Pass This Credit Card Quiz and Cut Your Costs

One look at a typical cardholder agreement makes clear that credit cards come with plenty of fine print. Even so, a lot of information isn’t readily available to cardholders, especially regarding what they can ask for from their card issuers and how they can manage their accounts more cost-effectively.

A recent NerdWallet survey found significant gaps in consumer understanding of credit cards — gaps that can be costly.

“The act of using a credit card is so simple, but they can be complicated products,” says Sara Rathner, a NerdWallet credit cards expert. “Knowing what your card offers, and what you can ask for, can make it significantly more valuable for you.”

Test your knowledge by taking the same quiz given to survey respondents.

1. True or false:

Moving credit card debt to a card with a lower interest rate or a 0% rate will always save you money in the long run.

balance transfer can help you pay off debt more quickly, but it isn’t always the best option. Moving debt from one card to another usually incurs a fee of 3% to 5% of the amount transferred. That fee could be more than you’d have paid in interest if you’d left the balance where it was and paid it off. So you have to compare costs. A balance transfer is effective only if it saves you money overall — and you use the money you save to pay down your debt even faster.

Answer: False.
Survey respondents who answered correctly: 22%.

2. True or false:

Credit card issuers allow you to ask for an increase in your credit limit.

You can always ask your card issuer for a higher limit, although there’s no guarantee you’ll get it. The issuer will consider various factors beyond your account record, including your income, debts and credit history.

Answer: True.
Survey respondents who answered correctly: 76%.

3. True or false:

Credit card issuers allow you to ask for a lower interest rate.

Similar to seeking a higher limit, you can certainly ask your card issuer if you qualify for a lower rate. You might not get it, but it’s worth picking up the phone to ask, especially with an account in good standing. A lower interest rate means immediate savings if you typically carry a monthly balance.

“If your current card isn’t working for you, it could be worth calling and asking for the change you want,” Rathner says. “If you’re a longtime customer in good standing, the answer might be yes. But if it’s a no, then you can vote with your wallet and shop around for a card that’s a better fit for your needs right now.”

Answer: True.
Survey respondents who answered correctly: 50%.

4. True or false:

Credit card issuers make financial hardship plans available to anyone struggling to make payments.

Some credit card issuers will temporarily lower interest charges or waive fees through a financial hardship plan for cardholders who can’t make payments due to circumstances beyond their control. For instance, you might be eligible if you’ve lost your job or had a family emergency.

But while some issuers offer hardship plans, they don’t make them available to everyone who asks. You’ll have to qualify based on your circumstances. No one is guaranteed to be accepted.

Answer: False.
Survey respondents who answered correctly: 18%.

5. True or false:

If you want to switch to a different card from the same company — for example, to get a lower annual fee or better rewards — you must ask the company to close your original account and open a new one.

Switching cards from the same issuer is called a product change. Since issuers don’t widely advertise product changes, it’s not surprising that many people don’t understand how they work.

If you’re unhappy with your current credit card because of its fees, rewards or other features, you can ask the issuer to switch the account to a different card that’s better suited to your needs. You keep the same account; it just has a new credit card attached to it. Keeping the account open can benefit your credit since scoring models consider the length of your credit history, including the age of your accounts.

Answer: False.
Survey respondents who answered correctly: 23%.

6. True or false:

Credit card issuers waive late fees.

Issuers don’t broadcast that they’ll consider waiving late fees, so it’s not surprising that many people don’t know it’s an option. Not all issuers will waive fees. Those that waive them will do so at their discretion, and they’ll consider it only if you ask. It’s not unusual for an issuer to waive the first late fee for an account in good standing. If granted, that’s a potential savings of up to $30.

Answer: True.
Survey respondents who answered correctly: 37%.

7. True or false:

You can use a credit card without ever having to pay interest.

You won’t be charged interest on purchases if you pay your credit card on time and in full monthly. If you carry a balance from one month to the next, on the other hand, you’ll incur finance charges unless you have a promotional 0% annual percentage rate period in effect.

Putting purchases on your card and paying the bill in full each month avoids interest while still reaping the benefits of a credit card, such as fraud protection, rewards and others.

Answer: True.
Survey respondents who answered correctly: 54%.

8. True or false:

Making the minimum payment every month on a credit card allows you to pay down debt quickly.

Paying only the minimum on a credit card every month can take years to get out of debt. The minimum is usually enough to cover the interest accrued over the past month, plus only a small fraction of the actual debt. Look at your credit card statement to see how long it would take at that rate. You’ll see a table that shows how long it would take to pay off the balance if you made only the minimum payment.

Answer: False.
Survey respondents who answered correctly: 64%.

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8 Tactics to Break the Credit Card Debt Cycle

Upon paying off between $12,000 and $15,000 in credit card debt in 2019, Yamiesha Bell, a special education teacher in New York, didn’t break up with her credit cards.

With goals to buy a car and a house, Bell hoped to preserve her credit history by keeping her cards open and active.

“I needed to sustain my credit in order to get the interest rates I wanted in the future,” she says.

While credit cards aren’t ideal for everyone, they can aid your credit journey if used responsibly. When reconciling with credit cards, you need a personalized stay-out-of-debt plan. Here are a few strategies to consider.

1. Reflect on spending habits

Maybe you ditched debt, but history can repeat if you don’t unpack the motivations that contributed to it. A get-out-of-debt plan that works in the short term may not be sustainable over the long term if it doesn’t align with your priorities, according to Julia Kramer, a financial behavior and leadership consultant at Signature Financial Planning in Pennsylvania.

Kramer suggests tracking transactions dating back a week or more. Add a plus sign next to those purchases you’re willing to repeat and a minus sign next to those you’re not. For obligatory purchases like gas and groceries, add an equal sign.

Note the date, the item purchased, the amount and the need the purchase met. Those frequent lattes or meals out with friends may be more about the personal connection experienced, or something else, as opposed to the gratification provided by the item, according to Kramer.

This information is key to identifying areas in your budget that are negotiable. For example, you may be more willing to choose budget-friendly food in order to keep a facial that meets an internal need for self-care and connection, Kramer says.

If your spending strays upon experiencing feelings like anxiousness or boredom, make a plan for those occasions. It might mean budgeting extra money or employing tricks like using a credit card lock feature to prevent spending.

2. Use cash for certain categories

If you want to reel in spending on categories like dining out or entertainment, for example, set aside physical cash to stay within budget. Money in hand can lead to more mindful spending, according to Kramer.

3. Track spending

Create a tracking system that works for you. Setting up spending alerts on a credit card account can notify you if purchases exceed a certain amount. Tracking spending with a spreadsheet, bullet journal or budgeting app, for instance, can also help with mental accounting.

“I would not open up credit cards if you do not have a system in place where you track spending every month,” Kramer says. “It has to be something that appeals to you that you know you’re going to do.”

For Bell, a cash envelope tracking system helps her manage spending in different categories, including her credit card bill payment.

“When you look in a cash envelope and you see you only have $50, it’s very clear that once that money runs out there’s nothing else I can do,” she says.

4. Use credit cards for planning purchases only

Ease your way back into credit cards with small planned purchases, like a subscription service payment.

After paying off debt, Bell only uses credit cards for in-budget purchases, and she pays them off in full each month to avoid interest charges. Initially, she left her credit card at home to avoid relying on it.

5. Have an emergency fund to fall back on

An emergency fund of even $500 for a car or home repair may keep debt off of your credit cards. Start small and aim, eventually, to cast a wider safety net over time — ideally, three to six months of living expenses stowed in a high-yield savings account.

If you previously got used to budgeting a certain amount each month to pay creditors, keep that momentum going, but direct funds toward savings instead.

6. Don’t store credit card info on websites or apps

Convenient payment options can sometimes lead to mindless spending. By entering payment information into forms for every online purchase, you’ll have more time to think through a purchase.

7. Get an accountability partner

A nonjudgmental partner or trusted loved one can offer input on a purchase or a stay-out-of-debt plan. An accountability partner can be a sounding board that lets you listen out loud to your own justifications for financial decisions.

8. Update your strategy

As motivations and priorities change, your stay-out-of-debt plan should follow. Continue revisiting credit card statements to identify the needs that are being met by purchases and which are most important.

If in this process you continue having frequent run-ins with debt, consider closing credit card accounts even if it can negatively impact credit scores.

“A big thing about this is knowing yourself and knowing what your challenge areas are and finding ways that work around them,” Bell says. “Five years from now it might look different, but for right now that’s what works.”

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

Melissa Lambarena writes for NerdWallet. Email: Twitter: @LissaLambarena.

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Viral Savings Challenges That Pay Off

Among the different ways to trick yourself into saving, money-saving challenges are some of the most engaging.

They can help you feel connected to finances by requiring frequent check-ins and debunking feelings of inadequacy when it comes to saving. For Cristina Brown, a self-described savings-challenge designer and founder of the blog Happy Savings Co, money-saving challenges helped her go from spending to saving.

“I recognized the need to save money, and I thought that this would be a good way to kind of gamify it,” Brown says.

If saving for tomorrow seems out of reach, the right money challenge can generate excitement, push competitive buttons and potentially increase savings.

Viral challenges that can add up

Before starting a savings challenge, review your budget to trim unnecessary expenses. The amount of breathing room in your budget will determine the level of difficulty that’s possible for a challenge.

Assigning a goal to a challenge may also keep you motivated and consistent, whether it be saving for an emergency fund, a vacation or something else.

A few popular challenges to consider include:

Keep the change challenges

Beginner-friendly $1 and $5 savings challenges allow for passive saving, which takes less effort and adopts an out-of-sight approach. For a designated amount of time, both challenges involve putting aside denominations of these bills that are left over from cash transactions.

Ezekiel Waisel, a certified financial planner at SHP Financial, a financial planning firm, tried the $5 challenge in 2016 and saved about $300 in a year for a round-trip flight. “I don’t use a lot of cash, so the fact that I even saved that much was pretty surprising to me,” he says.

The 52-week challenge

This challenge hikes up the savings by $1 weekly and requires you to actively save by budgeting for each week. In the first week you save $1, in the second week $2, and so on until the 52nd week. The challenge can also be reversed to start saving $52 in the first week and work downward, as is Brown’s preference in 2022. Either way, the challenge can save $1,378 in a year, enough to cover an emergency or a large purchase.

“At the end of the year with holidays — even with all of our best efforts of setting up sinking funds for the holidays and stuff like that — things can still get pretty tight, so I reversed the order to save the bigger amounts at the beginning of the year,” says Brown. A sinking fund holds money that’s earmarked for a specific goal or expense.

The 100 envelope challenge

This potentially lucrative and difficult money-saving challenge requires numbering 100 envelopes from one to 100, shuffling them and drawing one randomly every day. The number on the envelope drawn determines the amount of cash that must be saved. Drawing high numbers consecutively can prove difficult, so this challenge is ideal for those with more cash flow. If completed, it saves up to $5,050, but don’t hold money in envelopes too long. Keep it safe by designating a day every other week or monthly to deposit savings into a high-interest bank account.

The weather Wednesday challenge

For thrill-seekers with enough cash flow, this challenge can offer big savings with less predictability. On every Wednesday, for a year, save cash or make a deposit into a savings account based on the temperature in your city. If it’s 50 degrees, for instance, save $50. The challenge gets harder as it gets warmer, so it’s best to start in the winter when it’s more manageable.

No spend challenge

It’s as straightforward as it sounds: You commit to only spend on essentials over a certain period to save big. Some people even clean out their pantries to lower their grocery bills. The level of difficulty is subjective for this challenge, but it’s likely more sustainable over a short term.

Customize your own challenge

Modify a popular challenge to fit your needs by shortening or extending deadlines or the cadence of saving. For instance, you could stretch the 100 envelope challenge over 100 weeks (about 2 years) instead of days, if that’s more achievable. Brown also creates her own challenges. In one such challenge, she seeks discounts at the grocery store to stash savings for future goals. She says she saved a total of $3,560.58 in 2021 by juggling multiple challenges each month.

Learn what motivates you

Mastering a savings challenge involves understanding your motivations. Consider whether you’re motivated by big or small deposits, randomness or predictability, cash or electronic deposits, or active versus passive saving. If you’re unsure, try a few money-saving challenges to learn what works. Passive savings challenges like keep the change can lay a solid foundation for bigger challenges and savings.

“I think passive is a great starting point, and once you get comfortable and consistent with passive saving, you can then add or switch to an active savings model,” Waisel says.

Finding the right challenge may require trial and error, but even as you experiment you’ll likely save money in the process.

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

Melissa Lambarena writes for NerdWallet. Email: Twitter: @LissaLambarena.

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Keep an Eye on Debt Using Creative Visual Aids

With an $82,000 pile of debt, buying a house seemed far in the distance for Ehren Sixon and his wife, Florida residents who embarked on a debt-free journey in 2016. They opted for the debt snowball method, a debt payoff strategy that encourages motivation by quickly attacking the smallest balances first.

The couple also tracked every milestone along the way with different visual aids as they paid off car loans, student loans and credit card debt.

“We wanted to be able to track our progress and keep us motivated,” says Sixon, a 32-year-old systems engineer and part-time YouTuber.

The internet is full of debt-tracking templates that can help you log milestones toward your debt-free goals. From coloring pages to spreadsheets, here’s how you can use visual aids to demolish debt.

Visual aids motivate

If you have a long journey ahead, a road map that logs your progress can offer support and encouragement.

“You get lots of little dopamine hits from checking off those smaller milestones or those smaller elements along the way, and that really keeps motivation going,” says Katharine Iesiev, owner of She Minds Money, a financial therapy service based in Massachusetts.

Iesiev favors creating something tangible that you can print out and view often at home.

Track your progress in several ways

The Sixons turned to the internet to research debt-tracking solutions. As you explore your options, consider what will be most motivating for you.


Sixon started with a spreadsheet to keep track of all lenders, balances and debts paid off. A spreadsheet can be as simple or elaborate as necessary. You can use it to log every payment to each lender or to update balances after making a payment. A key benefit is that it can keep debt and information organized. It also pairs well with other tracking systems.

Printables for everyday viewing

The Sixons also looked at templates online to facilitate checking off debt goals. They chose a thermometer for their fridge and later moved it to the front door as a daily reminder to stay true to their goal. At every monthly check-in, they would evaluate their progress and color in the thermometer upon paying off each 10% of their debt.

“With the spreadsheet, there were times when we just got so caught up in the outstanding balances instead of celebrating how much we’d paid off so far,” Sixon says. “I didn’t realize how fun and exciting coloring a portion of that debt thermometer was, but it made our debt-free journey more enjoyable.”

Also consider coloring pages that display images like a home to represent a mortgage or a car to represent a loan. You can fill in the increments as you make payments.

For a different creative approach, a progress map can offer an appealing and discrete artistic design with unlabeled increments that you color in a similar way. For the Sixons, their bold, red thermometer became a conversation starter and inspired some friends to pay down debt.

“They were thankful that they saw the way we put it up in our house and they were able to do the same,” he says.

Bullet journals

A bullet journal is less visible than a page you can print and display, but it could offer more frequent engagement with your finances. Keep it as simple or creative as needed. In 2018, Kaila Penner, co-owner of the blog Frugal Twins, drew an easy bar chart inside her bullet journal to track payments toward the last remaining $24,000 from a car loan and two student loans. She colored in each bar with pink, green or blue ink after meeting every $1,000 increment.

It’s possible to break down the increments further and designate different pages for different kinds of debt. So instead of a bar chart, you could opt for drawing graduation hats, dollar bills or anything else that you can color in to represent debts paid off.

Like Sixon, Penner also used a spreadsheet throughout her entire journey, but it wasn’t as motivating as the bullet journal. “Filling that in every month was much more satisfying for me,” the Iowa resident says.

She also added a thermometer on her refrigerator door for daily visibility. With all three trackers, she logged her progress to crush the debt.

Rely on visual aids long after debt

The Sixons paid off their debt sooner than projected in 2018 by budgeting cash in envelopes and cutting back in categories like dining out and streaming subscription services. They now use a thermometer to track savings instead. In anticipation of the arrival of their baby girl, the Sixons recently colored in a thermometer indicating their savings toward a family-friendly vehicle.

“To come out in 2021 and buy a car with no car loan — fully paid off — and have it ready for our child, I didn’t think we would be at this point in our financial journey,” Sixon says. “It’s incredible.”

They’re currently using multiple thermometers that remind them to focus on priorities like paying off their home and saving for renovations and travel.

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

Melissa Lambarena writes for NerdWallet. Email: Twitter: @LissaLambarena.

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8 Other Things Your Digital Wallet Can Do for You

Digital wallets, also known as mobile wallets, have grown in popularity over the years. But the freedom to leave all your cards at home isn’t the only benefit users will enjoy. A digital wallet has many benefits outside of condensing physical cards and offering a seamless and secure payment option.

The top three digital wallets are Apple Pay, Google Pay and Samsung Pay. Venmo and PayPal can also function as digital wallets, both in stores and online. A major digital wallet is typically already downloaded to your mobile device or can be downloaded from the app store for free.

Once set up, a digital wallet could offer bonus rewards, lower exposure to germs at the register and help you split payments with friends, among other options. Get to know all of the potential functions of your digital wallet.

1. Declutter your wallet

In addition to organizing your credit cards, a digital wallet can store other items that occupy space in your physical wallet.

Condense your debit and credit cards

Debit and credit cards can all be added to a digital wallet and converted to virtual cards when you input the cards’ information on the app. Depending on the digital wallet, you may also be able to add cards to make purchases from a computer or smartwatch. It’s important to still keep a physical backup payment option or two in case a merchant doesn’t accept digital wallet payments.

Organize cards, coupons, tickets and more

The Apple Wallet stores travel boarding passes, gift cards, coupons, tickets to concerts and sporting events, membership cards like student IDs, transit cards and other documents. Samsung Pay and Google Pay also store your COVID-19 vaccination record. What you can store varies for each major digital wallet.

2. Access some credit cards instantly after approval

When you apply for a new credit card, some credit cards no longer require you to wait for it to arrive in the mail. American Express, for instance, offers an instant card number after approval, which can be added to Apple Pay, Samsung Pay or Google Pay. You can use the digital wallet to start using your card online or wherever it is accepted as a payment method.

Some cards may not even make it into your physical wallet. The Apple Card, for example, offers a physical card option, but you have to request it.

3. Earn bonus rewards

With a digital wallet, you may be able to stack rewards earned from credit cards, promotions or the platform itself.

From your credit card issuer

Some credit cards offer special incentives when you upload them to a digital wallet. U.S. Bank, for example,  offers a card that earns 3 points per dollar on purchases made with a mobile wallet and rewards in other categories, too. The Apple Card earns 2% cash back on purchases made using Apple Pay in addition to rewards in other categories.

Through the digital wallet

Samsung Pay and Google Pay offer the chance to earn additional rewards when shopping with select merchants through their app. Depending on the option, you may have to activate rewards and follow instructions to earn them. Terms may also apply. It’s a chance to stack rewards earned from both a credit card issuer and your digital wallet for even more value.

4. Send and receive money

Whether you’re picking up the check or paying back a friend, Apple Pay, Google Pay and Samsung Pay facilitate sending and receiving money with a bank account, debit card or the balance in the app’s account. Apple Pay, for instance, lets you add Apple Cash by loading money into the app from a debit card or other source to send money.

5. Split the bill easily

When sharing an expense as a group, you can pick up the tab, rake in a pile of credit card rewards and get your friends to reimburse you. Some digital wallets like Venmo and Google Pay, offer a way to easily split the bill.

With Venmo, you can request a payment from one or several contacts in the app. You can also change the amount requested for each user. Google Pay allows users to track the status of payments made by contacts in the app. Use these options cautiously because if you’re not reimbursed, the bill is your responsibility.

6. Track expenses

Some digital wallets, like Google Pay, facilitate managing your finances. The app offers insights on spending patterns, access to a total balance across all linked accounts and a view of the balance available. Google Photos may also be linked to search transactions.

7. Get better fraud protections

Digital wallets may require verification of identity with a PIN, pattern, fingerprint or other option before being able to make a payment. It’s an added layer of security that’s not present on a physical wallet. If someone took your debit or credit cards, they could potentially use the information on them to go on a shopping spree.

A digital wallet offers greater protection against fraudulent purchases. Digital wallets use a unique number and transaction code for purchases. When you pay in a store, the card number isn’t shared with the merchant. Through a process called tokenization, the digital wallet requests a token to represent the card and the result is a unique identification number associated that is used to make the payment.

8. Keep others’ germs at bay

With a digital wallet, you don’t have to hand a card to different merchants who have handled cash and cards prior to the transaction. There’s no need to touch the payment terminal unless you’re required to input a PIN for a debit card. Simply open the digital wallet, select a card and hold the back of the phone close to the payment reader to pay.

Melissa Lambarena writes for NerdWallet. Email: Twitter: @LissaLambarena.

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5 Ways to Rein In Impulse Spending

Since the COVID-19 vaccine started becoming available in the U.S., there have been more opportunities to impulse spend on items and experiences that you didn’t get to enjoy early in the pandemic.

With the freedom to do more, consumers are spending more. For the first seven months of 2021, retail sales were up 15.5% compared to that same period in 2020, according to calculations by the National Retail Federation.

As some restrictions have eased, it’s likely that you’ve had new spending needs: returning to work, visiting with friends and family, and partaking in other back-to-normal activities. But when the nonessentials threaten to put your finances in jeopardy, it’s important to keep your financial goals on track.

Here are five strategies to help you navigate impulse spending.

1. Wait a day or two

When you feel that overwhelming urge to spend, wait 24 to 48 hours to see if you still want an item, suggests Brad Klontz, a financial psychologist based in Colorado.

“Ask yourself: Can I afford this? Where am I going to put it? How am I going to feel about this purchase tomorrow? How am I going to pay for this?,” he says.

He adds that this pause can help calm the “emotional brain” and activate the “rational brain,” the one that holds you accountable tomorrow.

If you can’t bring yourself to wait, a store’s return policy may prove useful should regret set in. The return protection benefit on a credit card, if available, can also offer a backup option. When you make a purchase with the card that offers the benefit, it can provide a window of time to file a claim and receive a refund when a retailer’s return policy fails.

2. Practice safe credit card habits

Credit cards may help or hurt, depending on how you spend. Klontz says that people spend significantly more money when using their credit cards instead of cash. He suggests keeping a cash envelope to use in areas where you tend to overspend, like dining out, for example.

Also, minimize impulses by not storing credit card information on websites or apps, says Kathy Longo, a certified financial planner and president of Flourish Wealth Management, a financial planning firm in Minneapolis.

“It’s much easier to be like, ‘I’ll look at it later because I’m not going to go find my purse and get my credit card,’” she says. That time can indirectly make you rethink a purchase.

Once you do charge a purchase to a credit card, pay it off in full to avoid interest and save money. For large purchases, consider using a card with a 0% introductory APR.

3. Use curbside pickup

Many retailers have offered curbside pickup since the start of the pandemic. It’s one option that Lauren Miller, a Massachusetts resident, uses to stay on track in her debt-free journey.

Avoiding the inside of the store means “you’re not seeing those seasonal items and those flashy marketing strategies,” she says. These can often lead to impulse buying.

Some retailers may charge for curbside pickup or require you to spend a certain amount to waive the cost. You’ll have to weigh whether it’s worth paying a few dollars to avoid the potential cost of impulse spending.

If you have to go into a store and the urge wins, do an online price comparison of the item, suggests Longo. “See if you can find something similar at a better price or maybe on sale,” she says.

4. Give yourself a splurging allowance

Build a personal allowance into your budget for potential must-have purchases. When Miller first started to curb impulse spending, she gave herself $20 to use at each store. Over time, that amount lowered to $5 per store as she embraced the habit. Since she frequents only about four stores per month, the total doesn’t dent her budget.

“The desire to make impulse purchases lessens, I think, because I know I have the permission to make an impulse purchase if I choose to,” she says.

If you exceed your allowance, take that amount out of next month’s budget, or supplement it by redeeming credit card rewards for cash back or statement credit if it makes sense. (Some credit cards lessen the value of rewards when you redeem for certain options.)

But if impulse spending is constantly causing you to stray from your budget and get into debt, it may be time to reevaluate spending habits or speak to a credit counselor or financial therapist.

5. Get an accountability partner

An accountability partner can help you dissect your reasoning for a purchase. They don’t have to offer an opinion, just an ear. The goal is to hear yourself talk about it out loud and make a decision that aligns with your goals and values, Klontz says.

He suggests choosing a spending limit that merits discussion. For instance, if a purchase exceeds $100, then it may be worth running by an accountability partner. Another option is to use social media followers to stay accountable. Miller, as a content creator on YouTube, documents her progress on social media platforms by sharing her plans to stick to a shopping list.

Melissa Lambarena writes for NerdWallet. Email: Twitter: @LissaLambarena.

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5 Minimalist Tips to Make the Holidays More Affordable

After spending nearly $2,000 in gifts for her daughter’s first Christmas in 2017, Meg Nordmann knew her holiday strategy had to change.

“I totally blew it that first Christmas with her,” says the Florida-based author of “Have Yourself a Minimalist Christmas.” “I bought everything this child needed through the first five years of her life.”

Today, she is more intentional with holiday spending — a staple of the minimalist lifestyle she adopted. Minimalism eliminates distractions to free up room, time or money to do what you value. In Nordmann’s case, she avoids unnecessary spending to stay on course toward reaching early retirement with her husband.

You can use minimalist tips to keep your own financial goals on track, and still have a meaningful holiday season.

1. Review your holiday budget

This year, consumers plan to spend $998 on average on items such as gifts, food, decorations and other holiday-related purchases for themselves and their families, according to a National Retail Federation holiday survey conducted by Prosper Insights & Analytics.

Your budget may differ, but it’s worth considering that $1,000 could cover a month’s rent, an unexpected car repair or vet bill. Even one-fifth of that would make a decent start on an emergency fund, ideal in an uncertain economy roiled by a pandemic.

You don’t need to sacrifice gift-giving entirely. But before you start your holiday shopping, prioritize your own financial goals before determining what to spend on others.

2. Set expectations

Let family members know ahead of time if you’re changing your holiday approach. Last year, Nordmann and her family decided months in advance that they were only exchanging books.

Joshua Becker, Arizona resident and founder of the Becoming Minimalist blog, has an understanding with his family.

“I have a brother and a sister, and we’ve stopped exchanging gifts,” he says. “We just pool our money together and get one nice gift for our parents.”

They also trade off on buying gifts for each other’s kids. Becker’s teens have learned to expect gifts that include one thing they need, one thing they want and a shared family experience.

Marion Haberman, a YouTuber at the channel My Jewish Mommy Life, and her extended family have a strategy that doesn’t require a multiperson gift exchange with several people over eight nights of Hanukkah.

“We only do gifts for the kids — nieces, nephews, grandchildren — for their birthdays,” she says. “In our home, we do one present for each kid for each night.”

3. Craft your gift-giving strategy

For Haberman’s family, presents aren’t necessarily wrapped. A present can be a voucher for a jelly donut or a night of building a fort and watching movies.

Nordmann’s children usually get a gift they want, a gift they need, clothes and a book. For other family members, Nordmann and her husband are making gifts.

“We had a really good harvest for our garden this year,” she says. “We’re going to make hot sauces and papaya jelly.”

By giving thoughtful gifts that don’t hurt their budget, they can continue replenishing the income they lost during the pandemic. The setback has delayed the couple’s early retirement goals. Her husband, an auto mechanic, was unemployed for two months, and their vacation rental properties were forced to close at the same time.

4. Improvise on your holiday feast

Whether you’re planning a socially distanced holiday meal or a celebration with those in your household, look for opportunities to save.

See whether your credit card’s features have temporarily changed. For instance, to accommodate shifts in household spending, some credit card issuers have made it easier to earn or redeem rewards for groceries.

Nordmann saves on her grocery budget by visiting a local nonprofit that eliminates food waste. Some of these organizations in different cities give away soon-to-expire or dented items that are otherwise discarded.

She signs up in advance and waits in a long line, but she might find a free soon-to-expire holiday ham to freeze for later. “The savings are so worth it,” she says.

For Kim Lee, an Arizona-based minimalist and content creator at the lifestyle website Free to Family, a potluck saves money and stress. “It makes it a lot easier on the host,” she says.

5. Save on decorations and wrapping paper

Lee and her family enjoy the experience of crafting their own decorations. They make a banner out of popcorn and cranberries as they sip hot chocolate and listen to Christmas tunes or watch holiday movies.

“I’d rather have a small amount of decorations and make it a big activity, than a large amount of decorations and make it a dreadful experience,” Lee says. “It also makes it easier to clean up.”

Nordmann also makes her own decorations. Plus, she uses large rolls of general-purpose masking paper from home improvement stores to save money on gift wrapping. A branch of cedar or some evergreen adds a holiday touch.

“It looks beautiful and classic and everyone loves it, but it’s going to be drastically cheaper,” she says.

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

Melissa Lambarena is a writer at NerdWallet. Email: Twitter: @LissaLambarena.

The article 5 Minimalist Tips to Make the Holidays More Affordable originally appeared on NerdWallet.

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6 Great Recession Money Lessons That Still Apply Today

The Great Recession demolished jobs across the U.S., and it eventually came for mine, too. After graduating in 2009, I worked four months as an entry-level executive assistant at a nonprofit before being laid off.

I had limited financial knowledge, a short work history and a lot to prove to break into the field of journalism, my ultimate goal. Along the way, I picked up valuable lessons that might help you manage your finances during the coronavirus-related recession.

1. Save what you can

My short work history disqualified me from receiving unemployment benefits, so I relied on my savings account. Even a small emergency fund of $500 can prevent you from falling into debt, and I had socked away enough to cover a few months of expenses.

If you’re still employed, “pay yourself first,” said Samuel Deane, a financial planner at Deane Financial in New York. “Even if it’s $20 every time you get paid, make sure you put that $20 away first and then live your lifestyle with the remainder.” Automate it with direct deposit if you can.

If you’ve lost your job, saving will obviously be tougher. Apply for unemployment if you qualify, and contact your landlord, creditors, area nonprofits and family members to seek relief. If you’re still employed but have had your salary cut, consider a side gig and work on trimming expenses.

2. Think twice before rejecting job offers

After many interviews and dead ends, I applied for an administrative role at an accounting firm and got hired in December 2009. It paid about $7,000 less than my previous salary. I knew it wouldn’t put my career on track, but it would cover most of my bills, so I took it.

Amanda Grossman, now a certified financial education instructor in El Paso, Texas, made similar compromises after being laid off as a market researcher in Florida in 2008. She took a career counselor’s advice and relocated to Texas for a lower-paying job in the environmental industry.

“[The counselor] said, ‘Look, the economy is not doing well. You need to take that job, it’s going to keep going down; you’re not going to be able to find work,’” Grossman said.

If your sector is hurting and unemployment benefits or savings are lacking, even a less-than-ideal role can help you ride out a recession.

3. Get smart about money

You’ll find a myriad of financial literacy resources online and at your local library, assuming it is open and safe to visit during the pandemic.

I struggled to save money on a lower salary. Credit cards became my emergency fund. I don’t recommend this approach, but times were tough. Had I learned about financial hardship programs, student loan repayment options or balance transfer credit cards, I would have saved heaps on interest and ditched debt faster.

4. Establish multiple streams of income

I still wanted journalism experience and extra income, so on top of my new full-time job, I learned to shoot and edit video. I began freelancing in 2010. A year later, I also launched a small social media consulting business.

Grossman, too, had other goals. “I’ve always wanted to be a writer and I love, love, love talking about money,” she said.

While she was unemployed in Florida, she launched the blog “Frugal Confessions.” She learned new writing skills from books and sought feedback from editors at newspapers. In 2013, she left her environmental job in Texas to run her blog full time.

5. Protect your credit — but protect yourself first

In a crisis like COVID-19, many normal financial rules don’t apply. You may need to carry a credit card balance to buy groceries or address an emergency. You may need to make only the minimum payment to cover rent. You may even need to contact your card issuer and ask for relief options like payment deferrals.

Even with three jobs, I struggled at times to make the minimum payments on my credit cards due to high balances and interest rates. I never defaulted, but I did stress and scramble over it. I wanted a record of on-time payments and the good credit they build so that I could qualify for future low-interest rate offers.

That’s a worthy goal, but in times of emergency, prioritize getting back on your feet first. Once you do, you’ll have time to address your credit scores.

6. Make calculated money moves

Eventually, I left my apartment and moved in with roommates. I also read the post-recession climate and, in successive jobs, learned how to ask for a raise. Every year that my workload and responsibilities increased, I made a case for a higher salary. Asking is uncomfortable at first, but it gets easier. The extra money eventually paid off my debts.

A recession’s impact is largely out of your control, but your reaction isn’t. With strategic steps, you can insulate yourself and create new opportunities.

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

The article 6 Great Recession Money Lessons That Still Apply Today originally appeared on NerdWallet.

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How to Pay Rent When You Can’t Afford It

After Megan Pearson’s job as a restaurant server was put on hold because of COVID-19-related stay-at-home orders, the single mom had to figure out how to come up with the rent for her apartment in Brooklyn, New York.

“I posted my frustration on Facebook with trying to get through to unemployment the first week,” Pearson says. “I probably made 200 phone calls before I got it all settled.”

Uncertain whether assistance would arrive on time or at all, Pearson took action, reluctantly creating a crowdfunding account at the encouragement of a friend who’d seen her social media post. This move bought Pearson some time and ultimately allowed her to stay in her apartment without having to take on expensive debt.

If you, too, are dealing with an emergency and scrambling to make rent, consider some of the following steps first before resorting to high-interest loans.

Explore free options first

Some states have issued eviction moratoriums during the COVID-19 crisis, but you’re still responsible for paying rent. So the first step is to reevaluate your budget and “find” money where you can.

Cut back on nonessential expenses, lower 401(k) contributions, reach out to creditors for assistance and seek low-income programs for food and utilities, suggests Jeffrey Arevalo, a financial wellness expert with GreenPath, a nonprofit credit counseling agency.

Here are some options that cost nothing or close to it:

  • Take the help you can get. Applying for unemployment or other assistance programs may take time, but it can certainly be worth it. Pearson expects she’ll cover future rent payments with unemployment and coronavirus stimulus money.
  • Talk to your landlord. Explain your situation and ask for more time until a check arrives. You could also request an installment plan or waived late fees. Your landlord might be willing to help, especially if you have a history of paying on time. “It’s worth a shot,” says Arevalo, who notes he’s worked with clients who’ve had success with this step. Whatever terms are negotiated, get them in writing.
  • Call 211. Local nonprofits and religious organizations may offer rental assistance. United Way helps access those services upon calling 211. Note, however, that resources may be limited during national emergencies.
  • Apply for grants in your industry. Associations are raising money for people displaced from jobs in their industries due to COVID-19. Pearson applied for a grant from the Restaurant Strong Fund, which helps restaurant workers affected by COVID-19 closures, though she has not yet heard back.
  • Ask for help from family or friends. Loved ones — and strangers with steady income, for that matter — might be willing to help. Pearson raised $3,995 toward rent and essential expenses via the GoFundMe crowdfunding platform. “If you don’t ask, no one knows you need it,” Pearson says. If you’re not comfortable with crowdfunding, you could also ask family members for a loan.
  • Modify living arrangements. If your lease permits, consider subletting your apartment or a room. Or move in with a loved one and help each other by divvying up rent costs. Of course, moving may come with its own expenses, and if you’re under contract, you’ll have to weigh the cost of breaking your lease. Again, talk to your landlord to see what’s negotiable.
  • Seek professional advice. A credit counselor can review your finances for potential savings toward rent. Currently, GreenPath Financial Wellness is offering free phone-based financial counseling during the pandemic.

Lean on investments

Typically, it isn’t advisable to dip into money that’s meant for your future, but these aren’t typical times. When an emergency threatens to evict you — here and now, in the present — the normal “rules” don’t always apply.

If you have a taxable brokerage account, you could consider selling stocks. Otherwise, the next potential option might be a withdrawal from a 401(k) or individual retirement account, says Andrew Rosen, financial advisor and partner at Diversified, a financial planning firm. Again, raiding your retirement funds is not ideal, but in a crisis it may be necessary — and you may be able to mitigate the financial repercussions.

Under the Coronavirus Aid, Relief and Economic Security Act, for example, those under age 59½ years impacted physically or financially by COVID-19 can withdraw up to $100,000 from an eligible 401(k) or IRA through Dec. 31, 2020, without the usual 10% early withdrawal penalty. The tax bill is spread over the next three years, and you can claim a tax refund if you pay it back before that time. If you’ve lost your job, roll over your 401(k) to an IRA and then make a withdrawal, Rosen suggests.

The CARES Act also lets qualifying 401(k) plan participants borrow 100% of their vested balance up to $100,000 as a loan. And in emergencies unrelated to COVID-19, a loan on a 401(k) — if available through your employer — avoids penalties, taxes and a credit check.

Still, think hard before going this route. If you are truly drowning in debt and rent is just one of many financial obligations you’re unable to meet, you may want to consider other options.

“Most people don’t realize that generally speaking, your retirement accounts are protected in a bankruptcy,” Rosen says.

Choose the least expensive high-interest debt

You could look to finance some of your expenses to help cover rent by, say, opening up a low-interest credit card. But without sufficient income or good credit (typically a FICO score of at least 690), you may be left with only high-interest financing options. Consider the following, in order from least to most expensive:

  • Borrow against your existing credit card’s limit. Targeted offers like the Citi Flex Loan and My Chase Loan let you borrow against your card’s credit limit with a fixed interest rate and term. The money is deposited into a bank account without the need for a credit check or origination fee.
  • Pay rent with your credit card. Some services facilitate rent payments with a credit card, for a price. Plastiq, for instance, will let you charge your rent to your card and will then cut your landlord a check on your behalf, in exchange for a 2.5% processing fee. Weigh the costs of that fee before going this route, and be aware that if you can’t pay it back in full within a billing cycle, you’ll incur interest on the rent payment at whatever APR your card charges.
  • Among your last resorts, consider a cash advance. A cash advance can offer quick cash up to the amount of your available limit, but you’ll pay dearly for it in the form of a steep fee and an interest rate that starts accruing the moment you pull the cash from your bank or ATM. Cash advances could also negatively impact your credit by increasing your credit utilization, a key factor in credit scores. Still, it’s a possibility if you need it, and it’s likely cheaper than turning to a payday loan, which may not be an option anyway if you are no longer collecting a paycheck.

The article How to Pay Rent When You Can’t Afford It originally appeared on NerdWallet.

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3 Steps to Spring-Clean Your Credit Card Debt

Aja McClanahan, a Chicago-based writer, and her husband were staring down $120,000 in debt — about $20,000 of it credit card balances — and realized they needed to clean house. Literally.

They found less expensive housing arrangements, and along the way in those seven years that they carried the debt, they also became meticulous about budgeting. They negotiated some of the debt with a creditor, as well, and in 2013, the couple paid off the six-figure total.

That tidier balance sheet helped them tackle other goals.

“Currently, we are very debt-averse,” says McClanahan, writer at finance blog Principles of Increase. “The only exception is using small amounts of debt to finance our real estate business.”

If you, too, need to sweep away piled-up debt, here’s how to employ similar cleansing strategies.

1. Unpack your motivation

McClanahan kept a goal in mind.

“Every day I was fantasizing: ‘When we pay off debt, we’re going to go to the Caribbean,’” she says.

After paying it off, the couple did just that, heading to the Dominican Republic in 2015 for a two-and-a-half-week vacation with their two children.

That experience conquering debt also gave the couple confidence to envision new goals, some of which, yes, required taking on debt again — but with a plan.

The couple financed bathroom renovations for their rental property in 2017 by charging over $2,500 to their credit card. They were able to pay off the balance a few months before the end of the 0% introductory interest period on a balance transfer card.

“It was great to know that we could see a project through while getting it paid off pretty quickly and with no interest,” McClanahan says.

2. Prioritize the polishing

The average U.S. household with credit card debt has an estimated $6,929 in revolving balances, or balances carried from one month to the next, according to a 2018 NerdWallet study. If your debt is spread out over several accounts, prioritize in a way that makes sense for you.

McClanahan and her husband took the “debt snowball” approach, which calls for paying down smaller balances first to gather momentum with quick wins.

“If you feel more motivated to attack the lowest balance, then by all means do that,” says Thomas Nitzsche, spokesman at Money Management International, a nonprofit credit counseling agency. “If that’s what’s going to motivate you, then that’s what’s going to help you remain successful.”

Others may prefer to start by targeting debts with the highest interest rates, known as the “debt avalanche” method.

Either way, you’ll need to free up cash to put toward those balances. Sort through your monthly statements for expenses that might be weighing you down: a higher-than-necessary cable bill, a membership you no longer use, etc.

Windfalls such as a tax refund or bonus can also help, either toward paying down balances or building an emergency fund you can turn to instead of a credit card.

3. Choose the right cleaning solution

Depending on your credit score, you may qualify for a few debt-cleaning options:

  • Balance transfer credit card. With a good credit score of 690 or higher, you can transfer debt from a high-interest credit card to one with a lower annual percentage rate. To pay off her bathroom renovation, McClanahan looked for a balance transfer credit card with no annual fee and a long 0% introductory APR. Such cards typically charge a balance transfer fee — from 3% to 5% of the amount transferred — although it’s possible to find cards that don’t. For McClanahan, it was worth paying the fee in exchange for the lengthy interest-free period.
  • Personal loan. You can consolidate your debt from several credit cards into a personal loan that offers a lower interest rate. Consider one at a credit union that’s easy to join. They generally have lower interest rates than banks do.
  • Credit card interest negotiation. If you pay on time and haven’t maxed out your cards, a call to your issuers might get them to lower your interest rate. Some creditors are more flexible than others, but persistence can pay off, Nitzsche says.
  • Credit card hardship program. If your debt is spiraling because of circumstances out of your control, ask your issuer about a credit card hardship program. You’ll need a good reason to qualify, such as job loss or illness. It sometimes results in the account being closed, but the issuer might lower interest payments.
  • Debt management plan. This option is ideal if your credit score falls below 689 or if you’re three to five years away from paying off your debt. For a fee, a credit counseling agency can facilitate a debt management plan that combines several debts into one monthly payment, possibly with a lower interest rate.

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The article 3 Steps to Spring-Clean Your Credit Card Debt originally appeared on NerdWallet.