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Don't Be Spooked by Financial Decisions Apprisen Helps You Separate “Tricks” and “Treats”

 

Halloween tricks or treats happen once a year, but the consequences of financial decisions can last beyond the next spooky holiday. Options that seem good on the surface, if not handled properly, can have long-lasting negative consequences. To understand how a seemingly good financial move can work against you, there are tricks to be aware of before you get your financial treat.

 

Discontinuing the use of credit

  • Trick:  The consequence of having no credit means more money out of your pocket. Because, having no credit results in no credit score. For example, insurance companies look at your credit report and your premium is based partly on what is in your file. The lower the credit score the higher the payment. Cell phone and utility companies also pull credit reports and might require a deposit based on its contents as well.  Lastly, many rental car agencies require a credit card and if you don’t have one, they may pull a credit report to determine if they will rent to you.  So even if you don’t want to use credit, it is in your best interest to establish some sort of credit history. 
  • Treat: Living on a cash basis means that you may never live beyond your means or pay interest on your purchases. Typically, people who pay with cash save 20 percent more over those who use credit cards and carry a balance month to month.

Automatic bill paying

  • Trick: If you neglect to balance your check register and the automatic payment results in an overdraft, you've defeated the purpose.
  • Treat: Arranging for your payments to be sent to creditors before the due date means you'll never have a late fee or a dinged credit report.

Bundling of services

  • Trick:  If you purchase a more expensive plan than you need to bundle your land line, cable and Internet services, you may pay more than necessary.
  • Treat: You might enjoy significant savings if you evaluate and bundle the serves you really use and shop around for the best deal.

Co-signing on a loan

  • Trick: The co-signer and primary borrower are equally responsible for payment of the loan. As well- meaning as people are, things happen. Never co-sign on a loan unless you can afford to take over the payments.
  • Treat: You can help another person establish credit, rebuild credit, or purchase something beyond what they could, based on their own credit worthiness.

Balance transfers

  • Trick: It’s tempting to transfer your balance to a credit card with a lower interest rate, but you need to make sure you discontinue using the high-interest card.  Before you know it, you may now have two credit cards with balances.
  • Treat: By transferring your balance to a lower interest rate card and discontinue using credit, you can begin to create a plan to pay off your debt.

Reward Cards

  • Trick: Some credit cards offer “reward” plans if you use them for purchases. Reward categories often change each month, resulting in fewer rewards than hoped for. Some people tend to spend more simply to earn the rewards. If you can't pay the balance in full each month, a reward card is probably not for you.
  • Treat: You can earn miles, airline points, or even cash back with reward cards.

Closing unused accounts

  • Trick: Closing an account will lower your total credit line, potentially making your credit limit/debt ratio higher. That, in turn, could lower your credit score. 
  • Treat: Streamlining your finances makes them more manageable. Also, less plastic in your wallet equals fewer temptations to spend.

Opting for overdraft protection

  • Trick: Overdraft protection is expensive, particularly for those who routinely overdraw their checking account. This false sense of security is only putting a band-aid on the true financial problem- spending more than you make.
  • Treat: You'll avoid the embarrassment of having your purchase denied at checkout.

Freezing your credit file

  • Trick: By placing a freeze on your credit report, you will no longer have access to instant credit.  In addition, others who might need to see your report to base premiums or services on – insurance companies, landlords, cell phone companies, or utilities, will be denied access too. You can “unfreeze” your report, but that is not done instantly and may take some time before it can be accessed.
  • Treat: A frozen credit file may protect against identity theft since no one can open a new account in your name without you first lifting the security freeze.


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