Credit Karma

Alaska Airlines Visa® Business Card review: The right companion for your business?

Pros Cons
Save money with the sign-up bonus The annual fee could get high for businesses that need lots of cards
Bring a business partner or employee along for a flight No introductory APR offer for businesses that might need to carry a balance
Opportunity to build business credit
Ability to track employee spending

5 things you need to know about the Alaska Airlines Visa® Business Card

1. Save money when you travel for work

The Alaska Airlines Visa® Business Card offers plenty of rewards for business owners who frequently travel for work. So much so that you could pay for future business trips with the rewards you earn.

You’ll receive five miles for every $1 you spend on purchases at select restaurants in certain cities, three miles per $1 on purchases from Alaska Airlines, and one mile per $1 on all other purchases you make. Those points could add up quickly if you take a lot of business trips and like to treat your clients to dinner.

The current sign-up bonus for the Alaska Airlines Visa® Business Card comes in at 40,000 miles after you spend $2,000 on purchases during the first 90 days after opening the account. With domestic one-way flights starting at 5,000 miles, that could be enough to redeem for up to four round-trip tickets.

Alaska’s Famous Companion Fare, which also comes with the sign-up bonus, can help you save even more money, too. When you purchase your nonrewards ticket, your guest’s airfare will be discounted: The price of your companion’s ticket will start at just $121 ($99 base fare plus taxes and fees, which start at $22). If you’re booking a long flight with the companion fare — say, three hours or longer — you’re potentially getting a steeply reduced price. But you can only use this benefit once a year.

If you earn the sign-up bonus, you’ll be able to redeem Alaska’s Famous Companion Fare during your first year of card membership. After that, you’ll qualify for a companion fare each year on your account anniversary.

For those with a small travel budget, this could be a great way to bring along your business partner or an employee.

You’ll also receive one free checked bag on Alaska flights, and if your business takes you overseas, you won’t have to pay foreign transaction fees.

2. Help your business build credit

If you’re starting a new company, you may need to build business credit. Opening a business credit card like the Alaska Airlines Visa® Business Card could be one way to do just that.

To build credit, it’s important that you make on-time payments and keep your credit card balances low. Keep in mind, if you slip up, it may hurt your personal credit as well as your business credit.

Credit Karma Guide to Business Credit Scores

3. Keep tabs on how much your employees spend

The Alaska Airlines Visa® Business Card can help you track employee spending.

Not only can you set individual spending limits for employee cards, but you’ll get extra protection against card misuse by former employees.

4. Your annual fee could vary

The Alaska Airlines Visa® Business Card’s annual fee can be confusing if you don’t look closely.

Each year, you’ll pay $50 for the company account, plus $25 per card. That works out to $75 per year for one cardholder (presumably, the owner of the business), plus an additional $25 for each employee card you issue.

If you want to limit the cost of this credit account for your business, then you might have to consider exactly how many individual cards you really need to make the most of your rewards. Will every cardholder earn $25 worth of rewards with their spending?

Keep in mind that each individual card won’t earn the annual companion fare benefit — it’s only available once for each account.

5. Carrying a balance will cost you

If you’re opening a new business, you might be tempted to carry a balance until sales pick up. Unfortunately, the Alaska Airlines Visa® Business Card doesn’t offer an introductory 0% APR rate on either purchases or balance transfers. Instead, you’ll pay a variable APR between 17.24% and 25.24% on both.

Carrying a balance at those rates could make it difficult for your company to climb out of debt — and it could add up to even more if you’re not careful. That’s why you should aim to pay your balance on time and in full each month.

Understanding your points and redemption options

According to Credit Karma’s point valuations, Alaska Airlines miles are worth an average of 1.09 cents each when you redeem them through the flagship carrier. But you can also transfer your miles across Alaska’s 17 airline partners. This can help you reach more destinations where Alaska may not fly on your next business trip. That’s especially true for international locations.

Alaska doesn’t have blackout dates, so you can redeem your miles for any available flight unless you’re also using Alaska’s Famous Companion Fare.

The companion fare offer is a buy-one-get-one-discounted deal. That means to redeem this offer, you must pay for your own airfare out of pocket. You can’t use miles for your ticket and use the companion fare for your guest’s ticket.

The good news is that both you and your companion can earn miles with Alaska Airlines for this trip, even though your guest won’t have to pay the full price for their ticket.

Who this card is good for

The Alaska Airlines Visa® Business Card is helpful for small-business owners who frequently travel on or to the West Coast, where Alaska does most of its flying. If you’re looking to save money on your next business trip, you’ll appreciate checking your bag for free and bringing along your business partner or employee at a discount with Alaska’s Famous Companion Fare.

But this card probably isn’t best for businesses that do most of their traveling outside of Alaska’s flight area. Additionally, businesses that need to carry a balance may end up falling into debt without an introductory APR offer for purchases or balance transfers.

Not sure this card is right for you? Consider this alternative.

If the Alaska Airlines Visa® Business Card isn’t the right fit, you might want to take a look at our review of the Ink Business Preferred℠ Credit Card. This card offers more flexibility for business travelers who don’t want to commit to one airline.

Read more: The best credit cards for business travel

Fed signals no more rate hikes in 2019. What could this mean for you?

The Federal Reserve this week announced plans to leave interest rates unchanged at a range between 2.25% and 2.5%. Officials also indicated they would be unlikely to raise rates this year.

If you have a credit card or a line of credit, you might benefit from the Fed’s decision because variable APRs tied to certain indexes may stay about the same rather than go up.

Although job gains have remained strong in recent months, the central bank cited slower growth in household spending and business investment in the first quarter as areas of concern.

By continuing a wait-and-see approach that the Fed adopted earlier this year, the central bank has signaled that 2019 may bring growth, but at a slower pace than was seen in 2018. But there may still be plenty for consumers to be upbeat about.

Want to know more?

How has the Fed typically approached interest rates?

The Fed uses interest rates as a tool to help control inflation, with policymakers seeking a target inflation rate of about 2%. The thinking traditionally has been that interest rates can be lowered to jumpstart economic growth, or raised to cool an economy that might be growing too fast and causing inflation to rise too rapidly.

Since 2015, the Fed has engaged in a policy of steady rate increases as the economy experienced steady growth after the last recession. However, as the current economic expansion continues, the Fed has an opportunity to pause rate hikes to get a better idea of how the economy will behave. 

Why has the Fed changed course?

The Fed has a mixed bag of data to examine regarding the U.S. economy. There are a number of indications that the U.S. economy is doing well, such as steady job and wage growth. At the same time, recent declines in consumer spending are raising concerns.

Faced with both positive indicators as well as uncertainties influencing the economy, the Fed has decided the best course of action is to continue observing the economy for the time being and leaving interest rates unchanged.

What does this change mean for you?

In the near term, if you have a line of credit, a credit card or certain types of other loans, you may see variable interest rates remain at current levels — which could mean interest payments won’t cost you any more than they do now. This is because variable APRs are tied to an index, and some indexes fluctuate based on changes to the federal funds rate.

If you’d like to keep up with what the Fed’s up to, you can follow its meeting calendar and statement releases here.

Citizens Bank personal loan review: Interest rate discounts, no late fees

Pros Cons
No application, origination or late fees No small-dollar loans
Interest rate discounts $24,000 minimum-income requirement
Easy to apply online/get a rate quote “Reasonably strong” credit history requirement, according to Citizens Bank

What you need to know about personal loans with Citizens Bank

Citizens Bank personal loans are designed for borrowers with reasonably strong credit who want to borrow at least $5,000 and don’t want to worry about upfront or one-off fees, such as an application fee or late fees. If you prefer to apply for a loan in person, you’ll need to visit a branch in one of the 11 states where Citizens Bank has offices. But if online-only works for you, you can apply through the lender’s online division, Citizens One.

High loan minimum

Citizens Bank offers unsecured personal loans ranging from $5,000 to $50,000. While that’s nice if you need a large loan, you’ll have to look elsewhere if you need just a few thousand dollars or less.

But if that range fits your needs, know that repayment terms with Citizens Bank are relatively flexible, with periods ranging from three to seven years.

Generous rate discounts, fewer fees

Fixed interest rates with Citizens Bank are relatively competitive and can include up to two discounts. The first is an autopay discount, which gives you a small percentage off your rate just by setting up automatic payments.

The second is a loyalty discount, which can give you an additional small percentage off your rate for having another qualifying account with Citizens Bank when you apply. Eligible accounts include any checking account, savings account, money market account, certificate of deposit, auto loan, home equity loan, home equity line of credit, mortgage, credit card, student loan or other personal loan.

And unlike with some other lenders, personal loans with Citizens Bank have no application, late or annual fees. While you can expect loans to come with interest costs, you may find that some other lenders also charge origination fees, which they typically deduct from your loan funds.

Somewhat high eligibility requirements

Citizens Bank doesn’t specify a minimum credit requirement, but you will need to have what the bank calls a “reasonably strong” credit history to get approved. There’s also a minimum income requirement of $24,000.

If you don’t qualify on your own, you can apply with a co-signer. The loan terms will be based on the higher of your and your co-signer’s FICO® scores. If you don’t know where your credit scores range, it’s a good idea to check before applying for a loan, so that you have an idea of where you stand before applying.

Before you officially apply though, Citizens Bank allows you to get a rate quote with a “soft” credit inquiry, which won’t affect your credit scores. That way, you can get an estimate of your interest rate before applying for a loan. Keep in mind that if you do apply, your interest rate may be different from what you see via the rate check.

Citizens Bank personal loan details

Citizens Bank dates back to 1828 (as High Street Bank), and its branch network is primarily in the northeastern United States.

Here are a few other important details to know.

Who a Citizens Bank personal loan is good for

Because personal loans with Citizens Bank come with minimal fees, they’re a great option for many uses. They can be especially sensible for debt consolidation, where the alternative may be a loan with an origination fee or a credit card with a balance transfer fee.

It can also be a good fit if you want some flexibility when requesting your repayment terms — though keep in mind that the longer your repayment term is, the higher your interest rate may be and the more the loan is likely to cost you.

If you need less than the $5,000 minimum, you may be better off checking out other lenders instead of borrowing more money than you need. Also, remember that you’ll need reasonably strong credit and at least $24,000 in income — or a co-signer who meets those requirements — to have a chance at getting approved.

How to apply with Citizens Bank

You can apply for personal loans with Citizens Bank at one of its branches, or online through the lender’s website. If you apply online, you’ll first start out by providing some basic information about yourself to get a rate quote, and then move on to officially apply from there. The entire online process generally takes less than 10 minutes if you have this information available.

Here’s the information you’ll need to apply.

Not sure this lender is for you? Consider these alternatives.

If you’re not sure this lender is for you, here are some other options to consider.

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Best starter credit cards of 2019: Our picks

This offer is no longer available on our site: Deserve® Edu Mastercard

Whether you’re a college student, a young professional or someone else who hasn’t yet had a chance to build credit, these starter credit cards can help make it happen with little in the way of fuss or fees.



Best for college students: Journey® Student Rewards from Capital One®

Here’s why: The Journey® Student Rewards from Capital One® offers college students a flat rewards rate on all purchases and also provides extra rewards and more access to credit if you use your card responsibly.

You’ll earn 1% cash back on all the purchases you make plus an extra 0.25% back if you pay your bill on time for that month, for a total of 1.25%. You’ll also have the chance to earn a credit limit increase once you’ve made your first five monthly payments on time.

The card’s annual fee is $0, and it also doesn’t charge a foreign transaction fee, making it an excellent choice if you’re planning to study or do a gap year abroad. The typical foreign transaction fee is around 3% of every international purchase you make, so it could potentially save you a lot over time.

Read our review of the Journey® Student Rewards from Capital One® to find out more.

From our partner
Journey® Student Rewards from Capital One®

Journey® Student Rewards from Capital One®

From cardholders in the last year

Best for international students: Deserve® Edu Mastercard

Here’s why: International students don’t need a Social Security number to qualify for the Deserve® Edu Mastercard.

It’s also open to U.S. citizens and, if you do have a credit history, the card issuer will consider it in addition to looking at how you manage your money now and look at factors like on-time payment history to help determine your future credit potential.

New cardholders will receive a one-year membership to Amazon Prime Student plus 1% cash back on every purchase. And when you use your card to pay your cellphone bill, you’ll get up to $600 in insurance coverage against phone damage or theft.

The card charges no annual fee or foreign transaction fees. And depending on your creditworthiness, you could qualify for a credit limit of up to $5,000.

If you like what you see so far, read our review of the Deserve® Edu Mastercard to get the full details.

From our partner

Deserve® Edu Mastercard

Deserve® Edu Mastercard

From cardholders in the last year

Best for a limited credit history: Capital One® QuicksilverOne® Cash Rewards Credit Card

Here’s why: If you’ve already started building credit, like through an authorized user account or student loans, the Capital One® QuicksilverOne® Cash Rewards Credit Card offers solid value.

The card offers 1.5% cash back on every purchase you make, plus you may be eligible for a higher credit line after you make your first five monthly payments on time. The card also has no foreign transaction fees, making it a good choice for people planning a trip abroad.

The card’s annual fee is $39, but you can make up for that by spending just $2,600 per year. Also, try to avoid carrying a balance on the card, so you don’t have to pay the 26.98% variable APR on purchases and balance transfers.

If you’re on the fence, read our review of the Capital One® QuicksilverOne® Cash Rewards Credit Card to find out more.

From our partner
Capital One® QuicksilverOne® Cash Rewards Credit Card

Capital One® QuicksilverOne® Cash Rewards Credit Card

From cardholders in the last year

Best for a security deposit: Discover it® Secured Credit Card

Here’s why: If you’re having a hard time getting approved for an unsecured credit card, this one is a solid choice with a low security deposit requirement, a rewards program and the chance to convert your account to an unsecured card.

The Discover it® Secured Credit Card offers 2% cash back at gas stations and restaurants on up to $1,000 spent in combined purchases each quarter. Plus, you’ll get 1% cash back on all other purchases. What’s more, the bank will match all the rewards you earn during your first year with the account.

The minimum security deposit is just $200 and depending on how you use the account and your other credit accounts, you may get your deposit back in as little as eight months.

The card doesn’t charge an annual fee, and also doesn’t have a foreign transaction fee. Keep in mind, though, that Discover isn’t widely accepted internationally. So if you’re heading abroad, have a backup payment method.

Read our review of the Discover it® Secured Card to see if it fits your needs.

Best for no fees: Petal Visa Credit Card

Here’s why: It’s uncommon to find a credit card with no fees whatsoever, let alone one designed for people without a credit history. But that’s exactly what you’ll get with the Petal Visa Credit Card. But remember, there is still a variable purchase APR of 15.24% - 26.24%.

The card’s issuer decides whether you’re a good fit for the card based on how you manage your finances. The issuer can do this by having you connect your bank accounts, which can show it how you make, save and spend money.

The card also offers the possibility of a high credit limit, with options ranging from $500 to $10,000, based on your creditworthiness.

For more details, read our review of the Petal Visa Credit Card.

From our partner
Petal Visa Credit Card

Petal Visa Credit Card

From cardholders in the last year


How we picked these cards

There are plenty of credit cards out there that can help you build credit from scratch. But if you’re not careful, you could end up paying high fees or be unable to use them everywhere you go. To help you avoid these pitfalls, we focused on cards that can help you establish a credit history without costing you an arm and a leg.

Specifically, we focused mostly on unsecured credit cards with low or no annual fees, or rewards programs that can help make up for them. We also added a secured credit card that provides a path to getting your deposit back.

How to make the most of the best starter credit cards

While many of the best starter credit cards we’ve covered offer rewards programs, they’re not as impressive as some of the cards you might qualify for once your credit is in better shape. To get there, it’s important to use your starter credit card responsibly.

What does responsible mean? Make sure you pay your bill on time every month. Set up automatic payments or at least a reminder to ensure you don’t forget. If possible, pay the bill in full to avoid interest charges.

Also, keep your balance low relative to the card’s credit limit. Your credit utilization rate, which is the percentage of your limit you’re using at any given time, is an important factor in your credit health, and the lower it is, the better.

PNC Cash Rewards® Visa® Credit Card review

Pros Cons
Generous cash back on purchases in popular categories Annual cap on purchases that are eligible for cash back earnings
$0 annual fee $25 minimum redemption for cash back
Good intro APR on balance transfers This card isn’t available in every state
Attainable sign-up bonus

From our partner
PNC Cash Rewards® Visa® Credit Card

PNC Cash Rewards® Visa® Credit Card

From cardholders in the last year


What you need to know about the PNC Cash Rewards® Visa® Credit Card

Impressive cash back on gas station, dining and grocery purchases

The PNC Cash Rewards® Visa® Credit Card offers competitive cash back rates — which can be redeemed as statement credits — on gas station, dining and grocery purchases at 4%, 3% and 2% respectively. All other purchases earn 1% cash back.

But be aware: There is an $8,000 annual cap on purchases eligible for the 4%, 3% and 2% cash back rates. After you meet that annual cap, all purchases will earn 1% cash back until your next anniversary date.

PNC is also fairly generous with how it categorizes the transactions that can earn cash back.

Keep in mind that you won’t earn cash back on gas and fuel or food and groceries from superstores, warehouse stores and certain other stores. Other purchases from these types of merchants might earn cash back — you can check with the merchant or your bank to confirm which purchases are eligible.

Another important point: There is an $8,000 annual cap on purchases eligible for the 4%, 3% and 2% cash back rates. After you meet that annual cap, all purchases will earn 1% cash back until your next anniversary date.

You could earn cash back with ease and simplicity

Earning and redeeming cash back is simple with the PNC Cash Rewards® Visa® Credit Card.

Unlike some other cards — like the Chase Freedom® card, for example — you do not need keep track of rotating categories or activate rewards in order to maximize your rewards-earnings potential.

But there are limited redemption options

Some cards allow cardholders to use their cash back to book flights or purchase gift cards on their exclusive rewards portal. Other cards allow cash back to be transferred to travel partners.

But with the PNC Cash Rewards® Visa® Credit Card, cash back can only be redeemed for a statement credit — or for cash, if you have a PNC Bank checking or savings account.

Also, you must have at least $25 in your PNC Cash Rewards account before you can make a redemption request. If you want to be able to redeem your cash back for amounts of $25 or less, you should look for a cash back card with no minimum redemption limit.

Intro APR on balance transfers

New cardholders are eligible for an introductory 0% APR on balance transfers for the first 12 billing cycles. The 0% intro APR only applies to balance transfers within the first 90 days from account opening. After the intro period is over, your balance transfer variable APR will be 15.24% - 25.24% (same as the variable rate for purchases) based on your creditworthiness.

Be aware that the intro period of 12 billing cycles begins from the moment you open your account, not from when you initiate a balance transfer.

The PNC Cash Rewards® Visa® Credit Card charges a balance transfer fee of $5 or 3% of the transfer amount, whichever is greater, for the first 90 days from account opening. After that, the balance transfer fee goes to $5 or 4%, whichever is greater.

One more heads up: Balance transfer amounts do not earn cash back.

While this intro offer for balance transfers is good, you may be able to find even better options for balance transfer cards.

What else you need to know

Here are some other features of the PNC Cash Rewards® Visa® Credit Card that you should know about:

Who this card is good for

This card would could be a good option for people who can take full advantage of the bonus categories without being hampered by the $8,000 annual cap on cash back rewards.

If you your spending is likely to blow through that ceiling, you might still find value in the PNC Cash Rewards® Visa® Credit Card by combining it with other cash back credit cards.

This card is also built for people who are looking for simplicity in their rewards card. If you’ve felt frustrated or intimidated by the complicated rewards programs of other cash back cards, then you may appreciate the PNC Cash Rewards® Visa® Credit Card’s straightforward approach.

Not sure this is the card for you? Consider these alternatives.

How to buy a used car

Buying a used car might be the ideal route for you if your budget is limited or you want to minimize your auto loan.

A used car typically costs less than a new one of the same kind, but it can still be a significant investment. The average price of a used car was $20,084 as of the third quarter of 2018, according to a report from Edmunds.

To find a good deal and loan terms, it helps to do some homework. Here are some of the key steps to take when you buy a used car.


  1. Set a budget
  2. Research potential makes and models
  3. Determine a fair price
  4. Find a car and check it out
  5. Negotiate the price
  6. Sell or trade in your current car
  7. Close the deal

1. Set a budget

When buying a used car, you can either pay with cash or finance your purchase with a car loan.

With cash, it’s simply a matter of how much money you’re able and willing to spend on your car.

If you finance the car, you’ll have to make monthly payments on the loan. Look at your budget to figure out how much money you can comfortably afford to pay each month. Many experts say your car payment shouldn’t eat up more than 10% to 15% of your monthly take-home pay.

Find an auto loan that works for you

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Financing a car is more expensive than paying with cash upfront, because you’ll have to pay interest on the loan — and you’ll typically pay a higher rate on a used-car loan than you would for one that’s new. If your credit isn’t so great, your rates will likely be even steeper.

Keep in mind that some lenders don’t offer loans for cars over a certain age or mileage. That could limit your choices if you plan to buy an older, used car.

Applying for preapproval from several lenders can give you an idea of how much you can borrow, along with an estimate of your loan terms and interest rate. But remember, preapproval isn’t a guarantee — you’ll have to actually apply for the loan to see if you’re approved and for what terms.

The best place to get a car loan

2. Research potential makes and models

If you’re on a budget, you may be most interested in buying a car that’s low-priced, with good fuel economy. If you’re a parent, maybe you’re looking for a vehicle with strong crash-test scores and lots of cargo space.

Here are some resources to help you learn more about the kind of car you’re considering.

3. Determine a fair price

Once you narrow down the cars that might work for you, the question is what they’re worth.

When you buy any car, things like optional features, mileage and the car’s overall condition can affect the cost. With a used car, cost is influenced by a few additional factors.

Buying from a dealer or private seller

Dealers typically set higher prices than private sellers, so you could save money by buying from a private party.

Still, there are two key advantages to buying from a dealer.

Buying a certified pre-owned car

If you do plan to buy from a dealership, consider whether you want to buy a certified pre-owned car. Certified pre-owned cars tend to be more expensive than regular used cars. But those that are part of a manufacturer-backed program are supposed to be meticulously inspected and reconditioned, and some offer extended-warranty coverage.

Kelley Blue Book and Edmunds.com offer pricing tools that can let you know how much a particular make and model is selling for in your area. These tools can also help you determine the cost of a car bought from a dealer versus a private party.

4. Find a car and check it out

Once you have an idea of pricing for the models you’re considering, look at used-car inventory in your neighborhood. Many dealers and private sellers list their used cars online. You can also stop by local dealerships to see what’s on their lots.

Do some homework on each car you consider. This may include checking out vehicle history reports and title ownership, test driving and asking about past inspections. 

Vehicle history report

A vehicle history report provides info on a car’s background, including accidents, open recalls, service history, title history and damage. If you’re buying from a dealer, a vehicle history report will often be provided for free. If you’re buying from a private seller, you’ll likely need to buy a vehicle history report from a site like Carfax or AutoCheck. Costs can range from $10 to $40.

Remember, though, that while vehicle history reports can be a helpful source of information, they aren’t necessarily accurate for every vehicle because they are mostly based on reported info. So, for example, if an accident wasn’t reported, it may not appear as part of the vehicle history.

Vehicle title

If you’re buying your car from a private seller, you’ll want to make sure the seller has a clear title. This means that no creditors or other third-parties have a right to the car. The National Department of Justice’s National Motor Vehicle Title Information System offers information about a vehicle’s title for up to $4 per report.

Test drive

A test drive gives you a chance to experience how a car runs and handles. Look for signs of damage, listen for strange sounds and check the car’s features to make sure they all work. Pay attention to the brakes and steering and consider the car’s overall comfort. Be sure to check that the car has any optional equipment that’s included in its listing.

Inspection

One of the biggest fears when buying a used car is getting stuck with a repair bill right after you get the vehicle. If you’re dealing with a private seller, getting a mechanic you trust to inspect the car before you commit to buying can give you some peace of mind. Let the seller know that’s part of the deal.

If you’re buying from a dealership, the car will likely have been inspected already. But the Federal Trade Commission recommends having it inspected by an independent mechanic to be safe.

5. Negotiate the price

If everything checks out for the car you want, it’s time to negotiate the price. Use the pricing estimates you’ve gotten from sites like Edmunds and Kelley Blue Book as a guide.

If you’re financing your car through a dealership, the salesperson may try to win you over by offering to lower your monthly payment. But if they’re extending the loan term to bring down your monthly payment, you could end up paying much more in interest over the life of the loan. Keep your focus on the total price of the financing — not just the monthly payments.

6. Sell or trade in your current car

If you currently have a car and want to sell it to help pay for the next one (or just get rid of it), you have a few options.

You can use the Edmunds and Kelley Blue Book pricing tools to estimate a fair price for your used car. You’ll likely get a higher price from selling to a private buyer than you would from trading in the car at the dealership.

But selling your car to a dealership or trading it in can be simpler than selling the car on your own, since it doesn’t require you to list the car or meet with potential buyers.

7. Close the deal

Congrats. You’re ready to finalize your financing for the car and sign the paperwork.

Close the loan

Submit a formal loan application to the lender you’ve chosen. If you’re approved, you’ll move forward with finalizing the loan. If you’re financing through the dealership, you can usually finalize the loan and sales paperwork at the same time.

Finalize the sales paperwork

If you’re buying from a private seller, meet with the seller to sign the necessary paperwork and get the title signed over to you.

If you’re buying from a dealership, make sure that all of the terms and prices listed in the sales contract reflect your previous negotiations. If you’re also financing through the dealer, confirm that the loan details, like the interest rate and loan term, look right.


Bottom line

It may take some time to buy a used car, but doing your research and comparing options can pay off.

If you’re having trouble finding a reliable used car within your budget, consider waiting until you can make a larger down payment. Taking steps to build your credit also might help you qualify for a lower interest rate on your loan, which could lower your monthly payment.

Credit Karma Guide to Building Credit

What are in-house financing dealerships?

If you’re having trouble getting a car loan and your credit is the reason, an in-house financing dealership may be able to help.

In-house financing dealerships, commonly called “buy-here, pay-here” dealerships, offer financing directly to car buyers. Since these dealerships finance car purchases themselves, they don’t have to get approval from a bank or other lender to grant your car loan. Buy-here, pay-here dealerships set their own loan approval requirements.

This might sound much easier than the typical car loan process. The downside? You’ll most likely end up paying much more in interest buying a car this way.


Benefits of in-house financing dealerships

People with rough credit, or little to no credit history, may not be able to get approved for a traditional auto loan. They also might not have the money they need for a down payment.

But in-house financing dealerships provide loans independently and at their own discretion, free of the credit and down payment requirements that traditional auto loans may impose. This makes it possible for some people to get an auto loan when they wouldn’t have a chance otherwise.

Can you get a car loan with bad credit?

The car you might be able to get from a buy-here, pay-here dealership probably won’t be brand new (and may not be your dream car), but there’s a good chance it’ll at least get you on the road.

Downsides of buy-here, pay-here dealerships

While looser lending requirements might get you the set of wheels you need, financing from a buy-here, pay-here dealership has some big drawbacks.

First, you’ll likely pay a higher interest rate than you would with a traditional car loan. The loan may even be a precomputed interest loan, which can be a big financial pitfall.

FAST FACTS

What is a precomputed interest car loan — and why avoid them?

When reviewing an offer from an in-house financing dealership, watch out for the precomputed interest loan.

Unlike simple interest loans, which are more typical in auto financing, precomputed interest loans calculate the amount of interest you’ll pay over the full term of the loan — and require you to pay all of that interest, even if you pay off the loan faster.

This means you can’t save money by making early payments or by refinancing your car loan at some point if your credit improves.

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Buy-here, pay-here car dealerships may charge more for the cars they’re selling, too. Since you can only use in-house financing for cars on that dealership’s lot, you’re stuck buying from that particular dealer’s inventory. This means you can’t shop around for a great deal.

Additionally, buy-here, pay-here dealerships can lend as much they want, and may set their prices accordingly. This means you can end up in far more debt than your car is worth, putting you “upside down” on your car loan from the get-go.

One other potential negative to consider: While in-house financing dealerships may not check your credit, some will offset the risk of lending by other means. One way is to install a device in your car so they can disable the vehicle or more easily repossess it if you miss a payment.

How to find in-house financing dealerships

It’s usually not hard to find an in-house financing dealership. You’ve probably driven past plenty of them. Look for signs that say things like “buy here, pay here,” “no credit needed,” “no credit — no problem” or “no credit check necessary.” A quick search online for buy-here, pay-here car dealerships or in-house financing car dealerships, plus your city’s name, will also do the trick.

Before you bother heading to a dealership in person, call and ask if they offer in-house financing that might meet your needs. And talk to friends or family who might have ideas about specific car lots to avoid.


Bottom line

While an in-house financing dealership may seem like your only option to buy a car if you have no credit or iffy credit, you should definitely check your other options first.

Remember, buying a car from a buy-here, pay-here dealership will likely cost you much more than financing a car through a traditional lender, so it’s always best to start your search with banks or credit unions and other car dealerships.

If you run into trouble getting traditional financing, consider finding a co-signer or holding off and improving your credit before purchasing a car, if you can wait. Considering all the negatives, buying a car at an in-house financing dealership should be a last resort.

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What is a simple interest loan?

When considering your loan options, knowing the type of interest charged on the loan is just as important as knowing the interest rate.

There are three common types of loan interest: simple interest, compound interest and precomputed interest. It’s important to know how interest is calculated on a loan before you sign a contract, because it can affect how much total interest you pay.

Let’s take a look at how a simple interest loan works, and how this type of interest differs from compound and precomputed interest.


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How a simple interest loan works

With a simple interest loan, interest is calculated based on your outstanding loan balance on your payment due date.

With installment loans, you’ll generally have a fixed repayment term. When you make a payment, some of it goes toward the interest charges, while the rest is applied to the loan principal. At first, more of your monthly payment will typically go toward the interest. Over time, more of your monthly payment will go toward the principal as you pay down the loan balance.

What is the average interest rate on a personal loan?

For example, let’s say you took out a $10,000 loan with a 5% interest rate and five-year repayment term. With a simple interest loan, your monthly payment would be $188.71, assuming your interest rate doesn’t change over the life of the loan. If you made your minimum payment on time each month, you’d pay $1,322.74 in interest over the life of the loan.

With your first payment, just under $42 — or roughly 22% of your payment — would go toward interest. But with your final loan payment, just 78 cents would go toward interest. Let’s take a look at how you would pay down your principal each year with this loan. Remember, this is just one example. When you’re looking into loans, it’s good to ask the lender how your payments will be divided between interest and principal repayment.

Year Interest Principal Balance
1 $459.00 $1,805.55 $8,194.45
2 $366.62 $1,897.93 $6,296.52
3 $269.52 $1,995.03 $4,301.49
4 $167.45 $2,097.10 $2,204.39
5 $60.16 $2,204.39 $0

Key benefit of simple interest loans

A key benefit of simple interest loans is that you could potentially save money in interest.

With a simple interest loan, you can typically reduce the total interest you pay by …

A potential drawback of simple interest loans

While you could potentially save money in interest with a simple interest loan, making a late payment could result in your paying more interest, which could set you back.

If you make a late payment — even just one day behind schedule — a greater portion of your payment may go toward interest. This can affect your loan schedule, potentially adding more time to pay off your loan. Depending on your loan terms, you might also be charged a late fee, which could add to the total cost of your loan.

How simple interest is different from precomputed and compound interest

With a precomputed loan, the interest is determined at the start of the loan — rather than as you make payments — and rolled into your loan balance. This means that even if you pay off the loan early or make more payments toward your principal, you will not get the same reduction in interest charges that you would if your loan had a simple interest rate. On the flip side, late payments on a precomputed loan may not increase the amount of interest you pay — but you could still face late-payment fees.

If you make on-time payments for the full term of a precomputed loan, you’ll generally pay about the same in interest as you would on a simple interest loan.

Compound interest can be a more expensive way of calculating interest. With a compound interest loan, interest is added to the principal — on top of any interest that’s already accumulated.

A compound interest loan will usually cost you more in interest than a simple interest loan with the same annual percentage rate.


Bottom line

Whether you’re shopping for a personal loan, car loan or mortgage, opting for a simple interest loan could save you money. If you apply for and get prequalified from multiple lenders, you can get an idea of what might be the best loan for your situation. But prequalification won’t guarantee approval for a loan.

Before you apply for a loan, make sure you read the fine print thoroughly to understand how the interest is calculated — and ask your lender questions if you don’t understand any of the information provided.

Tips for prequalifying for a personal loan

What is the Social Security wage base for 2018?

Each year, the Social Security Administration establishes a Social Security wage base, determining how much of your salary is subject to Social Security tax. The Social Security wage base for the 2018 tax year was $128,400.

Have you ever looked at your pay stub and wondered why so much Social Security tax gets withheld from your wages? Or maybe you’ve heard about “paying into” Social Security while you work so that you can receive benefits in retirement, but you don’t really know how that works.

Once you know how the Social Security wage base works, you’ll be able to make better sense of what you’re paying.


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Social Security tax

To understand the Social Security wage base, it’s important to first know how Social Security tax works and why you pay it.

Social Security and Medicare make up the Federal Insurance Contributions Act, or FICA, taxes. These taxes help fund retirement and healthcare benefits for retired and disabled Americans and help support the families of people who have passed away.

The current rates for FICA-mandated taxes are 12.4% of your gross wages for Social Security and 2.9% of your gross wages for Medicare. But those rates are split between you and your employer. So when calculating your paycheck, your employer withholds 6.2% of your pay for Social Security and 1.45% for Medicare, and then matches those percentages from its own pocket.

There’s no wage base limit to the amount of Medicare taxes you pay — you’ll pay a flat rate of 1.45% of your wages. And if you earn more than $200,000, you’re subject to a 0.9% additional Medicare tax.

But there is a limit to the amount of income on which the Social Security tax is applied. That limit is the Social Security wage base.

Social Security wage base for 2018

Every year, the Social Security Administration, or SSA, releases the Social Security wage base. The limit shifts annually based on changes in the national average wage index.

This number serves two purposes.

  1. It establishes the maximum amount of an individual’s income that will be subject to Social Security taxes during a year.
  2. It helps in calculating Social Security benefits.

The Social Security wage base increases nearly every year. For 2018, the Social Security wage base was $128,400. For 2019, it’s increased to $132,900.

So what does that look like in real numbers? Let’s say you earned $130,000 from your job in 2018 and didn’t have any pre-tax benefits, like a 401(k) or flexible spending arrangement. Your employer would have withheld about $7,961 (6.2% of $128,400) from your wages. Once you paid in that amount, your employer wouldn’t have withheld any more Social Security taxes from your paycheck in 2018. You might even have noticed a little boost to your take-home pay on your last paycheck.

For 2019, that same gross salary is below the Social Security wage base ($132,900), so your employer would withhold $8,060 (6.2% of the entire $130,000) from your wages.

Reaching the limit

As your income exceeds the Social Security wage base, your employer is supposed to stop withholding Social Security tax from your paycheck.

But if you work for more than one employer, or have a side hustle in addition to your day job, you should keep the Social Security wage base in mind. Different employers might not be aware that you’ve reached the limit collectively, which means they might continue withholding Social Security tax until the end of the year, or until your wages with that employer reach the wage base.

Keep reading: Credit Karma Guide to Filing Taxes for Your Side Hustle

You can ask your employers to stop withholding Social Security taxes once you’ve paid up to the wage base or wait until you file a tax return. Depending on the situations, you may be able to request to receive any excess amount you paid for Social Security tax as a refund, or you could be able to take the excess as a credit against your income tax.

Social Security wage base for the self-employed

If you’re self-employed, the Social Security wage base still applies, but how you pay FICA-mandated taxes is different.

If you are self-employed, you’re responsible for paying the full 12.4% of Social Security tax (up to the Social Security wage base) and 2.9% Medicare tax on your net earnings. These make up the self-employment tax, which you calculate on Schedule SE and attach to your individual tax return.

Fortunately, self-employment taxes are calculated on your net self-employment income, not your gross income, and the wage base limit still applies for Social Security taxes. Say you earned $90,000 from your business but had $10,000 in business expenses; the combined self-employment tax rate of 15.3% (12.4% Social Security + 2.9% Medicare tax) would be applied to your net earnings of $80,000.

You’ll also get two other breaks on your self-employment taxes.

  1. When calculating self-employment tax, your net earnings from self-employment are reduced by half the amount of your total Social Security tax.
  2. You can deduct half of your Social Security tax from your gross income on your federal income tax return. This is taken as an adjustment to income on Line 27 of Schedule 1 attached to your Form 1040.

These self-employed rules are designed to replicate the treatment of Social Security taxes for an employee, for whom an employer’s share of Social Security taxes is not considered wages.

Learn more about paying taxes when you're self-employed

Bottom line

Social Security was designed to help ensure financial security for older and disabled Americans. It’s important to understand how the Social Security wage base works, and how your Social Security benefits will supplement your own retirement savings.

You can open an account on the Social Security Administration’s site to review your latest earnings statement, see your earnings history and estimate your benefits in retirement.

Find out if you’re getting a refund File Your Taxes

How can I get a copy of my tax return?

Keeping tabs on your old tax returns may not be your top concern in life — until a situation comes up when you need them.

For example, if you apply for a mortgage or student loan, you typically have to disclose your income — but lenders won’t always just take your word for how much you earn. That’s where your official tax records come in. They can serve as proof of your income when applying not only for loans but for things like rental housing, government benefits or other kinds of financial aid.

If you don’t have a copy of your tax return on hand when you need it, no problem! You can use a few different methods to get your past tax information.

The first big question: Do you need a full copy of your tax return, or can you get by with a transcript?


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Tax transcripts vs. tax returns

The IRS supplies taxpayers with past tax information in two different formats: tax transcripts or copies of past tax returns.

What is a tax transcript?

A tax transcript is basically a printout summary of the major data on your tax return, including a particularly important one: adjusted gross income, or AGI.

The IRS doesn’t charge for tax transcripts, and you can get one online immediately (or within five to 10 business days, if it’s mailed). You’ll need to register online with the IRS before you can access the Get Transcript online tool.

In most cases, when you need tax return info you can use a tax transcript. Ask whoever needs your tax information whether a tax transcript will be OK or if a copy of the return is required.

Copies of tax returns

A copy of your tax return is exactly that — a duplicate of the return you mailed or e-filed with the IRS. For a fee, the IRS can provide up to six years back, plus the current year’s tax return, if you’ve already filed yours. You’ll need to fill out and mail Form 4506 to the IRS to request a copy of a tax return.

You might need a copy of your old tax return, rather than a tax transcript, if more-detailed information from prior tax returns (like the specific W-2s you filed) is required — or if older tax information is needed.

How to get a copy of your tax transcript

There are three ways to get a copy of your tax transcript.

The easiest way is to use the IRS’s online transcript portal, Get Transcript. To use this service to access your transcripts online, you’ll need to provide your Social Security number, filing status from your most recent return, date of birth and the mailing address from your most recent tax return. You’ll also need a few other things: an email account, a mobile phone with your name on the account, and an account number from an eligible account to verify your identity.

You can also fill out and mail in a copy of Form 4506-T or use the Get Transcript by Mail option through the Get Transcript portal. But if you make your request that way, you should be prepared to wait 30 days to receive your copy. Finally, if you’re a phone person, you can also get a copy of your transcript by calling the IRS at 1-800-908-9946. Phone orders typically take five to 10 business days.

One thing to note: The IRS is now issuing transcripts that block out portions of your Social Security number, telephone number, last name and address. That’s why you’ll have to provide an account number (such as a loan number) to verify your identity so they can use it to match up with your file. By limiting the amount of personal information on the transcript, the IRS hopes to help reduce the risk of identity theft.

How to get a copy of your tax return

If you do need a copy of your tax return, you have a few options.


Bottom line

Big life changes like buying a house, going to college or moving into new digs often require proof of income.

If you’ve forgotten to store a copy of your tax return, or if you’ve lost it, first find out if you can use a tax transcript — this can be easier to get, and it’s free. If that won’t do, there are ways to get a copy of your old tax return. But doing so may take some time and money.

Find out if you’re getting a refund File Your Taxes

United℠ Explorer Card review: Friendlier skies for loyal United passengers

Pros Cons
Good sign-up bonus to help with flight redemptions United’s elite status doesn’t come complimentary
Nice travel and dining rewards No companion fare offer
Travel perks like priority boarding and lounge passes $75 fee for redemptions within three weeks of a flight
Annual fee is waived the first year of card membership (then $95) Annual fee kicks in during the second year

From our partner
United℠ Explorer Card

United℠ Explorer Card

From cardholders in the last year


4 things you need to know about the United℠ Explorer Card

1. Score free rewards flights

With the United℠ Explorer Card, you can earn 40,000 bonus miles after you spend $2,000 in qualifying purchases within the first 3 months your account is open.

You’ll earn another two miles (one additional mile on top of the one mile per $1 earned on each purchase) for every $1 you spend on qualifying purchases for tickets bought from United.

You can also earn two miles total (an additional mile on top of the one mile per $1 earned on each purchase) for spending on restaurants and on hotel accommodations when purchased directly with the hotel. So if you earn the sign-up bonus by making up to $2,000 in qualifying purchases in these categories, you’ll walk away with another 4,000 miles.

Combined, that could be just enough miles to earn two short roundtrip flights within the U.S. — depending on where you’re traveling.

2. No companion fare offer

Unfortunately, the United℠ Explorer Card doesn’t come with a companion fare offer.

A handful of United’s competitors offer this feature on their co-branded credit cards. The rules for how to get this perk vary based on the airline, but essentially it allows you to earn discounted airfare on a second ticket, and sometimes a free ticket, apart from the taxes and fees.

Without a companion ticket, you’ll have to rely on your rewards to score free flights for another passenger.

3. Relax and enjoy the ride

Even though the United℠ Explorer Card doesn’t include a companion ticket (or complimentary MileagePlus Premier status, for that matter), it does come with several flight perks to make your trip more comfortable.

When you first get to the airport, you can check your first standard bag for free on United Airlines flights when you pay for your ticket with your card and include your MileagePlus number in your reservation. If you’re traveling with someone who’s on the same flight reservation, they can also benefit from this perk. This benefit could save you up to $120 on a roundtrip flight for you and a companion.

The card could also help you speed through airport security lines. You’ll receive a statement credit when you use your United℠ Explorer Card to apply for the Global Entry or the TSA PreCheck program. You can get either a $100 statement credit (for Global Entry), or an $85 statement credit (for TSA PreCheck), every four years.

Once you clear security, you can relax in a lounge as you wait for your flight. With the UnitedSM Explorer Card, you’ll receive two one-time United Club passes after account opening and every 12 months thereafter, as long as your account remains open.

Then, when it’s time for your flight, make sure you head over to the gate early to take advantage of priority boarding for you and your companion — as long as you’re both on the same reservation. Remember to use your card to book your flight and include your MileagePlus number in your reservation if you want to get this benefit.

While you’re in the air, you can also save 25% on in-flight purchases for food, beverages and Wi-Fi when you use your United℠ Explorer Card.

Finally, if your flight takes you overseas, you’ll also enjoy no foreign transaction fees on your purchases.

4. Redeeming your miles

You can use your miles to book flights or upgrade your seat on United Airlines.

According to our points valuations, United MileagePlus miles are worth around 72 cents each when redeemed toward domestic flights with United Airlines. That’s not one of the better rates among airline programs.

Still, the United℠ Explorer Card guarantees no blackout dates when you redeem miles for flights operated by United Airlines. But you’ll be hit with a fee of up to $75 if you use miles to book a flight that is scheduled to take off in 21 days or less. So be sure to plan ahead when redeeming your miles.

You can also redeem your miles for hotels, cruises, Broadway shows, gift cards and merchandise such as electronics, housewares and jewelry. But you’ll probably get less value than if you use your points toward flights.

Keep in mind that the United℠ Explorer Card has an annual fee of $0 intro, $95 after first year.

That’s not bad — unless the United℠ Explorer Card is buried in your wallet behind other travel credit cards you use more often. Since United MileagePlus miles are worth around 72 cents each by our account, you’d need to redeem about 13,200 miles each year to break even on the annual fee. To earn those miles, you’d need to spend about $550 each month on flights, hotels and restaurants. If that’s more than you can comfortably fit into your budget, this may not be the right card for you.

Another thing to consider: Are you ready to commit to one airline?

Before you apply for the United℠ Explorer Card, ask yourself how much you prize airline flexibility.

People who frequently fly with United Airlines could get a lot of value out of the United℠ Explorer Card. But if you often use another airline or don’t live near an airport where United flies, you might not have much chance to use the card to its fullest.

Who this card is good for

The United℠ Explorer Card can be a great, cost-effective option for passengers who frequently fly with United Airlines. This card can help you save money, travel more comfortably and build loyalty status with the airline.

Those who fly with United only once or twice a year, or who prefer airline flexibility, might want to opt for a more versatile travel credit card. Ultimately, the value of the United℠ Explorer Card depends on how likely you are to redeem earned miles for flights on the airline.

Not sure this card is right for you? Consider these alternatives.

If you don’t fly with United Airlines on a regular basis, you might want to check out one of these other travel credit cards:

Bank of America® Cash Rewards credit card review

Pros Cons
Choose a 3% cash back category from a list of six spending categories Higher-rate rewards are capped
Get 2% cash back at grocery stores and wholesale clubs Low base rewards rate
Earn a sign-up bonus Not the biggest sign-up bonus
Introductory 0% APR on purchases and balance transfers
No annual fee

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Bank of America® Cash Rewards credit card

Bank of America® Cash Rewards credit card

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Bank of America® Cash Rewards credit card: Flexible bonus rewards with a few catches

There’s a lot to take in with the Bank of America® Cash Rewards credit card. Here are the core features you need to know.

3% cash back on a category of your choice — but there’s a cap

The card has a 3-2-1 rewards structure, but with a twist.

You get to choose your 3% bonus category from a short list, and then you’ll also get 2% cash back at grocery stores and wholesale clubs. But one downside is that your bonus rewards are capped at $2,500 in combined purchases each quarter across the 3% and 2% categories (with 1% earned after that cap). And all other purchases will net you just 1% cash back.

The 3% categories you can choose from are …

You can change your category each month, making it easy to plan for future purchases, or you can keep it the same.

And if you don’t remember to choose your next category one month, you won’t miss out — you’ll keep earning the 3% in your choice category until you hit the cap.

Average cash rewards bonus

As a new cardholder, you’ll earn a $150 cash rewards bonus after you spend at least $500 on purchases in the first 90 days the account is open. That’s right in line with other cash back cards that have no annual fee. 

Automatic redemption for Bank of America accounts

You can redeem your cash back for any amount and at any time for …

You can even set some of these redemption options automatically, like an electronic deposit into a Bank of America checking or savings account. But if you choose an automatic redemption, or you want to contribute your cash back to a qualifying 529 account, you have to have a minimum of $25 before you can start redeeming.

12-month intro APR offer

When you first open the card, you’ll get access to an introductory 0% APR promotion on both purchases and balance transfers for the first 12 billing cycles from your account opening. After that, the regular APR is a variable 16.24% - 26.24% for both.

Before you transfer a balance from a high-interest card, know that you need to make the transfer in the first 60 days of account opening to qualify for the intro APR for balance transfers, and there’s a balance transfer fee of 3% (minimum $10) of the transaction amount. There are other balance transfer cards out there that could be a better fit.

But if you need to finance a large purchase, this introductory APR could save you a lot of money on interest.

Who this card is good for

The Bank of America® Cash Rewards credit card is a solid choice if you spend a lot in at least one of the card’s 3% bonus categories and like having the option of switching back and forth, or you spend a lot at grocery stores and wholesale clubs, where you’ll get 2% back.

But if you’re a big spender, the card’s bonus rewards cap on combined purchases in your choice category and grocery/wholesale club purchases each quarter may be a deal-breaker.

Also, it’s possible that much of your spending would fall under the card’s base 1% rewards rate. With several credit cards out there offering 1.5% or even 2% cash back on every purchase you make, it may not make sense to settle for 1%.

As you consider whether the card is right for you, take a look at your spending habits and preferences to make sure.

Not sure this is the card for you? Consider these alternatives.

If you’re still on the fence about the Bank of America® Cash Rewards credit card, here are some other cards to compare it with.

Rent-control measures gaining traction in some U.S. states as rents continue to rise

Some states are making moves to crack down on rising rent prices.

Recently, Oregon became the first to enact statewide legislation that would cap, via rent control, how high rent prices can be raised. Meanwhile, rent-reform efforts have been gaining momentum in California, Washington state and Illinois.

Rent control works by mandating that rent in qualifying buildings can only be increased by a certain amount over a period of time. In the case of Oregon, qualifying rent won’t be able to rise more than 7% (plus inflation) each year.

These moves come as new Zillow Economic Research data show that the median U.S. rent rose 2.4% from February 2018 to February 2019, to a monthly $1,472.

Want to know more?

How did we get here?

Wages are rising at a slower pace than rents. Bureau of Labor data show that the real average hourly wage for U.S. workers rose from $10.73 to $10.93 between February 2018 and February 2019, a 2.2% increase.

Right now, someone renting at the median U.S. monthly rent of $1,472 and being paid the real average hourly wage of $10.93 would need to work nearly 34 hours per week just to cover their monthly rent and nothing else.

And while rent prices have slowed to a much steadier pace after years of steeper growth, they’re still creeping up.

What’s the debate over rent control?

In the past few years, rent control has been a hot-button issue as rent prices have climbed. Affordable-housing advocates argue that rent control helps keep housing affordable for all.

Meanwhile, landlords argue that rent control doesn’t address underlying issues facing the housing market, such as a lack of construction of affordable, rather than luxury, apartments.

What happens next?

The impact that rent reform efforts could have on you depends on where you live.

If you’re in Oregon, the newly passed legislation means that, effective immediately, your rent can’t rise more than 7% plus inflation annually — but new construction built in the past 15 years is exempt from the law. So if you want a rent-controlled apartment in Oregon, consider when the property was built before you sign a lease.

Rent-reform efforts have also been proposed recently in California, Washington state and Illinois, but none has gained enough support yet to pass.

According to the Wall Street Journal, momentum has been growing this year for pro-tenant legislation like rent control in New York state, while some legislators in California may also redouble efforts to pass such legislation.

How to get a personal loan

There are a few steps to take when you’re looking into getting a personal loan. Whether you need money for debt consolidation, a home improvement project or an emergency expense, taking out a personal loan can help you pay for different things — and it can be relatively simple to apply.

Personal loans are a type of installment loan, which means you borrow a set amount of money upfront and pay it back in installments, with interest, over a period of time.

Financial institutions — including online lenders, banks and credit unions — offer personal loans. The amount you qualify for and your terms will vary based on a number of factors, including your credit health.

Like a roadmap that helps you navigate a new city, having a plan to apply for a personal loan can help you find the best options for you. A good plan should include how you’ll use the money, the amount you need and how much you can afford to pay back every month.

Here are some steps to take when you want to get a personal loan and are getting ready to apply.


  1. Check your credit
  2. Apply for prequalification
  3. Compare loan offers
  4. Apply for a personal loan
  5. Review the terms
  6. Close on the loan

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Step 1: Check your credit

Your credit scores, combined with other factors, can affect your approval odds for a personal loan.

You can request one free credit report every 12 months from each of the three major consumer credit-reporting bureaus — Equifax, Experian and TransUnion — by visiting AnnualCreditReport.com.

You can also use Credit Karma to check your Equifax® and TransUnion® credit reports and monitor your VantageScore® 3.0 credit scores from Equifax and TransUnion for free year-round.

Although it’s important to know your credit scores, there are other factors that affect the terms of your personal loan. A low debt-to-income ratio, or DTI, which is a comparison of your income to your outstanding debt obligations, might improve your chances of getting approved for a personal loan with a lower interest rate. To get an idea of the DTI that a lender might see, use your credit reports, which show your account balances, to calculate your debt-to-income ratio.

A borrower with good-to-excellent credit, a good debt-to-income ratio and a steady income may be seen by potential lenders as a good candidate for a personal loan.

By checking your credit reports and ensuring the information on them is correct and up to date, you’ll be able to talk to lenders with confidence.

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Step 2: Apply for prequalification

Getting prequalified gives you a sneak peek into the personal loan offers you might qualify for.

Many lenders can do a prequalification check by performing a soft credit inquiry, which won’t affect your credit. They may also ask for your income, monthly debt obligations and personal information like your Social Security number.

If you get prequalified for a personal loan, you’ll have a better idea of what a lender may be willing to offer you — but remember, prequalification isn’t a guarantee.

FAST FACTS

Work to boost your chances of getting approved

You may not qualify for a loan if, among other factors, your income or credit scores are lower than what the lender requires or if your debt-to-income ratio is considered too high. If there is room for improvement on your credit health, here are a few steps you can take.

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Step 3: Compare loan offers

Make a list of the best personal loans you find. Include the financial institution, loan amount, annual percentage rate, whether the interest rate is fixed or variable, loan term, fees and total interest paid over time.

This will help you determine the offer that works best for you.

The average interest rate for a two-year personal loan from a commercial bank is 10.7%, according to Federal Reserve data from the fourth quarter of 2018. It’s common to see personal loans that range from $2,000 to $50,000.

Step 4: Apply for a personal loan

Once you’ve found the lender and loan that fit your needs, fill out the loan application.

You’ll typically need to supply an official form of identification, address verification and your income. The lender will perform a hard credit inquiry, which may briefly lower your credit scores by a few points.

Step 5: Review the terms

Reading your loan agreement may sound like a snooze fest, but you need to know what you’re promising before taking on debt.

Make sure you understand the monthly payment, interest rate, fees, whether the lender can change the loan terms (and when), and how much interest you’ll pay over the life of the loan.

If there’s anything you don’t understand, ask the lender to explain it. Need a quick primer? Check out our guide on the personal-loan terms to know.

Step 6: Close on the loan

Once you understand and are comfortable with all of the loan details, sign on the dotted line. If you’re consolidating debt, the lender may pay off the accounts for you or send the money directly to your bank account — often within a business day or two.

After closing on your loan, you can use the funds as planned and begin making your scheduled loan payments.


Bottom line

Getting a personal loan can help you consolidate credit card debt and finance expenses with a low interest rate, and using one responsibly can also help you build credit.

Having a mix of credit types, making on-time payments and lowering your credit utilization can all help improve your credit health. As you pay back your loan, check your credit scores to see whether your creditworthiness is improving.

If you’re able to put in the work and improve your credit, the next time you need to apply for credit you may find that you qualify for better rates.

How to find the best personal loan for your needs

The best place to get a car loan

What’s the best place to get a car loan? The answer varies based on each borrower’s needs, preferences and credit history. The good news is there are a variety of options out there to consider.

Before you sign a contract and drive off the lot, take some time to understand the pros and cons of different auto loan options, including banks, credit unions, online lenders and dealerships. Doing your research could help you find the best possible loan offer for you.

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Dealer financing

There are three common routes you can take when getting your car loan financed by a dealer:

Dealer-arranged financing

Dealers often have relationships with banks and other lending institutions. With dealer-arranged financing, the dealer connects the borrower with one of its lending partners, acting as an intermediary in the financing process.

The big advantage of dealer-arranged financing is that it’s incredibly convenient. The borrower doesn’t have to put any effort into finding a lender. From start to finish, the dealer supervises the process to help you find a loan.

Still, while dealer-arranged financing can simplify the process of finding a loan, you aren’t shopping around across a wide range of lenders to compare rates. This could result in your paying a higher interest rate than you would have if you’d done your own comparison shopping.

Another reason the interest rate may be higher is that lenders may include a fee to compensate the dealer for handling the financing process. As a result, you could wind up paying a higher interest rate than you would have if you’d chosen to deal with the lender directly.

Captive finance companies

Many of the larger carmakers have their own in-house financing divisions. These are called captive finance companies. Examples include Toyota Financial Services, GM Financial and Ford Credit. These companies may finance new or manufacturer-backed certified pre-owned cars.

When you’re buying a car at a dealership, the dealer may send your loan application to the captive finance company at the same time it reaches out to other lending partners. If you know the make and model of the car you plan to buy, you may also be able to apply online for a loan from a captive finance company before visiting the dealership.

Captive finance companies sometimes offer appealing promotional incentives, such as loans with 0% APR. But these deals may only available only to borrowers with strong credit.

‘Buy-here, pay-here’ financing

With “buy-here, pay-here” financing, the auto loan is financed in-house by the car dealership. The lender and the car dealer are one and the same.

In this car-buying process, the dealership determines whether you’re eligible for a loan and, if so, how much. If you choose a car from the dealership and finalize the loan, payments are typically made directly to the dealership. The lender may place a device on your car that helps it locate or disable your car if you miss a payment.

Buy-here, pay-here financing is often geared toward those with subprime credit. If your credit needs work and you’re struggling to get approved for a car loan, a buy-here, pay-here dealership could provide you an option.

But consider buy-here, pay-here dealerships a last resort. They typically charge the highest interest rates of all lenders out there, and some may also charge a bunch of fees. If you go this route, be sure to read the fine print.

Banks

When dealing with banks, you have the opportunity to get preapproved for several car loans, compare rates and identify the best offer for you.

Banks may advertise low or competitive interest rates — but often only offer those to borrowers they define as having “excellent” credit.

Your bank financing options may also be limited by the type of car you want to buy. Some banks won’t finance cars over a certain age or mileage. If you plan to purchase an older used vehicle, you may have difficulty finding a bank that will give you a car loan.

Why car loans from banks may be a better option than dealership loans

Credit unions

A credit union is a nonprofit organization that returns profits to its members through higher savings rates as well as lower fees and loan rates.

Membership comes with benefits. Credit unions generally offer lower interest rates than banks do. According to the National Credit Union Administration, the average credit union interest rate on a five-year loan for a new car in the third quarter of 2018 was 3.37%, while the average rate for the same loan through a bank was 4.93%.

If you have poor credit, a credit union may be more flexible than a bank. Credit unions build relationships with their members that allow them to offer a more personalized experience.

4 reasons to consider a car loan from a credit union

Online lenders

With online lenders, you can easily shop around and evaluate rates and loan terms from the comfort of your living room. In some cases, you can preview offers from various lenders on one site so you can easily compare loans side by side.

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As with credit unions, some online lenders may be more willing to work with borrowers with less-than-perfect credit. But these lenders may offer steep interest rates. Subprime borrowers can get charged interest rates on their car loans that reach as high as 25% or more. On the flip side, if you have good credit, an online lender might offer you a lower interest rate than you could get with a traditional bank.

With online lenders, customer service may vary dramatically from company to company. Research the lender’s customer service history before signing on the dotted line. As with dealerships, banks and credit unions, you should check out reviews on sites such as Yelp, and be sure to check with the Better Business Bureau and Consumer Financial Protection Bureau to see if any complaints have been lodged against the company.

Should you consider an online car loan?

Bottom line

Your financial situation and the type of vehicle you’re purchasing are key factors in determining the type of lender that’s best for you. It’s always a good idea to get several quotes from different types of lenders so you can compare offers and help make sure you’re getting the best rate.

If you can’t qualify for a car loan or are being offered sky-high interest rates, consider getting a co-signer, saving up for a larger down payment or taking some time to build your credit.

Emergency loans: What you need to know

If you don’t have enough in savings to cover an emergency expense, you might be wondering what your options are to cover this unexpected cost.

Maybe you’re considering an emergency loan. If so, you may have a number of options, depending on your credit health.

Whether your car breaks down or you find yourself unexpectedly battling an illness, you may need extra cash to get through. We’ll discuss the different types of emergency loans that could be available to you, and we’ll also give you tips on how to navigate the borrowing process and what other options you may have.


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What are emergency loans?

Unlike a student loan or a mortgage, emergency loans can be used for many different purposes.

Emergency loans can come in the form of unsecured personal loans, credit card cash advance loans, payday loans or even pawn shop loans.

Emergency loan funds can be deposited directly into your bank account within a day or two of approval, depending on the lender. To fully understand your options, make sure to do your research beforehand and read any fine print throughout the process.

While an emergency loan may help you get through financial difficulties — according to the Federal Reserve, 40% of Americans can’t cover a $400 emergency — there can be high fees and interest rates associated with some of them, depending on the type of loan you apply for and its terms. For example, payday loans can have steep interest rates, but unsecured personal loans may have lower rates, particularly if you have good credit health.

Types of emergency loans

If you need a loan in an emergency, there are several options to consider. But what type of loan you qualify for can be largely dependent on your creditworthiness.

Personal loans

If you have good credit health, you may qualify for an unsecured personal loan. Personal loans often have flexible uses for emergency situations. Personal loans are typically installment loans given out in a lump sum with a fixed interest rate. They could have better interest rates than credit cards and can be paid back over a set period of time.

You don’t need to borrow a huge amount, either. If you’re in need of a small amount of money, a small personal loan can help. For example, you could get a small personal loan of $1,000 to help you in a time of need. Just remember that you should take out only what you actually need and can comfortably afford to pay back. 

Credit card cash advance

A cash advance is essentially using the available balance on your credit card to take out a short-term loan. The credit card company will typically charge a higher interest rate for cash advances than it does for normal purchases, plus a processing fee. Also, interest will start accruing on the advance when you take the money out, so be careful of how much money you request.

Payday loans

A payday loan is a short-term loan that typically must be repaid by your next payday. Unlike a personal loan, which is typically paid back in installments, payday loans are paid back all at once.

But be aware: Payday loans can have APRs as high as 400%, according to the Consumer Financial Protection Bureau.

The problem with payday loans is that they can lead to a debt trap. Many borrowers might not be able to pay back the loan — and are then stuck in a cycle where they continue to borrow in order to pay off debt. The Consumer Financial Protection Bureau reports that four out of five payday loans are “re-borrowed” within a month — often around the time when the loan is due — so you should only turn to this option as a last resort.

Pawn shop loans

For a pawn shop loan, you typically have to use an item of value to secure the loan. A pawn shop will assess the value of the item and keep it on hand as collateral to back the loan.

If you’re unable to pay back the loan, the pawn shop can sell your item. Because a pawn loan doesn’t involve a credit check or application process, it could be good for those with few traditional credit options.

Title loans

Another option is a title loan. If you’re a car owner, you can use your car’s title as leverage to access a short-term loan. This might seem like an attractive option since there typically isn’t a credit check involved. But there’s a chance your car can be seized if you aren’t able to repay the loan, so this option should be carefully considered.

Alternatives to emergency loans

Before rushing to take out an emergency loan, you may want to consider some alternative options.

Low-interest credit cards

If you have good credit, you could qualify for a low-interest credit card with a 0% intro APR on purchases for a period of time. You could use this new credit card as a short-term loan and pay it back within the promotional period. Just remember that applying for a new credit card will initiate a hard inquiry, which can affect your credit scores. And you should only charge what you know you can pay off within the intro APR period — any leftover balance will begin to accrue interest if it’s not paid off in time.

Medical bill repayment plans

If you have an unexpected medical bill, you can talk to the hospital about repayment options. In many cases, a provider may work with you on a payment plan.

Some hospitals provide financial-assistance options specifically for under-insured or low-income families. Each hospital may have different financial assistance programs, so get in touch to see if you qualify.

Student loan payment restructuring

Federal student loan borrowers may be able to free up some money by opting for an income-driven repayment plan, which may make your monthly payments more affordable. This is a repayment plan that caps your monthly payment at a certain percentage of your discretionary income, which could lower your monthly payment amount. In some cases, you might qualify to pay $0 per month based on your income.

You can also consider deferment or forbearance to free up some money by stopping payments temporarily. Just be aware that depending on the types of student loans you have, your loans may continue to accrue interest while they’re in deferment or forbearance. So while you’re freed from making payments for now, your overall balance that you’ll need to pay back could continue to increase.

Home equity line of credit

You may also consider getting a home equity line of credit — often referred to as a HELOC. If you’re a homeowner, this is an option in which you use your home as collateral when applying for a loan. You’ll want to know the ins and outs of your repayment term, because you might be required to pay back the loan immediately after the draw period or have a set amount of time to pay it back.

Start planning for your next emergency

If you need an emergency loan, you’re not alone: 40% of Americans can’t cover a $400 emergency expense, according to the Federal Reserve. And it’s not just low-income earners dealing with this, either. About 1 in 10 workers making more than $100,000 a year live paycheck to paycheck, according to a CareerBuilder survey.

Although it can be difficult to break the paycheck-to-paycheck cycle, you can start setting aside small amounts of money for emergencies.

Even setting aside $10 each paycheck can help. You can adopt a “pay-yourself-first” model, where you make sure some of your earnings go into a savings account each payday so you’re not tempted to spend more money on discretionary purchases.

Keeping your savings in a separate, high-yield savings account can help make it easier to keep these funds reserved for emergencies. The key is to save what you can consistently, so you have an emergency cushion for the future.

Why everyone should have an emergency fund

Bottom line

No one wants to experience a financial emergency — but it happens. If you need a quick loan, you can consider an emergency loan — but it’s crucial to understand the total cost of this option and how fees and your interest rate can increase the cost.

Knowing what you’re agreeing to and reviewing all of your loan options can help you deal with the emergency and have peace of mind that you’ve made the right decision and can repay whatever money you’ve borrowed.

Buy-here, pay-here financing: What you need to know

If you have less-than-stellar credit, it may be tough to get approved for a car loan. Some car dealerships offer “buy-here, pay-here” financing to borrowers with poor credit — but it comes at a price.

With buy-here, pay-here loans, the car dealership acts as both the seller and the lender by offering in-house financing. Dealers sometimes advertise these loans as “no credit check” loans, which can make them especially appealing to borrowers with low credit scores.

Buy-here, pay-here loans may sound like a lifesaver, but their high costs probably aren’t worth it. Let’s take a look at how they work.


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How does buy-here, pay-here financing work?

When you buy and finance a car at a traditional car dealership, you choose a car and then the dealer typically passes your information to a network of potential third-party lenders. If you’re approved for a car loan, you make monthly payments to the lender that finances the loan.

Buy-here, pay-here dealerships flip the car-buying process in a few key ways. These dealerships sell and finance the cars straight off their lots — you might see them advertise with “we finance” or “no credit, no problem.”

If you plan to buy a car through a buy-here, pay-here dealership, you may be asked to verify your income and proof of residence, but the dealer typically won’t check your credit. Once the dealership determines the loan amount you qualify for, it will show you cars within that price range.

The average cost for a car on a buy-here, pay-here lot in 2017 was $7,201, and the average down payment was $801, according to an industry report from the National Independent Automobile Dealers Association. 

Drawbacks of buy-here, pay-here financing

Buy-here, pay-here loans are touted as an easy way for people with bad credit to qualify for financing — but they come with a host of expensive and inconvenient drawbacks.

They can be expensive

Buy-here, pay-here dealerships may not cut you any slack when it comes to the interest you’d pay on a loan. The average interest rate on this type of loan hovers around 20%, which is much higher than what you’d find at most banks and credit unions. Buy-here, pay-here dealers may also hit you with other fees.

In the third quarter of 2018, the average interest rate on a four-year, used-car loan was 5.31% from a bank and 3.44% from a credit union, according to a report from the National Credit Union Administration.

These high costs can result in financial trouble: About one in three borrowers defaulted on buy-here, pay-here loans in 2017, according to a report by the National Independent Automobile Dealers Association.

On top of the high interest and fees, you might end up paying a lot more for your car than it’s worth. Traditional lenders generally limit the loan amount based on the vehicle’s value. But buy-here, pay-here dealerships may not set those limits, meaning you might borrow — and pay — more than the car is worth. This could put you upside down on your loan as soon as you drive off the lot.

They might not help you build credit

Making on-time payments can help improve your credit and help you appear less risky to future lenders. But some buy-here, pay-here lenders may not report your payment history to the main consumer credit bureaus. So even if you’re keeping up with your payments, you may not reap the benefits of building credit.

The lender may install a tracking device

Because you might appear to be a bigger credit risk if you have low credit scores, dealers want to be sure they can easily repossess the car if you stop making your payments.

About two-thirds of buy-here, pay-here dealers install devices that track the car or can prevent it from starting, helping the dealer recover the vehicle if you default on the loan. But giving up a measure of your privacy may be a nonstarter for you.

Inconvenient payment structure

You may need to make weekly or biweekly trips to the dealership to make your payments, which can be inconvenient compared with making a payment online or by mailing a check.

Alternatives to buy-here, pay-here financing

Don’t be fooled into thinking that a buy-here, pay-here car loan is your only option. Here are a few alternatives to consider.

Shop around

If buy-here, pay-here financing is all you’ve considered so far, look elsewhere. Start by checking your credit scores, then compare auto loan quotes online and at local banks and credit unions. Some used car dealerships offer loans for borrowers with poor credit.

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Look at the annual percentage rate, length of the loan, monthly payment and any fees for each loan option. Ask if the lender will report your payments to the main consumer credit bureaus, which can help you build a credit history.

Pay cash for a pre-owned car

Go the old-school way and save up for a car with cash. Take steps to improve your credit over time, and eventually you may qualify to finance a newer car with a lower interest rate and use the pre-owned one as a down payment.

Buying a car: How much can you afford?

Get a co-signer

If you have spotty credit history, adding a co-signer to the car loan may help you get approved. Ask a trusted friend or relative who has a healthy credit history and understands the risks. If you fail to make a payment, the co-signer is on the hook to pick up the slack. Missed or late payments appear on both borrowers’ credit reports, which can hurt both of your credit.


Bottom line

Even if you have low credit scores, a buy-here, pay-here auto loan may not be your best option. You could end up paying way more than your car is worth, along with hefty interest costs.

Before you head to a buy-here, pay-here lot, check your credit and consider applying for preapproval from a few lenders. This could help you compare interest rates and loan terms across lenders. Knowing your options can help you get the best deal for you on a car loan.

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Spirit Airlines World Mastercard® review: Worth it for Spirit Airlines frequent fliers?

Pros Cons
Access to exclusive off-peak rewards flights Miles can only be used on flights
Double miles on all purchases Loyalty program offers few perks
Generous sign-up bonus available Fees are charged on rewards-redemption flights if not booked far in advance

What you need to know about the Spirit Airlines World Mastercard®

Flying Spirit Airlines is all about saving money. And with the Spirit Airlines World Mastercard®, you can bump up those savings another notch or two.

Access to off-peak rewards flights

In what we consider to be its standout feature, the Spirit Airlines World Mastercard® gives cardholders access to off-peak rewards flights, which are available exclusively to holders of Spirit-branded credit cards. With off-peak flights starting at 2,500 Free Spirit miles, this type of rewards redemption can give your miles the most value by far.

But keep in mind that these flights are called “off-peak” for a reason. During popular travel times, like the middle of the summer or holidays, they likely won’t be available.

During these busy seasons, you’ll be charged the Standard or Peak rate for rewards flights. To see all of the dates where off-peak flight prices are available, check out the Spirit Airlines awards chart.

Spirit Airlines miles become far less valuable when you redeem them for Standard and Peak flights, because they’re four times (starting at 10,000 miles) and six times (starting at 15,000 miles) more expensive.

If you have the flexibility to plan your travel schedule around the dates that off-peak flights are available, then the Spirit Airlines World Mastercard® could be a great choice. But if you don’t have that luxury, or don’t appreciate no-frills travel, you may want to pass on this card.

Generous and attainable sign-up bonus

For a limited time, Spirit Airlines is offering new cardholders 15,000 bonus Free Spirit miles after they make their first purchase and 15,000 additional bonus miles after spending $500 within the first 90 days of opening the account. With such a low spending requirement, many folks should be able to earn the 30,000 bonus miles without having to make any major changes to their normal spending habits. That being said, we never recommend spending more than you can afford just to earn a sign-up bonus.

At the off-peak rewards flight price of 2,500 miles, 30,000 bonus miles could get you six round-trip flights. You’d be hard-pressed to find many other airline card rewards bonuses that offer more value than that.

Double miles on all purchases

Unlike some other cards that have complicated miles systems, Spirit Airlines keeps things simple — you get two miles per $1 for every purchase you make with the Spirit Airlines World Mastercard®.

This means you can earn a free one-way off-peak flight for every $1,250 you spend with the card, which is a great deal.

The same Spirit Airlines customer service

Spirit Airlines has become famous (or some would say, infamous) for all of the different tactics it employs in order to keep flight prices so low.

Going into the specifics of all the ways Spirit Airlines nickels-and-dimes its customers isn’t the purpose of this article. But suffice it to say that Spirit is all about offering super-cheap flights and charging for almost everything else.

If you aren’t a fan of the Spirit Airlines way of doing business, then owning this credit card is unlikely to change your mind. Cardholders get little preferential treatment — no free checked bags, no in-flight discounts and no seat upgrades.

In fact, Spirit stays true to its “charge for everything” model by adding a fee to rewards flights unless they’re booked more than 181 days in advance. The fee ranges from $15 to $100 depending on how long you wait to book.

What else you need to know

Here are a few other details of the Spirit Airlines World Mastercard® to keep in mind.

Understanding your points and redemption

If you’re looking for rewards-redemption flexibility, the Spirit Airlines World Mastercard® isn’t the card for you — Spirit Airlines miles can only be used for Spirit flights. And again, to get the best value for your miles, you’re further limited to off-peak Spirit flights.

Spirit Airlines doesn’t technically have any rewards blackout dates, but they do say that rewards seats are limited and may not be available on all flights and dates.

Other airline rewards programs offer a much better variety of redemption choices. For example, the Southwest Rapid Rewards program allows cardholders to use Rapid Rewards miles on hotels, car rentals and gift cards, in addition to flights.

The best airline rewards programs of 2019

And cash back cards, like the Citi® Double Cash Card, or general travel credit cards, like the Discover it® Miles, are also better choices for travelers who value having options when redeeming rewards.

Who this card is good for

Spirit Airlines has built a successful business from attracting frugal customers who will go to great lengths to save money. And this is exactly the type of customer who can get the most out of the Spirit Airlines World Mastercard®.

Spirit Airlines frequent fliers will no doubt enjoy pinching every penny of value out of the card and may not be bothered by its lack of extras or the need to work around Spirit’s off-peak flight schedule to get the best deal.

But if you’re a traveler who likes a little more pampering and perks from your airline rewards membership, then this isn’t the credit card you’re looking for.

Not sure this is the card for you? Consider these alternatives.

5 reasons to make a car down payment

You can think of a car down payment as the first payment you make when you finance a vehicle.

A down payment is seen as a percentage of the car’s purchase price. If you’re buying a $30,000 car and make a 10% down payment, the down payment would be $3,000 at the time of sale. This down payment can be paid with cash, by trading in your old vehicle or a combination of both.

Lenders often want you to make a down payment to show your commitment to paying back the loan and to get some compensation for the car upfront. As a general rule, aim for no less than 20% down, particularly for new cars — and no less than 10% down for used cars — so that you don’t end up paying too much in interest and financing costs.

Benefits of making a down payment can include a lower monthly payment and less interest paid over the life of the loan. Let’s look at five reasons why putting cash down on your new vehicle makes a lot of sense — and what you can do if making a down payment isn’t possible.


1. You’ll pay less interest

The more money you put down for a car, the less money you need to borrow for the car. With a smaller loan, you’ll pay interest on a lower balance, which means your total interest cost will be less, too.

If you took out a five-year $30,000 car loan with a 4.5% interest rate, you’d pay a total of $3,557.43 in interest. But with a 20% down payment ($6,000) on the same car, you’d pay only $2,845.95 in interest on that five-year loan — a savings of more than $711.

With a down payment, you may also get a lower interest rate. That’s because your loan-to-value ratio — the amount you borrow versus the value of the car — is one factor that affects your interest rate.

2. You may get approved for a loan more easily

A down payment may help you to more easily qualify for an auto loan, especially if you have lower credit scores. Without a down payment, the lender has more to lose if you don’t repay the loan and they need to repossess and sell the car. Cars can begin losing value as soon as you drive off the lot.

What’s the minimum credit score needed for an auto loan?

3. Your monthly payments could be lower

Making a down payment and reducing the amount you need to borrow can also decrease your monthly loan payment amount. Let’s say you buy a vehicle with no down payment. With a five-year $30,000 loan at a 4.5% interest rate, your monthly payment would be $559 (or a little more if you include sales tax in the loan).

But if you made a down payment of $6,000 and borrowed just $24,000 for the same car at the same interest rate over five years, your monthly payment would drop to $447. Making that down payment would save you $112 each month.

4. You might qualify for special programs

Dealers may offer special financing programs with low rates or other incentives. In some cases, these programs require you to make a larger down payment.

When dealers advertise special incentives, they’re required to disclose the terms, so read the fine print carefully and ask questions to make sure you understand the down payment requirements.

5. You can offset depreciation

Vehicles typically lose around 15% of their value each year, but new cars have a faster rate of depreciation. They can lose 25% or more of their value in their first year.

If you don’t make a substantial down payment, you could end up upside down on your loan (owing more than your vehicle is worth) as soon as you drive your car off the lot.

Being upside down could make it difficult to sell or trade in your car down the road, because you may not be able to get enough money to pay what you owe on your car loan.

How to get out of a car loan when you’re upside down

What if you can’t make a down payment?

While making a down payment is ideal, not everyone can afford it. If you can’t come up with the cash, you have a few options to try to protect your finances.

Learn more: How to find good, cheap car insurance

Bottom line

Making a down payment on a car can save you money and increase your chances of getting a loan — and better loan terms — especially if you have less-than-perfect credit.

If you don’t need to buy a car right away, consider saving for a down payment before you start shopping around for a car loan. Creating a budget could help you set money aside and figure out how much you can save to put down on a car. And then once you’re ready, you can go out and look for your perfect ride.

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Should I consider a merchant cash advance for my business?

Sometimes, a small business may see more cash going out than coming in, which can create a cash flow problem.

Getting a bank loan in this situation may seem like an obvious solution, but it might prove difficult if, for example, you’ve got bad credit. That’s where this special type of financing may be able to help — business owners with low credit scores might find they have a better chance of getting a merchant cash advance, or MCA.

Merchant cash advances provide an upfront sum of cash that’s repaid over time from future credit card sales. But like any financial product, MCAs have their pros and cons. One upside is an immediate improvement in your business’s cash flow. You’ll have money on hand to pay overdue, current and new bills. But one major downside is that MCAs are expensive and repaying them may make your business’s financial situation worse in the long run.

Let’s take a closer look at merchant cash advances to find out if it’s a potential solution for your small-business cash flow problem.


What is a merchant cash advance?

An MCA converts anticipated debit and credit card sales into immediate capital. These cash advances technically aren’t loans, since there’s no bank, no interest rate and no set repayment period. Instead, a financing company supplies a sum of money upfront in exchange for a specified percentage of sales over time — also known as receivables — as the form of repayment. These receivables are primarily paid to your business through debit and credit card purchases.

What a merchant cash advance costs

A merchant cash advance has three components.

1. Cash advance

The cash advance is the amount of cash you request and receive upfront.

2. Repayment amount

The repayment amount is the total amount you’ll pay back for the merchant cash advance. Since a merchant cash advance isn’t technically a loan, it doesn’t have a true annual percentage rate. But that doesn’t mean MCAs don’t come with additional costs. In fact, this type of financing can involve a variety of fees, which are added to the total repayment amount. If an equivalent APR were calculated, it could be more than 80%, depending on how quickly you repaid the merchant cash advance.

The most significant MCA fee is the factor rate, which is the primary way an issuer determines the cost of your cash advance. When using factor rate to calculate the total repayment amount, your lender multiplies your cash advance by the rate, which typically ranges from 1.1 to 1.5.

For example, if you received a $10,000 cash advance with a 1.4 factor rate as the only thing determining your borrowing cost, your total repayment amount would be $14,000, making your fee $4,000 — that’s essentially a 40% fee on your cash advance.

Your factor rate depends on a number of things, such as your industry, business’s health and credit card sales history, all of which help determine your level of risk to the financing company.

3. Holdback rate

The holdback rate is the percentage of daily debit and credit card sales used to pay back your cash advance. Holdback rates vary, but can range from 5% to 20%.

Say you received a merchant cash advance with a repayment amount of $65,000 and a 10% holdback rate. On these terms, repayment would begin after the MCA and then continue until 10% of your daily credit card sales totaled $65,000. So if your daily debit and credit card sales average is $5,000, and assuming you’re open for business every day, it could take more than four months to pay back the $65,000 advance.

While your total repayment amount never changes, your payments will vary day-to-day as your sales volume fluctuates. When your sales increase, you’ll owe more toward your balance for that day. When your sales decrease, you’ll owe less.

Pros and cons of a merchant cash advance

While the idea of getting cash quickly for your business can be tempting, consider the benefits and drawbacks of merchant cash advances before you decide it’s for you.

Pro: You don’t have to offer up collateral

Merchant cash advances are unsecured, which means you won’t have to pledge your home, car or other assets.

Pro: Your odds of approval may be higher

Chances of being approved for a merchant cash advance tend to be higher. The Federal Reserve’s 2017 Small Business Credit Survey found that 79% of businesses that applied for an MCA were approved, compared to 54% that were approved for a Small Business Administration loan or line of credit and only 50% that were approved for a personal loan. Companies that offer merchant cash advances typically consider the age of your business and your credit card sales when determining your eligibility.

Personal loans from banks: 5 things to know

Con: MCAs can come at a high cost

A merchant cash advance can be risky for small businesses. It consumes a chunk of the cash that comes in — even when sales are lower than usual, which could put additional strain on cash flow until the advance is paid off.

Also, the factor rate for an MCA is fixed, and is applied to the entire cash advance upfront. This means that paying it off early won’t lower the cost of the MCA, which is unlike how interest on a typical loan works. With a personal loan, for example, you may be able to pay less to borrow the funds overall by paying your balance off early.

Find a personal loan that works for you

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Con: You could fall into deeper debt

Some merchant cash advance companies will offer an advance to businesses that already have one. This practice, which is known as “stacking,” can trap businesses in debt. Applying for multiple merchant cash advances means having multiple repayment demands from your incoming cash, which could prove too costly for the business to manage.

Con: They’re complicated and not federally regulated

Compared to other types of business financing, merchant cash advances are complex. A 2018 Federal Reserve report revealed that consumers found MCAs overall to be confusing for a number of reasons, including …

Part of why there’s so much confusion around merchant cash advances is because this form of financing isn’t federally regulated. Instead, it’s regulated by each state’s Uniform Commercial Code. This means that merchant cash advances aren’t subject to banking laws like the Truth in Lending Act, which helps protect consumers against inaccurate and unfair lending practices by requiring lenders to provide loan cost details.

Alternatives to a merchant cash advance

There are lots financing options out there (some potentially less expensive than MCAs) — so a merchant cash advance isn’t the only way to get funds for your business. One such option includes unsecured personal loans, which offer fixed terms and interest rates typically between 4% and 36%.

Could a small loan for business help you manage cash flow?

Another option is a business credit card. And if your card reports to the credit bureaus, you’ll have the added benefit of being able to use the card to build your business credit. It may even offer benefits like free employee credit cards or cash back rewards on business purchases.

Find a business credit card

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Bottom line

A merchant cash advance comes with significant risks. Its high fees and complicated terms could leave you in need of more money.

Take some time to shop around and consider all the options available to you. Ask questions and read the fine print. The more you know, the easier it can be to choose the right solution for your business.

Some lenders have started using AI to reduce risk, change approval process

Artificial intelligence may be coming soon to a loan near you.

A growing number of lenders are using artificial intelligence as a tool to analyze more data, including bank account balances and utility payments, to help determine creditworthiness.

Lenders, including a financial services company and a subprime auto lender, have partnered with ZestFinance, an artificial-intelligence company founded by Google’s former chief information officer, to help boost business and reduce losses.

Discover Financial Services will use ZestFinance’s automated machine learning tools in an effort to improve lending decisions and cut default rates, according to a Wall Street Journal report.

Meanwhile, Prestige Financial Services, which specializes in loans for subprime borrowers, has turned to ZestFinance for help with auto loans.

These partnerships mark another step that artificial intelligence has taken into the lending space, and signal its emergence in the industry.

Want to know more?

Why does the lending industry want to use AI?

The lending industry has been integrating artificial-intelligence technology into the mix over the past few years. Lenders now using AI include Synchrony Financial and Ford Motor Services Co.

Access to new consumer data points — including purchasing history, bank data, utility information and social media habits — has led lenders to seek ways to improve the accuracy of their decisions.

In the past, lenders generally used consumers’ credit reports before deciding whether to approve a loan. Now the industry has moved toward considering more variables, which artificial intelligence allows them to do.

“Banks that fail to invest in machine learning will end up fundamentally uncompetitive in a couple of years,” said Discover CEO Roger Hochschild when announcing the company’s work with ZestFinance this month.

What could this mean for you if you’re looking for a loan?

As use of artificial intelligence becomes more popular in the lending industry, the greater the odds that AI could play a role in your future lender’s decision.

Discover says it will start integrating ZestFinance’s artificial-intelligence tools into its loan process later this year, following a trial of the technology. Prestige started using ZestFinance’s technology last year.

BB&T secured credit card roundup

BB&T Bank offers secured credit card options that come with certain perks you can typically find with an unsecured rewards card.

Secured credit cards are designed to help people build or rebuild their credit. These types of credit cards require a cash deposit — the amount of which can vary by lender — to “secure” the account and help reduce risk to the lender. But secured credit cards tend to lack rewards and can come with costly fees.

We analyzed three BB&T Bank secured cards that might be worth considering, depending on your needs.



Best for earning cash back: BB&T Spectrum Cash Rewards Secured Credit Card

Here’s why: The BB&T Spectrum Cash Rewards Secured Credit Card is an option with some potential for people who are looking to build or rebuild their credit and want to earn rewards.

The BB&T Spectrum Cash Rewards Secured Credit Card offers cash back rates that are competitive with many other unsecured cards.

Just be aware that you can only earn the 2% and 3% cash back rates for the first $1,000 you spend in eligible purchases each month. After that, you’ll no longer earn those rates — you’ll earn 1% cash back. The good news is that there’s no monthly spending cap for that 1% cash back rate.

This card also adds a 10% bonus to your cash back redemption amount if you have your cash back electronically deposited into your eligible BB&T checking or savings account. That’s a point particularly worth noting for existing BB&T customers.

The BB&T Spectrum Cash Rewards Secured Credit Card also allows you to redeem rewards for gift cards and other merchandise.

Keep in mind, though, that this card has a $19 annual fee. If you think you can make up that fee by earning enough in cash back rewards, this card may be for you. Just be sure you only use the card to buy what you need. Spending beyond your budget just to earn rewards can be a recipe for debt disaster.

Looking for a secured card?

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Best for travel perks and rewards: BB&T Spectrum Travel Rewards Secured Credit Card

Here’s why: Credit cards that offer travel rewards often come at steep price, sometimes in the form of a super-high annual fee. The BB&T Spectrum Travel Rewards Secured Credit Card gives people with less-than-excellent credit a chance to earn travel rewards — and at a reasonable cost.

This card allows you to earn miles for purchases: You can earn two miles per $1 in qualified spending on airline tickets, hotel lodging and car rentals, and one mile per $1 in qualified spending on all other purchases made elsewhere. You can also earn 20,000 bonus miles when you spend $2,000 in qualifying purchases within your first 90 days from account opening.

Another perk: You can earn one $85 statement credit per account toward either the TSA PreCheck ($85) or Global Entry ($100) program. The statement credit can be earned every four years and applied to either program.

You can also get $50 each calendar year for qualifying airline “incidental” transactions — things like seating upgrades, in-flight food and drinks and baggage fees. When you use the card to make a qualifying purchase, you’ll get a statement credit for it (the credit should post within seven days). Be careful, though — there’s a lot of fine print about what purchases qualify. For one, transactions must be on qualifying “domestic-originated flights on certain U.S.-domestic airline carriers.” Examples of purchases that don’t qualify include tickets, gift cards and duty-free purchases.

All in all, the perks just might make up for the card’s $89 annual fee, depending on your travel and spending habits. We recommend taking some time to do the math and see if the rewards you’re likely to earn will be worth the fee.

Best for a lower interest rate: BB&T Bright Card

Here’s why: The BB&T Bright Card doesn’t offer the travel perks or notable cash back rewards that the other BB&T secured cards do. But its 19.49% variable APR on purchases and balance transfers is the lowest interest rate of the three — something to keep in mind if there’s a chance you’ll need to carry a balance.

The BB&T Bright Card does offer some cash back rewards. With the BB&T Deals program, you can earn cash back for card purchases at certain times with participating stores — it’s up to you to go to the U by BB&T site on your computer or mobile device, look at the list of offers and shop with your card if you want to purchase anything.

Keep in mind that there are other secured cards out there that offer a lower APR for purchases. In addition, the BB&T Bright Card has an annual fee of $19.

If you want to know more about what others think of BB&T’s cards, check out our BB&T cardholder review page.


How to make the most of secured credit cards

If you’re in the market for a secured credit card, it’s likely your priority is to strengthen your credit and later transition to an unsecured card, or get a different card that’s unsecured. Transitioning your card from a secured to an unsecured card typically means getting your security deposit back. And many unsecured cards charge lower or fewer fees and offer better interest rates and rewards.

The good news is that using a secured credit card to help build or rebuild your credit is pretty simple. One key piece is paying your bill — ideally the full balance — on or before the due date every month. Companies that offer secured credit cards may report your payment history to the three major consumer credit bureaus, which can help build your credit if you use the card responsibly. Before you apply for a secured card, it’s a good idea to check with the issuer to make sure it does report payment history.

Not sure if these cards are right for you? Consider these alternatives.

Should I get a personal loan to build credit?

If you’re working to build or rebuild your credit history, you may want to think twice about using a personal loan to do it.

While plenty of lenders may be willing to work with your credit situation, you may have a hard time finding favorable terms. And if you’re not careful, you may find that the lender isn’t helping you build credit at all.

Here’s what you need to know about getting a personal loan to build credit, along with ideas for other ways to help strengthen your credit profile.


How you can use a personal loan to build credit

A personal loan may help with most of the five factors that influence your credit scores.

The fifth factor that can influence your credit profile is recent credit. When you apply for a personal loan — or any type of new credit for that matter — the lender may run a hard inquiry on your credit reports to check your credit history. This can lower your scores by a few points. That said, a single inquiry typically won’t influence your scores significantly, and they can often recover within a few months.

Hard and soft credit inquiries: What they are and why they matter

Why you should think twice before using a personal loan to build credit

Using a personal loan responsibly may be able to help you build credit, but it may not be the best option for everyone — and there are ways that a personal loan can also hurt your credit.

Late payments will hurt your credit

As with any form of credit, one obvious risk with personal loans is that payments 30 days late or more typically show up on your credit reports — and that can lower your credit scores.

“If for some reason you can’t repay the loan, the lender will absolutely report your delinquency or your default to the credit bureaus,” says James Garvey, CEO of Self Lender, an online company that offers credit-builder loans.

Bad-credit and no-credit personal loans are expensive

Having less-than-stellar credit may not stop you from getting approved with certain lenders, but there’s usually a price to pay when you’re considered a higher-risk borrower. Some personal loans come with an annual percentage rate of more than 30%, while fees associated with payday loans translate to triple-digit APRs.

APRs can include both interest and fees, so it’s important to read the fine print to know what you’re paying.

Short-term loans can be dangerous

While some personal loans give you years to pay back what you owe, some small loans, including payday loans, may give you as little as a week or two and require a single payment.

If you can’t afford to pay the loan back in time, you may be forced to renew it or take out another one to make the payment, which can throw you into a vicious cycle of debt.

Not all personal lenders report to the major credit bureaus

Trying to use a personal loan to build credit? Imagine finding out that your activity isn’t being reported to any of the three major consumer credit bureaus.

Unfortunately, that’s the case with some personal loans. If you’re not careful, you could spend months or even years making on-time payments without it being reflected on your credit reports.

FAST FACTS

How do I know if a lender is reporting my payments to the credit bureaus?

Some lenders will list on their websites whether they report to the credit bureaus. If you can’t find it, call the lender to ask.

If you already have a loan, you can look for the account on your Equifax and TransUnion reports through Credit Karma, or get a free copy of your reports from all three credit bureaus every 12 months through AnnualCreditReport.com.

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Personal loan alternatives for building credit

If you want to build credit but your personal loan options come with sky-high APRs or other unfavorable terms, it may be worth considering a credit-builder loan or a credit card — or simply continuing to use your current credit accounts responsibly.

Here’s what you need to know about each option.

Credit-builder loans

A credit-builder loan is specially designed to help borrowers build credit. Instead of giving you the loan amount, which is usually between $300 and $1,000, the lender, typically a credit union or online lender, deposits the sum into a locked savings account.

You’ll then make monthly payments over the next six months to two years, which the lender will report to the three consumer credit bureaus. Once the loan term is over, you’ll receive the loan amount plus any interest it accumulated in the savings account.

While interest rates can vary by credit union, your APR at a federal credit union has a cap of 18%. However, payday alternative loans, which are short-term loans offered by some federal credit unions, have a cap of 28%.

Credit cards

If you’ve never had problems using credit cards in the past, it may be worth getting one now to build or rebuild your credit history. Depending on your situation, though, you may have a limited selection.

If you have no credit or a limited credit history, for instance, you may qualify for an unsecured credit card, or a student credit card if you’re in school.

If you don’t qualify for either of those options, you may be able to get a secured credit card. These cards require a security deposit as collateral, but some cards allow you to eventually get that deposit back and convert to an unsecured card.

While these cards may charge high interest rates, you can avoid the cost altogether if you pay your bill in full each month by your due date.

If you don’t want to apply for a credit card on your own, Garvey recommends trying to get added as an authorized user on a family member or friend’s credit card account. That way, their activity with the account may also show up on your credit reports and can help boost your credit scores.

Your current credit accounts

If you already have an open credit card account or loan, you may not need a new one to work on improving your credit. As long as the lender reports your account activity to the three major consumer credit bureaus, using it regularly and making your monthly payments on time can help you build credit.

“Your success in building credit with any of these options will depend very much on whether you can use them responsibly,” Garvey says.


Bottom line

It’s possible to use a personal loan to build credit. But if that means high fees and interest, too-short repayment terms or lenders that don’t report credit activity, it may be worth considering some alternatives instead.

With credit-builder loans and credit cards, you may be able to pay less while accomplishing the same goal.

Paying off your car loan early: Should you do it?

The thought of paying off your car loan early and doing away with your monthly payment is appealing. But should you do it?

Maybe you have a little extra cash each month, or you recently came into a large amount of money. Should you use those funds to pay off your car loan early? There are potential benefits, but also some possible drawbacks, to consider when deciding whether to pay off your auto loan ahead of schedule.


Benefits of paying off your car loan early

Paying back your lender early can be a good move for a number of reasons. Here are a few.

Save on interest

When you make your monthly payment on an auto loan, you’re paying both the principal, which is the amount you borrowed, and the interest and any fees, which is the cost of borrowing. Depending on the terms of your loan contract, you might pay less interest if you pay off your principal early.

For example, if you take out a $20,000 loan with a 60-month repayment term and 5% interest rate, you’ll end up paying $22,645 — the $20,000 original principal and then another $2,645 in interest. Paying off this loan early could save you on some of the $2,645 in interest payments — but it depends on whether you’re paying simple or precomputed interest on the loan.

If your car loan is a simple-interest loan, you pay interest based on what you owe at a given time. The sooner you pay off the loan, the less you’ll spend on interest — potentially saving you hundreds of dollars. If you paid off your $20,000 loan in four years instead of five, you would end up paying $2,108 in interest — a difference of $537.

But if you have precomputed interest, your interest is calculated upfront at the start of the loan and the amount of interest you pay is considered fixed. This means that if you pay off your car loan early, you could still be responsible for the full interest on the loan.

Understanding a car loan

Free up funds for other expenses

If paying off your car loan early provides you with extra money each month, you could use some or all of that cash to pay down other debt, like your mortgage or student loan, or to build up an emergency fund.

Why everyone should have an emergency fund

Avoid owing more than your car is worth

According to a 2018 report by Experian, the average new car-loan term is now just under six years. If you have a long-term loan, there’s a chance that you’ll owe more on your car than it’s worth at some point in your loan term thanks to the car’s depreciation rate. When this happens, you have negative equity in your car — also referred to as being “upside down on your car loan.” Paying off your car loan early could help reduce that risk.

Learn more: How car depreciation affects your vehicle’s value

What to consider before paying off your car loan early

Even though it may seem like paying your car loan off early could be a great way to save money, it’s not necessarily right for every situation. Here are some things to consider.

Prepayment penalties

Some car loans may come with a prepayment penalty, a fee that you’d be charged if you paid off your loan early. Be sure to read the terms of your car loan carefully. If your loan includes this fee, consider whether the financial benefits of paying off your car loan early outweigh the cost of this fee. 

Other debt

Think about any other debt you currently have, like credit cards and personal loans. If any of these debts have a higher annual percentage rate (APR) than your auto loan, it might make sense to pay down those balances first to save money in interest.

Your credit 

On-time bill payments can play a big role in determining your credit scores. Paying off and closing your car loan account may not hurt your credit, but keeping the account open could potentially have a bigger positive impact on your credit if you make payments on time and in full.

If your auto loan is your only account on your credit reports — or the oldest — it might be beneficial to keep it open as you continue to build your credit history.

Overall budget

It’s important to keep your other monthly expenses and your income in mind when you think about paying off your auto loan. If paying it off early would stretch your finances thin or leave you unable to afford other expenses that month, it might be best to stick with your current loan payment plan.

Credit Karma Guide to Budgeting

How to pay off your car loan early

Once you weigh out the benefits and drawbacks, you can decide whether it’s a good idea to pay off your car loan early. If you decide it makes sense for you, you’ve got a couple options for paying off your loan ahead of schedule.

One way to pay off your car loan early is to make one lump payment. Contact your lender to find out your car loan payoff amount and ask how to submit it. The payoff amount includes your loan balance and any interest or fees you owe. 

You can also pay more than the minimum amount due each month. Making at least one extra payment on your loan every month, or adding more money to your monthly payment, may help you pay off your car loan early. But if you plan to go this route, ask your lender to specifically apply any extra payment to the loan’s principal.


Bottom line

While paying off your car loan early can be a wise move in many cases, you might find it just doesn’t make sense for your situation.

If paying early isn’t for you, don’t sweat it — there are other options, like refinancing your auto loan, that might save you some money. You could also establish or make changes to your budget so that paying off your car loan early is a possibility down the road.

Thinking about refinancing? Find an auto loan that works for you.

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What are income-based loans?

An income-based loan might be an option if you have limited or less-than-great credit.

Have you ever needed money for an emergency? While everyone has to deal with financial emergencies sometimes, not everyone has access to quick cash or credit.

That’s where an income-based loan (which is really just a personal loan) could help. Some lenders could be using the term “income-based loan” to indicate they might be willing to extend personal loans to people who have little-to-no credit history but who show they have the income and ability to repay the loan.

If your credit isn’t great or you don’t have much of a credit history, getting a personal loan from a traditional bank can be more difficult because they often have stricter lending standards. But some lenders are more willing to look at your income and ability to repay when considering you for a personal loan.

The downside to a personal loan that’s based on income? Interest rates can be dangerously high in some cases. But if you use an income-based loan to help build your credit, you may be able to get better terms in the future.

Here’s what you need to know to help make the best decision for your circumstances.


How do income-based loans work?

Lenders will use different criteria and methods to determine if you’re eligible for an income-based loan (which again, is really just a personal loan). Some lenders perform a soft credit inquiry before offering you a loan while others won’t pull your credit history at all.

Note that it’s common for predatory lenders to offers loans without any credit inquiry at all. Watch out for this type of loan: It may have high interest rates and fees.

Payday-loan lenders may not pull your credit, but they may require you to verify your income and bank account information. Because of the high fees that come with payday loans, it’s possible to get stuck in a debt trap.

Need a loan with bad credit? Some things to know

Understanding secured vs. unsecured loans

Since income-based loans are personal loans, they can be either unsecured or secured loans.

When you get a secured loan, you offer a piece of property, like your car or home, to the lender as collateral for the loan. If you fail to repay the loan as agreed, the lender may be able to take the collateral to try to recover any unpaid amount.

On the other hand, an unsecured loan does not require you to put up any collateral, so it’s generally considered less risky to the borrower. But you’ll generally pay a higher interest rate because the lender faces a higher risk.

How can I apply for an income-based loan?

Even if your credit history is rough, you may be able to find a lender that weighs your income more heavily when deciding whether to issue a personal loan. But you’ll want to do your homework before making a decision.

Keep an eye out for this information as part of your loan application and loan terms.

How to use income-based loans to build your credit

If you get a personal loan it can help you build your credit if you use it responsibly. If you can raise your credit you may be able to qualify for better financial terms in the future.

Here are some ways you can use an income-based loan to improve your credit health.

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Bottom line

An income-based loan can be a useful tool if you need money quickly and your credit isn’t great. Be sure to look into all the terms before choosing a lender — and if you’re able to use the loan to build your credit, you may be able to get better options in the future.

Credit card debt hit record-high $870 billion at the end of 2018

Total U.S. credit card debt hit a record $870 billion at the end of last year, according to a recent report from the Federal Reserve Bank of New York.

The last time Americans held close to this much credit card debt, songs like T.I.’s “Whatever You Like” and Rihanna’s “Don’t Stop the Music” dominated the charts, the first “Twilight” movie was a blockbuster and Barack Obama had just been elected to his first term as president. It was the end of 2008 — the middle of the last recession.

A graph of U.S. credit card debt in billions, 2003–2018

Source: Federal Reserve Bank of New York

Not only do Americans now have more credit card debt than at any time in the past decade, the New York Fed’s report also shows an increasing number of credit card accounts that are at least 90 days behind on payments.

Want to know more?

Why does this matter?

At the end of 2018, Americans’ total debt rose to $13.54 trillion, the highest level since the summer of 2008, according to the New York Fed’s report. By far, mortgages were the biggest chunk of this debt, at $9.12 trillion, followed by student loans at $1.46 trillion, and auto loans, at $1.27 trillion.

While credit cards are a relatively small portion of total overall debt, they are a particular concern for older Americans, with data showing that those 60 or older hold around 30% of the nation’s total credit card debt, according to the Fed data.

Between the crippling student loan debt that millennials face and the high credit card debt burden on Baby Boomers, the Fed data clearly show that Americans are increasingly burdened by debt across all stages of life.

What can you do to manage your credit card debt?

If the Fed’s report is inspiring you to get a better handle on your own finances, here are some tips to help you manage your credit card debt.

PNC points® Visa® Credit Card review

This offer is no longer available on our site: PNC points® Visa® Credit Card

Pros Cons
Four points per $1 spent on qualifying purchases Low rewards redemption rate
$0 annual fee Foreign transaction fee
Intro APR on purchases and balance transfers Points expire 48 months after you earn them.
Balance transfer fees
Geographic restrictions on applying

From our partner

PNC points® Visa® Credit Card

PNC points® Visa® Credit Card

From cardholders in the last year


The PNC points® Visa® Credit Card earns mega rewards, but points have a weak redemption value

Ongoing rewards

At first glance, this card seems to reward you with more points than you could ever handle. Cardholders earn four points per $1 spent on qualifying purchases, with no limit on how much you can earn. Qualified cardholders can earn a bonus of 25%, 50% or 75% on top of those base points.

But be aware that you must meet certain requirements — including having a PNC checking account, maintaining a minimum balance or making qualified direct deposits to your account — to get those relationship bonuses. Make sure to read the fine print to learn exactly what those requirements are and how you can start earning bonus points on top of base points for a stronger rewards-earning potential.

Earning points with everyday purchases shouldn’t be a problem with this rewards card. But what also matters is how you can redeem your points, a process that some may consider a drawback.

Stingy rewards rate

With the PNC points® Visa® Credit Card rewards program, you can redeem points for cash back, travel, gift cards and merchandise. But depending on how you redeem your points, their value may vary.

For example, you can trade 50,000 points for a $100 statement credit to your account, meaning each point is worth about $0.002, which is not great compared to the 1 cent that many other credit cards offer. With this card, gift cards for merchants and travel rewards have roughly similar redemption rates. For example, a flight from Cleveland to New York City valued at $165 could cost 55,530 points, according to a PNC representative we spoke with in January 2019. Gift cards for merchandise have a lower redemption rate.

The rewards rate for the PNC points® Visa® Credit Card leaves a lot to be desired. For example, if you charge $12,000 in a year to this card, you’d earn 48,000 points, which is worth $96 as a statement credit to your account.

With some other credit cards, earning just one point per $1 spent would translate to a $120 cash reward if the points were worth 1 cent each.

With the PNC points® Visa® Credit Card, your points will expire at the end of the month, 48 months after they’re added to your PNC points account. So keep an eye on your rewards to make sure you redeem them in time.

Intro APR for purchases and balance transfers

Planning to finance a big purchase? With the PNC points® Visa® Credit Card, you’ll get an intro 0% APR on purchases for the first 12 billing cycles after account opening. After that, the purchase APR will be a variable 14.24% to 24.24%, based on your creditworthiness.

You can also get an intro 0% APR on balance transfers for the first 12 billing cycles (then, a 14.24% to 24.24% variable APR). To take advantage of the offer, though, you must complete any balance transfers within the first 90 days of account opening and pay an intro balance transfer fee of $5 or 3% of the amount of each balance transfer, whichever is greater. After that, the balance transfer fee is 4% of the amount of each balance transfer, with a $5 minimum.

Restrictions on applying

Weighing the pros and cons of this card may not even be necessary if you don’t live within PNC’s network. To apply for the PNC points® Visa® Credit Card, you have to visit a physical PNC location.

What else to know

This card comes with nice perks, but a handful of caveats.

Who this card is good for

If you live in a state with PNC branches and meet the 24%, 50% and 75% bonus rate requirements, you could get a nice rewards rate on all your purchases with the added benefit of keeping your finances with one institution. For example, if you qualify for the 75% bonus rate and spend $12,000 in a year, you’ll earn 84,000 points, which can be redeemed for a $168 cash statement credit. And since points go further when you redeem them for travel rewards, this card may be a good fit if you’re frequently on the go.

If you’re not already a PNC customer, you might be better off looking at other cards with better rewards redemption rates.

Not sure this is the card for you? Consider these alternatives.

What is statement credit?

A statement credit is one of the ways a credit card company might issue cash back or rewards you’ve earned.

In basic terms, a credit is the opposite of a payment — you get money credited back to your account instead of borrowing it to pay for a purchase.

Statement credits can show up on your monthly credit card statement, often in both a list of transactions and as a category of account activity.


How you might receive a statement credit

When you receive a statement credit, it could come in a few different forms. Here are some of the some common ways to get one.

Returns

When you return a previous purchase, whether online or in person, the money you get back will typically go straight to the credit or debit card you used for the original sale. When this happens, the returned amount will be added back to your card account balance as a statement credit.

Cash back rewards

Many credit cards offer cash back, with statement credit as one way to redeem your rewards. If you redeem this way, the redemption amount should post to your account as a statement credit that decreases your card balance.

But keep in mind that not every credit card offers the same ways to receive or redeem cash back. Some, like the Capital One® Quicksilver® Cash Rewards Credit Card and Bank of America’s cash back credit cards, let you pick from options including statement credits, checks and deposits into a bank account.

Read more: When's the best time to redeem cash back?

Travel rewards redemption

Credit card companies issue travel rewards in many forms, but one is by allowing redemption for previous purchases.

For example, Capital One offers redemption on past travel purchases via its Purchase Eraser feature. After you book your travel, you can use the Capital One app or website to redeem your available miles and get a statement credit for the cost of your travel purchase. 

Credit card perks

Sometimes simply using your card for specific purchases is enough to get a statement credit. Many rewards credit cards offer statement credits as reimbursements for advertised perks.

For instance, it’s common to see premium credit cards offer automatic travel credits or a credit for a Global Entry or TSA PreCheck application fee. In these cases, you simply make the relevant purchases with the credit card, and then the statement credit should appear on your account.

Is statement credit always the best option?

Now that you know what a statement credit is and how you might earn one, it’s important to remember that it’s not always your only option for getting money back from a purchase or rewards program. Whether you choose to redeem via a cash back, travel rewards or perks program, consider the option that suits your lifestyle best.

If you’re having trouble finding a statement credit you think you’ve earned, consider contacting your card’s customer service line for a deeper explanation. Credit card companies often handle their systems differently, and it can be beneficial to find out how yours works.

Your car’s trade-in value: Are you getting a fair price?

When you buy a new car, you may decide it’s also time to trade in your current vehicle.

And you can trade in your vehicle by selling it to a dealer — the one you’re buying a new vehicle from (if you’re buying a new car) or to another auto dealership. If you trade in your car to the same dealer you’re buying a new vehicle from, you may be able to get a credit for the value of the trade-in to reduce the amount you’ll owe on your new vehicle.

Trading in your vehicle can be a confusing part of the car-buying process. Here are some tips to help you assess your car’s value before you head to the dealer to trade it in.


Research your car’s value so that you know if an offer is fair

While trading in your car can be a simple way to get rid of your old vehicle — you avoid the hassle of finding a private buyer — you may not get as much money for it as you would selling it independently. After all, the dealer wants to make a profit on the car, so it’s not likely to pay the car’s full retail value.

But while you may not get top dollar for your trade-in, that doesn’t mean it’s impossible to get a fair price. The key is to do your research before you head to the dealer — it’ll be hard to know if you’ve gotten a fair offer if you have no idea what your car is worth.

Fortunately, there are many resources to help you figure out what your car would be worth on the open market. You can use Kelley Blue Book, Consumer Reports, Edmunds, NADA Guides and online classifieds to research the value of your car. If you can find similar vehicles in your area that have recently sold, this could also help validate — and give you leverage to negotiate — the price you think the dealer should pay for your car.

If you have data showing your car is worth more than the dealer is offering, the dealer may be much more likely to raise the price it’s willing to pay.

Make simple fixes before taking your car to a dealer

It may not be worth making major repairs to a vehicle. But making small fixes — like touching up scratches and dings — can be worthwhile.

Washing, waxing and detailing your car before taking it to the dealer can help your vehicle make a good impression when the dealer gives it a once-over before arriving at an offer. A good detailer can eliminate odors and dirt that may downgrade your vehicle from excellent or good condition to fair or poor condition.

Get quotes from several dealers

You don’t have to trade in your vehicle to the same dealer you might be buying your new car from. You should get quotes on your trade-in from several car dealers, to see who’s willing to make you the best offer.

Try to get written appraisals from several dealers so you can compare offers and use them to help you negotiate.

Negotiate your trade-in price separately

When you’re buying a new car from the dealer you’re doing the trade-in with, it’s a good idea to negotiate the price of the trade-in separately from the price of the new vehicle. That way, you can work to get the best price on each part of the deal.

How to negotiate your car price

If you’re trading in your car to the same dealer you’re buying a new vehicle from, it’s a good idea to have the value of your trade-in listed separately in your loan paperwork. That way, you can check to make sure that the trade-in amount is being properly deducted from your purchase price.

If you owe more than your car is worth, you may want to think twice about trading it in. When that’s the case, you may be tempted to roll the outstanding balance on the old auto loan into the new loan — which could require you to borrow more than the new car itself is worth.

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Bottom line

Understanding the trade-in value of your car is important to helping you get a reasonable price for it. Research prices before taking your trade-in to a dealer and make sure you negotiate the trade-in price for your car separately from the purchase price of a new vehicle. While it does take a little work, cleaning up your car and researching vehicle prices before heading to the dealer can help your effort to get a fair price. Ultimately, that could mean more money to put toward a new ride.

Keep reading: How to trade in a car

Should I consider a microloan for my business?

Maybe you’ve been denied a small-business loan and your credit is less than great. You’re confident that you could launch your business and turn things around if you can get a loan. But where can you turn?

That’s where microloans can come in. Microloans are small-scale loans that can help small-business owners get the funds they need.

In this article, we’ll look at what a microloan is, how it works, where you can apply for one, and the pros and cons of this loan option.


What is a microloan?

A microloan is a type of loan, typically for smaller amounts, for small-business owners who are starting a new business or building upon an existing one.

The average microloan is about $13,000, according to the Small Business Administration, and can go up to $50,000 or more. Many microloans are secured loans, meaning the lender requires some type of collateral, such as property or an asset, to back them.

Microloans can be used for different expenses, although some lenders may have their own requirements on how you can use the funds. For example, loans offered through the Small Business Administration microloan program can be used for inventory, furniture, working capital or equipment, but can’t be used to pay down existing debt or buy real estate.

Where can you get a microloan?

Microloans are often offered by nonprofit lenders and some peer-to-peer lenders. Here are a few organizations where you can start looking.

Some lenders that offer microloans may limit loans to businesses in certain states or regions. Others may focus on serving specific demographics, such as women or low-income communities. So keep that in mind as you’re shopping around for a microloan lender.

How does a microloan work?

As with other types of loans, you’ll generally make monthly payments toward the principal and interest over a set loan term. The interest rate and terms of a microloan vary by lender (and your creditworthiness), so it’s important to do your research beforehand.

Microloans through the Small Business Administration are capped at $50,000, can be repaid over a term of up to six years and generally offer interest rates between 8% and 13%.

Separately, Grameen America offers smaller microloans, typically between $1,500 and $15,000, with an interest rate that starts at 15%. Opportunity Fund will lend up to $30,000, with an annual percentage rate of 15% to 22.2% and loan terms of up to three years.

If you’re interested in applying for a microloan, be sure you understand the APR, repayment terms, monthly payment, and any requirements or restrictions involved. Some microloan lenders allow you to apply for prequalification before submitting a formal application. This can help you determine if you might be approved for a loan and what the interest rate and loan terms could be.

Benefits of microloans

Microloans can come with several benefits for small-business owners and entrepreneurs.

Potentially higher chance of approval

Microloans are designed for small-business owners who may not qualify for traditional business loans. If you’re struggling to qualify for a traditional business loan, your business might be too new; the amount of money you need may be too small; you may have poor credit health; or you might not have established business credit yet.

Your guide to credit score ranges

In considering your application, microloan lenders can look at factors beyond your credit, including your ability to repay the loan and a solid business plan.

Help in building credit

Microloan lenders might report your loan payments to the business credit bureaus, which could help build your business credit. They may also report to the three main consumer credit bureaus, which could help build your personal credit if you make on-time payments as outlined in your loan contract. In fact, on-time payments are one of the biggest factors in calculating your personal credit scores.

Financial education and resources

Some microloan lenders offer financial support that extends beyond a loan. For example, Grameen America provides financial training, and Accion has a business resource library and helps connect borrowers with other businesses in the community. LiftFund offers business education for both new and established businesses.

Drawbacks of microloans

While a microloan can offer important benefits, there are some other things to consider, too.

Your lender options might be limited

Many microloan lenders are limited to specific regions. Depending on where you live, you may find there are few local options for microloans.

Interest rates can be high

Interest rates for a microloan may be higher than what you could get at a traditional bank. While interest rates for business loans from a bank might start around 6%, interest rates for some microloans can start at around 8%.

Small-business startup loans: Not the only way to get your startup going

Bottom line

If you don’t qualify for a business loan from a traditional lender, a microloan could provide the cash you need to get your business off the ground or to take it to the next level.

But as with any loan, be sure to do your homework and understand the loan details and restrictions across potential lenders before committing. If you decide a microloan isn’t the right fit for you, you could consider alternatives such as a business credit card to help with everyday expenses.

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Most Americans fear a recession this year. Here’s what they’re doing to prepare.

Rarely has America’s economy looked so good.

Unemployment is at a historic low, real wages have finally been increasing, and GDP has grown at a sharp clip in recent years.

But on the heels of a volatile year’s end for the stock market, some have likely begun to wonder whether the good times may soon come to an end.

In fact, a majority (56%) of Americans are worried a recession will happen this year, according to results of a recent Credit Karma survey conducted online by The Harris Poll among over 2,000 U.S. adults. And many (68%) have already started preparing, with some stashing more into savings each month (23%) and others staying put in steady jobs (18%). (Learn more about our methodology.)

Of course, no one can say for sure when the next economic slump will happen. But if you’ve felt some recession fears start to creep in, apparently you’re not alone. Our survey shows just how Americans are feeling in the current economic climate and some of the actions they’re taking in response.

Key survey findings

A majority of Americans (56%) are worried a recession will hit this year.
Half of Americans (50%) believe a recession would have a negative impact on them financially. Meanwhile, 17% have no idea how it would impact them financially, and 6% think it would actually have a positive impact.
68% of Americans have already taken actions to prepare for the next economic slump, including limiting their nonessential spending (33%), decreasing credit card use (27%) and increasing their savings each month (23%).

Just how worried is America about the next recession?

Even though the economy still seems to be in fine fettle, it’s quickly becoming a question of when, not if, a recession will hit. When it happens, it could mean financial hardship for many, which could be especially painful for those still recovering from the Great Recession.

If that concerns you, you’re in good company. According to the survey, a majority of Americans (56%) are either somewhat or very worried about a recession taking place in 2019.

How worried are you about a recession occurring in 2019? Percentage of respondents
Very / Somewhat Worried (Net) 56%
Very worried 11%
Somewhat worried 45%
Not At All Worried / Not Very Worried (Net) 44%
Not very worried 32%
Not at all worried  12%

In addition, more than two-thirds of Americans (a full 68%) report already having taken some action to prepare for a potential upcoming recession. Here’s a list of some of the things people are doing:

In which of the following ways have you prepared for a potential upcoming recession? Percentage of respondents who have done something to prepare
Limited spending on non-necessities (e.g. luxury items, entertainment, travel) 33%
Decreased spending on credit cards 27%
Increased amount put in savings each month 23%
Stayed at a stable job (i.e., instead of looking for a new one or being unemployed) 18%
Changed investment strategy 15%
Spoken with a financial advisor 10%
Postponed medical care 8%
Taken on another job 9%
Other 2%

*Respondents could select more than one answer

It’s hard to know how to best prepare for hard times. But working to improve your credit and minimize your debts today is always a good strategy to help you feel financially stable.

Tips for managing your finances during uncertain times

Establish an emergency fund

A 2018 Federal Reserve report said 40% of Americans couldn’t readily cover a $400 emergency expense. Don’t let this describe your situation. Make a conscious decision to build an emergency fund over the next year — even if you can only contribute a few dollars here and there. Make it a priority to save up as much as you can for emergencies by the end of 2019.

Maintain regular payments on your credit cards and other bills

Doing this can help your credit remain healthy. Having healthy credit can be especially important in times of economic hardship because banks and other lenders can choose to tighten their lending standards when the market turns south. The lower your credit scores, the riskier you can appear as a borrower. And the riskier you appear, the harder it can be to get approved for loans and other financial products — especially when lenders tighten their standards.

Work on building your credit and track your progress

Typically, one of the first things lenders will look at to determine your borrower risk is your credit. If you’re worried about your credit, use this time of relative economic stability to build your credit health. Credit Karma offers tips on how to do this and, if you’re a Credit Karma member, you can check your VantageScore3.0 credit scores from TransUnion and Equifax for free any time without hurting your credit. Checking your scores regularly can help you stay on top of your progress and address any potential issues that crop up.


Methodology

This survey was conducted online within the United States by The Harris Poll on behalf of Credit Karma from January 2-2, 2019 among 2,005 U.S. adults ages 18 and older. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact pr@creditkarma.com.

Identity theft affidavit

The Federal Trade Commission created the online form that can help victims make an identity theft affidavit — a sworn, written statement — and begin the process of recovery.

The first step: Go to the FTC’s IdentityTheft.gov site and choose the “Get Started” tab.

Every identity theft case is unique — the one similarity being that the victim feels violated and frustrated. But no matter how complex your identity theft case might be, the sooner the recovery process starts, the sooner you can get your life back.


What is an identity theft affidavit, and when should you submit it?

As scary as data breaches are, and as intimidating as it may seem to deal with identity theft, the truth is that the recovery process can be very doable. It just takes some legwork and diligence.

The FTC set up a one-stop shop at IdentityTheft.gov to help. This website provides guidance and specific recovery plans based on the unique circumstances of different types of identity theft. Included is a identity theft affidavit, or identity theft report form. Once complete, the victim can submit the report to entities where the fraudulent activity occurred.

FAST FACTS

Do you have to fill out a separate ID theft affidavit for every company?

Many companies will accept the FTC’s identity theft affidavit as documentation of the fraudulent activity. Before you complete redundant affidavits, check with the company to see if it accepts the FTC’s affidavit. Work smarter — not harder!

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You should fill out the FTC’s online form if and whenever you learn that you’ve been a victim of identity theft.

The IRS has its own identity theft affidavit to complete if your identity — specifically your Social Security number — is used to file a fraudulent federal tax return. It’s known as IRS Form 14039. Keep in mind that identity theft victims can complete this form as a preventive measure if they don’t know whether someone used their information to file a tax return but they know they’re a victim of identity theft.

Why the identity theft affidavit is important

For identity theft victims, the primary goal is to reclaim their identities and reduce their risk of future victimization. The identity theft affidavit can help because …

There are many websites and resources focused on the identity theft recovery process. To be on the safe side, and to make sure the information you are receiving is accurate, we recommend utilizing government agency websites, which commonly end in .gov.

Here are a few to get you started.

Federal Trade Commission Identity Theft Resources
IRS Taxpayer Guide to Identity Theft
U.S. Department of Justice Identity theft information
USA.gov Identity theft information

Bottom line

Completing the FTC’s identity theft recovery plan is a critical step in the identity theft recovery process. Not only does it help you document the identity theft incident, it can help the victim avoid liability for debt sustained from the fraudulent activity.

When federal tax returns are filed fraudulently, the IRS’ Identity Theft Affidavit (Form 14039) should be completed.

If you know you’ve been a victim of identity theft but aren’t sure how to cover your bases, complete both the IRS and FTC forms. You can never have too much documentation or take too much precaution when you’re the victim of identity theft.

Married filing separately: Some things to know

Married couples have a yearly choice to make come tax time: File jointly or separately?

One of the first boxes you’ll check on an income tax return is your filing status. It’s important to pick the right one for your situation, because this choice affects the amount of taxes you’ll pay, the standard deduction you can take and any tax breaks you’re eligible to claim.

Although filing jointly usually results in a lower tax bill, some married couples may find it to their advantage to file separate returns based on their tax situation. Here’s some information to help you decide if this filing status could work for you.


Filing-status basics

The IRS recognizes five filing statuses: single, married filing jointly, married filing separately, head of household and qualifying widow(er). Of the 150.3 million federal returns filed in tax year 2016, only 3.07 million people used the married filing separately status, according to the IRS.

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“You generally give up a lot and pay a lot more in taxes to file separately,” says Joe Orsolini, president of College Aid Planners. 

Eligibility requirements for married filing separately

If you’re considered married on Dec. 31 of the tax year, then you may choose the married filing separately status for that entire tax year. If two spouses can’t agree to file a joint return, then they’ll generally have to use the married filing separately status.

If you have a dependent living at home and you’re considered unmarried by the IRS, you may qualify for the head-of-household filing status, which is typically more beneficial than married filing separately.

To be considered unmarried for tax purposes you must meet all the following criteria:

If you meet the criteria to be considered unmarried and want to file as head of household you must also have had a child, stepchild or foster child residing with you for more than half the tax year that you can claim as your dependent.

How does divorce change your taxes?

A few life events may cause you to change your status to or from married filing separately, including the following:

Income requirements for married filing separately

Some people aren’t required to file a federal income tax return if they meet certain age and income requirements for their filing status. But most separate filers will have to file a federal income tax return.

That’s because the IRS requires people with a married-filing-separately status to file a return if their gross income was at least $5, regardless of age.

So where a married couple who are both younger than 65 and filing jointly wouldn’t have to file unless their gross income was at least $24,000, if the same couple decides to use the married filing separately status, they would be required to file.

If you’re married filing separately, you may have to include Social Security benefits as gross income in order to determine if you’re required to file a return. You’ll include a portion of your Social Security income if either of the following apply:

Married filing separately with kids

Several tax breaks can benefit parents come tax time, especially for 2018.

“A lot more people will now be qualifying for the child tax credit that probably did not in the past,” Orsolini says.

That’s because the Tax Cuts and Jobs Act of 2017 raised the income threshold at which the credit begins to phase out.

“Children are very helpful on tax returns,” says Orsolini.

But when filing separately, only one parent can claim a qualifying child — and many of the tax breaks that follow. Generally, the parent who provides the child’s housing for most of the tax year gets to claim the child and the tax breaks. If the child lived with both parents equally, then the IRS requires the parent with the highest adjusted gross income to claim the child.

FAST FACTS

Who qualifies as a dependent?

For any child or adult to be considered your dependent, they must meet several requirements.

Learn more about who qualifies as a dependent.

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Advantages to married filing separately

In some situations, it could make sense to file separately. Here are just a few of those situations.

Get a lower student loan repayment

If you’re on an income-based repayment plan for a federal student loan, in most cases, the payment will be based on only your income, and not your spouse’s, if you file separately. But filing separately also means you can’t take the student loan interest deduction or education credits, like the American opportunity tax credit or lifetime learning credit.

Separate tax liability

In the eyes of the IRS, signing a joint return means both spouses are equally liable for all taxes and penalties for that tax year — even if you later divorce. The married-filing-separately status allows you to claim responsibility only for your own return. For example, two spouses may choose to file separately if they’re planning to divorce and wish to keep their finances separate.

Protect refund money

If your spouse has a delinquent federal income tax, student loan, child support obligation or other debt, the Treasury Offset Program allows the Department of the Treasury to seize any tax refund your spouse may be due. If you file a joint return, your refund will also be considered shared. That means if your spouse owes and you file jointly, you and your refund could be on the hook for their debt.

Before filing separate returns, look into innocent spouse relief. You may be able to get a portion of your tax refund while still filing jointly, says Kristin Ingram, certified public accountant at Accounting in Focus.

“A lot of people think that you have to file separately in order to use the injured spouse rule,” she says, “but that is not the case.”

Maximize a disparity in incomes

A spouse who earns much less than the other spouse may come out ahead by filing separately.

For example, “if one spouse earns $1 million a year, and the other earns $80,000, that might be an instance where you would use married filing separately,” says Ingram.

In this scenario, the low-income spouse would enjoy a lower tax bracket and may be able to claim some tax breaks.

Drawbacks of married filing separately

Even if filing separately does make sense for your situation, there are still a few downsides you should know about.

For example, although two spouses are filing separate returns, they’ll have to agree on one thing: Either they both must claim the standard deduction, or they both must itemize expenses.

And separate filers get the lowest standard deduction rate of $12,000 — the same amount as single filers.

Filing separately also means giving up certain tax deductions and credits or getting a reduced tax break. Here are the restrictions for people using the married-filing-separately status.

Separate filers can’t claim these tax breaks The value of these tax breaks is reduced for separate filers Separate filers who lived with a spouse at any time during the tax year must follow these guidelines
  • Earned income credit
  • Exclusion or credit for adoption expenses (in most cases)
  • American opportunity credit
  • Lifetime learning credit
  • Student loan interest deduction
  • Interest income from qualified U.S. savings bonds used for higher-education expenses
  • Child tax credit
  • Retirement savings contributions credit
  • Itemized deductions
  • Capital loss deduction
  • Standard deduction
  • Alternative minimum tax exemption
  • Child and dependent care expenses: The deduction is limited unless you’re legally separated or living apart
  • Can’t claim the elderly and disabled credit
  • When reporting income, you must include up to 85% of Social Security income or equivalent railroad retirement benefits received
  • If you or your spouse contributed to an employer-sponsored retirement plan, like an IRA, then the deduction may be greatly reduced or eliminated if your income is more than a certain amount

Tax rates and standard deduction for married filing separately

For your 2018 tax return, you can’t claim personal exemptions for yourself or anyone else. But you can lower your tax burden by either itemizing your deductions or taking the standard deduction, a dollar amount that automatically reduces your taxable income.

Standard deduction vs. itemizing: Which should you choose for 2018?

In 2018, the standard deduction is $12,000 for separate filers. It could be higher for people who are 65 or older or blind.

Here are the tax rates and corresponding thresholds for separate filers for 2018.

Tax rate Married filing separately filing status
10% $0–$9,525
12% $9,526–$38,700
22% $38,701–$82,500
24% $82,501–$157,500
32% $157,501–$200,000
35% $200,001–$300,000
37% $300,001 and more

The U.S. tax code is progressive. That means it’s possible for your income to fall into multiple tax brackets. If that’s the case, then you’ll pay the rate for each bracket only on the portion of your income that falls within the thresholds of that bracket. And for most brackets, there’s an additional amount of tax you’ll pay besides the percentage of income.

For example, a married couple filing a separate return in 2018 and who has taxable income of $35,000 would pay 10% on the first $9,525 of taxable income and 12% on the remaining $25,475.

Their tax calculation would look like this.

First tax rate that applies: $9,525 x .10 = $952.50

Second tax rate that applies: $25,475 x .12 = $3,057

Total tax: $952.50 + $3,057 = $4,010


Bottom line

If you’re not sure which filing status to use and you’re eligible for either married filing jointly or married filing separately, calculate your tax liability for both to see which makes sense for your tax situation. The Tax Policy Center has a Marriage Bonus and Penalty Tax Calculator to help you compare the taxes you would pay filing a joint return versus filing separate returns. Credit Karma Tax®, which is always free to e-file, can help you decide which tax status is best for you.

Find out if you’re getting a refund File Your Taxes

What is a creditor?

If you’ve ever made a payment on a car loan, credit card bill or utility bill, then you may be more familiar with a creditor than you think.

At first glance, you may be inclined to think of a creditor as only a bank or credit card company, but a creditor can be anyone that you owe an outstanding balance.


What is a creditor?

The term creditor can mean different things depending on the situation, but it typically means a financial institution or person who is owed money. You could end up having an outstanding balance if you took out a loan or line of credit, and the person or entity that owes the money may be known as the debtor.

Once a borrower and lender agree on terms for financing and sign a loan agreement, they’re entering into a contract. That contract often specifies the repayment agreement terms of the loan and the expected payment amounts.

You may hear the terms lender and creditor used interchangeably. The same goes for borrower and debtor. But you’ll more likely hear creditor and debtor used during legal proceedings where a creditor is trying to collect on an outstanding balance, such as during a bankruptcy case.

Ultimately, if a debtor can’t repay the funds borrowed, the creditor typically has the right to attempt recovery of what is owed, which is when repossession, foreclosure and debt collectors can come into play.

Four things debt collectors can’t do

Examples of common creditors

There are several types of creditors, such as real creditors, personal creditors, secured creditors and unsecured creditors.

Examples of common debts

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How creditors make money

One way creditors can make money is by charging interest on the credit they extend. A creditor can often make money through fees, like late payment fees, which may be applied if a payment is received after the agreed-upon due date.

The creditor may be taking a risk when extending credit to an approved borrower. If a debt can’t be repaid, the creditor may have no recourse other than to make a legal claim in court or to hire a debt collection agency to try to recover the money.

Depending on the terms of the agreement, the creditor may be able to repossess an asset used as collateral (like a car), garnish a debtor’s wages, or try to get at least partial payment from the debtor through a court order if the debtor is unable to repay as agreed.


Bottom line

A creditor is essentially a person or financial institution you owe money to. If you owe money, you may be referred to as a debtor.

If you ever come across these terms, make sure to read the fine print to understand how they are being used. Having a general definition can hopefully help you cut through some of the jargon to better understand some of the financial advice that comes with applying for credit.

Voluntary repossession: What you need to know

When you can no longer afford your car payments, voluntary repossession may seem like the best way to get your car loan off your hands.

But returning your car to your lender could have serious financial consequences, including your account going into collections and your credit taking a hit. Let’s take a look at the impact that a voluntary repossession can have on your finances, along with alternatives to consider before you hand over your keys.


What is voluntary repossession?

Voluntary repossession — also called voluntary surrender — means that you return your car to the lender because you can no longer meet the terms of your loan agreement.

Voluntary repossession is an immediate alternative to repossession, which is when the lender takes action to seize the vehicle once your loan is in default, per your auto loan agreement.

What does loan default mean?

Repossession can be an emotional experience, because the repo company the lender hires can show up at your home at any time and take your vehicle without letting you know beforehand.

How does voluntary repossession work?

The first step is to let the lender know that you can no longer make payments and want to voluntarily surrender the vehicle. Then you can set up a time and location to return the vehicle and hand over the keys.

Note the date, location and contact information of the person with whom you left the car. This information could come in handy if your lender has any questions in the future.

How a voluntary repossession affects your finances

A voluntary repossession doesn’t necessarily rid you of all financial obligation. In fact, it could take its toll on your finances in a few ways.

You may still owe money to the lender

The lender may try to sell the vehicle to make up as much of the remaining balance of the loan as possible. You’ll be responsible for paying any balance after the sale, along with any fees, like late-payment or prepayment fees. If you aren’t able to pay, your account could be turned over to a collection agency, which would show up in your credit history. The lender might also take you to court, which could result in a portion of your income going to the lender to pay back the remaining balance you owe.

It will show up on your credit reports

A voluntary repossession — along with any resulting collections or court judgements — can remain on your credit reports for up to seven years as a derogatory mark. According to Experian, one of the three main consumer credit bureaus, your credit report will list “voluntary surrender” instead of “repossession,” which may do slightly less damage to your credit.

How debts in collections affect your credit

It could affect your ability to get a loan in the future

The negative impact to your credit may make it more difficult to get a loan down the road. If you do get approved, lenders will likely charge a higher interest rate due to the higher risk of defaulting on the loan.

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Alternatives to voluntary repossession

Before you decide to turn in your car, consider whether any of these options could help improve your situation.

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Bottom line

A voluntary repossession should be a last resort. First, call your lender and explain the situation. Chances are good that they’ve helped other borrowers in your situation before.

If you can’t arrive at a solution with your lender and you’ve exhausted all other options, it may be time to consider voluntary repossession. It could help you avoid the stress that can come with the repo man showing up at your door, but remember that it will likely have a negative effect on your credit. So don’t make the decision lightly.

When it comes time to purchase a vehicle again, consider buying a less expensive make and model or a used car — both of these options could reduce your monthly payments. Paying with cash can also eliminate any worry about paying your monthly loan bill.