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Today's Headlines: Should the US Ban Credit Card Surcharges?

MoneyTips Who's For Paying More? Let's take a quick vote. How many consumers are in favor of surcharges just for the convenience of using a credit card? Anybody? That's what we thought. The European Union and the United Kingdom agree with that assessment. New rules from the British government will soon prohibit retailers from charging customers extra for paying for their purchase with a credit card. The UK rule stems from an EU directive set to take effect on January 13, 2018, and, according to the UK Treasury Ministry, British consumers could save a sizable portion of the millions of pounds spent annually on card surcharges. Calling credit card surcharges "rip-off charges", Economic Secretary to the Treasury Stephen Barclay said that such charges "have no place in a modern Britain." Do they have a place in a modern America? Some states already say no, but the situation is not straightforward – and, despite Barclay's comment, lack of surcharges does not guarantee lower prices to consumers. Variations on the Theme Currently, Puerto Rico and ten states do not allow credit card surcharges (California, New York, Kansas, Florida, Maine, Connecticut, Texas, Oklahoma, Massachusetts, and Colorado). Merchants in the other states are generally allowed to pass on a surcharge that is equal to their costs associated with accepting the card (up to 4%). Surcharges on debit cards are already banned throughout the US via an amendment to the Dodd-Frank legislation. However, each card network has a specific set of surcharging requirements that retailers must follow in order to apply surcharges using that card brand. Combine different card requirements with differing state rules and you can see why relations between retailers, banks, credit card companies, and the credit card processors are complex and tense. For example, the American Express guideline does not allow retailers to charge a higher fee for one card network (swipe fee) compared to another. This is troublesome because fees are not the same among all card networks, and merchants are then limited to passing on only the lowest rate — or refusing to take cards with higher rates altogether. Retailers can get around this by applying product level surcharges (types of cards) instead of brand-level surcharges, but the situation remains complex. They must still abide by any state laws and limits/restrictions imposed by each card network, post an appropriate notice of the surcharge within their store, and include the surcharge amount as a separate line item on the receipt. There's Always a Way What about states where surcharges are not allowed? In many of these states, merchants are permitted to offer discounts for using cash or debit cards – thus the standard price is raised to cover the cost of credit card processing. The Supreme Court recently addressed a New York case challenging the execution of this approach, ruling that state law may be challenged with respect to the way prices are advertised on free speech grounds. New York state law allows that a merchant can advertise an item for a specific cash price (for example, $5) and a specific credit card price (for example, $5.10), or advertise the item for $5.10 with a 10 cent cash discount – but the merchant can't advertise a $5 item and a 2% surcharge for credit. Of course, retailers are welcome to raise prices straightaway without explanation and charge the same price to every one regardless of payment type. They risk losing business in doing so, but each merchant must do the risk/reward calculation. In short, if the US bans credit card surcharges nationwide, retailers can — and almost certainly will — continue to find ways to recoup their costs. What can change, however, is making these costs fully transparent, so consumers can decide which cards best meet their needs. The free market should take care of the rest. The Takeaway Nobody wants to pay extra fees on their credit card transactions, and it's laudable that the EU and UK are trying to protect their consumers from such fees. But it is naïve for them to assume that by removing card fees, merchants will mostly absorb the costs of processing credit cards, and not pass those costs on to consumers in other ways. We remain skeptical. Your job as a savvy consumer is to consider all fees and taxes before making a purchase, regardless of what you are buying and where you are buying it. This is not always easy – especially if you are buying an airline ticket or booking a hotel online – but you can't truly comparison-shop until you understand the total costs associated with your purchase. New regulations may make your job of assessing costs a bit easier, but they have an equal chance of making it harder. In either case, it's still your responsibility to shop wisely for credit products, comparing features, benefits — and costs — on an apple-to-apple basis. If you want more credit, check out MoneyTips' list of credit card offers. Photo © Originally Posted at: Card Fees Consumers May Not Know AboutMany Credit Cards Drop International FeesThe True Cost of Your Credit Cards

Rent-To-Own Homes 101

MoneyTipsYou have spotted the house of your dreams, and it is on the market – but you cannot afford to buy it at the moment. Perhaps you do not have enough down payment funds, or your credit score is not good enough to get a mortgage loan. Don't give up yet. You have one other possibility to consider – a rent-to-own contract. In a rent-to-own arrangement, the potential buyer agrees to rent the home for a given period (typically 1-3 years). At the end of the rental period, the renter will either have the option to buy the house or be obligated to do so, depending on the terms of the agreement. To retain the option to buy the house, a renter puts up a payment (option money) which can range anywhere from 2.5%-7% of the sale price of the home. This gives the renter the right to buy, but not the obligation to do so. Meanwhile, the current homeowner/landlord agrees not to sell to any other potential buyers during this time. Option money may be refundable (usually not) or partially applied toward the eventual purchase price (usually so). Why would you want to rent-to-own? Here are a few potential reasons. Finding the Perfect Home – If you find the perfect home but cannot afford to buy it, the rent-to-own relationship gives you time to gather the needed down money or repaired credit score to qualify for a mortgage. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips. Quick Relocation – If you need to relocate for a job transfer or other involuntary reason with limited time, a rent-to-own can let you take advantage of the best fit you can find in a short timeframe without locking into a 30-year mortgage. Another example would be a move into a more desirable neighborhood or school district for your children. You have to weigh the advantages of rent-to-own over a straight rental. Inability to Get a Traditional Mortgage – Poor credit, previous foreclosures, or other historical problems that still count against you on mortgage applications may make rent-to-own a superior option. This does assume that the problems have been rectified, and that your current income allows you to make your rental payments. Unfortunately, there are also some downsides to consider. Expense – Renting-to-own is more expensive than a straight rental. Your rent will be higher as a premium to the current homeowner to accept the rent-to-own arrangement. You will generally receive a portion of your rental payments back as credit on the purchase price, but in the short term, the expense is greater. In essence, there is no point in renting-to-own a house if you do not reasonably expect to buy it. Risk – If you choose not to buy, you will lose any non-refundable option money as well as any credit you had built up toward the purchase of the home. Overextension – Beware of overestimating your ability to pay rent and still save up enough funds to buy the house at the end of the term. Make sure you have sufficient fiscal discipline to make this work for you. Before executing a rent-to-own agreement, have a real estate lawyer look over the terms before you buy. Clarify any ambiguities on expected maintenance and upkeep, payment terms and conditions, and expectations and obligations at the end of the term. Rent-to-own housing arrangements work well for some people, but they are not for everybody. Consider whether a straight rental is better while you save money for a future home purchase, and before you decide that a rent-to-own is best for you, make sure that you fully understand all of your obligations and options. MoneyTips is happy to help you get free refinance quotes from top lenders. Photo © Originally Posted at: the Choice Between Buying and Renting5 Reasons Not to Buy a HomeHome Buying vs. Renting

Have You Done Your Homework On Your Bank?

MoneyTipsHow do you know that your bank is the best one for you? You can consult all the advertising flyers and conventional information available at bank branches — or you can do some homework on the fundamentals of your bank with help from the online Bank Data Guide from the Federal Deposit Insurance Corporation (FDIC). What better source of information could you find than the organization that insures your deposits up to $250,000? The FDIC Bank Guide has links to lots of information, far more than you are likely to care about as a depositor. However, it does have several functions that are geared to depositors, starting with the BankFind menu. BankFind does just what the name implies — it allows you to find information about a particular bank. A drop-down menu will attempt to guide you through options as you type in the bank name. The main menu will give you the FDIC certificate number, when the bank was established and insured, the Bank Charter Class, location of the headquarters, and the webpage contact for the bank. FDIC contacts for consumer assistance regarding the bank are also included. The location drop-down menu allows you to find a specific location or all locations where your bank does business. The history tab lists all major changes within the bank including acquisitions, mergers, name changes, organization type, and changes of regulatory agency. The identification tab lists all relevant identifiers from the FDIC and the Federal Reserve. The financial snapshot tab gives the basic financial information about your bank's relative strength. Available information includes total assets and deposits, bank equity capital, and year-to-date and quarterly reports on net income, post and pre-tax return on assets, and return on equity. Click on the link for comprehensive financial reports and you will find a menu that goes further in depth, even allowing you to create comparison reports and to check FDIC ratings via the Community Reinvestment Act. The Details and Financials - ID tab will take you to that same menu, and the Reports and Analysis tab allows you to go to a user-friendly comparison page where you can compare dollars/percent of assets or rankings for up to four banks. Once you have located the branches of interest, you can use the Branch Office Deposits tab to find out the deposits at any particular location. Totals are available for each branch, including the countywide total for all branches in that category, and the statewide total. Bank robbers, don't get any ideas. The Bank Guide contains far more information that is useful primarily for analysts and regulators, such as downloadable reports on various banking institutions and cumulative data about the banking industry. As an individual depositor, you are probably not going to care about such in-depth information, but it is available if you find it interesting. The FDIC Bank Guide's real benefit to most people is the ability to find basic bank information quickly, to help you make decisions about your banking options. Do the locations and services at those locations match your convenience needs, is the bank stable with sufficient deposits, assets and returns, is it prone to acquisitions or changes, and how does it rate among its peer institutions? You may find that you have a better banking choice available to you, or you may find peace of mind in confirming that you already use the best bank for your needs. If you are starting from scratch with no credit history, check out MoneyTips' list of credit cards for limited or no credit, which can help you to build a credit history. Photo © Originally Posted at: Much Do We Trust Big Banks? (Infographic)Do We Trust Big Banks?Federal Reserve 101

More Americans Want To Forgive Trillion-Dollar Student Loan Debt Than Want It Repaid

MoneyTips More Americans believe that we should forgive all federal student debt than feel that the recipients should pay their loans back. In a shocking survey recently conducted by, nearly 42% agreed with the statement, I believe President Trump's Department of Education should forgive all federal student debt to help the economy. Less than 37% disagreed, while the remaining 21% neither agreed nor disagreed. "It is surprising that the majority of the US population supports this measure," says Brandon Yahn, Founder of "Perhaps this student debt burden has spread more across all generations, and popular sentiment is turning the corner as it relates to student debt." The exclusive survey of 466 Americans, conducted in June, found that more than 25% strongly agreed with the statement, while 18% strongly disagreed. If this became the law of the land, it would mean American taxpayers forgiving around $1.3 trillion in debt, which Trump and his Education Secretary Betsy DeVos do not seem inclined to do. As a candidate, Trump proposed student loan forgiveness after 15 years of repayment, but Trump and DeVos' initial education budget reportedly seeks to eliminate current forgiveness programs. While income wasn't a factor, gender seemed to affect people's feelings on this subject, with more women favoring forgiveness over men. 47% of the women agreed or strongly agreed with the statement, while less than 36% of the men felt the same way. Conversely, more than 40% of the men disagreed at some level, compared to less than 34% of the women. Less than 15% of the women surveyed felt strongly that the borrowers should live up to their obligations to pay back their loans. Since a recent study showed that women hold nearly two-thirds of aggregate student debt, perhaps sisters are doin' it for themselves. Reasoned millennial money expert Stefanie O'Connell, "Women are now more likely than men to get a college degree, which may explain why they would favor student loan forgiveness at higher rates. They're also likely to experience career interruptions due to childbearing and caretaking, which can impede their lifetime earning potential and, consequently, their ability to pay back their loans. Finally, many of the lucrative jobs that don't require a college degree tend to be in male-dominated fields - carpentry, electrical, etc. - which might explain why more women favor loan forgiveness." Younger people also tended to forgive the student loans, with those aged 18-49 clearly for it, while those 50 and up wanted the loans repaid. 30% of the younger group strongly agreed with the statement, while less than 19% of the older group strongly agreed. Of course, older people are not immune from the sting of student loan repayment. Adds Stefanie O'Connell, author of The Broke and Beautiful Life, "The average student loan debt has increased around $19,000 in just the past 14 years, so I can see why younger borrowers would be more eager to see student loans forgiven." Brandon Yahn, who himself paid back more than $40,000 in student loans, says, "Most young people (especially millennials) have seen how much of a burden student debt has had on them and their peers, so it's not a surprise that they would be interested in having all student debt taken away. This was clearly seen last year in the support that Bernie Sanders was able to garner in pushing for tuition-free college." Presidential preference certainly influenced the results, but not always as expected. Donald Trump supporters surveyed were against the concept of student debt forgiveness. Among the 164 winning voters who participated, the group who strongly disagreed was only one larger than the group who strongly agreed with the statement. Nevertheless, 25% simply disagreed with the statement, while less than 15% just agreed. Overall, nearly 48% of the Trump voters were against the idea, while less than 37% supported it. People who reported that they voted for Clinton were more likely to support the idea of forgiving federal student debt. 31% of the 156 Clinton voters who took part agreed strongly, while 16% more merely agreed. Contrast that to 14% who disagreed strongly and the 17% who disagreed. Since there were more Trump supporters than Clinton supporters in the survey, why did the overall numbers skew Clinton's way? The people who didn't vote in the 2016 Presidential election also want to wipe the student debt slate clean. More than 43% of them agreed or agreed strongly with the statement, while only 25% of them disagreed to some degree. While non-voters' views were similar to those of Clinton supporters, Americans who voted for third-party or write-in candidates surprisingly answered similarly to the Trump voters. 31% of them disagreed strongly with the statement, while less than 23% agreed strongly. Senator Bernie Sanders suggested free college tuition and lower interest rates for student borrowers during his ill-fated presidential campaign. Bucking stereotypes, the few "Bernie Bros" surveyed were even more opposed to student loan debt forgiveness than Trump supporters. Our favorite write-in candidate gleaned from the survey: Ivana Do Over! Says Student Loan Hero expert Miranda Marquit, "Many millennials, who thought they were doing the right thing, took on student loan debt only to graduate to an economy where jobs have been scarce and wages have been mostly stagnant for decades. Gone are the days when you could work for the summer and pay for the following school year. As a society, we sold a dream and failed to deliver. You can make payments on your loans for decades and barely make headway." Adds Marquit, "As a result, these millennials are unable to help the economy in other ways. Research indicates they are putting off financial milestones that come with economy-building benefits. All the consumption that comes with things like buying homes and starting families is being lost because the largest generation yet doesn't have money to spare. Student loan forgiveness would go a long way toward helping millennials feel stable enough to take the next steps in their financial lives, as well as even starting businesses." Find out quickly at what rate you can refinance your student loan. Photo © Posted at: Loan Debt Hurting Retail SalesNew Jersey's HESAA Student Loan Program Under FireObama Administration Announces New Loan Forgiveness Rules

Pre-Qualify Before Car Shopping

MoneyTipsYou may like shopping for a new or used car, but you will not like paying for it — especially when it comes to arranging the auto loan. The finance and insurance (F&I) office at the dealership is nobody's idea of a good time. How can you keep your time in the F&I office to a minimum? The easiest way is through pre-qualification for a car loan. Pre-qualification provides a solid estimate of the loan amount that you qualify for and the interest rates you will be charged through that institution. By pre-qualifying with a bank or credit union, you have an independent reference to compare to the financing offer from the dealership. The dealer will always prefer that you use their financing, because that's the more lucrative part of the auto business. Some car buyers simply agree to dealer financing out of convenience, others because they do not realize that they have alternatives, and still others because they incorrectly assume they can get the best interest rates from the dealership. In fact, rates are frequently higher with dealerships, and the alternatives are fairly simple with a bit of research. Keep in mind that advertised rates at dealers are only available to those with superior credit. If you have poor credit, it is even more important for you to pre-qualify to check your options. You can pre-qualify through your regular bank or credit union, which may offer you a discount for financing if you are already an account holder. Another option is through online sites such as Up2Drive, BlueHarbor, and Auto Credit Express. With poorer credit, pre-qualification through online sites may be your best option; some cater specifically to borrowers with lower credit scores. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips. Armed with pre-qualification, you can ignore the financing element at the dealership and focus on the price, knowing what you can afford to pay. Look for vehicles slightly lower than the loan amount to allow for all taxes and fees. Dealers may attempt to beat your pre-qualification deal, or add other incentives to sweeten the deal. Be very skeptical of any other offers from the dealership that retain a higher interest rate than your pre-qualification terms. There are other advantages of pre-qualification aside from negotiation with the dealership. You also have a solid budget to keep you from being tempted to buy a more expensive car than you can realistically afford. You can go one step beyond pre-qualification with pre-approval. Pre-approval means that you are approved for a loan amount instead of an estimate. This process includes a more extensive credit check and proof of income. If you can pass the criteria, you have an even greater influence with the dealership. You can stand completely firm with the original pre-approval offer, the equivalent of a check in your back pocket. Pre-approval through a bank or credit union gives you the ultimate in flexibility, since that is good with any dealership. Pre-approval with any dealership limits you to buying at that dealership. If you are going through the pre-approval stage, you should be ready to buy; when you are just exploring options and unsure about a purchase, stick with pre-qualification. If you have a preferred lender and dealer in mind, check with the lender to see if they have a list of approved dealers, and that your dealer is on that list. For new cars, you simply negotiate the price with the dealer and let them make arrangements with your lender. Lenders may have other stipulations on used car loans, such as a secondary loan limit that applies only to used cars or limits on the age and/or odometer reading. Check on these restrictions if you are thinking about buying a used car. Pre-qualification/pre-approval is a powerful tool for you to use at an auto dealership. You do not have to settle for the dealer's financing, which is often a worse deal for you. It is a great feeling to go into a car dealership with the upper hand. Consider getting pre-qualified or pre-approved for your auto loan at a bank or credit union, and experience that wonderful feeling for yourself. If you are interested in a personal loan, visit our curated list of top lenders. Photo © Originally Posted at: Keys to Buying a Used CarIs Your Car Dealer Financing Final?Online Car Loans 101

How Much Should You Spend on a Wedding Gift?

wedding gift needs to serve multiple purposes: You want it to say “congratulations” and avoid giving the impression that your wallet has been to one too many other celebrations this season.

There’s no easy answer to the question of how much is the right amount to spend on a wedding gift, but if you’re looking for guidance, these tips can help.

If you say no

If you’re invited to a wedding and RSVP no, you’re technically not on the hook to buy a present, according to lifestyle and etiquette expert Elaine Swann. Having something from the registry sent to the couple is a nice gesture, but not mandatory.

If you say yes

If you say yes, you’ll be expected to provide a gift. The difficult part is deciding how much to spend on it.

If you’re the kind of person who likes to compare, consider what other guests spend. The national average cash gift amount is $160, according to the 2016 Wedding Season Report by cash-giving platform Tendr, although regional averages vary. In Arkansas, the average gift is $73, while it’s $245 in Vermont.

Gift expectations also depend on your relationship: The closer you are to the bride and groom, the higher your financial obligation. “I think if you’re very good friends or family members, you’re going to probably want to give a little more than if you’re not as close to the couple,” says Diane Forden, the editor-in-chief at Bridal Guide magazine.

Another consideration? If you’re flying solo at the wedding, a smaller gift can suffice. Couples usually give more than individuals, according to Forden.

If you have other obligations

As a general rule, the more that’s required of you as a guest, the less that’s required when it comes to the gift.

“With a destination wedding, in my opinion, your presence is a present,” Swann says. “So for those who go out of their way to pay for airfare and hotel and all of the festivities around a destination wedding, then that’s your gift to the couple.”

You can also cut back on the gift if you’re in the bridal party. Between the showers, the bachelorette party and the bridesmaid dress, the whole process can be “financially crushing,” Forden says. If you’re feeling the pinch, she suggests chipping in on a group gift with your fellow bridesmaids.

» MORE: 11 affordable wedding gift ideas

If you’re on a budget

Finances always trump etiquette. There’s nothing wrong with selecting an affordable present — even if it’s the least extravagant item on the registry, or it’s not on the registry at all.

“People should never be ashamed about being fiscally responsible,” Swann says. “So if you cannot afford to get an expensive gift, then don’t do it. Hold your head up high and say, ‘You know what, my budget allowed me to get this beautiful card, and that’s it.’”

Don’t overthink it. There’s no right or wrong amount to spend on a wedding gift, and weddings aren’t about the gifts, anyway.

“The focus shouldn’t really be on gifts,” Forden says. “It shouldn’t be a gift grab. It’s a celebration of a marriage, and I do think a lot of brides and grooms are aware of that.”

Courtney Jespersen is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @courtneynerd.

Why Are Millennials Avoiding Credit Cards?

MoneyTipsCredit card usage is dropping among the millennial generation. A surprising 67% of Americans between 18 and 29 years of age have no credit cards at all, according to a recent survey. That compares to only 45% of Americans between the ages of 30 and 49, and 38% of those aged 50-64 without credit cards. At 32%, even less Americans aged 65 and over are without a credit card. The 2009 Credit Card Accountability Responsibility and Disclosure (CARD) Act probably played some part in the decrease by making credit cards difficult to obtain for those under age 21. Whopping levels of student debt also play a role, as millennials are wisely afraid to add more debt to their loan obligations. Unemployment may be keeping some millennials from qualifying for credit, but others appear to be avoiding credit cards as a matter of principle. Given America's soaring credit card debt, that is a positive development… or is it? Consider some of the potential advantages of credit card use. Building Credit History – Without a credit history, lenders have no way to evaluate your risk when the time comes to buy a car, a home, or any other large purchase requiring a loan. You will be charged higher interest rates, as a result, until you prove your risk level is low. Purchase Protection – As opposed to cash purchases, credit cards offer protection against vendor fraud and stolen items. You also have means for disputing fraudulent purchases made in your name. Convenience – Credit cards are convenient and accepted at most vendors, whether brick and mortar or online. (Arguably, this is a negative if you have poor self-control.) Record of Expenses – Monthly credit card summaries provide you with a full record of your credit purchases. If you do not keep receipts or budget properly, these records are quite helpful to outline where your money is going. Emergency Reserve – Your credit limit serves as an emergency pool of funds for unexpected expenses such as an auto breakdown or an accident requiring medical care. suggests that the average person without credit cards could pay almost $160,000 in extra interest over a lifetime when compared to the interest rates acquired through responsible credit card use. While there are many assumptions involved in that figure, the principle is sound. However, many millennials are putting more emphasis on the negative side of credit cards, such as these examples. Fraud/Identity Theft – Credit card breaches cause many headaches in disputing fraudulent charges and repairing the damage from lost personal information. Debit cards are less tempting as they are limited to the cash in your account, and your credit limit is probably higher than your bank account balance. Debt/Interest Rate – Credit card debt is usually the highest interest rate debt you will incur and if you charge more than you can pay off each month, debt can spiral to unmanageable levels. If you want more credit, check out's list of low-interest credit card offers. Ease of Overspending – The flipside of the convenience advantages listed above. Poor Credit Scores – Just as you can build your credit history with responsible credit card use, you can damage it with irresponsible use. Having no credit history makes it difficult to qualify for loans and mortgages, but having a poor credit history increases those difficulties. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips. The most responsible path is to use cards sparingly, pay them off in full each month, and stay at a small fraction of your credit limit (10% or less if possible). This strategy will give you the best credit rating without increasing your debt. Avoiding credit cards is advisable if you cannot use them responsibly. However, it is better to learn how to use cards sparingly and intelligently. The same properties that can cause you to run up credit card debt (such as lack of self-control, poor budgeting and overspending) are going to cause problems in other areas of life eventually. Once you get those habits under control, you may not feel the need to avoid credit cards. Photo © Originally Posted at: Your Credit Card Limit Measure UpWhat Happens When You Go Over Your Credit Limit?Higher Credit Limits Help Improve Credit Scores

Does Your Spending Personality Match Your Credit Cards?

It’s easy to get caught up in credit card incentives, such as cash back, travel perks and sign-up bonuses. But if your credit cards don’t match your spending personality, you might not get the rewards you expect, or you might end up paying too much in fees.

One in five consumers carries a card that “has fees or rewards not aligned with their actual purchase habits,” according to J.D. Power’s 2016 U.S. Credit Card Satisfaction study.

And circumstances change. Even a credit card that was once compatible with your spending habits might no longer be the best fit. Identify your spending personality to determine whether the cards in your wallet are offering you the most value right now.

The jetsetter

If you travel in style often and want big rewards for your spending, a premium credit card will go further than a regular travel card. Some premium cards offer credits for airlines, hotels or airport security screening programs, as well as airport lounge access. They come with a large annual fee, but you likely spend enough to earn it back in the form of perks and a generous sign-up bonus.

The explorer

Travel is your hobby, but you’re not loyal to airline brands; you’re loyal to the best deals. General travel credit cards offer flexibility in reward redemption. Some charge annual fees, but you can often make up the cost in rewards, and the best cards don’t charge foreign transaction fees. However, travel rewards might lose value if you redeem them for anything other than travel.

The cash-back connoisseur

You like knowing the exact value of your rewards in cash, and you use plastic at every opportunity to earn more. Tiered and bonus-category cash-back credit cards offer higher rates on certain purchases and 1% on everything else. You could get more value by pairing one of these with a flat-rate cash-back card that pays 2% for all purchases. Minimalists should consider a single flat-rate cash-back card.

The balance carrier

Your paychecks aren’t always steady, so sometimes you lean on a credit card, and it’s not always possible for you to pay the balance in full every month. Still, you make sure you never miss a payment. Cash-back credit cards are tempting, but their high interest charges will outweigh your rewards. A low-interest credit card is more likely to save you money over time.

The self-starter

If you have bad credit or no credit, you probably have limited credit card options. Secured credit cards offer an opportunity for credit building. They require a security deposit that you get back after closing the account or upgrading to a regular, unsecured card. The credit limit is often relatively low, equal to the security deposit.

The survivor

You’re struggling to pay off debt, but if you have good or excellent credit, a balance transfer credit card can provide a way out. It allows you to transfer a balance from an existing credit card to take advantage of a lower interest rate. A card with a low balance transfer fee and a 0% annual percentage rate period can give you time to catch up on payments.

The optimizer

You’ll go to great lengths to get a good deal, including managing multiple credit card bills. Mixing and matching cards can be worth it as long as you save money. Just watch out for annual fees or interest.

If your credit card is no longer a match, it might be time to move on. But unless it charges an annual fee, don’t rush to close the account, because that could impact the length of your credit history — and your credit score.

Keep current cards active with the occasional, small purchase and use a new credit card to swipe your way toward your goals.

Melissa Lambarena is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @LissaLambarena.

Teachers: Here’s How to Ace Retirement Without Social Security

When it comes to saving for retirement, many teachers can’t use the standard lesson plan.

What’s different for them? Social Security coverage, or the lack thereof. About 40% of public school teachers aren’t covered by the Social Security system, according to the National Association of State Retirement Administrators.

That goes back to the initial draft of the Social Security Act in 1935, which left state employees out in the cold. Most states have since opted into Social Security for their public-sector employees, but 15 states haven’t. In those states, teachers and other state and local government workers are exempt from paying Social Security taxes and instead typically rely on a state-run pension plan.

+ Click to expand to see a list of the 15 states States where teachers are ineligible for Social Security AlaskaLouisiana CaliforniaMaine ColoradoMassachusetts ConnecticutMissouri Georgia (some areas)Nevada IllinoisOhio Kentucky (some areas)Rhode Island (some areas) Texas Why teachers aren’t covered by Social Security

The short answer: In part, it’s because they don’t pay into the Social Security system. But in some cases, even if they’ve paid in at some point in their career, Social Security benefits — including retirement, disability and survivors benefits — could be reduced if they also have a state pension.

The retirement and disability benefit reduction is due to a rule called the Windfall Elimination Provision, which is designed to block state and local public employees from collecting a pension alongside Social Security benefits. It does that by reducing Social Security retirement benefits. A separate rule, called the Government Pension Offset, can also cut into Social Security survivors benefits.

The Windfall Elimination Provision

You might wonder how Social Security can be reduced if you weren’t covered by the program in the first place. The answer is that it can’t. The Windfall Elimination Provision doesn’t directly affect you if you’ve never paid into the Social Security system; you simply won’t receive benefits.

But if you have contributed to the system — most likely because you paid Social Security taxes in a different job — and you now work for a state or local government in a role that doesn’t participate in Social Security, the Windfall Elimination Provision could reduce any Social Security retirement or disability benefit for which you’re eligible based on that past work.

Your Social Security statements likely won’t reflect that reduction, which is based on a special calculation. The maximum monthly reduction in 2017 is $442.50, limited to one-half of your monthly pension benefit. You will be subject to a smaller cut if you have 21 or more years of “substantial earnings” from a job in which you paid Social Security taxes. If you have 30 or more years of substantial earnings, your benefits won’t be reduced by the Windfall Elimination Provision.

How teachers can save for retirement

Teacher retirement options vary by state, but you’re generally offered either a pension or a defined contribution plan like a 403(b) or 457(b), or both.

Pensions have plenty of perks, most notably a guaranteed benefit in retirement that lasts as long as you live. But they’re also not without downsides. Many are underfunded or in debt, and they typically don’t travel well, requiring you to participate in the plan for a certain number of years before you’re vested (“vested” means promised the full pension benefit you’ve accumulated).

If you leave teaching or move to a different state before you meet the vesting requirement, you may forfeit any employer contributions. Contributions you’ve made — and often at least a portion of interest earned — are yours to keep. Generally, the longer you work, the larger your pension benefit.

All of this means it’s wise to supplement your pension. You can do that in a couple of ways:

1. A defined contribution plan

You may be eligible for a 403(b) or 457(b) plan alongside your pension. Both are similar to the private-sector 401(k) plan, in that they allow you to put aside money for retirement pretax. The annual contribution limit for 2017 is $18,000, with additional catch-up contributions in some cases. If you have both a 403(b) and a 457(b), those limits are separate. You may also earn employer matching contributions.

The money you contribute generally grows tax-deferred and will be taxed as income when you take distributions in retirement. Both plans may also offer a Roth individual retirement account option, which allows you to put away after-tax dollars and take retirement distributions tax-free.

One word of warning: 403(b) plans can be rife with fee pitfalls for participants, sometimes even more so than other employer-sponsored retirement plans. An analysis by human resources consultant Aon Hewitt found that those costs could add up to a cumulative leak of $10 billion annually. No matter where you invest, be sure to understand your fee costs by asking to see investment prospectuses or annuity contracts.

2. A Roth or traditional IRA

These are accounts you would open and fund on your own at an online broker. You can contribute up to $5,500 in 2017, with an extra $1,000 if you’re 50 or older.

With a traditional IRA, you make tax-deductible contributions, then pay taxes on distributions in retirement. With a Roth IRA, your contributions don’t get you an upfront tax break, but distributions in retirement are tax-free. Depending on your income, you may be able to combine IRA contributions with a 403(b) or 457(b), increasing how much you put away for retirement each year. Review the IRA contribution limits to find out, then learn how and where to open an IRA.

» IRA vs. 403(b) vs. 457(b): Get all the details in our retirement plan comparison

Arielle O’Shea is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @arioshea.

Mortgage Rates Thursday, July 20: Rates Lower as Fed Looms

Mortgage rates for 30-year fixed-rate loans and 5/1 ARMs both fell by one basis point today, while 15-year fixed loans remained unchanged, according to a NerdWallet survey of daily mortgage rates published by national lenders Thursday morning.

Both fixed-rate products and 5/1 ARMs haven’t been this low in several weeks.

The Federal Reserve meets again next week, and going by the futures market, the general consensus is that the target range for the federal funds rate will be left as is, especially after Fed Chair Janet Yellen’s remarks last week that low inflation levels merited further observation.


(Change from 7/19)30-year fixed: 4.07% APR (-0.01)15-year fixed: 3.47% APR (NC)5/1 ARM: 3.87% APR (-0.01)

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NerdWallet daily mortgage rates are an average of the published annual percentage rate with the lowest points for each loan term offered by a sampling of major national lenders. APR quotes reflect an interest rate plus points, fees and other expenses, providing the most accurate view of the costs a borrower might pay.

Emily Starbuck Crone is a staff writer at NerdWallet, a personal finance website. Email: 

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