5 Ways to Save Money on Holiday Shopping This Season

This holiday shopping season is shaping up to be longer, pricier and in some ways more chaotic than in previous years, which makes it easy to overspend. But there are also opportunities for significant savings if you know where and how to search for them.

“There are supply chain issues, inflation, major retailers reducing inventory — when you put all of that together, it looks like a recipe for disaster,” says Jill Cataldo, a consumer coupon expert based in Chicago. Her solution? “I started shopping now. If you see something and it looks like a good deal, it’s time to pick it up.”

That’s because while prices are higher overall, retailers have already launched the holiday deal season, spreading out discounts and sales over the final three months of the year. Given that complicated background, here are the best ways to save money this Black Friday season:

1. Shop early and often

It might sound counterintuitive, but starting early can ease the impact on your budget and allow you to score the best deals. “I watch prices, see which retailer is offering the best price and always look for coupons before I buy — anything is better than paying full price,” Cataldo says. When she makes an early purchase, she keeps the receipt handy in case the price drops. Some retailers offer price matching, or you can buy the better deal and return the higher-priced purchase.

2. Be relentless about comparing prices

Apps, browser extensions and other tools that will help you track and compare prices abound; you just have to pick the one that you like using most. You can find choices that scour the web in the background while you shop and alert you to lower prices, coupon codes and cash-back opportunities.

For example, the shopping app ShopSavvy will follow price changes on specific items. John Boyd, co-founder and CEO of Monolith Technologies, which owns ShopSavvy, says he uses that feature for things he has his eye on, like a digital single-lens reflex camera. “I want to get an alert the second those things get marked down, because it might only be on sale for a few minutes and then the quantity runs out,” he says.

The Camelizer app performs a similar function for Amazon prices specifically.

Greg Lisiewski, vice president of PayPal Shopping, which includes the shopping browser extension Honey, says when he wants to buy something, he looks up the retailer in the PayPal app to see if any discounts are available (under the “Deals” section).

Those discounts are especially valuable now because PayPal Honey reports that toys and games are 11% more expensive this year compared with last year, coffee machines have increased 7%, and cycling gear and equipment is up 9%. The company also reports that the biggest discounts this holiday season have been in cosmetics, musical instruments and general department stores.

3. Layer on coupon codes and cash back

Getting a good deal isn’t only about price: You can add on other savings with coupon codes and cash-back offers.

Cataldo takes advantage of cash-back offers, which are available through apps like Rakuten, CouponCabin and Ibotta. “It’s just one extra step if you are going to buy online, and then you receive a check,” she says. “I like things that are easy, and that’s very easy.”

Scott Kluth, founder and CEO of CouponCabin, says stores with excess inventory will often have discounts of 10% to 15%, and cash-back offers range from 3% to 20%. “Stack all of those savings on top of each other,” he says, adding that sometimes online retailers accept multiple coupon codes plus provide free shipping.

4. Get to know your local stores

Deborah Weinswig, CEO and founder of Coresight Research, a retail research and advisory firm, says that getting to know your local stores and attending in-person events can be the way to score the biggest deals. “Store managers are being given the ability to negotiate and price match or price beat,” she says, especially when they have excess inventory in stock.

She suggests joining livestreams, following your favorite brands on social media and signing up for brand loyalty programs to be the first to hear about discounts or sales. “Some codes are only good for 24 hours and some prices are only good for four hours,” she says, so if you want the best deals, be ready to move quickly.

5. Talk to friends and family about scaling back

With so many people feeling the strain of rising prices, it’s a good year to talk with family and friends about setting limits. For Sarah Schweisthal, social media manager at the budgeting app You Need a Budget, that means creating a gift exchange with family members so each person purchases just one gift within an agreed-on spending cap. “We used to all buy gifts for each other, but there are a lot of adults in our family. It just took one of us to say, ‘Hey, this doesn’t feel sustainable,’” she says.

Schweisthal estimates that the gift exchange approach has saved her family hundreds of dollars — and this year especially, it’s more important than ever to budget for the holidays.

Kimberly Palmer writes for NerdWallet.

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What if You Can’t ‘Out-Budget’ Inflation?

Inflation is a nightmare for the many Americans who already stretch their dollars to cover basic needs. What happens when those dollars lose value?

Their choice is probably not about whether to cut streaming services or opt for store-brand groceries. Instead, they may have to pick between buying enough food and paying rent.

The families hit hardest by inflation typically have little in savings and other resources. And that lack of access to wealth can be rooted in a history of inequality, says Phuong Luong, a Massachusetts-based certified financial planner and founder of Just Wealth, a financial education and consulting firm.

For example, say generations of your family have been underpaid or limited in where they can live, due in part to racist policies. Then inflation causes everything to become more expensive.

You may have to scrape together cash to support not just yourself, but also family or community members. Perhaps you have to spend money and time traveling across town to the grocery store or doctor’s office.

“Your proximity to people with resources and people with wealth is going to be different depending on where you live and who you are,” Luong says. “There’s a larger context than just expenses and budgeting.”

Whatever context describes your situation, here’s how to combat inflation if money is already tight.

Prioritize essentials

Aim to pay for expenses that enable you to live safely: housing (mortgage or rent), utilities and food. Also try to cover costs that help you work, such as transportation, cell phone and child care.

Next-level priorities are those that trigger major consequences if you don’t pay: taxes, child support and insurance.

For credit cards, aim to pay your minimum at least, because you may need that credit access.

Tap local resources

If you’re struggling to pay bills, find support. Luong suggests Findhelp.org, which lists local programs designed to cut costs across many categories.

Calling 211 or visiting 211.org can also help you find assistance related to housing, health, food and emergency costs.

Pick up the phone

You may also save money by calling credit card and insurance companies, lenders, banks, cell phone providers and other businesses you pay.

With the pandemic affecting so many consumers, these companies “are a little more empathetic than they have been,” says Emlen Miles-Mattingly, co-founder of Onyx Advisor Network, a Sacramento, California-based support platform for underrepresented financial advisors.

They may pause or lower payments, for example, or forgive overdue bills. Or they could lower your interest rate.

But you have to ask. And often a patient phone call with customer service yields quicker, more effective results than an email or online form.

Connect with your community

To overcome financial struggles, “community is going to be major,” says Dasha Kennedy, Atlanta-based financial activist and founder of The Broke Black Girl Facebook community.

Leaning on — or supporting — your family members, friends and neighbors can take many forms. For example, Kennedy points out how temporarily living with others can lower housing expenses. Or you can pool resources by sharing a vehicle or splitting a large expense.

To connect with supportive locals you’ve yet to meet, look to libraries, religious organizations and recreation centers. Or use virtual platforms like Facebook and Nextdoor.

In these in-person and online spaces, you may find free or inexpensive goods and services. Maybe someone will give away secondhand clothes or walk your dog while you work.

Or seek guidance. Your neighbors may point you toward free, nearby health resources, for example, or describe what’s helped them stretch their money.

Profit from your skills

Of course, making more money helps, too. If you’re already working, Kennedy recommends first trying to increase earnings through your employer. Consider working overtime or negotiating raises and role changes, she says.

Or explore side work — with caution. Plenty of online gigs could waste your time, take your money or misuse your personal information.

“It’s high time for frauds and scams,” Kennedy says. Trust your gut, and read reviews. Also check the Federal Trade Commission and Better Business Bureau websites for tips to avoid scams.

The most effective way to make money? “Monetize skills you already have,” Kennedy says. These could include anything from cleaning and organizing to writing and designing.

Assuming you start without clients, she suggests tapping your community once again.

“You may not have the time to build trust and reputation, so you’re going to have to rely on personal relationships,” she says. Ask friends, neighbors and family members to promote and vouch for you.

Mind your mental health

Money struggles are exhausting. So regularly “connect with yourself,” Miles-Mattingly says. Identify what makes you feel better, whether it’s walking outside, calling a friend, meditating or reading.

If time is tight, make your activity quick, and consider Miles-Mattingly’s point: “People, when stressed, don’t have the best decision-making abilities.” And hard times mean hard decisions. It pays to feel centered before negotiating a lower bill or agreeing to a side job.

To avoid feeling overwhelmed during times of financial stress, Kennedy tries not to overthink the unpredictable future. Instead, she suggests “focusing on getting through the day.”

Laura McMullen writes for NerdWallet.

What You Need to Know About Apple’s Buy Now, Pay Later Feature

Earlier this week, at its Worldwide Developers Conference, Apple announced the release of a new feature called Apple Pay Later — a type of “buy now, pay later” plan. The feature lets users divide Apple Pay purchases into equal installments at zero cost.

Though there have been rumors of a cooling-off period for the explosive buy now, pay later industry, Apple’s entry into the market suggests this type of short-term installment loan is here to stay. And with millions of people already using Apple Pay, more borrowers will have access to a buy now, pay later plan as the cost of goods rises and household budgets tighten.

Buy now, pay later plans can be an affordable way to borrow money, but potential users should consider the risks of taking on this type of debt.

How will Apple Pay Later work?

Apple Pay Later splits your total purchase into four equal installments repaid over six weeks, with no interest or fees, according to a news release from the company.

It’s similar to plans offered by other buy now, pay later providers like PayPal, Afterpay and Klarna. The first payment is due at checkout and the remaining three payments are due every two weeks until the loan is paid in full.

For example, if your purchase is $100, you’ll pay $25 at checkout, then have three remaining payments of $25, each due two weeks apart, for a total repayment period of six weeks.

By eliminating interest and fees, Apple is an automatic standout in the buy now, pay later space. Though few current providers charge interest on a pay-in-four plan, many charge late or missed payment fees.

To use Apple Pay Later, borrowers must first apply, which can be done when they check out with Apple Pay or through the Wallet app. Apple did not mention underwriting criteria in its news release. Still, most buy now, pay later providers do not require a minimum credit score, making it an option for bad-credit or no-credit applicants. Once users are approved and opt in to the payment plan, they can view and manage upcoming payments in the Wallet app.

Payments must be tied to a debit card, which may be automatically billed. Apple will send reminders before an autopayment is processed.

Apple Pay Later will be available everywhere Apple Pay is accepted online or in-app, according to the news release. The feature will launch with iOS16, which will be released later this year.

What to know about using a buy now, pay later plan

Most financial experts urge caution when it comes to buy now, pay later plans. Though it seems easy to spread a purchase out at no additional cost, taking on debt is risky, particularly for things you don’t need.

One of the biggest concerns around buy now, pay later plans is overspending. Charles Ho, a certified financial planner based in Folsom, California, says the instant gratification built into these plans may lead to splurges you eventually regret.

“With cash, we’re much more attuned to whether what we’re buying is worth what we’re paying,” he says. “Whereas if we don’t have that pain of paying immediately, our value radar gets thrown. We’re willing to pay more for something or even buy something we otherwise wouldn’t buy.”

It’s also easy to lose track of payments and fall behind, especially if you’re managing multiple buy now, pay later loans at a time. Though Apple may not charge a fee for failed payments, your bank or credit union most likely will if you overdraw the debit card tied to your Apple Pay Later. In addition, some buy now, pay later lenders may also report late payments to the credit bureaus, which could hurt your credit score.

Finally, there are growing concerns about the lack of regulation around buy now, pay later plans. In December 2021, the Consumer Financial Protection Bureau opened an inquiry into some of the largest providers, citing data harvesting, debt accumulation and consumer protection concerns. However, the bureau has yet to release its findings.

Ho says buy now, pay later isn’t always a bad option for those who want more payment flexibility and can afford the installments. However, he recommends taking a beat before agreeing to the loan.

“If you want to take advantage of zero interest and spread out the payments, I would say, sleep on the purchase for a night,” he says. “If tomorrow you still really want it, and you can make the payments, then go ahead.”

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How to Protect Your Spending Power From Inflation

Inflation — the rise in consumer prices — is a slow erosion of your money over time. Before 2021, the United States hadn’t seen annual core inflation much above 3% for the better part of 25 years, says Michael Ashton, managing principal of Enduring Investments, a consulting and investing firm in Morristown, New Jersey.

So the 7.5% spike seen over the past year in the costs of fuel, used vehicles, groceries and just about everything else is the kind of sudden and systemic rise that can give a jolt to most peoples’ everyday spending.

Ashton also says that the COVID-19 pandemic stimulus checks and tax relief, combined with the reopening of the economy, fed consumer demand but didn’t replace product inventories. The result: shortages that lead to higher prices.

“Having supply chain difficulties is part of what inflation looks like,” Ashton says.

With inflation chipping away at your spending power, how can you protect yourself?

Examine your spending

  • Trim discretionary spending, voluntary spending in categories like entertainment or travel, by just 5%. This is one of those incremental changes that isn’t that difficult to do and goes directly to your personal bottom line.
  • Don’t delay a major purchase; prices will likely rise.
  • Shop strategically. Buy more generic brand products and prescriptions. Save on necessary expenses by using coupons and store loyalty programs. Use membership cards (like Walmart+ and others) to pay 5 cents less per gallon for gasoline.

Look for savings

  • Eliminate any fees you pay for credit cards or bank accounts (late fees, monthly or annual service fees, ATM fees, etc.). Many banks are waiving such fees and credit cards often have fee-free options.
  • Renegotiate bills like cable, streaming or cell phone for any possible savings.  “I can say from my own personal experience – it’s amazing how easy this is,” Ashton notes. He says that every time he would call his cell phone provider, it would offer him a plan that was far better than his current one. “And it doesn’t happen unless you call,” Ashton adds. He now makes a habit of calling once a year and asking, “What’s the best plan you have and should I be on that?”
  • Reduce the number of subscriptions you have, even if by just one. “You should do an audit of those from time to time because sometimes they sneak in a price increase, and it just shows up on your credit card,” Ashton says.

Try to bring more money in

  • Search for financial institutions that pay higher interest rates than you are earning now (if you are earning anything at all). Online banks and credit unions often offer high-yield savings accounts that sweeten returns, especially as interest rates rise.
  • Perhaps the most powerful idea of all: Ask for a raise. If you haven’t received an increase in salary in a few years, you’ve likely experienced what amounts to a pay cut because of inflation, Ashton says.

The inflation-matching savings account

Another inflation-fighting idea: Series I savings bonds. They were created specifically to protect consumers’ purchasing power against inflation, says Zvi Bodie, professor emeritus in finance at Boston University. Bodie holds a doctorate in economics from the Massachusetts Institute of Technology and has become an avid proponent of I bonds.

I bonds rates are keyed to the rate of inflation, which lately has been over 7%, he notes. They are a perfect safe haven for near-term savings. And not a bad addition to your long-term nest egg, too.

A minimum investment in I bonds through TreasuryDirect.gov is only $25, and an individual can put up to $10,000 annually into the savings bonds with electronic purchases. The bonds pay fixed interest plus the inflation rate, adjusted twice per year.

You can withdraw your savings without penalty after one year, but if you cash them in before five years, you’ll lose the last three months’ worth of interest.

“So what you get is essentially a savings account that can’t go down, and that’s going to go up with inflation,” Bodie adds. “Do I need to say more?”

Inflation is not the same for everyone

Inflation hit a 7.5% national average in January, but that’s not likely to be your inflation rate, says Ashton.

You may consume different items than the average person and you may not live in an average place, so your particular rate of inflation quite likely varies from the average, according to Ashton.

So, rather than agonizing over a single number as a spending power loss to recoup, use the small money moves above to improve your financial position slowly but surely.

The article How to Protect Your Spending Power From Inflation originally appeared on NerdWallet.

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Ready to Spend Like a College Graduate?

In just a couple of months, a new cohort of college graduates will leave behind their careers as students and start new ones as entry-level workers. And for many — regardless of age — that change brings a whole new financial landscape to navigate.

Gabby DelMonaco, a financial planning assistant in Silver Spring, Maryland, is set to graduate from college this spring. She began budgeting and covering her own living costs when she started college and feels financially prepared to leave school. But she’s not sure her classmates are all in the same position.

“I think a lot of people are just unaware of the reality of how much it really costs to live on your own,” says DelMonaco.

College graduation might mean you land a job and have more money to spend. It also might mean you now have to use that income to pay for living expenses like rent and groceries. And six months after school is over, you can also expect to start repaying any student loans you have.

As you think through how much your post-college lifestyle will cost, consider all of your expectations. Many expenses — from food and gas to rent and your first living room couch — are getting more costly due to inflation, making it a little bit more challenging to be a new graduate with limited income, says Andrea Clark, a certified financial planner in Fountain Hills, Arizona.

“You just have a better chance for financial success if you start out with a plan instead of starting out haphazardly,” Clark says. Most importantly, making a plan will keep you from living beyond what you can afford, Clark adds.

To do this, you can start by estimating the fixed costs you’ll need to cover and getting a handle on the money you have to work with.

Uncover your fixed costs

The first step in preparing your post-graduation budget is laying out your fixed costs, says Marcio Silveira, a CFP at the same firm as DelMonaco. These are expenses that you can’t forgo, such as housing and transportation costs, as well as any monthly debt repayments.

Pay attention to these costs because you can’t reduce them once you commit, says Silveira. If you have a job lined up with an employer that offers a 401(k) match — a benefit where your employer matches a set amount of your contributions to your retirement fund — try to build this into your fixed costs, Silveira adds.

Student loans are another fixed cost that you likely need to consider. Currently, 65% of college students graduate with student debt, according to the Education Data Initiative. If this is you, add your student loan payments into your monthly expenses if you can afford it, but if this won’t fit into your current budget, take advantage of any grace period offered to you.

Grace periods begin after you graduate, and during this time, you don’t have to pay your loans but interest will continue to accrue. A grace period may allow you to do other things with your money — move, pay off a credit card or buy cheap furniture — but you’ll always need to plan for its end.

Assess your financial situation and build healthy habits

Maybe you built a budget in college and didn’t always stick to it, or you made it through college with no budget at all. Either way, starting a budget now and tracking your spending can help build healthy habits so you’re ready once you start your post-college career.

“Start tracking, start knowing where you spend the money,” says Silveira, and if you commit to it, it can only take three months of spending within your budget to make it a habit.

If you have a job lined up for after you graduate, build a budget around your monthly take-home pay. And if you don’t yet have a job, consider how long you can continue covering your expenses. Doing so can give you an idea of what next step to take; this might be taking the first job offered to you or moving back in with relatives or roommates where you can minimize your expenses.

“I’ve heard so many people say … the best time to find a job is when you already have one, and I think that’s true,” says Clark. “You’re just a little bit more organized, you’re managing your time, you just look more employable if you’re already in a job. But having some sort of money coming in is just important.”

Clark adds that if your parents or guardians are still covering any of your expenses, such as insurance or a phone bill, ask them how much longer they plan on doing that. If you can avoid any surprises in your budget, it’ll help you keep your spending on track.

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

Colin Beresford writes for NerdWallet. Email: cberesford@nerdwallet.com.

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6 Things to Know About Student Loans Before You Start School

The summer before your freshman year in college means choosing classes, checking out your future roommate’s Instagram and figuring out how you’re going to pay the bills.

Chances are you will need a loan: 2 out of 3 students have debt when they leave school, according to 2017 graduate data from the Institute for College Access and Success. But consider a loan after you’ve accepted grants, scholarships and work-study. You can get these by submitting the Free Application for Federal Student Aid, or FAFSA.

Here are six things you need to know about getting your first student loan.

1. Opt for federal loans before private ones

There are two main loan types: federal and private. Get federal loans first by completing the FAFSA. They’re preferable because you don’t need credit history to qualify, and federal loans have income-driven repayment plans and forgiveness that private loans don’t.

You may be offered two types of federal loans: unsubsidized and subsidized. Subsidized loans — for students with financial need — don’t build interest while you’re in school. Unsubsidized loans do.

Take a private loan only after maxing out federal aid.

2. Borrow only what you need — and can reasonably repay

Undergraduate students can borrow up to $12,500 annually and $57,500 total in federal student loans. Private loan borrowers are limited to the cost of attendance — tuition, fees, room, board, books, transportation and personal expenses — minus financial aid that you don’t have to pay back.

Aim to borrow an amount that will keep your payments at around 10% of your projected after-tax monthly income. If you expect to earn an annual salary of $50,000, your student loan payments shouldn’t be over $279 a month, which means you can borrow about $26,000 at current rates.

To find future earnings, look up average salaries in the U.S. Department of Labor’s Occupation Outlook Handbook. Then, use a student loan affordability calculator to estimate payments.

Your school should provide instruction on accepting and rejecting financial aid in your award letter. If you’re not sure how to do it, contact your financial aid office.

“We’re not scary people,” says Jill Rayner, director of financial aid at the University of North Georgia in Dahlonega, Georgia. “We really do want students and families to come in and talk with us so we can help strategize with them.”

3. You’ll pay fees and interest on the loan

You’re going to owe more than the amount you borrowed due to loan fees and interest.

Federal loans all require that you pay a loan fee, or a percentage of the total loan amount. The current loan fee for direct student loans for undergraduates is 1.062%.

You’ll also pay interest that accrues daily on your loan and will be added to the total amount you owe when repayment begins. Federal undergraduate loans currently have a 5.05% fixed rate, but it changes each year. Private lenders will use your or your co-signer’s credit history to determine your rate.

4. After you agree to the loan, your school will handle the rest

Your loan will be paid out to the school after you sign a master promissory note agreeing to repay.

“All the money is going to be sent through and processed through the financial aid office — whether it’s a federal loan or a private loan — and applied to the student’s account,” says Joseph Cooper, director of the Student Financial Services Center at Michigan Technical University in Houghton, Michigan. Then, students are refunded leftover money to use for other expenses.

5. You can use loan money only for certain things

Loan money can be used for education-related expenses only.

“You cannot use it to buy a car,” says Robert Muhammad, director of the office of scholarships and financial aid at Winston-Salem State University in North Carolina. “It’s specifically for educational purposes: books, clothing, anything that is specifically tied to the pursuit of their education.”

You can’t use your loan for entertainment, takeout or vacations, but you should use it for transportation, groceries, study abroad costs, personal supplies or off-campus housing.

6. Find out who your servicer is and when payments begin

If you take federal loans, your debt will be turned over to a student loan servicer contracted by the federal government to manage loan payments. If you have private loans, your lender may be your servicer or it may similarly transfer you to another company.

Find your servicer while you’re still in school and ask any questions before your first bill arrives, says John Falleroni, senior associate director of financial aid at Duquesne University in Pittsburgh. They’re also whom you’ll talk to if you have trouble making payments in the future.

When you leave school, you have a six-month grace period before the first bill arrives.

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The article 6 Things to Know About Student Loans Before You Start School originally appeared on NerdWallet.

How to Bounce Back From a Credit Card Mistake

Whether you’re using a credit card for the first time or you’ve carried one for years, mistakes happen. And while a credit card mistake can affect your credit scores, there’s no need to be hard on yourself. With some habit changes and a bit of time, you can begin to see your credit scores heal.

Here are some common credit card errors and tips for getting back on track.

Missing a payment

You’re in the middle of a hectic week and lose track of time. That’s when you notice the late fee on your credit card. If this happens to you, it’s always worth calling your credit card issuer. You might be able to get the fee waived if you ask, especially if you’ve never missed a payment before. Plus, the late fee serves as a warning since your credit scores won’t be affected until you’re more than 30 days late, which is when the missed payment would get reported to credit bureaus.

How missing a payment can be harmful: Not only is that late fee an added expense, but a missed payment that’s more than 30 days late can drop your credit scores substantially — sometimes by as much as 100 points.

How to avoid this in the future: Create an ironclad reminder system, like email or text alerts from your credit card issuer. You can also set up automatic credit card payments each month, but be sure you have the money in your bank account to cover your bills so you don’t get charged overdraft fees. Some cards allow you to choose your due date, so you can time payments with a memorable day, such as the first of the month or the day after your paycheck is deposited into your account.

Maxing out your credit limit

It can be difficult to avoid charging more than the recommended 30% of your total credit card limit, especially if you have a low limit to begin with or you’re faced with an unexpected major expense. In an emergency situation, you may need to tap into your credit limit and that’s OK. But if you’re routinely maxing out your card, you’re potentially damaging your credit over time.

How maxing out your credit limit can be harmful: Your credit utilization, or the amount of your total available credit you charge, is a factor in the calculation of your credit scores. Generally speaking, the lower your utilization, the better.

How to avoid this in the future: Cut back on using your credit card for every single purchase. You can use your credit card for some expenses each month and then turn to cash or your debit card for everything else. If you have a low credit limit, call your issuer to see whether you’d be eligible for a credit limit increase. Update your card issuer on your income if it increases, as this can help you qualify for such a hike.

Spending more than you can afford to pay back

Compared to handing over all the cash you have in your wallet, paying with a credit card just doesn’t feel like you’re spending real money, which can make it easier to spend more. That can lead to a rude awakening when your credit card bill arrives, especially if you don’t have enough in your bank account to cover it.

How going over budget can be harmful: By their very design, credit cards can lock you in a cycle of expensive debt because you can charge up to your credit limit, pay just a small portion of your bill, and then charge up to the limit again next month. After a short time, your debt can grow to thousands of dollars.

How to avoid this in the future: Don’t just hand over the plastic without a second thought. Check your balance several times throughout the month, and if you have a big expense coming up, plan for it by setting money aside to pay for it. If you’ve already overspent, switch to cash or a debit card while you pay down the debt. Setting up a budget can help you feel more in control of your money.

Closing a card account without a strategy

Deep cleaning your wallet might feel satisfying, but you don’t have to break out the scissors just because you don’t use a card that often anymore. Closing a credit card is sometimes the right move, but it can affect your credit scores. Because of this, you may want to consider ways to keep the account open.

How closing a credit card can be harmful: Closing a credit card you’ve had for a long time can lower the average age of your credit card accounts. When it comes to your credit scores, older is better. Plus, closing a card means a lower total credit limit. If your spending remains the same, that increases your credit utilization.

How to avoid this in the future: There are good reasons to close a card, like not wanting to pay an annual fee on a card you no longer use. But you may have other options, such as downgrading the card to one without an annual fee, which lets you keep the account open at a lower cost. Be sure to use that card a few times a year to keep the account active. If it sits in a drawer for too long, the issuer may close the account because of inactivity, and you’ll face the same result as if you had canceled the card yourself.

Paying your credit card statements without looking

While you can put your credit card payments on autopilot, take an active role in monitoring your account because errors can happen. You may have no idea unless your credit card company contacts you about possible fraud.

How ignoring credit card statements can be harmful: Suspicious charges, even in small amounts, can be the first sign that your credit card information was stolen. By law, you’re not liable for more than $50 of fraudulent charges, though most cards waive your liability entirely. However, you do need to report the fraud. If you consistently pay your credit card bill without reviewing the charges listed on it, you may be paying for expenses someone else racked up in your name.

How to avoid this in the future: Check every credit card statement before you pay it. If you have autopay set up, create a reminder to review your account every month. Any time you see an unfamiliar charge, call the number on the back of your card to report it. The credit card company will issue you a card with a new number.

Sara Rathner writes for NerdWallet. Email: srathner@nerdwallet.com. Twitter: @sarakrathner.

5 Options for Your Money Before Student Loan Payments Resume

5 Options for Your Money Before Student Loan Payments Resume

This article provides information for educational purposes. NerdWallet does not offer advisory or brokerage services, nor does it recommend specific investments, including stocks, securities or cryptocurrencies.

The Biden administration has extended the federal student loan payment pause a final time, meaning borrowers won’t owe money or accrue interest until February 2022. While a new NerdWallet survey shows that over a third of federal student loan borrowers (35%) have continued making loan payments throughout the automatic forbearance, others have chosen or needed to put this money elsewhere.

With this final extension, federal borrowers whose essentials are covered have four to five more would-be payments that they might apply toward different goals. If you aren’t sure how to best use your remaining payment reprieve, here are five suggestions, plus next steps in case you aren’t ready to resume payments in February.

1. Save it in your emergency fund

Around 1 in 8 federal student loan borrowers (13%) say they put loan payment money into a savings account, according to the survey. The COVID-19 pandemic has been financially devastating for many, highlighting the importance of emergency savings. Ideally, you’d save three to six months’ worth of expenses, but even $500 or $1,000 stashed away can make a big difference in your peace of mind and ability to handle the unexpected.

2. Pay off high-interest debt

The survey found that some federal borrowers put would-be payment money toward paying off/down credit card debt (20%), private student loans (12%) or another type of debt (14%). If you’re comfortable with the amount you have saved for emergencies, focusing on high-interest debt can have a meaningful impact on your overall interest costs, especially with federal student loans at 0% interest for the next several months.

3. Avoid high-interest debt

Speaking of high-interest debt, a credit card balance of $1,000 with an interest rate of 16% would cost $160 in interest charges if carried for a year. If you don’t have any high-interest debt, but have upcoming purchases you’d otherwise let sit on your credit card — like a home improvement project or holiday expenses — you could use would-be federal loan payment money to pay for these purchases upfront. That way, you can avoid interest charges and the stress that may accompany a hefty credit card balance.

4. Put it aside to pay in one go

While payments aren’t due now, your main financial priority may be paying off your federal student loans. You can make monthly payments as normal or hang on to the payment money and make one large payment right before the pause ends. With this approach, you have cash on hand as a buffer in case something comes up. If nothing does, you can avoid the interest you’d otherwise accrue on the student loan principal.

5. Contribute to an IRA

Around 1 in 6 federal student loan borrowers (16%) say they invested the money that would otherwise go toward their loans for retirement, according to the survey. If you’re comfortable with the amount you have in emergency savings and aren’t paying off high-interest debt, you may choose to put would-be payment money into an IRA.

An IRA is a tax-advantaged retirement account that a person with taxable income (or someone who has a spouse with taxable income) can contribute to. The current annual limit is $6,000, or $7,000 for those ages 50 and older. IRA contributions for 2021 can be made until your tax return filing deadline, so even the January loan payment money can help you increase your retirement savings and potentially reduce your taxable income.

If you can’t make payments, evaluate next steps

Around a third of federal student loan borrowers (34%) say they’re using loan payment money for necessities, like rent and food, which could indicate that these expenses might not be met otherwise. When asked when it’s financially feasible for them to start making loan payments again, 11% of federal loan borrowers say 2022 or beyond and 10% of borrowers say they don’t know when they’ll be able to do so, according to the survey.

If it’s not realistic for you to restart payments in February, you have options to avoid defaulting on your loans. For borrowers who can’t pay the full amount due, an income-driven repayment plan could be a good option. It caps your monthly payments at a certain percentage of your discretionary income and forgives the remaining balance after 20 or 25 years, depending on the specific payment plan you enter into.

If you meet eligibility requirements — for instance, if you’re unemployed, receiving welfare benefits or undergoing cancer treatment — student loan deferment will pause your payments completely and may even stop accruing interest (depending on the type of loans you have).

If you don’t qualify for deferment, student loan forbearance is also an option. You can put loans in forbearance for up to 12 months at a time, but you’ll accrue interest, regardless of your loan type. All of these alternatives to a standard repayment plan can cost more in interest and time over the life of a loan. But they can also provide some necessary breathing room if your budget simply won’t allow you to make student loan payments right now.

Erin El Issa writes for NerdWallet. Email: erin@nerdwallet.com.

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Beat Your Summer ‘Revenge Shopping’ Debt

The joy of shouting to your friends over the roar of a crowded bar, the giddiness of seeing the world rushing by below you from the seat of an airplane, the weirdly constricting sensation of wearing pants that aren’t elastic — the summer of 2021 brought back many experiences we had forgone during the past year and a half of the pandemic.

But this push to re-create a world that felt something like “normal” may have brought back another familiar feeling: the anxiety of racking up debt.

If your summer of “revenge” spending has come for a payback of its own in the form of lingering debt, make a plan for paying it off. Then, think about how to prevent yourself from getting into more debt as you navigate progress and setbacks on the path to normalcy.

Take stock of your debt — and find your payoff path

Whether you’re back to spending most of your time at home or killing time at an airport terminal before a flight, find time to sort out your debt and pick a payoff strategy.

First, understand exactly how much you owe and to whom. If you don’t know all the details, certified financial planner Pamela Rodriguez in Sacramento, California, suggests pulling your credit reports, which you can do for free.

“Pulling your credit report is probably the fastest way to know what you owe because there’s no hiding from your credit report,” Rodriguez says.

Using a spreadsheet, pencil and paper, or a debt payoff app, list your debts. Include the balance, interest rate and monthly minimum payment for each. Be sure to account for all forms of debt, like buy now, pay later loans.

Then, dig into your income and expenses to see how much money you can put toward debt and where you can cut spending. If you’re spending more on dining out than you were six months ago, for example, try cutting back on that to free up cash for debt payoff.

Next, pick a strategy for paying it off. Here are a few common tactics:

Debt snowball: With the debt snowball, you channel your debt payoff energy toward the smallest balance first while making minimum payments on the rest. Once the smallest debt is knocked out, roll the amount you were paying on it to the next smallest debt. As you wipe out more debts, the payment amount keeps growing like a snowball until you’re debt-free.

Debt avalanche: With this method, you pay off the debt with the highest interest rate first. Then, similar to the debt snowball method, once that is paid off, you cascade the payment onto your debt with the next highest interest rate.

Balance transfer credit card: If your credit score is high enough to qualify for one, a credit card with a 0% APR promotional period can help you pay off debt faster and cheaper than keeping it on the original credit card. Be sure to wipe out the balance before the 0% promotional period ends to avoid paying interest.

No matter which payoff path you choose, it’s important to decide on one and commit. Waffling between a few different options can cost you time and money as debts continue to accrue interest.

“People have decision overload when figuring out how to pay off their debt,” says Thomas Nitzsche, financial educator at the nonprofit credit counseling agency Money Management International. “Just come to terms with the fact that you’re going to have to do something and figure out a way to overcome that emotional barrier.”

If you don’t see a way to pay more than the minimums on your debts monthly, think about calling a nonprofit credit counseling agency for free budgeting and debt help.

Know your spending habits and triggers

If your summer debt was the result of revenge spending, dig into the triggers that led you to overspending so you can avoid sliding back into debt in the future.

For many, that may have been the opportunity to experience something that they were deprived of during the first year of the pandemic.

While travel and eating at restaurants may be safer for those who are vaccinated, these activities can wear down your budget. Rodriguez suggests finding more-affordable ways to enjoy activities you’re seeking.

“If you can think of the one thing you were deprived of, find a smaller scale of that,” Rodriguez says. “So a smaller scale of travel would be going on a local adventure, and that is so much more manageable financially.”

The path forward in the pandemic seems likely to have a number of starts and stops, with accompanying opportunities to either spend or save money. Take advantage of moments where you can pull back your spending and direct more cash toward your debt. Having manageable debt — or no debt at all — equips you with more options whenever the world is ready to fully reopen.

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

Sean Pyles writes for NerdWallet. Email: spyles@nerdwallet.com. Twitter: @SeanPyles.

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In Your Debt: Back to Pre-Pandemic Spending? Don’t Overdo It

With COVID-19 restrictions mostly lifted in the U.S. (though that’s changing), you may be enjoying a more social summer than you were last year. But dinners out and movie tickets can seem pricey compared with a year and a half of home-cooked meals and whatever’s on TV — especially if you experienced pandemic-related financial hardships.

It could be time to recalibrate your money habits for the way life is now. Doing so just takes some planning and a healthy dose of honest communication.

Reconsider your values

Your values may have changed over the past year. Ask yourself a few questions: What did I start or stop spending money on? What do or don’t I miss doing? What specific money goals do I have now? Your answers can help you create a list of your current values, in order of importance, which can lead to an updated spending plan. If you have a spouse or partner, involve them in this process, too.

“Many people think this process is for those who can’t save,” Julie Quick, a financial planner in White Lake, Michigan, said in an email. “I would argue it’s for people who want to live intentionally.”

Match spending and saving with updated needs and wants

After reconsidering your financial priorities, you can begin to give your money specific jobs. You’ll likely have a combination of short- and long-term goals, like budgeting for weekly outings while replenishing your emergency fund or saving for an upcoming major purchase.

It’s in the name: A spending plan requires planning. Though it’s tempting to meet up with friends and see where the night takes you, for instance, picking where you’ll go in advance allows you to design social outings around your budget.

Be thoughtful about diving back into travel, too. According to U.S. Bureau of Labor Statistics data compiled by the Federal Reserve Bank of St. Louis, airfares have been increasing in the U.S. since March 2021, though they haven’t yet returned to levels seen in February 2020 and earlier.

“Spontaneous travel is exciting, but it can also run away with your wallet,” Vadim Verdyan, head of advice at the financial wellness mobile app Albert, said in an email. “Keep in mind that people usually get the best deals when they plan far in advance and the worst deals when they plan last minute.”

Open up about money with friends and family

The outside pressure to spend is nothing new, though now you may be feeling an extra-strong urge to make up for lost time with people you haven’t seen in more than a year. But all those far-flung weddings and in-person visits may be beyond what you can afford. This is where honest communication comes in, even though discussing money can be difficult. In these situations, it can help to let the other person know what’s going on in your life.

“To tell a friend that something they want to do isn’t in your budget, it feels like a rejection of them,” says Joshua Escalante Troesh, a financial planner in Rancho Cucamonga, California. He recommends telling your loved one about the thing you’re saving up for that makes it difficult to afford the activity. “Most people who care about you will say, ‘Yeah, I understand that.’”

If you overspend, get back on track

There’s nothing quite like an enormous credit card bill to ruin the fun you’ve been having, especially if you can’t pay it in full and end up in debt. If this happens to you, it’s time to regroup and reallocate some funds.

If you were saving for something, like a vacation, by automatically transferring money to a savings account, you’ve already learned to live without that cash each month. This situation presents an opportunity: Apply that monthly sum toward your debt instead. You may have to postpone or scale back your trip, but you’ll get out of debt quicker without having to make too many changes to your day-to-day life.

Escalante Troesh recommends putting away your credit cards and using only cash or a debit card for purchases while you pay down your debt. “We’ve dug ourselves in a bit of a hole — not a big deal, people make mistakes,” he says. “But let’s get the shovel out of our hands.”

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

Sara Rathner writes for NerdWallet. Email: srathner@nerdwallet.com. Twitter: @sarakrathner.

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