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5 Surprising Credit Card Landmines Revealed

5 Surprising Credit Card Landmines Revealed

Credit cards are an unbalanced risk. Play your cards right, and you’re a winner. Play them wrong, and you’ll owe the house money. All the rules, disclosures and fine print are set-up to help the house win. However, if you know the rules in advance, credit cards can be less of a gamble, and the cards will be stacked in your favor. Here’s a list of 5 lesser known tricks the credit card companies employ which you should be aware of.

1. 0% Rate Clawbacks

We all love 0% teaser rates. 0% balance transfers for 21 months, 0% cash advances, financing your TV at 0% for 12 months, etc… But there’s a catch. If you make one late payment, you not only lose your 0% rate, the lender may retroactively charge you the penalty rate from the first day of your loan!

So imagine you got that new sofa for $1,399 with sales financing of 0% for 12 months. You make 11 straight payments on time. You’re one day late on your last payment. You’re toast. You won’t owe 1 month’s payment with interest. The lender has the right, depending on your agreement, to charge you interest at the penalty rate, let’s say 24.99%, from months 1 through 12!

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To avoid this, always set-up pre-authorized debits equivalent to the minimum monthly payment where possible. This will take away the risk of making any late payments.

2. Point Annulments

This is a lesser known trick. Some issuers will annul your accrued points/rewards if you’re delinquent on a payment. So imagine, you spend the year using one card, and you’ve finally earned enough points for your free flight. But you forget to make a payment. Boom, say bye bye to your points.

Luckily, there is a fix. Once you’ve made your payment and your account is current, you can call your issuer and ask for your points to be reinstated. Most issuers just play the heavy hand to force you to make your payment. Once made, they’re glad to give you your points back, so don’t let them vanish.

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3. Penalty Rates

We all know that if we miss a payment or two, we could get hit with nasty penalty rates from 24% to 30%. But what’s worse, once you’ve made your payments and you’re current, your card issuer may maintain the penalty rates for another 6 to 12 months, until you prove worthy of the original purchase interest rate.

What some people don’t know, is that even if you make your payments on time, the issuer reserves the right to change your interest rate to the penalty rate at their discretion! They may do it because your credit score has changed, they may do it to improve their own profitability. The one good thing is, they’re required to notify you of any rate increase beforehand. The lesson, make sure to read your mail and the fine print.

4. Overlimit Fees

This one just makes no sense. Most credit cards come with a set credit limit. This limit is meant to protect you and the issuer from spending more than you want or have. However, did you know that some issuers will allow you to go over your credit limit? But when you do, they’ll charge you an over limit fee as high as $35! What’s the point of a limit, if it’s not really a limit?

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So imagine you buy a bottle of milk that brings you $1 over your credit limit. You’ll automatically get dinged $35, making it the most expensive bottle of milk you’ll ever buy. To avoid reaching your limit, get set-up for mobile alerts and your issuer will send you a notification when you come within a pre-determined range of your limit.

U.S. regulations have made it harder for credit card companies to pull this off, but the practice is still used on less diligent consumers. Some countries, like Canada, have no consumer protections related to over limit fees.

5. Grace Period Cancellation

One of the true benefits of credit cards, is that if you pay down your credit card bill every month, the bank essentially lends you money for free. You typically have 21-28 days after you receive your statement to pay your credit card bill. If you do so, you won’t pay any interest.

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However, if you’re late, you will lose the interest-free period on new purchases for that statement period. What most people don’t know, is that the issuer may also remove your grace period for the next 6-12 months! That means you’ll be charged credit card interest rates of 19%-21% from the time you make your purchase, even if you pay future bills on time.

If this happens to you, call your issuer, and ask them to re-instate your grace period. Kick and scream and threaten to leave if they don’t. Actually, leave and use another card if they don’t re-instate your grace period, otherwise, each purchase on your card will be a lot more expensive than the ticket price.

Hopefully shining a light on some of the tricks of the trade will make you a more informed cardholder and stack the deck in your favor once again.

Featured photo credit: Credit Cards / Sean MacEntee via flickr.com

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Marc Felgar

Marc Felgar is an aging, health & senior care expert focused on improving the lives of mature adults.

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Published on May 7, 2019

How to Invest for Retirement (The Smart and Stress-Free Way)

How to Invest for Retirement (The Smart and Stress-Free Way)

When it comes to stocks, I bet you feel like you have no idea what you’re doing.

Everyone who’s not a financial expert has been there. I’ve been there. But, time is passing and you need to be crystal clear with how you’re investing for your retirement.

Otherwise, it’s back to work until you can afford not to. So, how can you invest for retirement when you’re not a financial expert?

You take the time to learn the fundamentals well. If you do, you can grow your wealth and retire happy. The best part is that you don’t need to be a financial expert to make smart investment decisions.

Here’s how to invest for retirement the smart and stress-free way:

1. Know Clearly Why You Invest

Odds are you already know why should invest for retirement.

But, maybe you know the wrong reasons. It’s time you get clear on why you’d like to retire. Here are some questions to help you get started:

  • Will you spend more time with your family?
  • What does retirement mean to you?
  • Are you looking to launch that business you’ve been holding off for years?

Everyone wants to retire but not for the same reasons. Once you’re clear for why retirement is important for you, you’ll focus on making it happen.

Investing in the stock market allows you to take advantage of compound interest.[1] All this means is that your money earns money on top of its interest. A reason why investment in the stock market is one of the best ways to plan for retirement.

2. Figure out When to Invest

“The best time to plant a tree was 20 years ago. The second best time is now.”– Chinese Proverb

It’s true if you’d had started investing when you were 10 years old, you’d have a lot more money than you do today.

The reality is that most people don’t start investing until it’s too late. So, if you’re currently waiting for the perfect time to start an investment, it would be today. Open your calendar and block out 2 to 3 hours to choose how you’ll invest for retirement.

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A quick way to get a snapshot of where you stand is to use Personal Capital. Input all your personal information and spend some time setting your retirement goals. Once completed, you’ll know where you stand with your retirement.

Having a savings account for retirement isn’t planning for retirement. Why? Your money loses value when you factor in US inflation.[2]

3. Evaluate Your Risk Tolerance to Create the Perfect Portfolio

Investing your money well depends on your emotions.

Why?

Because when the market drops most people panic and withdraw their money. On average, the US stock market yields an annual 6% to 7% ROI (return on your investment.) But, this won’t happen if you’re worried about short-term loses.

Before you invest your next dollar, know your risk tolerance.[3] Your risk tolerance determines the number of risky and safe investments you’d have.

Regardless of your investing style, you need to view investing for retirement as a long term game. Know that some years you’ll lose money but recoup this in the long-term.

Avoid watching market-related new. Also, create a double authentication to log in your investment account. This way you’re less likely to withdraw your money.

4. Open a Reliable Retirement Account

Depending on your circumstance, you may need to open a new brokerage account. This is the account is where you’ll invest your money.

If you’re currently working for a company, odds are that they offer a 410K investing account. If so, here’s where you’ll invest most of your money. The only problem with this is that you’re limited to the stock options that are available.

You do have the option to open a separate IRA (individual retirement account.) Here are some of the best brokers:

  1. Vanguard
  2. TD Ameritrade
  3. Charles Schwab

5. Challenge Yourself to Invest Consistently

Committing to invest for retirement is hard, but continuing to do so is harder.

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Once you’ve started investment for your retirement, you run at risk from stopping. Often you’ll want to contribute less, so you’d have more money in your pocket.

That’s why it’s important that you create a budget that allows you to invest each month. If you’re working for a company, you can set a percentage for the amount you’d like to contribute each month. Most people by default contribute 1% but aim to contribute 10% to 15%.

Be the judge for how much you can afford to contribute after covering important expenses. To stay motivated, use Personal Capital to view your net worth.

A benefit to contributing money to your retirement account is not taxed. For example, if you earn $100 and invest 10%, you’d contribute $10, then get taxed on the remaining $90. As of 2019, the most you’re able to contribute towards your 401K is 19K but this can change.

6. Consider Where to Invest Your Money

The most common way to invest your money is in stocks, but it’s not the only way. Here are other ways to invest:

Robo Advisors

Robo-advisors[4] are fancy algorithms that’ll choose the best investments for you. Sites like Wealthfront make it easy for first-time investors to invest their money. You’d input information about yourself and set your risk tolerance.

Then, set your monthly contribution amount and your robo-advisor would do the rest. Robo-advisors charge a fee to manage your money, but less than regular advisors.

Bonds

Think of bonds as “IOUs” to whomever you buy them from.

Essentially, you’re lending money and charging interest. Like stocks, not all bonds are equal. Some will be riskier than others depending on their rating.

Here are the different types of bond categories:[5]

  1. Treasury bonds
  2. Government bonds
  3. Corporate bonds
  4. Foreign bonds
  5. Mortgage-backed bonds
  6. Municipal bonds

Mutual Funds

Picture a group of people dumping all their money in a jar that’s managed by a professional. This is how mutual funds work. The fund manager manages the money looking to earn capital gains (interest.)

One of the best types of mutual funds is index funds. Since these funds don’t try to beat the market and instead follow it, they need less research. Because of this they often charge the lowest fees and yield the best long-term results.

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Real Estate

Yes, buying a home is an investment when done correctly.

Imagine buying a home and using it as a rental property. After repairing it, you receive a monthly surplus check of $100 to $200.

This may not sound like a lot, but repeat this process enough times and you’d earn a large amount of passive income. That’s why real estate is one of the best investments to not only retire but become wealthy.

But, it requires a lot of money to start and you should expect losing money along the way as you learn the process.

Savings Accounts

Your money can still grow in a savings account. Nowadays most online banks offer a 2% annual return. Although the average inflation is higher your money will be available when you need it.

7. Master Disincline to Dodge Short Success

Investing for retirement is a long-term strategy. That’s why you need to master delayed gratification. All this means is delaying short-term pleasure for something bigger in the future. Research shows that those who have delayed gratification are more successful.[6]

So how can you master delayed gratification?

By building your discipline.

Think back to what retirement means to you. A clear purpose will help you avoid withdrawing your money during a market downturn. It’ll help you contribute more towards retirement when you’d want to waste it instead.

Your journey towards retirement will be long, so reward yourself along the way. Choose a reward that’s relevant and meaningful, so that you reinforce positive behavior. For example, after contributing more towards retirement, treat yourself to dinner.

8. Aggressively Invest on This One Investment

I’ve mentioned several types of investments but haven’t covered the most important one.

It sounds cliche but here’s why you’re your best investment towards retirement. The more you know, the more money you’ll be able to make. The more good habits you adopt, the more secure your retirement will be.

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More importantly, investing in yourself is an investment that no one can take away. There’s no market downturn nor tragic circumstance that’ll wipe your knowledge and experience.

But, how can you invest yourself?

Reading books, blogs, and anything that’ll help you learn new topics daily. Listen to podcasts and audiobooks on your commute to/from work.

Save money to buy courses and hire coaches. I used to believe hiring coaches was a waste of money when I could learn the subject alone.

But, coaches see your blind spots and hold you accountable. Hiring the right coach will help you achieve your goals faster than you would’ve alone.

Retire Happy with Excess Money

The key to a secure financial future doesn’t only belong to financial experts.

It’s possible for you and I. What if you were able to retire earlier than most people and weren’t a financial planner? What if you were able to focus on what you enjoy doing the most while your money was working hard for you?

I know this sounds impossible now, but the truth is you’re capable of taking charge of your retirement. I’m not a financial expert but I’ve learned how to invest my money by reading books and learning from others.

Investing your money is scary. So start small and invest a small amount of your money with a robo-advisor. Feel your money drop and rise for a month or two. Then, invest more and keep this up until you’re aggressively saving for retirement.

One day, you’ll wake up with a net worth you’re proud of – confident about your retirement. You now know a few strategies you can use to invest in your retirement. Will you take action to retire happy?

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Featured photo credit: Matthew Bennett via unsplash.com

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