Should You Cancel a Credit Card with $0 Balance?

The downsides of cancelling a credit card are usually not worth itCollage of overlapping credit cards
Many consumers are tempted to limit their debt by closing one or more credit cards as a result of the steady rise of the cost of living and credit card interest rates. However, though there are many reasons to close a credit card, there are ultimately even more and better reasons not to.

Adverse effect on credit score
If you care about maintaining a good credit score, you should avoid closing a credit card even if you have fully paid off the balance. This is because your credit score is based on a number of different factors that will almost all be adversely affected by closing a credit card.

“An account closure could wind up hurting your score because it eliminates the available credit line associated with the card and could easily skew your…credit utilization. It could also lower the age of your credit report, which may affect your score over time,” warns Jeanine Skowronski, credit card analyst and reporter for Bankrate.com.

According to FICO™, the United States’ biggest credit scoring service, 10 percent of your credit score is determined by credit mix. The more diverse the mix of your credit types, the better, so you should especially avoid cancelling a credit card if it is your only one or one of just a few.

Another 15 percent of your credit score is determined by the length of credit history. Because of this, you should take care not to close your oldest credit card. “Lenders tend to view borrowers with short credit histories as riskier than borrowers with longer histories,” writes LaToya Irby, credit and debt management expert, in a May 2017 article for TheBalance.com. “Closing your oldest credit card won’t impact your credit score immediately. But, once the credit card falls off your credit report several years down the road, you might see an unexpected credit score drop.”

More importantly, 35 percent of your credit score is determined by your payment history. If the credit card you want to close has a long and good history, closing it will hurt your credit score significantly. “If you have a good payment history on a card, then it is a good idea to leave that card open. This is especially important if you have a poor history with other cards or forms of credit,” says Chizoba Morah, contributor for Investopedia.com.

Debt and identity theft
Limiting debt and preventing identify theft are among the top two reasons people might decide to close a credit card. According to Morah, “When people feel they are spending too much money and cannot resist the lure of the credit card, they close the account.”

Furthermore, Morah adds that “by closing a credit card, they can lessen the chances that their identity will be stolen,” a risk that is increasingly at the front of people’s minds given the increase in identity theft in recent years.

While these are legitimate reasons to cancel a credit card, there are alternative methods to tackling these without incurring penalties on your credit report.

Alternative methods
There are a couple of steps you can take to keep a credit card open while making it very difficult to use it, thus limiting the aforementioned temptation and risk of identity theft. One step is to remove your credit card information from any online retailer that still has it, such as Amazon, so that it can never be unintentionally used by you or the retailer.

Another step is to destroy the physical credit card itself so that there is no risk of losing it or having it stolen. “If you have an inactive credit card or a card with a high balance, cut it up instead of closing it so that the history remains on your credit report but you won’t accumulate more charges on it,” advises Morah.

Ultimately, the negative consequences of canceling a credit card more than offset the potential benefits, especially as these benefits can be explored via alternative means. Unless the credit card you want to cancel is very new, mostly unused and one of many other credit cards, you are likely better off leaving it open.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

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What Does Your Car Insurance Really Cover?

Deciphering car insurance coverageCar Insurance registration form
Car ownership involves purchasing auto insurance. But what circumstances does it protect you against? What does car insurance not cover? Discover the ins and outs of car insurance to make sure you have the coverage you need.

Collision coverage
According to Barbara Marquand, contributor at Nerdwallet.com, this type of insurance protects you during a car accident with either another car or an object. It also covers you if your car flips over and suffers damage.

Comprehensive coverage
This type of insurance is usually sold together with collision coverage, as a package. Comprehensive coverage protects you from harmful incidents not related to car accidents. Per Esurance.com, it covers damages incurred from storms, falling objects, vandalism and collisions with animals like deer.

Liability coverage
In the case of an accident with another car, this type of coverage goes towards paying for the person’s injuries and any car damage incurred.

Liability coverage is usually expressed in three numbers, as Marquand states. For example, a 100/300/500 liability coverage means it will pay a maximum of $100,000 bodily injury per person, $300,000 bodily injury per accident and $50,000 property damage per accident.

Each state varies in the minimum liability insurance that they require; check your state’s requirements before purchasing car insurance to make sure you comply with this standard.

Personal injury coverage
Even if you have health insurance, it’s wise to opt for a car insurance policy that includes personal injury coverage. It covers the medical bills for you or passengers in your car in the case of an accident. If the accident proves fatal, this insurance covers funeral expenses.

Personal injury coverage can be broken down into two subcategories: medical payment coverage or personal injury protection. Some states require one or the other policy, so check your state’s requirements before purchasing this type of insurance.

Uninsured motorist coverage
This insurance protects you if you have an accident with someone who is uninsured or underinsured. It covers your medical expenses if the other driver doesn’t have insurance. If the other driver’s insurance covers only some of your medical bills, then uninsured motorist coverage will pay the difference.

According to Christina Couch, contributor for Bankrate.com, some states have more uninsured drivers than others. In Mississippi, for example, one in three drivers is not insured. If you’re on the fence about whether or not to purchase this insurance option, find out what the statistic is for your state.

Circumstances not typically covered
Although collision and comprehensive car insurance policies can shield you from a wide variety of circumstances, there are some situations that they will not cover.

As Couch notes, car insurance usually won’t cover you for items that are damaged or stolen from your car. For instance, it would cover features that came with your car when you first bought it, such as the radio or CD player. However, it would not cover any gadgets or personal items that were in your car.

Car insurance usually will not cover drivers who are living with you, unless they are specifically listed on your car insurance policy. So this insurance would not cover an out-of-the-house friend or relative who borrowed your car.

Towing and roadside maintenance are two other services that car insurance typically will not cover. However, many insurance companies offer these services as available add-ons to your overall insurance package.

Equipped with this knowledge, you can have peace of mind knowing what each type of car insurance coverage means and exactly what circumstances your policy protects you from.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Guide to Investing in Your 20s

Laying the groundwork for a lifelong investment strategy

Young man in front of a blackboard with financial notes on itYou have finally graduated college and, after finally finding a full-time job, can start paying back those student loans. Retirement seems like it is in the distant future and you are more concerned with living paycheck to paycheck. But it is never too early to start preparing for your future by establishing sound financial footing and taking early investment steps.

Save money
The first step to investing is to align your spending habits with your investment plans by carving out a chunk of every paycheck for savings. While you might not feel that you have the current flexibility to put away any money, the earlier you make saving an uncompromisable habit, the easier it will be to increase your investments long-term.

According to Charles Schwab Foundation president Carrie Schwab-Pomerantz in an interview with Forbes, people in their 20s should be budgeting for and saving at least 10 percent of their annual income. While this may seem excessive, the more you have saved early on, the more it will compound over the next 50 years. Not to mention, it is a solid step to increasing your savings rate to 20 percent in your 30s.

Pay off your debts
Get out from underneath the oppressive thumb of student loan and credit card debt as quickly as possible by establishing an aggressive debt repayment plan. According to Stacy Rapacon of Kiplinger, the longer you let debt linger, the further it will set your finances back in the form of greater interest payments and lower credit scores. The sooner you repay your debts and free yourself from crippling interest payments, the more money you’ll have to invest in your future.

Fund your retirement
It is never too early to start setting aside money in your retirement fund, especially since the years will only compound how much you will have in your account by the time you retire. Rapacon of Kiplinger calculates that if you invest $100 a month as a 25-year-old, assuming an 8 percent return and quarterly compounding, you’ll have around $346,000 by the time you turn 65.

Investing money in a retirement fund now is even more essential because of your employer’s matching program. Arielle O’Shea of NerdWallet highly suggests taking advantage of your employer’s generosity by contributing to any available retirement plan, such as a 401k, especially if your employer offers a matching percentage.

If you don’t have access to a company-based 401k, Forbes’ Samantha Sharf recommends investigating the option of starting a Roth IRA or Roth 401k that taxes your contributions now but lets those contributions grow tax-free for the rest of your lifetime.

Take risks
Those who do invest in their 20s often do so conservatively because they don’t want to see any of their hard-earned money lost, but that also limits the potential for their investments to grow. According to O’Shea, “Many millennial investors make the mistake of avoiding risk even though it helps them over a long timeframe.” Thus, to reach your target retirement financial goals, it is important to allocate much of your portfolio to stocks over bonds. While there may be more short-term drops, Vanguard analyses show that it is the way to get a better lifelong annual return.

Get advice
If you are not sure what the best investment options are for you, or would like additional clarification on what investing involves, it never hurts to ask for advice from an advisor who can help you map out a financial plan that spans. O’Shea of Nerdwallet recommends even opening an account with a robo-advisor that will give you basic insights into your current plan and offer advice on the next steps.

Your gut feeling may be to wait to invest and spend your money elsewhere while you are young, but the more aggressively you save and invest your income now, the better prepared you will be for retirement.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Pros and Cons of Living at Home During College

Staying at home during college provides numerous costs and benefits

Young black girl on her bed studying When people describe the typical college experience, it usually involves living on campus in a dorm. Many colleges actually require students to live in dorms for their first two years, unless they commute. After moving out of the dorms, many students often move into a nearby apartment during their junior and senior years.

However, the quintessential college experience is changing. In fact, according to a report from Forbes, 54 percent of students now choose to live at home during their college years. Whereas living at home was seen as a rarity in the past, it is now rather commonplace. University students have come to recognize the various benefits that living at home provides them during their college career.

Of course, living at home does come with its drawbacks as well. Each student must weigh out the costs and benefits of choosing to live at home while attending college to determine which path is right for them.

Benefits of living at home

The most obvious benefit of living at home, and the number one reason why students choose to do so, is cutting costs. Amy Diluna of NBC News reports that students can save around $10,000 a year by commuting from home, depending on what college they attend. With each passing year, college grows more expensive and many students are forced to rely upon loans to pay for their education. Room and board will only add to the climbing amount of debt that students acquire by the end of their academic journey.

Beyond room and board, living at home can save students money in other ways. Doing laundry will likely be a much simpler and less expensive task while meals will probably cost less as well. Living at home carries more than just financial benefits. Staying with family can often provide students with a social support system, according to Kate Ashford of Forbes. College can often be a tough time of transition for many students and living away from home can make them feel isolated. Living at home often eliminates much of that isolation.

Drawbacks of living at home

Living at home might eliminate the distractions of those late-night parties, but it will also reduce the number of social gatherings and events for students as a whole. NBC News’ Amy Diluna explains that many students that live at home can feel like social outsiders, due to their reduced presence on campus. Students who commute are less likely to join clubs and activities than those who choose to live on campus.

Living away from campus doesn’t just make socializing with other students harder. It also makes working with them harder. Diluna also notes that scheduling group projects can be more difficult when one student lives farther from campus. The distance between where students live and where they go to school can often land them with a long and arduous commute. Said commute can drain students of energy or even cost them a hefty fee in terms of gas money, according to Susannah Snider of U.S. News & World Report.

Furthermore, commuting to school and living at home only works if the university that students are interested in attending is in the same vicinity as their family home. If students truly want to live at home during college, then it can greatly reduce the number of universities where they can feasibly enroll. Needless to say, the decision to live at home also depends on how strong the relationship is between students and their family members. Many students will pursue the independence that living away from home provides, even if it may cost them more in the long run.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Holiday Shopping on a Budget

Tips to limit what you spend on gifts this season

Woman holiday shopping online using a laptop and a credit cardThe holidays should be time for celebration and generosity, not for accumulating credit card debt and draining your savings. By sticking to a budget and following these simple strategies, you can bestow meaningful gifts while staying within your financial means.

Create a budget
Donna Montaldo, contributor to TheBalance.com, advises that you make a spending budget before the holiday season hits. Make this an informed amount, based on what you can truly afford to pay.

Make a list
Maya Kachroo-Levine, contributor to Forbes.com, suggests making a list of everyone you want to buy presents for along with a certain amount you should spend on each person. This will help you stay within your allotted budget.

Avoid using credit cards
Montaldo recommends leaving your credit cards at home to avoid racking up debt while shopping. Mellody Hobson, writer for ABC News, recommends using your debit card instead. This way, you won’t be tempted to spend beyond your means and you won’t have to pay interest on your purchases.

Start saving early
Kachroo-Levine advises starting a holiday spending fund as early as possible so that when the holidays approach, you will already have a surplus to tap into. Consider setting aside $30 a week starting two to three months before the holidays.

Compare prices
Hobson suggests that you research prices before purchasing any gift. If you’re shopping in person, use your phone to check online to see if there’s a discounted price if you order an item online. You can also check prices of that item at similar stores.

Re-gifting
Another affordable option to stay within your budget this holiday is to re-gift an item that you received but don’t use or need, explains Montaldo. Make sure the gift is new and wrap it in an attractive package to give it a fresh look.

Go homemade
Browse ideas on Pinterest and others websites for simple gifts that you can make yourself. Montaldo suggests visiting the dollar store to purchase candy or nuts that you can package in mason jars and wrap with festive bows. Handmade items such as cookies or homemade bath salts are two additional ideas great for teachers and coworkers.

Rethink gifts for your partner
It can be easy to overspend on the people closest to you, particularly your spouse or significant other. Kachroo-Levine recommends setting money aside earlier in the year to purchase a high-cost experience or household item that you both have been wanting. Another great idea is to give your partner the gift of quality time this year, to avoid focusing on material possessions as gifts.

Amp up your gift’s appearance
Montaldo advises enhancing the visual appearance of your present by investing in quality gift wrap, ribbons, bows and accessories. You can also add a personal touch by making your own gift wrap, following do-it-yourself instructions on sites like Pinterest and Instructables.

Say “no” to holiday guilt
A thoughtful gift doesn’t necessarily mean an expensive one. Also, you don’t have to buy an item for every coworker and acquaintance you know, explains Kachroo-Levine.

Stay within your budget by applying these practical suggestions for giving affordable holiday gifts this season.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Security Warning Signs When Shopping Online

Remove the stress from shopping online by following these key shopping safety tips

Young woman shopping on a laptop while holding a credit card It’s an undeniable fact that many people shop online, either for personal shopping or gift giving. Companies like Amazon and Etsy have built modern empires out of their online operations. With each passing year, more and more brick and mortar stores close their doors. With all of these shopping venues shutting down, the variety of online shopping sites has only grown more diverse.

But for every trusted online retailer out there, there is a different website that is certainly not as safe or secure. Online security is always something to be concerned about, and this is even truer when money is involved. Keep an eye out for these warning signs and how to respond to them in an appropriate way.

Warning signs to check for
With the growing number of online shopping websites, there are guaranteed to be some bad eggs in the bunch. Shoppers might find themselves deceived and robbed if they aren’t careful. Even though the venue is online, most reputable online websites have both a physical address and a phone number according to Norton Security’s Mary O. Foley. If a site lacks either of these, then it might be one to avoid.

Pop-up ads are another red flag for shoppers. Not only are they annoying, they might also indicate that a particular site is not the best in terms of online security. Another sign of a scam would be extremely low prices. If the prices on a certain website seem too good to be true, the BBC’s website warns that they probably are. The easiest way to make sure that a website is safe, however, is to use the internet itself. A simple web search might yield the answer as to whether or not a shopping venue is legitimate.

Ways to pay safely
Even with these warning signs in mind, it can still be easy for online shoppers to fall prey to a trap on the internet. As important as preparation leading up to a purchase is, how someone actually goes about shopping and paying online is just as critical, if not more so. It might be tempting to purchase a product while out and about, relying upon a Wi-Fi hotspot for an internet connection. However, Elizabeth Weise of USA Today warns that hackers often monitor public connections, meaning that waiting to shop until you get home is the safer bet.

As is the case for all online activities, you will want to make sure that your passwords are rigorous without being complicated. That way hackers won’t be able to guess your password, but you won’t forget what it is, either. Similar to certain transactions offline, using a credit card is more advisable than using a debit card when it comes to shopping online. Paying with a debit card can lead hackers straight to a banking account, putting your money at greater risk.

After a purchase is made, it is vital to still practice your due diligence when it comes to protecting your cash. Eric Griffith of PC Magazine states that shoppers should not wait until their monthly bank statement arrives to check and see if something is amiss. Instead, they should check their banking accounts online on a consistent basis.

Shopping online can be a very enjoyable activity. With these tips in mind, you can remove a lot of stress from the entire online experience.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Furniture Restoration for Beginners

woman sanding an old wooden tabletopGive new life to hand-me-down treasures and thrift-store finds
Breathing new life into hand-me-down furniture, thrift store finds and flea market treasures is a creative way to save money and decorate your home with one-of-a kind, customized pieces. Whether using a new paint color to spruce up a table, new upholstery fabric to brighten up tattered chairs or a new stain to restore a youthful glow to a dresser, you can cultivate a stylish and signature look for every room in your house by letting your inner interior designer run wild.

Simple fix
Typically, second-hand furniture and thrift-store steals have seen better days in both style and condition, but if that couch or chair retains a solid foundation, making them look new again can be an easy fix. According to the experts at BHG.com, a slipcover can hide past damage and create a whole new look for an outdated piece; they suggest choosing one in a neutral pattern or color and using accessories for a punch of color and interest.

Style reinvented
Give new life to an old piece by giving it a totally new identity. CountryLiving.com writer Sienna Fantozzi highlights an antique ladder repurposed as a cute storage solution for pretty quilts and extra blankets, a table constructed from old shutters and an old metal washtub flipped upside down for a rustic addition to your décor.

A dining room table by any other name is a coffee table, says BHG.com, which suggests cutting down a dining room table to coffee table height, painting it a new color and adorning it with a fabric remnant for a distinct look.

Entertainment cabinets have fallen out of fashion as television sets have become sleeker with wall-mounting potential. BHG.com suggests turning these once-useful consoles into sturdy shelves, accessorized with decorative bins, perfect for a dorm room.

Picture perfect
Art is a captivating way to add warmth, style and texture to your walls. But sometimes you might love the frame more than the picture it surrounds. The experts at BHG.com suggest replacing an ugly picture in a beautiful frame with an eye-catching wallpaper remnant. The wallpaper can complement the look of your room, add color to a neutral room or dress your wall with an attractive pattern. Or, perhaps you’d like to incorporate your artistic ability into a new frame—paint, draw or reframe a photograph that has special meaning to you.

New hue
Sometimes fresh and clean is the best way to energize or downplay the look of old furniture and fixtures. BHG.com suggests recovering lamp bases and nightstand tables in white. With so many shades, you’ll have no problem picking the right one for your room.

If you are ready to try your hand at stripping, staining and refinishing a wood piece, HowStuffWorks.com writers Emilie Sennebogen and Jill Jaracz recommend putting safety first. Since chemicals in wood varnish and strippers are highly toxic, it’s essential that you protect your skin with proper clothing, your eyes with safety glasses and your lungs with a mask while you work in a well-ventilated area. Clean the piece well, repair areas of damage, follow the directions on any chemicals you use to strip the existing paint or finish, sand what’s necessary and take time figuring out what stain is right for your work of art, advise Sennebogen and Jaracz.

If you are a bargain hunter, a fan of DIY or just want to create something special for your home, a little time and effort can transform neglected hand-me-downs and overlooked treasures into wonderful, stylish additions to your home.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.