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Paying Down Credit Cards: Go With A Snowball Or Avalanche?

Paying Down Credit Cards: Go With A Snowball Or Avalanche?

By Carolyn Bigda, Chicago Tribune (TNS)

During the holidays it’s easy to add a few inches to your waistline — and to the balance on your credit card.

According to estimates by CardHub.com, which keeps track of credit card trends, total outstanding credit card debt was likely to exceed $900 billion by the end of 2015, up from $872 billion the year before.

Piling on new debt now could be costly, though, if the Federal Reserve continues to increase interest rates this year (which pushes up the rates on credit cards).

So to help you get back into the black, consider these strategies:

Look for zero-percent offers: Many credit card issuers offer a temporary zero-percent rate on balances that you transfer when you sign up for a new card.

You can search for such offers online, but one of the best deals available now is the Chase Slate card, which has 15 months of zero-percent interest on balance transfers and no fees for transfers made within 60 days of opening the card, said Kali Geldis, editorial director at Credit.com, an online resource about credit.

To qualify for the card, you need a strong credit rating, which generally means a score of 700 to 850.

If you’re young and just building a credit history _ and therefore don’t have a mighty score yet — you may have to shop around for other deals.

Geldis said one card to consider is Capital One QuicksilverOne, which has a zero-percent rate through September on balance transfers. The catch: The card carries an annual $39 fee.

“But if you make the most of those nine months of zero interest, it can be worth it,” Geldis said, noting that any additional purchases on the card earn 1.5 percent cash back.

Request a lower interest rate: If you don’t want to switch credit cards, another option is to ask your current issuer for a lower interest rate.

“People with the best credit are always the most likely to get breaks from the banks,” said Matt Schulz, senior industry analyst at CreditCards.com, which lists credit card offers. But, he said, the credit card marketplace is very competitive, so you may have some negotiating power.

“If you’re a 20-something with relatively low balances and a good history of paying on time, it’s definitely worth making that phone call,” he said.

Go with a snowball or avalanche: Once you’ve secured the lowest interest rate for your outstanding balance, the next step is to figure out a strategy for paying off the debt.

If you have multiple cards, you can pick between two options.

With one, the “snowball” approach, you pay off cards with smallest balances first (while still making minimum payments on your other cards). In doing so, you may feel a sense of accomplishment and get the motivation you need to keep paying off your debt.

With the second approach, the “avalanche,” you tackle the cards with the highest interest rate first (again, while making minimum payments on other cards), helping you pay less interest over the long run.

Both methods work well, although if you want to pay off your debt as quickly and inexpensively as possible, you should choose for the avalanche.

And it’s always a good idea to pay more than the minimum on your cards, said Bonnie Sewell, a financial planner in Leesburg, Va. To do so, she suggested picking up temporary work, such as house sitting, dog walking or signing up for odd jobs on Upwork.com.

What about cash you might have received for the holidays?

“My strongest suggestion would be to bank it, so that you slow down your credit card purchases,” Sewell said.

ABOUT THE WRITER
Carolyn Bigda writes Getting Started for the Chicago Tribune. yourmoney@tribune.com.

(c)2016 Chicago Tribune. Distributed by Tribune Content Agency, LLC.

Photo: Computer chips are seen on newly-issued credit cards in this photo illustration taken in Encinitas, California September 28, 2015. REUTERS/Mike Blake

Happy Halloween! 10 Tips To Treat Yourself To A More Secure Financial Future

Happy Halloween! 10 Tips To Treat Yourself To A More Secure Financial Future

Dear Readers: If you’re like most people, you’ve made a few hare-brained money decisions in your time. That’s just being human. However, if you’re striving to get yourself on track, I suggest that you review these ten smart money management tips. This Halloween, treat yourself to a more secure financial future!

Stick to your budget, no matter how large or small: Living beyond your means is dangerous no matter how much money you make. So even if you’re lucky enough to earn a big paycheck, it’s important to create — and stick to — a realistic budget. Use an online budget tool and make a list of your essential expenses and another list of your nice-to-haves. If your income won’t cover both, start crossing off the extras you can live without. And don’t be tempted to pull out the credit cards to cover any excess. Keeping on top of debt is an important part of smart budgeting. While you’re thinking about debt control, remember to stay on top of any student loans!

Don’t put off saving for retirement: To me, the scariest thought of all is facing retirement without adequate resources. So put retirement savings first — before saving for a house or a child’s education. Start by contributing at least enough to your company retirement plan to capture the maximum match. Then contribute more if you can, to either your 401(k) or an IRA, putting contributions on automatic. Remember, the earlier you start, the smaller the percentage of your salary you need to sock away.

Expect the unexpected: Unexpected expenses can land on your doorstep at any time. To protect yourself, set aside enough money to cover three to six months worth of essential expenses in an easily accessible savings or money market account or short-term CD. Retirees should try to increase this amount to cover a year’s worth of expenses.

Know where you stand: Set up a personal net worth statement to get a clear view of your finances. List both your assets (what you own) and your liabilities (what you owe), and then subtract liabilities from assets to find out if you’re in the plus or the minus. This will give you a benchmark so you can measure your progress.

Sharpen your investing skills: With market volatility a fact of life, it’s easy to get spooked. But don’t hide from your portfolio. Instead, take a good look at your long-term goals and feelings about risk. Are your current investments still working for you? Are you diversified enough? Remember, if one stock represents more than 20 to 25 percent of your portfolio, that’s probably too much — and you run the risk of big losses. A diversified portfolio designed for the long-term is the best way to ride out howling market storms.

Make sure you have the right amount of health insurance: A single illness or accident could wipe out your savings unless you have adequate health insurance. If you don’t have coverage through your employer, take the time to research your best options under the Affordable Care Act to avoid the potential horrors of having to handle healthcare costs on your own.

Create an estate plan: Not having a will that names a guardian for your minor children is a pretty frightening proposition, so make that your first estate-planning step. Beyond a will, the complexity of your estate plan will depend on your financial situation. But if you don’t put at least the basics in place — including an Advance Health Care Directive — you may be leaving your heirs with a web of difficulties.

Maximize your Social Security benefits: Jumping the gun on Social Security benefits could cost you big time. That’s a chilling thought. On the bright side, every year you delay collecting between age 62 (the earliest you’re eligible) and age 70, your monthly benefit goes up. If you’re married, there are strategies for couples that could increase your combined benefits even more. Of course, the right time to take benefits is different for everyone — but it’s definitely worth it to look carefully at your options.

Ask for help: The complexity of financial planning can be pretty unnerving, but no need to go at it alone. Even if you usually bravely follow your own financial path, when it comes to planning — especially retirement planning — it’s good to have a guide. Talking to a financial advisor, at least occasionally, can give you a more realistic picture of where you’re headed. Even financial professionals turn to each other for a little guidance!

Don’t keep your family in the dark: Things are always scariest in the dark, so don’t be afraid to shed some light on your finances with your family. Talk to your spouse openly about expenses, credit and debt, savings goals and retirement. And when it comes to estate planning, make sure your adult children know what to expect.

Halloween comes once a year, but smart money management means staying on top of things year-round. Start using these tips now — and enjoy this holiday and all the holidays to come.

—

Carrie Schwab-Pomerantz, Certified Financial Planner, is board chairwoman and president of the Charles Schwab Foundation and author of “The Charles Schwab Guide to Finances After Fifty.” Read more at http://schwab.com/book. You can email Carrie at askcarrie@schwab.com. For more updates, follow Carrie on LinkedIn and Twitter (@CarrieSchwab). This column is no substitute for individualized tax, legal or investment advice. Where specific advice is necessary or appropriate, consult with a qualified tax adviser, CPA, financial planner or investment manager. To find out more about Carrie Schwab-Pomerantz and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com. COPYRIGHT 2015 CHARLES SCHWAB & CO. INC., MEMBER SIPC. DISTRIBUTED BY CREATORS.COM

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High Gas Prices Driving You Crazy? Do These Simple Things To Slash Your Gasoline Bill

High Gas Prices Driving You Crazy? Do These Simple Things To Slash Your Gasoline Bill

By Jerry Hirsch, Los Angeles Times (TNS)

You can’t control the price of gas, but you can minimize the damage to your wallet. Many drivers can improve their fuel economy by 10 percent or more with some easy steps.

“Motorists can significantly reduce fuel consumption and save money by simply adjusting their driving style,” said Steve Mazor, chief automotive engineer for the Auto Club’s Automotive Research Center. “Driving style impacts motorists’ wallets because warming up an engine, speeding and ‘jack rabbit’ starts can needlessly use precious fuel.”

Perhaps the easiest move is to keep your tires fully inflated to their recommended maximum pressure.

Make sure your engine is properly tuned and has adequate oil and coolant circulating through the system.

If a car has an eco-mode setting, use it. It forces drivers to accelerate more smoothly and saves energy.

Use cruise control on fairly flat roads because a steady speed conserves fuel, but avoid it in hilly terrain where it could hurt fuel economy.

Always drive gently off the line; never accelerate hard from a stop.

Don’t tailgate on the freeway. Allow five or six car lengths so that if the car in front brakes, you don’t have to hit your brakes. Coast and allow the gap to close somewhat. Generally, the car in front will accelerate again before you get close enough to have to use your brakes.

Anticipate stops. If you see a red light, stop sign or heavy traffic ahead of you, let off the accelerator and coast.

Keep your top speed at about 60 mph.

Don’t haul stuff in your car that you don’t need. Take the golf clubs or flat of bottled water out of the trunk when you get home. Reducing extra weight can save up to 2 percent fuel economy for every 100 pounds removed, according to AAA.

Lose the roof rack if it’s not being used regularly. It increases aerodynamic drag and reduces fuel economy.

Shop around for gas smartly. Used the AAA or GasBuddy apps to see which stations near your location have the lowest gas prices. Don’t drive 10 miles to the nearest Costco gas station. Traveling long distances to save a few cents wastes fuel and may cost more money in the end.

Know what gas your vehicle requires. If the recommended fuel for your vehicle is regular, don’t waste money on a higher grade. It won’t improve performance or fuel economy.

Look for frequent-buyer discounts. Several supermarket chains provide gas discounts based on the volume of groceries you purchase. Some oil company and other credit cards provide a rebate when you fill up.

If you have more than one car in your household, make sure the vehicle with the best fuel economy gets the most use.

Consolidate trips and errands to cut down on driving and the number of miles driven.

Avoid the drive-through. Park the car and walk into the restaurant or coffee shop.

Don’t leave your engine on while parked. There’s no reason to let the motor idle if you aren’t moving or stuck at a red light.

(c)2015 Los Angeles Times. Distributed by Tribune Content Agency, LLC.

Photo: Drivers can improve fuel economy by traveling at steady speeds, anticipating stops and making sure tires are properly inflated. (Photo courtesy Fotolia/TNS)

Tech Q&A: Do Those New Chip-Based Credit And Debit Cards Need Protection?

Tech Q&A: Do Those New Chip-Based Credit And Debit Cards Need Protection?

By Steve Alexander, Star Tribune (Minneapolis) (TNS)

Q: Do the new EMV chip credit cards (named after the developers, Europay, MasterCard and Visa) require a protective cover so that they can’t be scanned by nearby thieves, just as RFID (radio frequency identification) cards do? Do other radio frequency ID cards, such as hotel key cards, pose a risk of identity theft? — Jan Sartee, San Rafael, Calif.

A: There are two types of credit cards using EMV chip technology. One is read by a slot in a point-of-sale terminal; the other is read by holding the card near the sales terminal.

If your EMV card requires physical contact inside a reader, its transactions and account information can’t be scanned remotely by thieves. If it is a contactless card, there’s a chance it could be read by nearby spying equipment, although the credit card industry says that’s unlikely.

Why is it unlikely? Because the contactless card uses an over-the-air technology called near-field communication, or NFC, which is more secure than RFID. NFC card signals are detectable in a range of 2 to 4 inches, while RFID card signals can be detected at up to 25 feet, says the Smart Card Alliance, an industry group. And while RFID cards are designed for minimal security, contactless EMV cards have secure microprocessors and memory and can encrypt (encode) data. (The hotel industry says that for security reasons no personal information about guests is put on RFID room cards.)

But, even if thieves were able to steal financial information from an EMV chip card, either by remotely detecting a contactless card or by infecting a point-of-sale terminal with malicious software, the effect of the theft would be less than it is with magnetic stripe cards.

Why? So far, it isn’t possible to use stolen EMV chip card information to create a fake credit card that could make fraudulent purchases, something that’s easily done with magnetic stripe cards. EMV cards create a special code for each financial transaction, a function that can’t be duplicated by stealing card data, experts say. However, stolen EMC card data could still be used for online sales fraud, because in online use a credit card’s chip isn’t used. In addition, stolen EMV card ID information could still be used to apply for new credit card accounts.

Q: My wife has one of the first iPads, and is having problems because it doesn’t seem to recognize newer software. Is there any single website where the iPad can be updated? — J. Glenn Dockery, Lakeland, Fla.

A: If your wife has an iPad 1, the upgrade possibilities are limited. It can download the Apple operating system, iOS 5.1.1, but that won’t enable it to handle more modern functions such as photography (it has no camera), or use the Siri voice-activated assistant. The iPad 2 and later models can download the latest operating system, iOS 8.4, although some still can’t use Siri. For details on how to upgrade your iPad, see tinyurl.com/paxt64n.

ABOUT THE WRITER
Steve Alexander covers technology for the Minneapolis Star Tribune. Readers may write to him at Tech Q&A, 425 Portland Ave. S., Minneapolis, Minn. 55488-0002; email: steve.j.alexander@gmail.com. Please include a full name, city and phone number.

(c)2015 Star Tribune. Distributed by Tribune Content Agency, LLC.

Photo: Ciaran McGuiggan via Flickr