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5 money hacks hiding in your wallet
Your wallet has a secret. Buried in your billfold, bound in a money clip, or stuffed in a pocket on your phone case are untapped benefits on credit and debit cards that could save you hundreds of dollars a year. Here are five money hacks hiding in plain sight.
1. Use a savings app
Build savings even as you spend money by linking your credit and debit cards to an app like Acorns or Digit. Acorns automatically rounds up your purchases to the nearest dollar and then adds the difference to your savings. Digit analyzes your spending and income and sets aside a little of your extra money for savings. It’s like a tip jar by the register or a spare-change dish, but the money goes to your future.
2. Maximize your card benefits
Credit cards often come with valuable but easy-to-overlook benefits. According to a 2019 J.D. Power study, only 36% of cardholders understand the supplementary benefits on their cards.
“Consumers generally are probably not very knowledgeable about all of the features of their credit cards,” says John Cabell, director of wealth and lending management at J.D. Power and a lead researcher on the study. Money-saving card benefits “may not be clearly communicated or communicated proactively by the issuers.”
Among such benefits:
- Travel perks. Cabell points to airline cards that offer free checked bags and airport lounge access, as well as cards that charge no foreign transaction fees. Several cards reimburse the application fee for TSA Precheck and Global Entry.
- Cell phone insurance. Wells Fargo, U.S. Bank, Mastercard and other credit card companies offer cell phone coverage with certain cards when you pay your bill with the card.
- Automatic credits. Some cards automatically reimburse you for things like travel expenses, rideshares, meal delivery or purchases at select merchants, up to a monthly or annual limit.
Read your credit card’s benefits guide to see what’s included. You might be surprised by how much you can save. A checked-bag benefit, for example, could save you $120 on a single round-trip with a companion. Getting cell phone coverage from your card could shave $9 to $15 a month off your wireless bill if you were previously paying for it through your carrier.
3. Use your rewards cards for everything
Some people have a habit of using credit cards only for “big” or “important” purchases while paying for smaller or everyday purchases with cash or debit. But every purchase that isn’t on a rewards card is money left on the table.
“I think if you pay your balance in full every month, it’s kind of silly not to have a rewards card because you’re getting something for nothing,” says Holly Johnson, who with her husband, Greg, runs the money-saving tips blog ClubThrifty.com.
Rewards cards essentially give you a discount on all your spending. Depending on the card, how its rewards are structured and where you use it, you’ll typically earn rewards equal to 1% to 6% of the purchase price. Even earning a paltry 1% on everything, a modest $100 in spending a week turns into more than $50 in rewards in a year.
4. Stack savings with a cash-back portal
Websites such as Rakuten (formerly Ebates) and BeFrugal pay you a percentage back on every qualified purchase from participating retailers. A Rakuten spokesperson, for example, says the average member earns 4% to 6% in cash back on purchases made through the site, which can add up to hundreds of dollars a year.
The trick is to get into the habit of checking the sites before you shop and to use them only for purchases you were going to make regardless.
“I am a big online shopper, and once I learned about Ebates a couple of years ago, I thought ‘Why would anyone not use a program like this?’ You’re ordering from the store anyway, so why not get cash back?” says Stacey Wallenstein, a parenting blogger at The Mint Chip Mama and mother of three from Plainview, New York. Wallenstein says she has saved more than $175 in 2019 just through Rakuten.
Use a rewards credit card on a cash-back site, and you’re multiplying your savings with zero extra effort.
5. Know your price protections
Here’s another good reason to keep your receipts: You might be able to get money back if something you bought goes on sale for less somewhere else. If your credit card has price protection, you can claim a refund of the difference if you submit proof of the lower price on an eligible item within a particular time period after your purchase. Don’t have price protection on your card? Several major retailers offer their own version if certain competitors offer the same item for less. Participating stores include Bed Bath & Beyond, Best Buy and Home Depot.
An earlier version of this article misstated how the Digit app works. It has been corrected.
Don’t let holiday shopping sink your credit score
When you’re holiday shopping, your credit score is probably the last thing on your mind. But seemingly unimportant decisions about which cards to use and whether to apply for new credit can affect your credit score come January.
The biggest holiday threats to your credit come from:
- Increasing your credit utilization, or the percentage of your credit limit you are using.
- Missing a bill payment, which creates a negative mark on your credit reports.
- Having too many credit applications, because they trigger “hard inquiries” on your credit reports, which can ding your credit score.
But if you know how to keep credit healthy, you can avoid or minimize the damage.
Be strategic with credit utilization
Credit utilization simply means how much of your available credit you’re using. It’s calculated both per card and overall. If you charge more than usual on your credit card or cards, your utilization can go up. Using more than 30% of the limit on any card can lower your score.
Credit expert John Ulzheimer says he advises people who want to protect their credit score to put holiday shopping on the card with the most available credit.
You may need to spread spending around to stay below 30% of your limits, but be aware that having multiple cards with balances can hurt your credit scores. Can Arkali, senior director at FICO, explains it this way: “A larger number of accounts with amounts owed can indicate higher risk of over-extension.” Credit scores are simply an estimate of how creditworthy you are, so anything signaling higher risk usually leads to a lower score.
What to do: Pay down credit card balances as soon as you can, and preferably get in the habit of paying them off every month. If your utilization does go up temporarily, know that the hit to your score will disappear as soon as a new, lower balance is reported to the credit bureaus.
Avoid missing payments
It’s easy to overlook bills in the crush of email and postal mail that arrives during the holidays. But paying a bill 30 days late can drop your credit score 100 points or more — and the damage doesn’t disappear quickly. It typically stays on your credit report for seven years, although the effect on your score fades over time.
What to do: Set up alerts for every credit card you have. “I have alerts set on all of my credit card accounts so I’m constantly being notified of charges, statements, due dates, etc.,” Ulzheimer says. “Leverage the tech.”
Beware of too many credit applications
Many retailers, both online and in physical stores, market credit cards as you check out. You may be offered a discount on your purchases, free shipping or some other perk in exchange for a successful credit application. But applying triggers a “hard inquiry” on your credit, and each inquiry can shave a few points off your score — possibly more if you have a limited credit history.
While there’s nothing wrong with applying for a card you want, doing so on impulse is often a mistake. “You’re using your credit report as a 10% off coupon,” Ulzheimer says.
It’s especially worrisome if you plan to shop for a mortgage soon. “If you’re going to apply for anything meaningful in the next 12 months, it’s a bad idea, because you have no idea what the new account — or accounts, if you open several — is going to do to your credit scores,” he says.
What to do: Be aware that credit applications can ding your score, and multiple credit applications can leave a pretty big dent. It’s smart to wait about six months between applications.
If you already opened a new card and regret it, Ulzheimer says you might as well activate it. The hard inquiry already happened and will stay on your credit report for two years, although its impact will fade much sooner than that. Meanwhile, you benefit from the additional credit limit, which helps your overall credit utilization level.
2020 mortgage trends: Low rates, fewer homes, more competition
Mortgage rates will remain low in 2020, affordable homes for sale will remain scarce, and boomers will remain in their homes and build equity that they won’t borrow from. But not everything in 2020 will be a continuation of 2019: People shopping for FHA loans might find more lenders competing for their business, and change is coming in the timeworn ways that homes are bought and sold.
In most places, it will still be a seller’s market in 2020, and first-time home buyers will especially be at a disadvantage because there aren’t enough starter homes to go around.
NerdWallet has identified the following 10 housing and mortgage trends to watch for in 2020.
1. Mortgage rates will stay low
Mortgage rates are expected to remain around the same low levels through 2020 as they spent the last half of 2019, when they averaged about 4% APR, according to NerdWallet’s daily survey of national mortgage lenders.
Fannie Mae, Freddie Mac, the Mortgage Bankers Association and the National Association of Realtors all predict that mortgage rates will end 2020 within a quarter of a percentage point higher or lower of where they end 2019.
Forecasters expect inflation to remain mild, trade tensions to ease and the Federal Reserve to cut short-term rates once or twice. In short, they expect the economy to sail through relatively smooth waters in 2020, despite it being an election year, and that’s why they don’t expect much movement in mortgage rates.
2. It will be hard to find homes to buy
“Inventory could reach a historic low as a steady flow of demand, especially for entry-level homes, and declining seller sentiment combine to keep a lid on sale transactions," according to Realtor.com’s 2020 forecast.
Not enough homes are being built to house young adults who grow up and want to move out on their own. A little over 2 million households were expected to form in 2018, according to the Census Bureau. Yet builders began construction on just 1.25 million housing units that year, and a lot of them aren’t priced to be the starter homes that first-time buyers want.
3. Lack of affordability will hold back home sales
The problem isn’t only a shortage of homes for sale — it’s also a lack of affordable homes for sale. Potential buyers outnumber sellers of homes costing $150,000 to $400,000, says Mark Boud, of Metrostudy. The opposite is true for homes costing $500,000 or more. For homes in the $400,000s, supply roughly equals demand.
4. Believers in climate change pay less
As the climate heats up, are ocean levels rising? Scientists say they are and that rising seas endanger coastal real estate with storm surges and “nuisance flooding” of streets, sidewalks and buildings.
Not everyone believes ocean levels are rising. There’s evidence that nonbelievers are willing to pay more for beach houses. A paper titled “Does Climate Change Affect Real Estate Prices? Only If You Believe In It,” by researchers at the University of British Columbia and University of Chicago, says that, all other things being equal, prices for vulnerable U.S. homes are 7% higher in “climate denier neighborhoods” than in “believer neighborhoods.”
The researchers add that “our analysis is agnostic about whether it is believers who overreact or deniers who underreact to long-run risks of climate change.” Either way, the research might be reassuring news to sellers in denier neighborhoods and buyers in believer neighborhoods.
5. Sellers could see multiple offers again
You’d think that a shortage of homes for sale would bring on the bidding wars, right? But buyers stopped playing that game in fall 2019 — the season when sales typically cool off.
“Nationally, just 10 percent of offers written by Redfin agents on behalf of their homebuying customers faced a bidding war in October, down from 39 percent a year earlier and now at a 10-year low,” the national real estate brokerage says.
But Redfin’s chief economist, Daryl Fairweather, expects bidding wars to break out more often in 2020: Inventory is low, and so are mortgage rates, which boosts affordability and brings out more buyers. “All of the pieces are in place for bidding wars to become more common and for the housing market to shift back toward the seller’s favor next year,” she says.
6. Borrowers might find a broader selection of FHA lenders
Big banks cut back on underwriting FHA loans over the past few years because of a perception that the federal government punished banks severely when they made errors. Nonbank lenders stepped in to fill the FHA loan gap. But to encourage big banks to resume FHA lending and provide competition, the departments of Justice and Housing and Urban Development have announced that they will “ensure that the severity of certain violations is matched with the appropriate remedy."
If big banks jump back into FHA lending with both feet, as the feds intend, then borrowers could end up benefiting from lower costs and better service brought on by more competition.
7. Homeowners will stay, not sell
Americans aren’t as restless as they used to be. Typical homeowners have had their homes for 13 years, according to Redfin. In 2010, typical owners had been in their homes for eight years.
The National Association of Realtors has noted the trend, too. “People used to move every six to seven years because of a change in life” such as having children and needing a bigger home, or getting a new job, says Jessica Lautz, vice president of demographics and behavioral insights for NAR.
But fewer people are citing those urgent reasons to move. In 2019, the most commonly cited reason for selling a home was to move closer to friends and family, a NAR survey found. It’s easy to conclude that if that’s the top reason for moving, people may not be in as big of a hurry to make it happen.
Boomers, especially, are staying put, so millennials will buy their first homes from Gen Xers who move up, according to Realtor.com’s forecast.
8. Homeowners sit on their equity
American homeowners had $19.7 trillion in equity in the middle of 2019, the highest figure ever, according to research from the Urban Institute’s Housing Finance Policy Center. In fact, Americans doubled their home equity from 2011 to 2019. They accomplished it the old-fashioned ways: By paying their mortgages over time, and by not cashing in their equity.
Another way of extracting equity, the cash-out refinance, remains popular. More than half of refinances in 2019 were cash-out refis. Cash-out refinancers extracted about $20 billion in equity in 2019, compared to more than $80 billion at its peak in 2006, according to the Urban Institute, which takes this as a sign that lenders and borrowers are taking fewer risks than they did before the housing crisis.
9. iBuyers make their move
An iBuyer is a company that lets you request an automated offer on your house. If the iBuyer makes an offer and you accept it, the company buys the house, fixes it up and sells it — on your schedule. You don’t have to clean up and clear out for buyer showings. You pick a closing date that matches up with the purchase of your next home.
The best-known iBuyers are Opendoor (the pioneer), Zillow Offers, Offerpad and RedfinNow. The companies operate in a limited number of markets, but they are expanding into new places, and they are expected to keep growing.
10. Wars over the MLS system could change home-selling
The real estate industry faces challenges that could upend the way homes are marketed.
One threat comes in an antitrust investigation by the Justice Department, which wants to know whether local Multiple Listing Services allow buyer’s agents to filter listings by commissions. If so, agents would be able to hide listings from you if, in your agent’s opinion, they offer commissions that are too low.
Another threat comes via class-action antitrust lawsuits that accuse large brokerages and the National Association of Realtors of forcing sellers to pay inflated commissions to buyers agents.
An upstart real estate brokerage called REX is fighting the industry on another front. REX doesn’t list homes on the MLS. Instead, it markets homes so they’re easily found on Google, Facebook, Zillow and Trulia, says Jonathan Friedland, a senior vice president for REX. Home sellers represented by REX don’t pay commissions to buyer’s agents.
REX avoids listing homes on the MLS altogether. Meanwhile, there has been a trend in which local brokerages have listed homes on their websites but have withheld them from the MLS. In November 2019, NAR adopted a rule requiring homes to be listed on the local MLS within a day of being marketed elsewhere. These moves and countermoves are likely to continue into 2020 and future years.
How your employer can help you save for emergencies
Everyone needs a rainy-day fund — your financial health depends on it. Your employer could help you build one.
Many companies offer 401(k)s and other retirement plans, but until recently few had programs to promote short-term savings. That’s starting to change, as employers experiment with matching funds, payroll deductions and other methods to encourage workers to build emergency funds.
“This idea of employer-sponsored emergency savings accounts is just gaining traction,” says Brian Nelson Ford, a financial well-being executive at SunTrust Banks. “I think we’re going to see a lot more of them.”
The need is obvious: 2 out of 5 U.S. adults would have trouble covering a $400 emergency expense, according to the Federal Reserve. Millions of families live paycheck to paycheck, including some with six-figure incomes.
Even a small rainy-day fund can help cover emergency expenses, reduce stress and avoid costly solutions such as payday loans or raiding retirement funds, says John Thompson, chief program officer at the Financial Health Network, a nonprofit consultancy. A lack of emergency savings can increase financial stress that often spills over into work, with effects including lower productivity and increased absenteeism.
Some of the current employer programs are pretty basic, such as encouraging workers to use split deposit. This direct deposit feature allows you to automatically divide your paycheck between checking and savings accounts, or spread it among accounts at different banks. Any employer that offers direct deposit can offer split deposit, and many do, but employees often don’t know the feature is available.
Other emergency savings programs, known as “sidecar accounts,” are bolted on to existing 401(k) plans. Workers can use payroll deduction to build savings while avoiding minimum balance requirements and account fees that often discourage people from using traditional bank accounts.
Last year, 401(k) provider Prudential Retirement introduced an emergency savings feature that allows workers to contribute to savings accounts as well as make pretax contributions to their retirement accounts. Workers can withdraw money from the savings account for emergencies, although the portion of the withdrawal that represents earnings on the contributions is subject to income taxes and penalties.
Some employer savings plans offer cash or company matches for meeting financial health goals. SunTrust Banks, for example, offers a $1,000 incentive to workers who complete a financial education program and contribute at least $20 per paycheck to emergency savings, Ford says. So far, 53% of the company’s 23,000 employees have qualified for the cash.
Internal polling found the program not only made participants feel better prepared for emergency expenses, but also more optimistic about life and more likely to feel the company cares about their well-being. The one-year retention rate of new hires who completed the program rose to over 90%, compared with about 60% among those who didn’t participate, Ford says.
Making savings automatic helps people save more, but many have variable incomes that make that difficult. So companies are exploring other possibilities, including technology that would adapt savings’ rates to individual circumstances, says Thompson, whose Financial Health Network is partnering with two other consumer financial health networks and companies including UPS, Etsy and Mastercard to build and test various approaches.
“If your paycheck suggests that you can pull $60 to $100 a week out [to save], but mine suggests I can pull $6 to $10, an intelligent automated savings solution that operates in that context can work for both of us,” Thompson says.
Many companies aren’t aware that their workers want help building an emergency fund, says Catherine Harvey, senior policy advisor for the AARP Public Policy Institute. An institute survey conducted last year found 71% of employees polled said they would be likely to participate in a payroll-deduction rainy-day savings program if their employer offered one. The prospect of an employer match moved that approval rating up to 87%.
“We tested an employer match and found it moved nearly everyone, including skeptics of the original idea, toward full participation in the program,” Harvey says. “It skewed our metrics so much, we call it a super feature.”
What people don’t want is a lot of restrictions or companies deciding what constitutes an emergency. A successful plan would give people the freedom to start or stop saving at will, the ability to choose the financial institution where the money is deposited and immediate access to their funds, the AARP survey found.
“The point is to have the cash when you need it,” Harvey says.
How I Ditched Debt: ‘Happiness Journey’ Fueled Payoff
In this series, NerdWallet interviews people who have triumphed over debt. Responses have been edited for length and clarity.
How much: $212,000 in 6.5 years
Okeoma Moronu fell from one major life decision to the next. She went to law school in New York City because people said she had a knack for law. And the more than $200,000 in student loans she needed to fund that degree? She figured that was just par for the course.
But when Moronu had to confront the reality of how much she owed — and was paying in interest — the young lawyer realized she needed to take a more purposeful approach to life and her finances.
So she dedicated herself to what she calls her “happiness journey.” A big part of that journey was freeing herself from the $3,000 monthly student loan payment that stretched her budget despite making $160,000 her first year out of law school.
After paying off $212,000 in 6.5 years, Moronu and her young family now live in Costa Rica and continue to focus more on happiness and less on burdensome debt.
How much debt did you have and what’s your debt load now?
I had $212,000 in student loans.
My husband and I currently have a $70,000 mortgage on rental properties and a $20,000 balance on a 0% annual percentage rate credit card that covered the remaining balance on our house in Costa Rica, which we mostly paid cash for and expect to pay off by February.
How did you get into debt?
Law school. I was completely in over my head.
I grew up overseas, spent most of childhood in Indonesia and moved to the United States in high school. As a result, I didn’t have much guidance growing up in terms of college or finance because my parents didn’t know about that.
I ended up in New York at Columbia Law School and took out a lot of student loans, a little over $200,000 by the end. It was a much bigger financial decision than anyone in my family had to make before. So I just blindly went all in. It also happened to be 2008, so it was a terrible time to take on loans. Many of my interest rates were around 8%.
When did you begin to understand your situation?
The first time I understood what I got myself into was when I graduated and I had to go to the loan office at my school.
I saw my total outstanding balance and what my monthly payment was going to be. I owed $212,000 and I was supposed to pay around $3,000 a month. It was a complete shock. I felt like the floor was pulled out from under me. It was the biggest number I had ever seen.
At that time, my husband and I were planning our wedding … I didn’t have much time to process it. I was thinking, “You’re a smart girl, you’ll figure it out.”
It was incredible because I thought I was going to pay so much toward my loans, but I hadn’t accounted for the cost of living in New York City. Once I paid for my exorbitant rent and food and taxes, there was just not that much left to put toward my loans.
When did you decide to get out of debt?
I ended up going to Singapore for work for a year, and it was only when I returned that I realized I needed to get serious about paying off my debt.
Upon my return, I remember talking with my law firm about my taxes, because they handled them. I remember having to tell them how much my interest payments were that year, and it was around $30,000 from all my loan servicers.
That’s when I said, “This is insane.” And that’s when I started digging into the interest rates of my loans and I refinanced for the first time.
How did you get out of debt?
I put a timeline in place to pay off my debt in five years, and I just started throwing all my extra cash, like bonuses, tax refunds and gifts, toward paying off the loans. I was making $160,000 a year with my first job out of college and was paying a little more than $3,000 a month to my student loans, which was just over the minimum.
Ultimately, I didn’t end up paying off the debt in five years, because my husband and I had kids and we bought real estate and there were so many expenses of living in New York. But each year when my salary increased, I would put the difference toward my debt. I also refinanced my various loans four times over the years to manage interest rates.
While I was paying off my student loans, my husband was also paying off his own debt. He’s had numerous jobs over the years I was paying off my debt, making between $22,000 and $80,000, and he took time off at various times to take care of our kids. Over the years I was paying off my debt, my husband often directed most of his income toward his debt or child care.
You moved to Texas to boost your debt payoff. How did that help?
The move to Texas was easily the biggest sacrifice we made in pursuit of debt payoff. We loved (and still love) Brooklyn and had a great community of friends, great jobs that we enjoyed. But we knew that we could significantly increase our disposable income by moving to Texas. The move was incredibly challenging for us as a family, but we knew it was going to be worth it.
We knew that having that extra disposable income [thanks to the lower cost of living] would mean that we would be able to not only pay off the student loans, but also able to start building a real foundation for our financial future, including the move to Costa Rica.
How did your happiness journey guide your debt payoff?
Prior to becoming a happiness enthusiast, I was driven by a lot of fear. I was constantly afraid I was going to lose my job and I wouldn’t be able to pay off my debt. There was a fear I had that something could happen between where I was in paying it off and getting my balance to zero.
So I switched my mentality … I figured if I could get my [debt] to a manageable number, that for me was as good as getting it to zero. By focusing on happiness, I regained some control in the process. It helps me not feel like I was trapped by that financial situation.
That way, I could take a lower-paying job that is maybe less stressful and could still make my debt obligations. That was very liberating, because I realized that debt is very scary if you don’t think you can keep up with it.
How has your life changed for the better since you ditched debt?
My husband and I were able to leave our 9-to-5 jobs and take a sabbatical in Nosara, Costa Rica, while we expand our real estate portfolio and pursue other passion projects.
The truth is that we went from being a high-earning family to a family living on a very tight budget, but our lifestyle hasn’t changed that much. It’s really just the rate at which we are able to save and grow our wealth that has been affected, but our day-to-day life is so much more fulfilling now that we feel financially free.
[After taking time off, Moronu recently accepted a job working remotely as legal counsel for a startup in the Bay Area. She continues to run her blog and podcast. The family continues to live in Costa Rica.]
How to ditch your own debt
You can ditch your own debt, too. Here’s how.
Overwhelmed by student loans? Know your options. Income-driven repayment plans and refinancing loans can help make your payments more manageable.
Find your “why.” Focusing on your financial and life goals can keep you motivated to pay off your debt over the long term.
Pick a debt payoff strategy. There are a number of ways to pay off debt, depending on your budget, lifestyle and how much debt you have. Find a debt payoff path that works for you.
Photo by Abby Bengs.