Her approach to leadership is deeply influenced by the idea of empowering others. Cavanaugh credits Katie Sweeney, CEO and chairwoman of AIME, for inspiring this outlook. “Her belief system has always been that she wants to help people help more people,” Cavanaugh shared. “And I think that that is really a common thread among all … [Read more…]
United sent out an email that TravelBank credit can now be gifted to family and friends.
You can now gift TravelBank cash to friends and family. we’re making it easy to give the gift of travel this holiday season. Our newest feature allows you to gift TravelBank cash to friends or family — all you need is their MileagePlus® number and last name.
Useful for gifting travel to a friend. This can also be useful for churners bartering their various airline credits: some travel credits or incidental credits are triggered with United TravelBank credit purchases, and it’s now easier for one person to load the account of another.
Hat tip carpethediem5
Source: doctorofcredit.com
There’s a lot to learn when you’re preparing to buy a home.
First, you’ll need to understand market values to avoid paying too much for your house. In addition, home inspections are vital to uncover any hidden issues before finalizing a purchase.
Furthermore, potential buyers must pay attention to closing costs, ensuring they have sufficient funds for the transaction. Lastly, perhaps the most critical aspect to keep in mind is being aware of current mortgage rates.
For those in the market for a house, even a minor adjustment in the interest rate can substantially change your financial picture and affect how much house you can afford.
This guide will shine a light on the intricacies of securing the best mortgage rate, which could translate into significant savings throughout the life of the loan. A lower rate may even allow you to afford a nicer home for your money.
A top-tier credit score be your VIP pass to securing the most enticing mortgage rates. But what factors make up your credit scores? And how can you boost yours in a hurry?
Remember, in the eyes of lenders, a higher credit score depicts financial responsibility. Achieving this can translate to potentially thousands saved in interest over the life of your mortgage loan.
The down payment is more than just the initial chunk of money you put toward your home; it’s a reflection of your commitment to the property. The amount you put down influences how mortgage lenders perceive your loan’s risk.
Take a look at some of the advantages of putting 20% or more down.
While it may be tempting to jump into homeownership with a smaller down payment, putting at least 20% down can lead to substantial savings in the long run and a more favorable loan structure.
The strategic purchase of mortgage points, also known as discount points, serves as an effective mechanism to lower your mortgage rate. Let’s explore how they work.
What are mortgage points?
A discount point is a form of prepaid interest. One point typically equates to 1% of your loan amount and can decrease your interest rate by a certain percentage, usually around 0.25%.
Should you buy points?
Points can be a costly upfront expense at closing time. It’s important to decide if the future benefits justify the investment. Ask yourself:
Your mortgage lender can help you calculate whether buying points makes sense for you. They can provide a breakdown of the costs and savings associated with purchasing points, offering a clearer picture of the potential benefits.
Your loan term is more than just a deadline for repaying your mortgage; it determines your interest rate and monthly mortgage payment.
Generally, shorter-term loans, like a 15-year fixed rate mortgage, come with lower interest rates than longer-term ones, like a 30-year mortgage. The reason is simple: lenders face less risk when the borrowed amount is to be repaid over a shorter period.
However, with a shorter term, you’ll have higher monthly payments, since you’re dividing your total mortgage amount over fewer months. You’ll need to balance the allure of a lower rate against the practicality of larger monthly payments.
Before you choose a loan term, assess your current financial situation and your projected future income. Your comfort with the size of the monthly payment, your financial goals, and your age at the end of the term are all factors that should inform your decision.
By understanding these elements, you can select a loan term that best aligns with your financial plans, payment capability, and homeownership goals.
Understanding and responding to the broader economic landscape is pivotal in securing an affordable mortgage. The U.S. Federal Reserve sets the federal funds rate, which is the rate at which the central bank lends money. The funds rate determines the interest rate for credit cards, loans, and mortgages.
A flourishing economy often triggers an increase in interest rates. The U.S. Federal Reserve has raised rates in recent months to try to stem inflation. However, an economic downturn could cause the Fed to keep rates steady or even reduce rates to stimulate borrowing and spending.
Understanding these principles can offer insight into potential rate fluctuations as you decide whether you want to buy now or wait for rates to drop.
It’s important to research these factors to have an understanding of the market. But you can also seek the guidance of a financial advisor or a mortgage broker. They have expertise in market trends and can provide advice tailored to your circumstances.
If you’re navigating the housing market for the first time, there are a plethora of programs tailored to assist you in securing a favorable interest rate. These programs, often government-supported or backed by financial institutions, are designed to make homeownership more accessible. They offer a variety of incentives such as competitive mortgage rates, lower down payment requirements, or even assistance with down payments.
To qualify, you usually need to meet certain criteria, including income limits, purchasing in a designated area, or completing a homebuyer education course. It’s crucial to investigate these opportunities, as eligibility can vary widely between programs and regions.
Tapping into these programs can significantly alleviate the financial strain of homeownership, reducing your mortgage rate, and making the dream of owning a home more achievable and affordable. Research and due diligence are key in identifying and securing these benefits.
Actively seeking and comparing options from several lenders can help you secure the most favorable interest rate. Here are three steps to take in your search for the best mortgage rate.
While it might seem daunting, negotiating your mortgage rate is entirely possible and could result in substantial financial savings. Lenders and mortgage brokers often have some flexibility in the rates and fees they can offer. This is where thorough research and understanding of your own financial health, including your credit scores, debt-to-income ratio, and loan options, can be advantageous.
The more you understand these factors, the more leverage you have during negotiations. A well-prepared negotiation strategy can give you a significant advantage in securing a mortgage rate that suits your financial situation best.
Remember, even a slight decrease in your mortgage rate can result in significant savings over the life of your loan. It’s worth the effort to negotiate terms; it could save you a considerable amount of money in the long run.
Securing the best mortgage interest rate can make your dream home more affordable and save you thousands over the life of the loan. By understanding how different factors like your credit scores, down payment, and loan term affect your rate, you can take steps to secure the best mortgage deal. Remember, a home loan is likely to be one of the biggest financial commitments you’ll ever make, so take the time to get it right.
While credit requirements can vary by lender, a credit score of 740 or higher generally qualifies borrowers for the best mortgage rates. However, it’s still possible to secure a mortgage with a lower credit score, but the rates might be higher.
A fixed-rate mortgage has a constant interest rate and monthly payments that never change. This offers stability and predictability over the life of the loan.
Adjustable rate mortgages have an interest rate that may change periodically, affecting your monthly payments. The rate adjustments are tied to market conditions and specified in the mortgage agreement.
The main difference is that a fixed-rate mortgage offers long-term stability in payments, while an ARM carries the risk of the payments increasing or decreasing over time.
The difference in mortgage rates between different credit score ranges can be substantial. For instance, improving your credit score from ‘fair’ (580-669) to ‘very good’ (740-799) could potentially lower your interest rate by a full percentage point or more. Over the life of a 30-year mortgage, this could translate to tens of thousands of dollars in savings.
The amount you should save for a down payment can depend on the type of loan you’re getting and your financial situation. Traditionally, a 20% down payment is recommended for conventional loans, as this allows you to avoid paying for private mortgage insurance (PMI). However, some loan types, such as Federal Housing Administration (FHA) loans, allow for lower down payments.
The choice between a 15-year and a 30-year loan term depends on your financial circumstances and goals. A 15-year loan typically has a lower interest rate but a higher monthly payment, making it a good choice if you can comfortably afford the payments and want to pay off your mortgage faster. On the other hand, a 30-year loan has lower a monthly payment but a higher interest rate, making it a more affordable option for many buyers.
Whether it’s worth buying discount points depends on your particular situation. If you have the cash and plan to stay in your home a long time, buying points can be beneficial. The savings over time from a lower rate can exceed the points’ upfront cost.
First-time homebuyer programs can vary by state and by lender, but some examples include FHA loans, USDA loans, and VA loans, as well as specific state-sponsored programs that offer down payment assistance or tax credits. It’s worth checking with your local government and potential lenders to see what programs might be available to you.
Mortgage rates are influenced by a variety of market conditions, including inflation rates, economic growth indicators, and monetary policy decisions by central banks. Generally, when the economy is strong, mortgage rates tend to rise to keep inflation in check. Conversely, during economic downturns, rates often fall to stimulate borrowing and investment.
Source: crediful.com
Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders who compensate us for our services, all opinions are our own.
The interest rate on a 30-year fixed-rate mortgage is 8.375% as of October 24, which is 0.125 percentage points lower than yesterday. Additionally, the interest rate on a 15-year fixed-rate mortgage is 7.000%, which is 0.125 percentage points higher than yesterday.
With mortgage rates changing daily, it’s a good idea to check today’s rate before applying for a loan. It’s also important to compare different lenders’ current interest rates, terms and fees to ensure you get the best deal.
Rates last updated on October 24, 2023. These rates are based on the assumptions shown here. Actual rates may vary. Credible, a personal finance marketplace, has 5,000 Trustpilot reviews with an average star rating of 4.7 (out of a possible 5.0).
When you take out a mortgage loan to purchase a home, you’re borrowing money from a lender. In order for that lender to make a profit and reduce risk to itself, it will charge interest on the principal — that is, the amount you borrowed.
Expressed as a percentage, a mortgage interest rate is essentially the cost of borrowing money. It can vary based on several factors, such as your credit score, debt-to-income ratio (DTI), down payment, loan amount, and repayment term.
After getting a mortgage, you’ll typically receive an amortization schedule, which shows your payment schedule over the life of the loan. It also indicates how much of each payment goes toward the principal balance versus the interest.
Near the beginning of the loan term, you’ll spend more money on interest and less on the principal balance. As you approach the end of the repayment term, you’ll pay more toward the principal and less toward interest.
Your mortgage interest rate can be either fixed or adjustable. With a fixed-rate mortgage, the rate will be consistent for the duration of the loan. With an adjustable-rate mortgage (ARM), the interest rate can fluctuate with the market.
Keep in mind that a mortgage’s interest rate is not the same as its annual percentage rate (APR). This is because an APR includes both the interest rate and any other lender fees or charges.
Mortgage rates change frequently — sometimes on a daily basis. Inflation plays a significant role in these fluctuations. Interest rates tend to rise in periods of high inflation, whereas they tend to drop or remain roughly the same in times of low inflation. Other factors, like the economic climate, demand, and inventory can also impact the current average mortgage rates.
To find great mortgage rates, start by using Credible’s secured website, which can show you current mortgage rates from multiple lenders without affecting your credit score. You can also use Credible’s mortgage calculator to estimate your monthly mortgage payments.
Mortgage lenders typically determine the interest rate on a case-by-case basis. Generally, they reserve the lowest rates for low-risk borrowers — that is, those with a higher credit score, income, and down payment amount. Here are some other personal factors that may determine your mortgage rate:
Other indirect factors that may determine the mortgage rate include:
Along with certain economic and personal factors, the lender you choose can also affect your mortgage rate. Some lenders have higher average mortgage rates than others, regardless of your credit or financial situation. That’s why it’s important to compare lenders and loan offers.
Here are some of the best ways to compare mortgage rates and ensure you get the best one:
One other way to compare mortgage rates is with a mortgage calculator. Use a calculator to determine your monthly payment amount and the total cost of the loan. Just remember, certain fees like homeowners insurance or taxes might not be included in the calculations.
Here’s a simple example of what a 15-year fixed-rate mortgage might look like versus a 30-year fixed-rate mortgage:
If you’re thinking about taking out a mortgage, here are some benefits to consider:
And here are some of the biggest downsides of getting a mortgage:
Requirements vary by lender, but here are the typical steps to qualify for a mortgage:
Here are the basic steps to apply for a mortgage, and what you can typically expect during the process:
Refinancing your mortgage lets you trade your current loan for a new one. It does not mean taking out a second loan. You will also still be responsible for making payments on the refinanced loan.
You might want to refinance your mortgage if you:
The refinancing process is similar to the process you follow for the original loan. Here are the basic steps:
Interest rates on mortgages fluctuate all the time, but a rate lock allows you to lock in your current rate for a set amount of time. This ensures you get the rate you want as you complete the homebuying process.
Mortgage points are a type of prepaid interest that you can pay upfront — often as part of your closing costs — for a lower overall interest rate. This can lower your APR and monthly payments.
Closing costs are the fees you, as the buyer, need to pay before getting a loan. Common fees include attorney fees, home appraisal fees, origination fees, and application fees.
If you’re trying to find the right mortgage rate, consider using Credible. You can use Credible’s free online tool to easily compare multiple lenders and see prequalified rates in just a few minutes.
Source: foxbusiness.com
American Express has made major changes to the Hilton Surpass and Hilton Aspire cards.
American Express seems intent on increasing the annual fee across all cards and introducing statement credits that can be difficult to use. Frustrating for some to lose priority pass access as well. Surpass has offered 130,000 points + free night certificate in the past, bonus on the Aspire is the best we have seen (I think).
Overall I see these as negative changes as quarterly credits are very annoying to use. It should be possible to purchase a $50 Hilton gift card at reception and it trigger the credit (for the Surpass), but that still involves going into a hotel and hoping they actually sell the gift cards.
Source: doctorofcredit.com
While the principal of a student loan isn’t tax deductible, the interest you pay on it can be — and that includes refinanced student loans. If you’re eligible, you may be able to deduct up to $2,500 from your taxable income.
The amount you can deduct is dependent on your income; as you earn more, the amount you can deduct is decreased and eventually eliminated. You also must have paid interest on a qualified student loan – that is, one taken out to pay for qualified higher education expenses, such as tuition, books, or room and board.
Here’s what to know about refinanced student loans and tax returns, including when interest on student loans is tax deductible, how tax deductions differ from tax credits, and how refinancing can affect taxes.
For starters, it’s helpful to review what a tax deduction is: A tax deduction lowers your taxable income by reducing the amount of your income before you or a tax professional calculates the tax you owe.
For example, a $100 exemption or deduction reduces your taxable income by $100. So it would reduce the taxes you owe by a maximum of $100 multiplied by your tax rate, which can range from 0% to 37%. So your deduction could reduce your taxes between $0 to $37.
And before considering how refinancing affects your taxes, it’s helpful to review what happens when you refinance a student loan: Your lender “swaps out” (or “pays off”) your existing loans and gives you a new loan with new terms. A student loan refinance may be beneficial if you get a lower interest rate and/or a lower monthly payment, which can save you money in the long run. (Note: You may pay more interest over the life of the loan if you refinance with an extended term.)
If you’re considering refinancing federal student loans, however, it’s important to understand that you would lose access to certain federal benefits and protections, such as Public Service Loan Forgiveness, federal deferment and forbearance as well as income-driven repayment options.
💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fee loans, you could save thousands.
Keep in mind that a tax deduction is not the same as a tax credit. While a tax deduction reduces your taxable income, a tax credit directly reduces your taxes.
Tax credits give you a dollar-for-dollar reduction on your taxes. In other words, if you qualify for a $2,000 tax credit, the tax credit lowers your tax bill by that exact amount — $2,000.
Recommended: Tax Season 2022: A Guide to Understanding Your Taxes
If you paid qualified student loans during the year, you may be eligible for the student loan interest tax deduction. This deduction can reduce your taxable income by the amount of student loan interest you paid during the year — up to $2,500.
Note that the interest on student loans is tax deductible, not your total payment amount (which includes the principal). You can claim it without having to itemize deductions on your tax return because it’s taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Form 1040.
The student loan interest deduction is an “above the line” deduction, which means that it is deducted to calculate your adjusted gross income (AGI).
As mentioned earlier, the interest paid must be for a qualified student loan that you take out for yourself, your spouse, or a dependent for qualified undergraduate or graduate education expenses, such as tuition, books, or room and board. In addition, the expenses must have been incurred within “a reasonable period of time” prior to or after taking out the loan, according to the IRS.
For taxable years beginning in 2023, your modified adjusted gross income (MAGI) must also amount to less than $80,000 ($160,000 if filing a joint return). Your amount will be phased out (reduced) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return).
You cannot claim the deduction at all if your MAGI is $90,000 or more ($180,000 or more if you file a joint return). You also will not qualify for the deduction if you are married and filing separately.
Recommended: How Income Tax Withholding Works
Yes, you can get a tax deduction on the interest you’ve paid on refinanced or consolidated student loans as long as the new loan refinanced qualified student loans.
Refinancing affects your taxes only insofar as the refinancing might change how much interest you pay in a given year – and thus, how much you can deduct. For instance, if refinancing lowers the amount of interest you pay below the $2,500 deduction amount, then that would mean you can’t deduct as much on your taxes. Still, refinancing may save you more money in the long run than a student loan interest deduction because it’s a deduction, not a tax credit. It’s important to do the math or consult a tax professional before you make a final decision.
Recommended: Where Is My Tax Refund?
It’s also worth taking a look at common eligibility requirements for a refinance. For most borrowers, the soonest you can refinance is usually after graduating. In addition to a degree, you often need to have:
• A debt-to-income (DTI) ratio under 50%: Your DTI refers to how much of your income goes toward debt and how much goes toward your regular income. It’s best to keep your DTI under 50%, but being over doesn’t necessarily mean you won’t qualify for a student loan refinance.
• Minimum credit score of 650: Your credit score is a three-digit number that shows how well you pay back debt. It’s best to have a minimum credit score of at least 650 to be eligible for student loan financing. Again, your personal situation will be considered before determining whether you qualify for a refinance.
• A steady job and/or consistent income: You may need to prove that you have a steady job and have enough savings to be able to pay for at least two months’ worth of regular expenses.
• A certain balance amount: In most cases, lenders will require you to have a certain minimum balance on your student loans in order to qualify for a refinance.
If you’re thinking about refinancing your student loans, SoFi offers flexible terms with fixed or variable rates. You can apply online, and there aren’t any fees.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
When it comes to refinancing and taxes, lenders usually don’t charge any upfront fees to refinance your student loans, which means that there aren’t any refinance costs to deduct.
When you make payments on a qualified student loan — including refinanced student loans — you may be eligible for the student loan interest deduction.
Yes, when it comes to student loans and tax returns, you may be able to deduct up to $2,500 from your taxable income if you’re eligible.
To be able to claim the deduction, your modified adjusted gross income (MAGI) must be less than $80,000 ($160,000 if filing a joint return). You’ll also experience a phased-out deduction if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). It disappears entirely at MAGIs above $90,000 and $180,000 for joint filers.
Only the interest you pay on your student loans is tax deductible. Whole student loan payments (which include principal) are not tax deductible.
Student Loan Refinancing
If you are a federal student loan borrower you should take time now to prepare for your payments to restart, including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. (You may pay more interest over the life of the loan if you refinance with an extended term.) Please note that once you refinance federal student loans, you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans, such as the SAVE Plan, or extended repayment plans.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Photo credit: iStock/Drazen Zigic
SOSL09230683
Source: sofi.com
Updates include new travel-related statement credits, the ability to earn Hilton Honors points in a wider variety of ways, and a slightly easier path to a free night certificate. But they come at a cost — literally, in the form of higher annual fees. And if you relied on either of these cards for access to Priority Pass lounges at airports, that benefit won’t be around for much longer.
Here’s what you need to know about the latest Hilton card refresh.
The Hilton Honors American Express Surpass® Card is upping its annual fee from $95 to $150. The added cost comes with a few additional benefits.
You’ll earn 4 points per $1 on U.S. online retail purchases. That’s in addition to existing rewards categories, which include:
12 points per $1 on Hilton purchases.
6 points per $1 at U.S. restaurants, U.S. supermarkets and U.S. gas stations.
3 points per $1 on all other eligible purchases.
Terms apply.
There’s also a potentially valuable benefit in the form of a $200 annual statement credit (paid out in $50 statement credits per quarter) for eligible Hilton purchases on your card. Plus, you’ll get complimentary National Car Rental Emerald Club Executive status. Terms apply.
Like before, you can still earn a free night certificate after you spend $15,000 in a calendar year. Also, you’ll get complimentary Gold status, which upgrades to Diamond status if you spend $40,000 in a calendar year. Terms apply.
The high-end Hilton Honors American Express Aspire Card is raising its already sizable annual fee from $450 to $550, but it’s also getting a few updates, some of which might help make the price more palatable.
Up to $400 in statement credits per year (in the form of two $200 credits semi-annually) for eligible purchases with participating Hilton Resorts. Before, this was a $250 annual credit.
Up to $200 in statement credits per year (in the form of up to $50 in credits each quarter) on eligible flight purchases. Previously, the card offered a $250 annual airline fee credit that didn’t have to be paid out quarterly.
Up to $189 in statement credits per year when you use the Hilton Honors American Express Aspire Card to pay for a CLEAR Plus membership.
Terms apply.
Previously, you could earn up to two free night certificates with the Hilton Honors American Express Aspire Card — one each year just for continuing to carry the card and another if you spent $60,000 in a calendar year.
Now, there’s another path to earn a free night that goes right down the middle. You’ll still get the first free night just by being a cardholder. Then, if you spend $30,000 in a year, you’ll earn a second free night. And you can get a third free night for reaching $60,000 in spending in that same year.
Terms apply.
Just like the Hilton Honors American Express Surpass® Card, the Hilton Honors American Express Aspire Card now offers complimentary National Car Rental Emerald Club Executive status. In addition, it provides cell phone insurance.
With the Hilton Honors American Express Aspire Card, you’ll still earn:
14 points per $1 on Hilton purchases.
7 points per $1 at U.S. restaurants, on flights booked directly with airlines or amextravel.com, and on car rentals from select car rental companies.
3 points per $1 on all other eligible purchases.
Terms apply.
Cardholders will also continue to get complimentary Diamond status and a $100 property credit at qualifying Waldorf Astoria Hotels & Resorts and Conrad Hotels & Resorts. Terms apply.
Both cards are phasing out access to Priority Pass lounges as a perk, according to a representative. If you enrolled in Priority Pass Select by Jan. 31, 2023, your membership will end on Feb. 1, 2024. If you enrolled between Feb. 1, 2023, and Jan. 31, 2024, your membership will end on Nov. 1, 2024. If you have either the Hilton Honors American Express Surpass® Card or Hilton Honors American Express Aspire Card already but haven’t yet enrolled in Priority Pass Select, you can still do so by Jan. 31, 2024.
Source: nerdwallet.com
A flexible expense is a non-essential item in your budget. Because it’s not a must-have, you can change the expense in question to help save money. For example, while the newest smartphone (with all kinds of amazing camera functions) might be enticing, purchasing it could add strain to your budget. Instead, you could continue using the phone you bought last year and not increase that expense. In this way, managing flexible expenses can be key to making a budget that helps you reach your financial goals.
Flexible expenses span many categories, from dining out to travel to self-care. These expenses are negotiable, meaning you can save money by reducing or changing how often you spend on these items and services.
Here’s how to distinguish flexible expenses from inflexible expenses and how to reduce your monthly costs on them.
The definition of a flexible expense is an item in your budget that you can modify or adjust as needed. These are different from necessities with fixed costs, such as rent and health insurance.
In addition, it’s worth noting that a fluctuating bill is not necessarily a flexible expense. For instance, while you might turn the thermostat down a degree or two to be thrifty or the price of fuel might shift, heating your home during cold months isn’t a negotiable expense.
Flexible expenses are those you change to make room in your budget. These may at times be commonly forgotten monthly expenses, such as buying birthday gifts or loading up on toys for your pet, but they aren’t essential for life.
Therefore, you can change them if you want. Perhaps you realize something (boredom? FOMO?) has been a cause of overspending in a specific area, or maybe you want to start saving money for a financial goal, like the down payment on a house.
Flexible expenses are daily or monthly expenses you can change or eliminate. Here are examples of items in your budget that have wiggle room:
• Vacations. You might decide against saving for a vacation in Mexico and instead have a staycation to free up some funds.
• Beauty treatments. Having your hair or nails done is an expense you could eliminate or pay for less frequently.
• Electronics. A new phone or tablet can be a nice upgrade, but, if the one you bought three years ago is in working order, replacing it is a flexible expense.
• Food. This is a good example of an expense that can be either a flexible or inflexible expense. Everyone has to eat, that’s a fact. But planning meals and saving money on groceries when you shop are examples of how you might manage the inflexible cost of feeding yourself. There is a range of how much you might pay, but you will have to pay something.
However, when it comes to how often you eat out, get fancy lattes on the go, and meet friends for drinks, those are flexible expenses you can cut (even entirely) to save money. Those expenses are likely to vary too; for instance, you might dine out more around holidays.
• Entertainment. How much you spend on streaming services and cable television isn’t a necessary expense. It’s a flexible one. Yes, this kind of entertainment can be fun and relaxing, but you could cut cable or limit yourself to one or two streaming services.
Recommended: 30 Fun and Affordable Hobbies
When you make a budget, inflexible expenses are the ones that are permanent and vital to daily life. For example, your mortgage, credit card minimum payments, and car loan costs are inflexible expenses. But, of course, they are flexible at a certain point. For instance, you could refinance your home to lower your mortgage payment or pay off a debt to get rid of it.
However, these require significant financial shifts and are more challenging to adjust to than your flexible expenses. As mentioned above, flexible expenses can reflect the wants vs. needs in life, or your discretionary spending. Flexible expenses can include dining out, deciding to upgrade your car or electronics, taking a vacation, purchasing gifts for others, paying to redecorate your home, joining a gym or yoga studio, and the like.
These are things many of us spend money on, but how much you spend and how often is under your control.
Taking control of your flexible expenses can mean making a budget to manage your money and prevent overspending. One approach to take is the 50/30/20 budget rule. This popular system involves designating 50% of your income for essentials, such as housing and transportation, 30% for nonessential expenses, and saving the remaining 20%. Your flexible expenses will go into the 30% portion of the budget.
For example, say your monthly take-home pay is $5,000. Half your income ($2,500) goes towards your needs, and 30% ($1,500) is for flexible expenses. The remaining $1,000 gets put towards savings. So, your job is to make your non-essential expenses fit into the $1,500 portion of your budget.
That said, the 50/30/20 rule might not work for you, especially if more than half your income goes toward essentials. Not to worry: You can approach flexible expenses from another angle. Instead, you can take your bank and credit card statements from the past three months, identify the flexible expenses, and decide which ones you can cut from your budget or reduce. For instance, you might realize you’re spending $75 at coffee shops every month and decide to make your own coffee every morning.
You can pay for flexible expenses by opening a checking account and using funds in it for those charges. For instance, you might have your cable bill linked to your bank account to make an automatic payment every month. You might tap a linked debit card when you shop for, say, some new shoes.
A credit card with rewards could also be a good way to pay for flexible expenses. Getting cash back on every purchase can be a good perk when paying for flexible expenses. For example, using specific credit cards for such major expenses as flights and hotels during a vacation can provide considerable rewards. However, you’ll want to be wary of carrying too much of a balance on your credit card since that’s typically high-interest debt that can be hard to pay off.
Also worth noting: If you have enough money in an emergency fund, that could be useful for specific flexible expenses, such as unexpected bills. Not things like taking a long weekend away, but perhaps paying for a car repair bill that you didn’t see coming.
Recommended: Reasons Why It’s So Hard to Save Money
A flexible expense is one you can usually change at will to fit your budget or an expense that can pop up without warning. These irregular expenses usually reflect your spending habits, such as how often you’ve dined out or treated yourself to some new clothes or electronics. Recognizing and wrangling these flexible expenses can help you take control of your finances. Also, keeping some cash in an interest-bearing bank account can be one way to afford fluctuations in these expenses.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with up to 4.50% APY on SoFi Checking and Savings.
Because rent is a consistent monthly cost, it isn’t a flexible expense. This bill doesn’t fluctuate, and you’re usually only able to change it by moving somewhere else.
You can budget for flexible expenses with the 50/30/20 rule, where 50% of your income is for inflexible expenses and 30% of your income is for flexible expenses. The remaining 20% is for saving. This 30% provides a boundary in which you must fit paying for the nonessentials, like entertainment and travel.
Flexible expense examples include a vacation and a meal out. Both are flexible expenses because they are nonessential expenses. You dictate the cost because you choose where you’ll go and what luxuries, treats, and events you’ll pay to partake in.
Flexible expenses regularly change based on your spending habits. For example, your choices regarding food and entertainment drive how much you’ll spend in these areas. You can change these habits weekly or monthly to adjust how much you’re spending, unlike rent or a car note.
Photo credit: iStock/Yumi mini
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
SoFi members with direct deposit activity can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.50% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.50% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 8/9/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet..
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SOBK0223021
Source: sofi.com
You may think that because you have bad credit, buying a house is out of reach for you. But, there are plenty of trustworthy mortgage lenders with good offers willing to loan to people with poor credit.
So, you might just have to start packing sooner than you thought.
LendingTree
For flexible mortgage options with less stringent credit score requirements, check out LendingTree. Instead of serving as a direct lender, LendingTree aggregates multiple mortgage offers after you fill out a single application.
The process is completed entirely online, and you could potentially see up to five different offers from various mortgage lenders. From there, you can compare the interest rates and terms to see if any fit your needs.
LendingTree also offers mortgages from lenders that provide a broad range of home loan types.
In addition to conventional loans, you can also access loans from the Federal Housing Administration (FHA loans) and VA loans. These come with lower credit requirements and lower down payment requirements.
With an FHA loan, for example, you could qualify with a minimum credit score of just 580 and a 3.5% minimum down payment on your new home’s purchase price. Even if your credit score is lower than 580, an FHA loan is still possible if you increase your down payment to 10%.
For multiple home loan options with a quick and easy application process, be sure to consider applying through LendingTree.
Read our full review of LendingTree
CitiMortgage
CitiMortgage has a range of home loan products for people with various credit scores. A unique feature of CitiMortgage is that they consider nontraditional credit situations, such as paying rent and child support on time.
They only approve loans for houses in good condition. This means all construction must be finished, and the roof and windows must be intact.
So, no fixer-uppers, HGTV fans. In addition, there is a $100 application fee and an origination fee, but this is not unusual.
If you can’t put much of a down payment down, CitiMortgage offers what they call a HomeRun loan program. This program allows you to only pay 3% down. Plus, they don’t even require you to pay for private mortgage insurance.
So, a $200,000 house would only require you to put $6,000 down. Applicants must make 80% or less than the neighborhood’s average income. However, it’s available to anyone in low-income areas.
CitiMortgage also offers a conventional loan geared toward those with low income and low credit scores. It comes with no mortgage insurance requirements and highly competitive interest rates. However, origination fees are typically a bit higher.
Read our full review of CitiMortgage
Rocket Mortgage
For those seeking a user-friendly online experience alongside a variety of loan options, Rocket Mortgage is worth considering. As one of the pioneers in the digital mortgage industry, their process is streamlined, allowing you to get pre-qualified in mere minutes.
They offer an array of loan types including Conventional, FHA, VA, and Jumbo loans. Terms range from 8 to 30 years, which includes popular 15-year and 30-year terms.
Those with a credit score of 620 will find themselves comfortably eligible, but Rocket Mortgage also caters to those with scores as low as 580, as long as other criteria are met.
One of the highlights of Rocket Mortgage is their flexibility in property types. Whether you’re looking to buy or refinance a single-family home, a second home, an investment property, or even a condo, they’ve got you covered.
Their user-centric approach is further exemplified by their dedicated Rocket Mortgage app, ensuring easy access to your account.
A potential downside is the hard inquiry they conduct to offer a personalized interest rate, which could have a minor impact on your credit score.
Additionally, they do not provide USDA loans, HELOCs, construction loans, or mortgages for mobile homes. For those eyeing jumbo loans, it’s worth noting that Rocket Mortgage does not manage these accounts post-closure.
However, if a swift online process coupled with diverse loan options appeals to you, Rocket Mortgage stands out as an excellent choice.
Read our full review of Rocket Mortgage
Navy Federal Credit Union
Serving military members and their families, Navy Federal Credit Union makes first-time home buyers their number one priority.
They help would-be homeowners by offering a wide variety of loans. Some of their loans include:
Their standout loan is the HomeBuyers Choice. It’s a fixed interest rate 15 or 30-year loan with 100% financing and no mortgage insurance.
There is a 1.75% funding fee that you can get waived if you’re willing to pay a higher interest rate. This is a great option at closing if you need to save some cash.
Like CitiMortgage, Navy Federal evaluates a range of payments for borrowers with poor credit scores, such as rent, cell phone, and utility payments. There is no minimum credit score requirement for VA loans, but it’s 620 for others.
The only real downside is that some borrowers report that it takes longer to close on houses than other mortgage lenders.
This is not incompetency by any means. On the contrary, with such popular mortgage options, they likely have more volume to get through than other lenders.
Read our full review of Navy Federal Credit Union
For borrowers with bad credit scores who are considering refinancing their mortgages, we recommend Connexus.
Connexus
By no means just a refinancing company, Connexus is an all-around great credit union with nothing but positive feedback online. With a super strong and user-intuitive web presence, they’re easily one of the trailblazers for next-generation banking.
Connexus offers great mortgage interest rates for anyone, but they do something a little special regarding refinancing. Any homeowner can go to their website and fill out an online form detailing what they currently have.
After only two business days, a loan officer from Connexus Credit Union will call you to discuss every option available. They call this their “No-hassle mortgage comparison.”
If you’re worried about low credit scores, Connexus also considers alternative methods to determine your ability to repay a loan. This includes utility bills, rent, monthly cell phone payments, and child support.
Read our full review of Connexus
Decent customer support seems to be what companies struggle with the most these days. People want 24/7 support, but they don’t want to speak with robots. Two companies that have figured out how to meet customer expectations are HomeBridge and Network Capital.
HomeBridge
At HomeBridge, you can initiate your mortgage application online, where they have various home loan programs to choose from.
You can also learn about the pros and cons of each loan and refinance option through their extensive library of educational content.
Where they really receive their accolades, however, is through their customer support. It’s not something they really boast about, but they are constantly tweaking the process of getting a loan or refinance more user-friendly.
Here’s how.
Any negative feedback a customer provides is addressed as soon as possible by HomeBridge so that every customer can walk away happy. Look for this kind of dedication elsewhere, and you’re going to have a tough time.
Most companies who perform customer feedback questionnaires analyze the results and ask themselves how to resolve the problem moving forward.
HomeBridge not only resolves the problem moving forward but will actually go back to the initial complaint and address that specific issue, too.
Read our full review of HomeBridge
Network Capital
Be advised: Network Capital does have its faults. For example, it only does business in the following states:
It also doesn’t have an online prequalification tool. So if you’re interested, you’ve got to go through the whole process to see if this mortgage lender is even interested in working with you.
Even with these complaints, we still love Network Capital. Why? They’re doing many things right.
For starters, they don’t charge any lender fees.
Secondly, they offer support to you while you’re applying and want you to call and ask questions. Even if it’s just for a small question that will take them three seconds to answer, they want you to call.
Tri Nguyen, the founder, believes that no matter how digital we become, everyone wants to hear a human’s voice during such a significant life decision. So, they are there to answer questions and help you gather documentation.
And they do this all before they even know if they want your business. But don’t worry: the minimum credit score they require is only 600.
Read our full review of Network Capital
Taking into account the entire user experience, there are two bad credit mortgage lenders that stand out:
New American Funding
New American Funding is just about everywhere and doing everything right. They have 150 branch locations across the U.S. (except New York and Hawaii) and have a solid web presence.
The loan application can be completed online. You can also get rate quotes, and you can track your loan status remotely.
New American Funding works with down payment assistance programs in numerous states. They also have a vast array of loan products.
Here’s a list of everything they offer:
Unlike other mortgage lenders, they still do everything old-school — they evaluate each application individually with (gasp!) a real live human. No algorithms here.
In other words, they’ll look at you holistically despite your bad credit score because they understand that cultures handle money differently.
For example, Latinos tend to pull money from family members when making a large purchase and prefer cash to credit cards.
With a no-debt mindset, of course, you may have a low credit score, but that doesn’t mean you don’t know how to handle money.
A person’s ability to be a responsible homeowner goes beyond what the three major credit bureaus consider. And New American understands that.
Read our full review of New American Funding
Carrington Mortgage Services
Carrington Mortgage Services seems to bend over backward to help people with poor credit become homeowners. They’re even willing to work with you if your FICO score is as low as 550.
Carrington also requires all homeowners to go through a mortgage education program before purchasing, which some people consider a negative.
They do this to make sure all borrowers understand everything that revolves around a home loan so that they’ll be more likely to make better financial decisions in the future.
Carrington considers the typical factors that play into your credit score, like payment history and money owed. However, they also consider job history, job stability, gross income, and down payment size for approval.
Need assistance with a down payment?
Depending on where you live, Carrington may be able to help you. However, the program isn’t available nationwide because some states would require Carrington to sell the servicing rights to the associated loans if they helped with the down payment.
If they did this, it would impact their ability to work with low-income, bad credit borrowers.
It should come as no surprise that Carrington has a solid digital infrastructure, and offers competitive refinance rates. Their customer service is also among the best of the best.
The only cons we can come up with for this company is that it’s not in every state (Alaska, Massachusetts, North Dakota, and Vermont.) Additionally, Carrington can’t offer down payment assistance nationwide.
Bottom line: Carrington Mortgage Services is awesome.
Read our full review of Carrington Mortgage Services
Many of the mortgage lenders listed in this article are ideal for borrowers with high credit scores. But if you have a lower credit score, know that it’s still possible for you to qualify for a home loan.
Many bad credit mortgage lenders are willing to work with borrowers that have lower credit scores. Here are five steps you can take to get started.
The first place to start is to request a free credit report from each of the credit bureaus. Your credit reports will give you an idea of where you are currently and the steps you can take to improve your credit score.
Make sure you check your credit report for any inaccuracies or derogatory marks. You can request to have any incorrect information removed. If you have any negative marks on your credit report, you can write your lender a goodwill letter and ask to have them removed as well.
The best way to improve your credit score is by paying down credit card debt and making monthly payments on time. Just taking these two action steps alone should help your credit score, since they account for most of your FICO score.
You can still apply for a mortgage with a bad credit score. But be realistic about what you can afford with your current budget.
With a low credit score, most lenders will see you as more of a risk of defaulting on your mortgage, so you will have a higher interest rate. However, if you only request the maximum loan amount you need, you’ll have a better chance of getting approved for your loan.
Borrowers with imperfect credit may qualify for a bad credit mortgage loan with alternative homebuyer programs. For example, borrowers can get an FHA loan with credit scores as low as 580. The required minimum down payment is 3.5%.
Veterans with less than perfect credit should look into getting a VA loan. These mortgage loans don’t have a minimum down payment requirement and are easier to qualify for than conventional mortgages.
Finally, USDA loans are designed for low-income homebuyers in rural areas. They typically require a credit score of at least 640.
See also: 14 First-Time Homebuyer Grants and Programs for 2023
If you want to increase your odds of approval, then it’s a good idea to save up for a sizable down payment. At least 20% is ideal for convention loans. It will also save you from having to take out private mortgage insurance (PMI).
A down payment won’t compensate for a bad credit score. However, it could help you make your case with some lenders.
And finally, you can look into applying with a qualified cosigner. When you apply with a cosigner, that person agrees to take legal responsibility and repay the loan if you can’t. And since that person’s credit score is tied to the loan as well, it increases your odds of approval.
However, cosigning a loan is a risky move. So, you only want to ask someone to do this if you’re confident you can make your monthly mortgage payments. Otherwise, you’re putting that individual’s financial future at risk.
Finding the best mortgage lender to fit your financial situation requires careful consideration. You need to be sure about what you need from any bad credit home loan. Along with mortgage rates and loan terms, here are the other major factors to consider when comparing mortgage lenders:
Minimum credit scores will vary depending on the mortgage lender and the specific loan product. There are many lenders who will work with a low credit score, including all the lenders we’ve analyzed above.
In most cases, the maximum debt-to-income ratio that lenders will work with is around 43%. However, with so many online mortgage lenders today, you will still find mortgage companies that have higher than normal debt-to-income limits.
Make sure you’re clear on where your debt-to-income ratio stands. Then, take some time to see if you can improve it before applying for a loan formally.
The reality is, if you have a bad credit score, you’ll likely be required to save a larger minimum down payment. Generally speaking, those with a lower credit score who still qualify for lending will need a down payment of 10%.
However, regardless of what your credit history looks like, it’s useful to shop around. This is because most mortgage lenders will consider a range of factors when evaluating your loan application.
When considering different mortgage products, make sure to look for any home buyer assistance programs. Many companies have their own programs with benefits. They can range from a lower minimum credit score requirement, lower down payment percentages, or credits toward closing costs.
The most common mortgage fees include origination fees, application fees, underwriting fees, processing fees, and administrative fees. Some lenders don’t charge these fees, but don’t forget to check what they do charge.
According toFICO, which is the biggest credit scoring company, anything below 580 is considered poor credit. Here’s a quick run through of the entire credit scoring range:
However, the definition of ‘bad credit’ can vary between lenders, as they won’t all stick rigidly to FICO scoring. So keep this in mind as you look for loan products to apply for, and make use of online loan quotes that don’t run hard credit checks.
Absolutely, it is possible to qualify for a mortgage even if you’ve got a low credit score. Your credit score is always an important factor for mortgage lenders. However, alternative credit data such as stable employment and saving a large down payment can sometimes help offset a bad credit score.
Some mortgage products, like FHA loans, come with lower minimum credit score requirements than conventional loans. However, if possible, you should always try to build your credit score before taking out a loan. This can help you significantly improve your mortgage options. It can land you a better interest rate and lower monthly payment, potentially saving you thousands of dollars.
There are several types of mortgage products available for those with poor credit:
Government backed loan programs, such as Federal Housing Administration (FHA) loans, are among the most popular options for bad credit borrowers. The majority of people will need a minimum credit score of 580 to qualify, as well as a minimum down payment of 3.5%. However, if you can make a 10% down payment, you could be eligible for an FHA mortgage with a credit score as low as 500.
While VA loans don’t have any formal credit score requirement, the reality is that the ideal credit minimum varies between lenders. If you do go for a VA loan, keep in mind that many lenders prefer to lend to those with a higher credit score. However, others will be more sympathetic to lower credit scores.
Another of the popular government backed loans, USDA loans typically require a credit score of at least 640. However, that doesn’t mean it’s impossible to qualify for a USDA-backed loan with a low credit score. It just means your application will have to be processed manually, and may require consideration of alternative credit data.
If your score is high enough, you can use a USDA loan to purchase a home with no down payment.
The lowest credit score you can get a mortgage with varies depending on the type of loan and the individual lender’s requirements. Conventional loans usually have a minimum credit score of 620, and for jumbo loans it’s 680. However, FHA, VA, and USDA loans allow lower minimum credit scores and might make more sense for you if your credit is poor.
For lenders who offer bad credit mortgages, a credit score of 500 is generally the lowest that lenders will work with. Your interest rate will be high and you’re likely to need a large down payment to get a mortgage with a score this low.
Source: crediful.com
A checking account is one of the most useful items you can have in your financial toolbox. You can use a checking account to pay bills, get paid early with direct deposit, or build your savings through automatic transfers.
However, it’s possible you’re not getting the most out of your account. Recognizing some of the most common mistakes you’re making with your checking account could help you to save money and time.
Ready to optimize this aspect of your financial life? Read on to learn:
• Common mistakes you’re making with your checking account
• Tips for improving your banking habits
Making mistakes with your bank account could cost you in more ways than one. It’s possible that you’re overpaying bank fees unnecessarily, missing out on valuable interest earnings, and possibly leaving yourself vulnerable to fraud. You may also be short-changing yourself and missing out on benefits and features if you’re using the wrong type of bank account for your needs.
Here’s why these issues can cost you:
• High fees are generally not a good thing, as they can nibble away at your balances over time.
• Losing out on the best interest rates means your money has less room to grow.
• Fraud can potentially be the biggest drain on your accounts, if your debit card or bank account is used to make unauthorized withdrawals or purchases.
The good news is that it’s relatively easy to get back on track. That starts with knowing which checking account mistakes to avoid. You’ll learn about them next.
Managing a checking account shouldn’t be complicated. Here are 11 of the biggest checking account mistakes that you’ll likely want to sidestep.
Sticking with the same bank for years may be comfortable, but it doesn’t necessarily mean you’re getting the best deal. It’s a mistake not to shop around for better banking options, as banks regularly introduce new benefits and features to attract customers.
It’s also incorrect to assume that switching banks is time-consuming or difficult. Many banks offer switch kits that help to simplify the process of transitioning your accounts over. These kits include a checklist of steps to complete to get your new accounts open and shut down your old ones if you choose to do so.
How you use your checking account matters but it’s also important to consider where you keep it. Online banks can offer benefits you don’t always get at traditional banks or credit unions, such as lower fees or higher interest rates for deposit accounts. These two features could help you build wealth.
Opening an online checking and savings account is usually something you can do in just a few minutes. The trade-off of choosing an online bank is that you don’t have branch banking access. Comparing online banking pros and cons can help you to decide if it’s right for you.
Banks can charge monthly maintenance fees for having a checking account. In some cases, you might pay these fees for savings and money market accounts as well. Paying these fees is a mistake if there are ways to get around them.
Your options for avoiding monthly maintenance fees might include:
• Meeting a daily or monthly minimum balance requirement
• Scheduling a qualifying recurring direct deposit
• Maintaining a minimum balance across multiple linked accounts at the same bank
• Making a certain number of purchases with your debit card each month
You could also avoid monthly maintenance fees by moving to an online bank. Online banks tend to be more fee-friendly than traditional banks, and you could earn a higher rate on interest-bearing accounts as well.
Here’s another common mistake you may be making with your checking account: When you need quick cash, you hit the first ATM you come across. Convenient, yes, but that’s a problem if your bank charges ATM fees.
What are ATM fees? They’re fees you pay to use another bank’s machine. Typically, your bank won’t charge if you use their ATMs. But they might tack on a foreign ATM surcharge if you use a machine that’s out of the bank’s network. The ATM owner can also charge a fee of their own. Typically, out-of-network ATM fees will cost you between $2.50 and $5 per transaction and possibly even more.
Knowing where you can withdraw cash fee-free is a simple way to avoid that mistake. You might also consider looking for a bank that reimburses foreign ATM fees each month. Some banks offer reimbursement, either as a flat dollar amount or up to a certain number of foreign ATM fees per month.
Maintaining a lower balance in your checking account isn’t necessarily a bad thing, but it could put you at risk of incurring overdraft of non-sufficient funds (NSF) fees.
Banks can charge overdraft fees to complete transactions when you don’t have enough money in your account. Non-sufficient funds fees may apply when you don’t have enough money in your account and the bank cancels or rejects the transaction.
In terms of how much you’ll pay for NSF vs. overdraft fees, that depends on the bank. However, it’s not uncommon for banks to charge anywhere up to $40 for these fees.
You could avoid overdraft fees by enrolling in overdraft protection. What is overdraft protection? It’s a service that allows banks to transfer money automatically from your savings account to checking if you’re in danger of overdrafting your account. You can avoid high overdraft fees by opting in, though banks may charge a smaller transfer fee.
Keeping too much money in checking could also be a mistake if you’re missing out on interest earnings. Siphoning off some of the money in checking into a high-yield savings account or money market account, for example, could allow you to earn a competitive interest rate and APY on your balances.
It’s also important to consider how FDIC coverage limits apply to checking accounts. The Federal Deposit Insurance Corporation insures deposits up to $250,000 per depositor, per account ownership type, per financial institution. If you keep more than that in checking, you could be at risk of losing money in the rare event that your bank fails.
A basic checking account should have all the features you need to pay bills, deposit money, or make purchases with a linked debit card. But a specialty account could offer a wider range of benefits.
For example, a high-yield checking account earns interest on balances. That’s like getting free money just for keeping a balance in checking. You will, however, have to pay tax on the interest you earn at the end of the year.
Another checking account mistake to avoid is losing out on potential rewards and bonuses. What are reward checking accounts? These are bank accounts that reward you with points or cash back for completing certain activities. For example, you might earn rewards when you make a specific number of debit card purchases each month or link a savings account.
These accounts are similar to rewards credit cards but the difference is you’re spending your own money to earn them, rather than borrowing from the credit card company. They can offer you some nice perks as you conduct your usual banking business.
Shopping online is convenient and you might be able to save money versus shopping in store if you’re using promo codes or coupons at checkout. However, you could be putting your checking account at risk if you’re shopping over unsecured WiFi networks or making purchases on untrusted websites.
A simple way to verify a site’s authenticity is to look for “https” in the site’s address. That indicates the site uses a Secure Sockets Layer certificate to encrypt and protect user data.
You can also protect yourself by not storing your debit card information at the checkout. If you’d like to be able to automatically enter your debit card details to pay, you can add them to a secure mobile wallet like Google Pay, Apple Pay, or Samsung Pay.
There are different ways to keep track of your bank accounts, including online and mobile banking. If you don’t always have time to log in, you could use email and text alerts to monitor your accounts instead.
Banks can allow you to set up different types of alerts, including notifications for:
• Low balances
• New credit transactions
• New debit transactions
• Updates to your personal information or login information
• New linked accounts
• New wire transfer transactions
• Failed login attempts
Not using alerts can be a mistake as it can save you time as you manage your financial life.
Enrolling in alerts can also help you to spot potentially fraudulent activity before someone is able to do any major damage with your account.
Recommended: The Biggest Money Scams in the U.S.
Your password is your entry key to your online and mobile banking accounts and it’s important to choose a strong one. The stronger your password, the more difficult it might be for hackers to steal your information, and your money.
If you’re using weak passwords that are easy to guess, you could be leaving yourself open to fraud. It’s also a mistake to reuse the same passwords to log in to multiple accounts. If a hacker gets their hands on the password, they could have instant access to bank accounts, credit cards, investment accounts, email accounts, and any other accounts you manage online.
Choosing strong passwords and updating them regularly can help you avoid that scenario. If you have trouble remembering passwords, you might consider storing them online in a secure password keeper.
Building better habits can take time, but it may be well worth the effort if you’re able to avoid making common checking account mistakes. Here are a few ways to improve your banking habits:
• Check your accounts regularly. Logging in to your bank accounts once a day or every few days is a simple way to check your transaction history and balances so you know what you have to spend.
• Sign up for alerts. Banking alerts can help you to spot potential fraud, track your balances, and know what’s being debited or credited to your account. It’s typically free to enroll, and you can personalize which alerts you want to receive.
• Maintain a buffer. Getting in the habit of maintaining a cash cushion in your checking account can help you to minimize your risk of overdraft. For example, you might want to keep an extra $500 to $1,000 in your account at all times and not let your balance fall below that amount.
• Review your accounts. Reviewing your checking account once a year can be a good way to see what you’ve paid in fees and what benefits you’ve enjoyed. You can then use that as a guide for deciding whether to stick with your current bank or shop around for a new one.
Recommended: Guide to Practicing Financial Self-Care
Having a checking account can make managing your financial life easier, but it’s important to make sure you’re using it the right way. Avoiding common checking account mistakes and developing good banking habits can help you use your account to its full potential. Doing so can also help you earn more interest and pay fewer or lower fees.
If you’re ready to try a new banking experience, you might consider opening an online checking and savings account with SoFi. You can enjoy the convenience of saving and spending in one place, plus you’ll get benefits like paying no account fees and enjoying a great APY on deposits, which can help your money grow faster.
Better banking is here with up to 4.50% APY on SoFi Checking and Savings.
The worst checking account mistake may simply be choosing the wrong account or the wrong bank. When you fully understand what you need a checking account for and what kind of features you’d like to have, that can make it easier to find the right banking option that’s convenient and low-cost.
If your bank makes a mistake with a deposit, bill payment, or any other transaction, it’s important to contact the bank right away. You can explain what you believe the mistake to be so the bank has an opportunity to correct it.
Making banking mistakes can cost you both time and money. You may end up spending more time than you’d like to managing your accounts. Or you might overpay banking fees if you’re not paying attention. Correcting any banking mistakes can help you avoid those scenarios.
Photo credit: iStock/MStudioImages
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
SoFi members with direct deposit activity can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.50% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.50% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 8/9/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet..
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
SOBK1122006
Source: sofi.com