seem convoluted because you are not paying the fees based on the APR rate, but rather the note rate, as the note rate is the real cost of funds.

For example, it is not uncommon to see a 30-year fixed-rate mortgage with a note rate at 3.875% and an APR of 4.137%. The 26 basis points spread between the 4.137% and a 3.875% is the fees disclosed as expression of cost based on the size of the loan you are applying for.

APR can be best used to distinguish amongst mortgage offers in order of priority, starting with the highest APR offer, and working down.

Keep in mind that a mortgage with a lower note rate and a higher APR may actually be a lower cost mortgage for you than a loan with a lower APR but a higher note rate. How long you keep the mortgage plays a big role in the cost of the loan.

What You Need to Examine When Comparing Mortgages

  • Loan term
  • Loan program
  • Loan amount
  • Note rate
  • Total payment
  • Closing costs
  • Recapture

Remember that examining the APR of a mortgage offer can only help with determining which mortgage offer has better terms and fees. The APR does not take into consideration which mortgage loan makes the most financial sense for you because it is not the driver of your monthly principal and interest payment or closing costs.

Some Extra APR Tips

If you’re getting a no-cost mortgage, where your lender is providing a credit for closing costs, the APR is still calculated as though you’re paying the fees because your lender must disclose it appropriately to meet federal regulations in the origination of residential mortgage loans.

If the APR is more than 0.25% higher than the note rate, pay closer attention. The majority of the time the mortgage has discount points associated with it, which is by far the biggest driver of higher APR. If you received disclosures that show a substantially higher APR than the interest rate and you don’t understand the disparity between the annual percentage rates on your disclosures and/or mortgage quote versus the note rate ask your loan officer. Don’t be afraid to ask questions even if they seem silly or redundant.

As a well-informed mortgage consumer, you have a duty to yourself to make certain you understand all of the many intricate facets of the mortgage loan you are seeking. Doing this discovery research will help you make the determination as to which mortgage loan is most suitable for you.

Keep in mind that one of the biggest factors in what determines your note rate is your credit score. Taking some time before applying for a mortgage to build a good credit score can save you thousands over the life of your loan. You can check your credit scores for free on Credit.com to see where you stand and make a plan to improve.

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This article originally appeared on Credit.com.

This article by Scott Sheldon was distributed by the Personal Finance Syndication Network.

What to Do If Your Car Loan Outlasts Your Car

What happens if your car loan lasts longer than your car? While you may have every intention of driving a car long after it’s paid off, an accident (and inadequate insurance), expensive repairs, or mysterious problems your mechanic can’t fix could leave you with a vehicle that’s out of commission even though you’re still making payments. 

“Longer-term loans are increasingly prevalent,” says Melinda Zabritski, senior director of automotive credit with Experian. Nearly half (48.2%) of model year 2014 vehicles purchased used were financed with loans of between 61 and 72 months, according to Experian Automotive data. 

What can you do if you find yourself in this position? Here are four possible options.

1. Pay Off the Debt 

Of course, paying off the balance of your loan would be your best option, but what if you don’t have that kind of cash sitting around? Or what if you need those funds for a down payment on another vehicle? In that case you may have to use another loan to pay off the car loan so that you can get the title and dispose of the vehicle. One option might be a 0% or low-rate credit card balance transfer offer. In many cases, you can have those funds deposited into your bank account and use them for whatever debt you want to pay off. Make sure you understand the fees that will be charged (usually 2% to 4% of the amount transferred) and that you can pay the debt off before the low-rate offer ends. (You can find Credit.com’s picks for the best balance transfer credit cards in America here.)  

2. Roll It Into a New Loan 

An auto dealer may work with you to roll the balance of your loan on your current vehicle into a new loan. Technically “you can’t roll negative equity into a loan,” says Bob Harwood, vice president at CarLoan.com. but there are ways around it. A dealer can try to inflate the value of the trade-in and/or loan more than the value of the car. “Banks will put a cap on how much over value on a car (you can borrow),” he says. “It’s usually around 120% to125% if you have decent credit.” But with less than stellar credit, they may lend only 100% to 110% of value of the new vehicle — or even less if you have very poor credit. (It’s a good idea to know where your credit stands before applying for a car loan. You can get a free credit report summary, updated monthly, at Credit.com.) 

And, yes, they will want your old vehicle even if it’s now a junker, says Harwood, if only to try to increase the value of the trade-in to make the deal work. 

3. Park & Pay 

You could simply park the vehicle and continue to pay off the loan. When it’s paid off, you can then get the title back and donate it to charity, sell it, or use it as a trade in on another vehicle. 

But be careful: This strategy assumes you have a place to safely store it. And you may need to keep tags and/or a minimum level of insurance on the vehicle. Your homeowner’s insurer (or your landlord’s), for example, may not look kindly on an inoperable untagged vehicle sitting on blocks in your driveway. Or your city may require these types of vehicles to be garaged. Check with your insurance company, your DMV and city or municipality to find out what’s permissible.

4. Call a Bankruptcy Attorney 

You may be able to use bankruptcy to get out of this mess. “Bankruptcy can be a ticket out of this type of situation,” says Atlanta bankruptcy attorney Jonathan Ginsberg.  “If you qualify for a Chapter 7 you can surrender the vehicle and cancel the installment contract and owe nothing,” he explains. What if you don’t qualify? You may look into Chapter 13, which Ginsberg says may offer several outs: “’Cram down’ the loan to the value of the vehicle, ‘redeem’ the vehicle for the fair market value, or surrender the car and pay any deficiency at pennies on the dollar.”

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This article originally appeared on Credit.com.

This article by Gerri Detweiler was distributed by the Personal Finance Syndication Network.