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6 Ways to Prepare Your Credit Cards for the Holidays

The leaves are changing color and Halloween is almost here, which means the holidays are approaching fast. Now is the time to get your credit cards in order and avoid holiday overspending. Here are six ways to help you get started.

1. Check Your Credit Score

Your credit score is one of the greatest indicators of the overall health of your finances, so it pays to know where you stand. You can view two of your free credit scores, updated every 14 days, by signing up for an account on, and by checking your score, you can see what areas you need to improve. For example, you may find out that you need to do a better job making loan payments on time or lowering your credit card balances. And if you have problems with your credit, then you can adjust your holiday shopping plans accordingly, so you don’t do any more damage.

2. Take Stock of Your Cards

Before your holiday shopping begins, you’ll want to know which cards you have at home, in your wallet and elsewhere. Perhaps you have some credit cards that you keep in your car, or at work. Or you might have signed up for store credit cards in last year that you forgot about. In any case, make sure that you can find all of your cards, and double check that the accounts are still open (and, ideally, in good standing).

3. Check Your Available Credit

One reason that you should take inventory of your credit cards is to see each card’s line of credit and how much of it is still available. That’s because your debt-utilization ratio — how much credit you’ve used versus how much is offered to you — is one of the biggest factors that determine your credit score. If you’re bumping up against your available credit limit, that’s a sign that you may have taken on too much debt and need to adjust your spending habits.

4. See Which Cards Offer the Most Rewards

If you are in the habit of avoiding credit card interest charges by paying your statement balances in full, then you may be the type of credit card user who could benefit from a rewards credit card. You may be able to find credit cards that reward you for the kind of shopping you do over the holidays. For example, the Chase Freedom card offers 5% cash back on up to $1,500 in spending each quarter on select categories of merchants. From October through December, that category is department stores, wholesale clubs and drug stores, and you can check Chase’s website for specific stores that fall into those categories. That’s just one example — you can see our roundup of the best cash back rewards cards here.

5. Examine Your Cardholder Benefits

While most people focus on credit card rewards, your card’s purchase protection benefits could offer you tremendous value during the holidays. For example, a price protection policy could refund you the difference when an eligible purchase experiences a price drop. A return protection policy could come in handy if a merchant is unable to accept or offer a refund for an unwanted item. Damage and theft protection policies are commonly found on many credit cards, while extended warranty coverage can add a year to your manufacturer’s warranty. By knowing which policies your cards have, you can choose to use the ones that offer you the most valuable benefits.

6. Create a Budget

The final, and perhaps most important, way to prepare for using your credit cards during the holidays is to examine your budget. It’s very easy to get carried away with your holiday spending, so it’s vital to create a budget before its too late. After all, you don’t want to bump up against your credit limit, as we mentioned earlier, or take on so much debt that it drags down your credit score.

By deciding in advance how much is prudent to spend during the holidays, and by closely tracking how your actual charges compare to your budget, you can keep your spending under control. When you prepare your credit cards well in advance of the holidays, then you can start the new year off in a good financial situation, rather than making up for last year’s missteps.

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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6 Free (or Cheap) Tools We Used to Make More Money & Get Out of Debt

Employment gives us a lot — a sense of security, a regular paycheck, health and life insurance and other perks, but what about our dreams? How much do we give up to be employed by someone else and work on their dreams? How do we change so that we’re both financially free and personally happy?

We paid off $51,000 in credit card debt and became financially free. When we started our dream business three years ago, our goal was to build a business so that — from anywhere in the world — we could help others become financially free. We decided we wanted geographic freedom along with financial freedom. We’ve achieved this through our writing, speaking, videos and podcast.

The same tools that keep us digitally connected to grade school friends and celebrities are also a source for information and a platform to grow a business.

The barriers of entry to start a business today are lower than ever. With a tablet, a website and a few social media accounts, a few hundred dollars spent on moderately sophisticated recording equipment and basic editing knowledge gleaned online, you may be able to turn your hobby into a successful blog, podcast or video show.

The trick is learning how to monetize these mediums. This can be done with affiliate marketing, sponsorships and branding that provide multiple (horizontal) income streams, eliminating the risk of the single (vertical) income stream. But the first step comes in learning about your given industry and what the leaders of a platform or marketplace are doing.

Below are the six tools we still use today to help grow our business.

1. YouTube

YouTube isn’t just for music videos and beauty video bloggers. YouTube is for ME: motivation and education.

Whether we’re paying full or partial attention, motivational videos keep us positive. Starting your own business isn’t easy and there are times we get negative. Negativity must be remedied. As Willie Nelson once said, “Once you replace negative thoughts with positive ones, you’ll start having positive results.” And we’re always looking for positive results.

We’ve used YouTube as a teacher. It’s taught us about creating tags and categories for our website, how to manage lists in Twitter and video editing. We’ve spent hours studying public speakers on their style, tempo and delivery.

If you want videos that both motivate and teach you the art of public speaking, you can’t lose by YouTubing anything with Lisa Nichols.

2. Podcasts

Podcasts supplement YouTube and offer access to today’s leading minds for free and on your own time. Listening while we work, drive or exercise allows us to challenge ourselves to new ways of thinking, which helps us in our personal and professional lives.

Want to know what Mark Zuckerberg is planning next for Facebook? Want to learn what Tim Gunn thinks of today’s fashion? Want to hear what world leaders think of today’s current affairs? Podcasts can be your answer. Two of our favorites are Sean Croxton’s “The Sessions” and Stephen Christopher’s “Business Revolution.”

3. Apps

Can’t afford a personal coach? Neither could we, so we turned to apps. Apps are a great alternative and can be the tools that help get you to where you want your career to go. With just your phone or tablet and the right level of engagement, some business and life coaching apps can be as helpful as some business and life coaching humans.

4. Books

Nothing beats books. Though certainly not new, the accessibility of books is new. On Amazon alone, an average of 1.064 million digital books were downloaded each day, as of January 2016. There are many free books available on Amazon or at your local library. Here’s another secret: Don’t only source your books from the bestseller’s lists. There are great books being published independently. Give someone lesser known a try. Two such books are “True to Your Core” and “Discover. Act. Engage.” These are both powerful books that haven’t been picked up by a major publisher yet.

5. Facebook Groups

Facebook is more than cat videos and memes about the drudgery of the 9-to-5 grind. Facebook groups offer valuable information and support. Whatever your specialty or niche, you can likely find a Facebook group for it. Within these groups, people share their successes and failures, ask questions and throw out ideas. These are motivating and inspiring discussions that can have a much wider reach than they did before the days of social media.

6. LinkedIn Groups

You can do more with LinkedIn than create a digital resume. Like Facebook, but on a more professional level, are LinkedIn groups. LinkedIn groups are especially good for career guidance and networking.

To be fair, you may already be aware of some or all the tools we mentioned. What we hope we’ve demonstrated here are our ways to help you embrace what’s available to you and get you closer to financial freedom.

[Editor’s Note: Saving money and paying off debt can be an important part of any financial plan and can even benefit your credit. You can see how your spending behaviors are affecting your credit by viewing two of your free credit scores, updated every 14 days, on]

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18 Data-Based Tips for Saving on Car Insurance

The complexities of car insurance pricing, made even more complex by varying state coverage requirements, can make finding the right policy for you an incredibly frustrating ordeal for countless consumers. Oh yeah, and coverage can be pretty expensive.

As a licensed insurance agent, I know a few more tricks than the average consumer to help lower that auto insurance premium. So, in an attempt to help bring transparency to the world of car insurance, here are some data-verified savings tips, culled from The Zebra’s State of Auto Insurance Report.

1. Avoid Letting Your Insurance Coverage Lapse

Even after being insured for just one year, rates drop 7.7%. The discount for maintaining continuous insurance offered by most companies is also affected by the amount of liability coverage on your policy. The higher your limit of liability, the better your prior insurance discount will be.

2. Consider Bundling

Bundle your auto policy with homeowner’s insurance and you could save an average of $110 per year or bundle renter’s with auto to possibly save $72 per year.

3. Do Some Research

Take a few minutes to learn about which companies, minimum coverage requirements and other factors apply to your state.

4. Get Ahead of the Game

Purchase your policy at least 10 days before you need it activated for a better rate. This is especially helpful if you know your policy is coming up for renewal and you want to switch to a new company.

5. Pay in Full Up Front for Your Policy

Drivers save an average of $62 per year by paying in full rather than an installment plan.

6. Shop When You Move

If moving to a new state — or even a new ZIP code — make sure to shop for a new policy. The most expensive state for insurance (Michigan) is almost three times as expensive as the least (Ohio), so you could be in for huge savings depending on the state you’re leaving (or increases, so make sure you’re informed).

7. Boost Your Credit

Drivers who increase their credit score by one tier save an average of 17% off their annual premium. (You can see two of your credit scores for free, updated every 14 days, on to find out where you stand.)

8. Buy an Older Car

A 5-year-old version of a certain model is nearly 13% less expensive to insure than its current model year version.

9. Provide Your VIN When Getting Quotes 

Most new vehicles come with factory alarms so giving your VIN might help you qualify for an anti-theft device discount.

10. Drive Safely

While this is a good idea for your own well-being and that of others around you, of course, you’ll also save yourself from a potential rate increase.

11. Remember: Not All Car Insurance Companies Are Created Equal

They have unique business models designed to serve certain types of drivers who pose different levels of risk. Make sure to find the right fit for your needs and behaviors.

12. Don’t Stop Looking

It’s a good idea to shop around every six months to see if a new insurance company or policy fits you better and compare car insurance quotes to make sure you’re considering all rating factors and companies applicable to your unique needs.

13. Go Paperless

Agreeing to go paperless and signing your policy documents electronically can lead to discounts with some providers, so consider opting in and providing your email address when buying a new policy.

14. Tout Your Education

Listing your highest level of education can lead to a lower rate because many companies use it as a rating factor and may even offer discounts for college grads. Check the answer to that question on your policy; you could be leaving money on the table.

15. Consider Usage-Based Insurance

If you live close to work and are a safe, low-mileage driver, you may want to consider adding a telematics device in your vehicle to share your driving behavior with your insurance company. Having this device on your car may be able to save you up to 30% on your coverage, based on your driving habits and other regulations.

16. Study Up On Insurance Lingo 

Spend some time researching and reading to help you understand what you’re buying and make sure it actually fits your needs. There is no one-size-fits-all car insurance policy.

17. Make it Automatic

Consider signing up for auto pay or electronic funds transfer (EFT) instead of receiving a bill. Many providers offer a discount for doing this, which can certainly add up over time.

18. Venture Out on Your Own

Have you been listed as a driver on someone else’s policy for at least six months? Most insurance companies will offer a discount on your own separate policy.

You can see the full list of data-based tips for saving on car insurance on

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Worst Financial Advice Ever


Most of us receive poor financial advice at some point in our lives. Some of us ignore the recommendations; others follow it, to their later regret. See if you recognize any of the following common bad tips from your own experiences. You're Too Young to Save for Retirement – It is critically important to put away even small amounts for retirement to get the best use of compound interest and long-term stock market increases. Student Loans Are Good Debt – It is not uncommon for students to use loan money for frivolous expenses, and/or look at student debt as "investment" money that will pay off later in a high-paying job. It might, but there is no guarantee – as many graduates with crushing debt and no job can tell you. Look for alternatives before accepting student loan debt. Co-signing Doesn't Have Consequences – People tend to co-sign as favors to friends or to help their children as they head out into the world. That is fine, but make sure you understand the risks involved. Blithely co-signing loan papers or credit card agreements can leave you on the hook for some or all of any unpaid debts. You Can Live Off of Credit Cards – Sure, you can… for a short time. However, it is too easy to enter a debt spiral by buying more things than you can afford and making only minimum payments. Use your credit responsibly. Limit high-interest credit card debt, pay that debt off first, and if possible, never charge more than you can pay off at the end of the month. Spend Your Raise – A big raise may tempt you to change immediately to a more free-spending lifestyle. Do your part to stimulate the economy if you want, but save or invest a significant portion of your raise first. Make sure that basics are taken care of and that you have a sufficient emergency fund. You Don't Need to Save That Much for Retirement – People tend to underestimate their costs in retirement, especially medical costs. Seek the advice of a retirement planner who can help you find the best target and plan for your needs. Fund College Before Retirement – Your kids have more alternatives for paying for college than you do attempting to catch up on missed retirement savings during your 50's. Sell Your Stocks as you Approach Retirement – You should rebalance your portfolio toward more conservative investments as you approach retirement, but pulling out of the stock market entirely may mean that your investments cannot even keep up with inflation. Real Estate Investments are Easy Money – Real estate investments may have good returns, but they are not easy. Whether you are a house-flipper or a landlord, you must invest a huge amount of capital and time to make the investments pay off. Make sure you have the resources and the stamina for long-term real-estate investments. If not, consider something like a Real Estate Investment Trust (REIT) Exchange Traded Fund (ETF) Exchange Traded Fund (ETF) that trades like a stock. Try "Dabbling" in Investments – As a general principle, "dabbling" in anything related to investments is a bad idea. Unprepared day trading in stocks is a great example of people who simply fall for ads, dive in over their heads, and come out poorer (but hopefully wiser). Without sufficient research and planning, you may as well buy lottery tickets. Did any of the above give you flashbacks? If so, do your part to educate others and help them avoid the same mistakes. They may ignore your advice, but at least your conscience will be clear. Let the free MoneyTips Retirement Planner help you calculate when you can retire without jeopardizing your lifestyle. Photo ©

Originally Posted at:

Debt Spiral 101

Saving Money vs Retiring Debt

Over Half Of Americans Won't Have Enough Saved To Retire

Worst Financial Advice Ever


Most of us receive poor financial advice at some point in our lives. Some of us ignore the recommendations; others follow it, to their later regret. See if you recognize any of the following common bad tips from your own experiences. You're Too Young to Save for Retirement – It is critically important to put away even small amounts for retirement to get the best use of compound interest and long-term stock market increases. Student Loans Are Good Debt – It is not uncommon for students to use loan money for

Reducing Your Income to Escape the Alternative Minimum Tax

By Geoffrey M. Zimmerman, CFP

Learn more about Geoffrey at NerdWallet’s Ask an Advisor

If you got hit by the federal alternative minimum tax last year or think you might get hit this year, now is the time to think about your tax planning. There may still be some ways you can escape the AMT. Talk to your tax professional about the best strategy for you, but one way to avoid the AMT is to reduce your alternative minimum taxable income (AMTI) to the point where the AMT is less than the ordinary tax.

How it works

The AMT is an alternative method of calculating income tax that runs parallel to the regular tax system. Under the regular system, taxable income largely drives what tax bracket you fall into. I’ll call this “regular taxable income” (RTI). With the AMT, certain types of income, exemptions and itemized deductions also factor into your taxable income amount. You must calculate both your RTI and your AMTI to determine your tax liability under each system. Then you pay whichever is higher.

To find your AMTI, calculate your RTI and then add certain types of income that normally aren’t included. Examples include income from the exercise of incentive stock options, tax-exempt interest on industrial revenue bonds — a certain type of municipal bond — and depreciation. You also add back certain deductions such as property taxes, state income taxes, depreciation and interest on home equity loans. Finally, while deductions for medical expenses are still allowed, the threshold for claiming the deduction under AMT is higher than under RTI. So, under the AMT, fewer of your medical expenses will be deductible.

All of the above are examples of AMT preference items. The greater the number and amount of preference items you have relative to your income, the more likely you are to be hit by the AMT.

Escaping the AMT

Avoiding the AMT will involve either strategies that reduce both your RTI and your AMTI or strategies that reduce your AMTI relative to your RTI. Talk with your advisor about the following:

Retirement contributions: Maximize your contributions to qualified retirement plans such as your 401(k). The contributions reduce your adjusted gross income as well as your taxable income, regardless of whether you’re hit by the AMT. Reducing your AGI can be important, because as your AGI rises, your ability to use itemized deductions is slowly reduced. Qualified plan contributions also help you save for retirement.

Deferred compensation: If your company offers you access to a nonqualified deferred-compensation plan — essentially a promise by the employer to hold on to the assets until a future point in time — you may want to elect to defer income into the plan. By deferring compensation, you also defer taxation on the amount contributed to the plan, plus any growth, until you withdraw the money, typically when you leave your job or retire. The election to defer income normally doesn’t take effect until the next year, but it may still affect year-end planning for the current year. Work with your advisor to weigh the pros and cons of this income-reduction strategy.

Itemized deductions: The type, number and amount of deductions you take are key factors in determining whether you must pay the AMT or the regular income tax. Consider deferring certain itemized deductions if you fall under the AMT. For example, state income taxes can be an itemized deduction under ordinary tax but not under the AMT. If you’re making estimated tax payments, your fourth-quarter payment is due on or before Jan. 15. So if you review your tax situation in December and find that you’re going to fall under the AMT in the current year but possibly not in the following year, you would choose to defer that state tax payment until after Jan. 1, instead of making it this year.

Charitable contributions: If this year is an abnormally high income year, pushing you into the AMT, consider making a larger than normal donation. This is known as “bunching” several years’ worth of charitable contributions. You can give either directly to charities or through a donor-advised fund offered by a broker or a community foundation. Donations to these funds are deductible in the year of contribution, and once you’ve made the donation, the money may be distributed to charitable organizations over time according to your wishes.

Incentive stock options: With incentive stock options, you generally don’t have to pay ordinary income tax on the difference between the option strike price (the exercise price in your contract) and the stock price on the date of exercise. This is known as the bargain element. If you’ve exercised and held ISOs in the current year and expect to be subject to the AMT, consider selling some or all of the stock before the end of the year. If you sell the stock before you meet the qualifying holding periods — at least two years from grant date and at least one year from the date of exercise — the sale results in a disqualifying disposition. This makes the portion of the revenue attributable to the bargain element regular taxable income (RTI), not an AMT preference item.

If you’re going to do a disqualifying disposition to help reduce AMT, you must do it in the same year as the exercise. An exercise of an ISO could trigger both the AMT, in the year of exercise, and an ordinary income tax event, if you sell stock in the calendar year after the year of exercise but before you meet the qualifying holding periods.

If you find at the end of the current calendar year that you are subject to the AMT, and you’ve decided to continue holding the stock purchased through the exercise of an ISO, make sure you have enough money set aside (in particular, to pay your tax bill or meet other short-term obligations) without having to sell the stock as a disqualifying disposition.

Other strategies: You should also look for other ways to reduce your tax burden under the AMT and regular tax system. For instance, you can invest in tax-free municipal bonds (but avoiding industrial revenue bonds), rather than in taxable bonds, or you can enroll in your employer’s pretax medical-deduction plan to help reduce your salary.

Don’t delay

Meet with your tax professional and financial advisor to assess your level of AMT risk and find ways to avoid it or reduce the impact. Make an appointment for a year-end tax-planning meeting in November or early December. By then, you’ll have a pretty good idea of what your income, itemized deductions and exposure to preference items will look like for the year and what more you can do before the tax year ends.

Geoffrey M. Zimmerman, CFP, is a senior advisor and chief compliance officer with Mosaic Financial Partners.

4 Things Retailers Don’t Want You to Know About Black Friday

Like the arrival of Santa’s sleigh on Christmas Eve, each year retailers deliver a host of deals, discounts and freebies for shoppers as part of a highly anticipated shopping event called Black Friday, which falls on the day after Thanksgiving.

Many of the deals are legitimate bargains, but others are nothing more than ordinary sales wrapped in shiny packaging. How can you tell the difference? We have the secrets you need to know about the annual discount shopping bonanza, which this year is Nov. 25.

1. Doorbusters are few and far between

Doorbusters are the blockbusters of Black Friday. They’re deeply discounted products that are available for only a limited window of time — usually on Thanksgiving Day or Black Friday. The products look good, and the prices certainly sound good, but the reality of actually getting your hands on one of these items isn’t so rosy.

In 2015, for instance, Sears plastered a Kenmore Elite washer and dryer on the front page of its Black Friday ad, with the promise of 51% off on the pair. But the fine print below the deal revealed that there were approximately only four available per store.

The story is similar at other retailers. If you don’t secure a spot at the front of the line or log online the moment a sale starts, you could miss your shot at these big deals. Shoppers should look for stores with doorbuster guarantees. In some cases, as long as you arrive at a certain time, you can be guaranteed the low price.

» MORE: When is Black Friday 2016 (really)?

2. Discounts are often inflated

Deals can be difficult to grab, but they can also be misleading. Last year, a NerdWallet study found that major department stores inflated the amount of some of their Black Friday discounts to make deals appear better than they actually were.

For instance, depending on where you shopped, the same-priced coffee maker could have looked like a better bargain. The Keurig K45 Elite Single-Serve Coffee or Tea Brewing System was on sale for $89.99 at Macy’s and Kohl’s during Black Friday 2015 and for $89.98 at Stage. But each of these retailers advertised a different regular retail price: $174.99 for Macy’s, $149.99 for Kohl’s and $119.98 for Stage. If you shopped at Macy’s, it looked like you were saving $85, but at Kohl’s, it appeared you were saving only $60 — despite the fact that the product was on sale for the identical price.

If you shop this year on Black Friday, don’t pay attention to the supposed percentage of the discounts. Instead, judge the value of a product based on the sale price and how it compares with the item’s price at other stores.

3. Price matching may be exempt

Price matching is a common practice that allows customers to show retailers proof of a lower price elsewhere on an identical product and ask the store to match that competitor’s price.

But many retailers suspend their price-matching policies on Black Friday. At Target, “Price matching and adjustments will not be allowed for prices from Thanksgiving Day through the end of the following week, whether offered by Target or a competitor. Exclusion dates are November 24 through December 3.”

Similarly, Wal-Mart’s policy reads, “ will not price match items on or to other retailers between Thanksgiving and Cyber-Monday,” which this year is Nov. 28. On Black Friday 2015, Wal-Mart stores would match the price of any local competitor’s ad for an identical product, but some exclusions applied.

When price matching is largely off the table, it’s up to the shopper to compare prices and research which store has the best offer.

» MORE: Black Friday 2016 ad leaks

4. Fine print is everywhere

Finally, even if you manage to avoid all of the above tricks and traps, you could still be faced with more fine print. Retailers have a way of making some sales difficult to actually claim.

Certain deals may require completion of a mail-in rebate. Other products are available at their advertised sale price only for a few hours and then go up in price. Keep an eye out for such fine print and exclusions — usually located at the bottom of a Black Friday ad or beneath individual deals within the ad — so you aren’t surprised when you get to the store on Black Friday.

Courtney Jespersen is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @courtneynerd.

Shopping Dealfinder Newsletter Get the best deals on Black Friday and beyond!                        

Is the U.S. Profiting from Student Loans?


Donald Trump and Hillary Clinton don't agree on much, but they do agree on one thing: the government should not be profiting from student loan debt. Both candidates offer predictable responses to the issue. Clinton promises to use interest rate cuts to prevent student loan profits (thus indirectly having government foot the bill), while Trump says he will "fix it" without saying how. Given that collective outstanding student loan debt is approaching $1.4 trillion, you might expect a large profit from debt repayment. Would you believe that there is no profit at all, but that the government actually loses money by holding this debt? An argument can be made both ways. In true governmental fashion, estimates from the same government agency, namely the Congressional Budget Office (CBO), have the U.S. government either making a profit of $1.6 billion or losing $20.6 billion on student loan debt in 2016. The reason has to do with risk and how to assess that risk properly, combined with the future value of money. Consider that student loans are not like most forms of credit. Federal student loans are available to most students without any consideration of their ability to pay back the loan in the future, and default rates on student loans are significant. For example, according to the Federal Student Aid website run by the Department of Education, the three-year cohort default rate (the default rate on Stafford loan borrowers who enter their repayment period in a given year and default before the end of the second following year) was 13.4% for 2009 and 14.7% for 2010. Two-year cohort rates for 2007-2011 range from 6.7% to 10%. The government, as private institutions do, must assess the value of those loans over time based on some sort of discount rate — essentially an average return on investment — to determine the present value of all the money that is to be received over the life of the loan. Defaults cut into that return on investment by reducing the future cash flows. Financial institutions evaluate value all the time by attempting to assess the repayment risk based on market conditions — how have similar loans turned out in the past, and are they likely to change in the future? The official government accounting method to estimate student loan debt, mandated by Congress and applied by CBO, does not use discounting at market rates. Instead, the discount rate is the return on Treasuries of similar maturity (a thirty-year loan would be discounted at the relatively low rate of a thirty-year Treasury bond). However, Treasuries are far less likely to default than student loans. Jason Delisle, Resident Fellow at the American Enterprise Institute, notes that the government accounting method shows higher relative returns compared to Treasuries without capturing the corresponding greater risk. As a result, the discrepancy snowballs into future years. According to Forbes, the CBO estimates for student loan profit/loss show a $37 billion profit with standard government accounting and a $170 billion loss using market value discounting. Not all categories of student loan carry the same risk. There are five basic federal student loan programs (unsubsidized loans for both graduates and undergraduates, subsidized loans for undergrads, and PLUS loans for both graduates and parents). Subsidized loans for undergraduates are not profitable under either accounting scenario — reasonable, since the government is subsidizing the interest rate — and the PLUS loans for parents make a profit under either scenario. For the other categories, standard CBO accounting shows a profit while market-risk assessment shows a loss. So is the government really profiting from student loans? In a technical sense, yes — but in a more practical sense, the answer is no. It is hard to see how default rates will ever sink low enough to make student loans collectively profitable with market-risk discounting. It's telling that the one accounting method that produces governmental profits is the one mandated by Congress. Unfortunately, neither choice of accounting practice helps students that are drowning in debt, nor does it address the skyrocketing cost of college as the root cause of excessive student debt. Perhaps both Congress and the Presidential candidates should consider working on those issues first before debating accounting practices. Find out quickly at what rate you can refinance your student loan. Photo ©

Originally Posted at:

How To Get A Student Loan

Pros And Cons Of Private Student Loans

Student Loan Repayment Problems

Is the U.S. Profiting from Student Loans?


Donald Trump and Hillary Clinton don't agree on much, but they do agree on one thing: the government should not be profiting from student loan debt. Both candidates offer predictable responses to the issue. Clinton promises to use interest rate cuts to prevent student loan profits (thus indirectly having government foot the bill), while Trump says he will "fix it" without saying how. Given that collective outstanding student loan debt is approaching $1.4 trillion, you might expect a large profit from debt repayment. Would you believe that there is no profit at all, but that the government actually loses money by holding this debt? An argument can be made both ways. ...

The Best Ways to Build Credit Now

Once, building credit meant taking on debt — sometimes expensive debt like a car loan or a credit card with a high rate.

Today, it’s possible to build a good credit score in a year without a big chunk of cash upfront or a large debt at the end. You can make yourself look better to lenders while keeping more money in your pocket. Here’s how to do it right.

You don’t need debt to build credit
  • Old advice: Take whatever credit you can get, even at double-digit interest rates.
  • New advice: Start with a credit builder loan, then add a credit card to the mix.

With a credit-builder loan, you build credit and savings at the same time. The money you borrow is placed in a certificate of deposit or savings account that you can claim once you’ve made all the payments, which are reported to credit bureaus.

Many credit unions offer these loans. If yours doesn’t, check to see if there’s a community development financial institution near you that does, or investigate Self Lender, an online lender that makes one-year credit-builder loans of $550, $1,100 and $2,200. Someone who borrows $550, for example, would claim a $550 CD after making 12 payments of $48.50, plus a $12 administration fee.

These loans can help people build credit scores in the high 600s or even low 700s, says credit expert Barry Paperno, who blogs at Speaking of Credit.

“Regardless of the loan amount, one year of on-time-payment installment loan history with no other credit on the report should deliver a decent score,” says Paperno, who previously worked for credit scoring company FICO and credit bureau Experian.

Once your scores are in the mid-600s, you can qualify for a regular credit card. Using the card for a few small purchases each month and paying the balance in full will continue to build your scores.

You can get plastic even earlier if you have some cash to make a deposit on a secured card. Most require people to put down $200 to $2,000 in exchange for a credit limit equal to that deposit.

“Adding a secured credit card with even the smallest limit and obtained at about the same time as the installment loan would make for an even better score,” Paperno says.

Store cards may improve your mortgage chances
  • Old advice: Regular credit cards are better than store cards for building credit.
  • New advice: Certain store cards may help you get a mortgage.

Store-branded cards have long been seen as a stepping stone to “real” credit cards. Store cards typically are easier for people who are building credit to get, but regular or general-purpose cards issued by national banks are weighed more favorably by credit-scoring formulas.

However, if you’re building or rebuilding credit with the goal of getting a mortgage, store cards may prove more helpful.

Mortgage buyer Fannie Mae now requires mortgage lenders to look more favorably on people who regularly pay off their credit card balances when that information, known as trended or time series data, is available. Research by Fannie Mae and credit bureau TransUnion has found that people who don’t carry balances are less likely to default on any credit account than those who do.

The problem is that many big credit card issuers don’t report to the credit bureaus how much of their accounts customers pay off each month.

“The percentage of issuers who are reporting this time series data is small, relative to the whole population of issuers that report to the [credit bureaus],” says credit expert John Ulzheimer, who has worked for FICO and Experian.

Some store-branded cards do report actual amounts paid each month, however, including Synchrony Bank’s Amazon card and TD Bank’s Target card. If getting a mortgage is important to you, call the issuer and ask if it will report your actual payment amounts to the credit bureaus before you apply.

Use free credit scores as much as possible
  • Old advice: Monitor your FICO scores to track your progress.
  • New advice: Keep tabs with free scores and buy the right FICO before you apply for loans.

FICO credit scores are used in far more lending decisions than rival VantageScores, but VantageScores have an edge for people new to credit.

FICO formulas require at least six months of credit history before a score can be generated, and at least one account must have been updated by the issuer in the previous six months. A VantageScore can be calculated as soon as a person’s first account is reported to the credit bureaus, typically within 30 days of approval. VantageScores also can be calculated for anyone with a credit account that’s been updated in the prior two years.

You can get VantageScores for free from sites like NerdWallet. Many credit card issuers also offer free FICOs or VantageScores. The version of the FICO that they typically offer is the FICO 8, the most commonly used score in lending decisions. It’s not the FICO that most mortgage lenders use, however — they typically use older versions of the scores pulled from each of the three credit bureaus:

  • The score retrieved from Equifax credit bureau is typically called FICO Score 5 or Beacon 5.
  • At Experian, it’s FICO Score 2 or Experian/Fair Isaac Risk Model V2SM.
  • At TransUnion, it’s FICO Score 4 or FICO Risk Score, Classic 04.

Similarly, auto lenders use various versions of FICO Auto Scores, which have a 250-to-900 scale. FICO Auto Score 8 is commonly pulled from all three credit bureaus, while version 2 is popular at Experian, version 5 at Equifax and version 4 at TransUnion.

When you’re ready to apply for a major loan such as a mortgage or auto loan, you can get a better idea of how lenders are likely to view you by purchasing your scores from Currently you can’t buy just an auto or mortgage score; you need to purchase your FICO 8s from each bureau for about $20 each, and the other scores come with the package.

Until then, go for a free score.

Liz Weston is a certified financial planner and columnist at NerdWallet, a personal finance website, and author of “Your Credit Score.” Email: Twitter: @lizweston.

This article was written by NerdWallet and was originally published by The Associated Press.

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