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Justin Pritchard

Justin's Banking / Loans Blog

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Many Faces of ID Theft

Friday May 30, 2014

You probably know that identity theft is something to be avoided, but do you have a clear idea of what it is?With all of the recent data breaches, it might be helpful to review what thieves are going after and what you need to watch for.

Identity theft is about more than just getting your Social Security Number stolen (and having it used for a credit card application).  About.com has a full section devoted to identity theft, and it features an explanation of eight different types of identity theft.

Knowing what thieves are after (and sharing that information selectively) is the best you can do to fight identity theft. By coincidence, Adam Levin recently published eight pieces of information that data thieves are after. If you're surprised that the number is as high as eight, both of those articles are essential reading.

No matter how well you protect your information, there are numerous ways for it to get out -- it just takes one data breach or small incident -- so it's probably as important to watch for signs of trouble as it is to secure your information. Watch your accounts, check your credit, read your mail, and take a second look at anything that seems out of the ordinary.

Skip the "Skip Payment" Offers

Friday May 23, 2014

A little extra cash never hurts. Lenders know that you'd enjoy a break, so they occasionally offer to let you skip a payment. These offers are common around the winter holidays, but you'll also get the "opportunity" to skip a payment in summer months (presumably for a summer vacation).

For the most part, it's a bad idea skip payments. For starters, there's often a fee for doing so ($25 to $50 is pretty common, depending on the type of loan you have and your lender's policies). If you can afford to make your payments, there's no point in paying a fee just to hold on to money and stretch out your loan. When you take extra time to pay off a loan, you pay more in interest. It might not amount to much if you're talking about an auto loan from the last few years (assuming you're paying something like 3% or less), but you'll still have to pay a fee. With a high-interest-rate credit card, it will cost a lot more.

If you're tempted to skip a payment, it probably highlights a problem, and the problem isn't this month's payment. You should be able to easily afford your monthly payments, and budget for summer vacations (or year-end gifts) ahead of time. Sometimes things won't go as well as you'd like and you'll fall on hard times, but it's unlikely that skipping one payment will solve the problem. More drastic measures, like trading down (unfortunately), might be in order until you're back on your feet.

If your lender offers to let you skip a payment, look closely at the cost of doing so. If the offer is tempting, it's probably a sign that things are tight in your budget -- which is fine, but that's probably not something you can fix with a few monthly payments.

Further reading:

Your Brain and your Money

Monday May 19, 2014

It may seem obvious, but it's worth spending time thinking about: your behavior is one of the most important determinants of your financial security.

At the extremes, there's more at work (if you earn a very low income or have extremely high medical expenses, for example), but for most people it's all about behavior. High income-earners can be deep in debt, while modest income-earners can retire early. The most secure people have figured out a way to manage their spending and saving and reach their goals.

Of course, that's easier said than done - and it's not just true in personal finance. Keeping a healthy diet and a fitness regime are similarly challenging. So what can you do to improve your chances?

Neuroscience might have some answers. Now, "brain science" and behavioral finance have been in a bit of a bubble in recent years, but that doesn't mean you can't find some valuable information. The idea is to figure out how you can help yourself make better financial decisions. If that means using little "tricks" (and they happen to work), all that matters is that you're better off.

Sometimes discussions about behavioral finance get a bit too detailed or abstract. The topic is extremely interesting and obviously important, so it's understandable that you'd want to learn as much as possible. But basic, specific tips are more helpful in getting the results you want. So, where can you get some of those? Shannon McNay at Ready For Zero recently published an article with great ideas that will help your finances whether or not your "happy chemicals" pitch in.

Which Deposits are Available Quickly?

Tuesday May 13, 2014

When you deposit funds to your bank account, you might have to wait a while before spending the money. Banks take several days to make funds "available" for withdrawal, so it's always a good idea to check your available balance before writing a check or making purchases with your debit card.

Why do banks hold your money? They want to be sure that there really is some money there - if you cash a check that bounces, the bank is out of luck unless they come after you for repayment. As a result, "safer" deposits clear more quickly than more questionable deposits (such as personal checks). The safest form of deposit is, of course, cash - the bank can easily tell if you've handed over legitimate currency. Government-issued checks are also very safe, and you can generally spend those funds within one business day.

What other types of deposits are available quickly? See MyBankTracker for a list of items that become available quickly. But double-check with your bank if it's really important; bank rules vary, and you might have a hold placed on a portion of your deposit held in some circumstances.

Different Loans, Different Features

Thursday May 8, 2014

All loans are not created equal. The concept is the same with all loans (you get some money and you pay back more than you got), but different types of loans function differently.

If you're going to borrow, it's essential to understand how loans work and which types of loans best fit your needs. Sometimes you don't have much of a choice - if you're buying a home, a home loan is probably the only loan that will provide the funds you need with a repayment schedule that you can manage (and that's because the home's value serves as collateral).

If you want to borrow without using collateral to secure the loan - so you have freedom to spend the money on just about anything you want - you can use an unsecured loan or a personal loan. Again, there are different types of loans that come with different features and restrictions. You can read about the basics of personal loans here, and for more context, Gerri Detweiler explains how these loans differ from other types of loans.

Before you get your next loan, take a look at all of the options available. Doing some homework can help you can avoid surprises and spend a little less on interest.

Sometimes Debt is Helpful

Tuesday May 6, 2014

Being debt-free sounds great: no more monthly payments, no money wasted on interest costs, and no worrying about how you'll stay on top of all of your bills.

Some people make an effort to pay off all their loans early, close credit cards, and live without any type of debt. While that's an impressive feat that shows you take your finances seriously, it might backfire one day. Once you stop using "debt" (in quotes because you don't necessarily have to pay interest), your credit files grow a little dusty, and your credit scores may begin to suffer. For some people, that's no problem - they hate the idea of playing the credit score game. Others may find that they want to borrow money someday down the road, but lenders are unwilling to approve them because of their thin credit.

If you're concerned about keeping your credit scores in good shape, what can you do? The easiest way to stay active in the credit world without paying interest is to keep a credit card open. Use it from time to time so that it doesn't get closed (sometimes inactive cards get cancelled), and pay it off completely every month.

If you want to pay off other loans, such as auto and home loans, that's fine. Just keep something active so lenders have something to look at if you ever want to borrow. Yes, it's crazy that lenders are hesitant to lend to somebody who paid off all their loans long ago, but it's the way things currently work.

Further reading:

Doing Well by Doing Good

Thursday May 1, 2014

If you work in public service, you might not earn as much as your peers in the private sector. There are plenty of exceptions, but in general, teachers and firefighters don't earn the highest incomes in the land. They are rewarded in other, non-financial ways, and there are even some financial perks that only public servants can enjoy.

The Good Neighbor Next Door loan is one example. This program is available to public servants such as law enforcement officers, teachers, firefighters, and EMTs, and allows homebuyers to save a lot of money as long as they stick around for at least three years.

Student loan forgiveness is another good example. Borrowers who work for certain nonprofits may have student loan debt wiped out after making on-time payments for at least 10 years.

If you work in public service, take a look at programs available to you. They might make it even more appealing to keep doing what you're doing.

Further reading:

Some Student Loans due at Co-Signer's Death

Tuesday April 22, 2014

Usually it's helpful to have a co-signer. That person allows you to qualify for a loan that you otherwise wouldn't receive by promising to repay the loan if you are unable or unwilling to do so. Unfortunately, having a co-signer might be a liability years later -- even if you've been making payments on time.

A report out from the Consumer Financial Protection Bureau (CFPB) found that some lenders demand repayment if a co-signer on a private student loan dies or declares bankruptcy. That's a nasty surprise to borrowers who can't come up with a large lump sum or refinance the loan.

How does this happen? Some lenders include language in their agreement that says the loan is due if a co-signer dies or declares bankruptcy. When borrowers fail to repay the loan in full, the loan goes into default, and the borrower's credit suffers (making it even less likely that they'll be able to refinance the loan, much less get a mortgage or auto loan).

The CFPB is looking into the issue and may issue consumer protection regulations eventually, but what can you do in the meantime? If you've got private student loans and you used a co-signer, find out if you can get the co-signer removed from the loan -- it may be possible after several years of on-time payments. That way you'll be in the clear if something happens to your co-signer.

Further reading:

Ways to Protect your Credit

Friday April 18, 2014

With all of the data and security breaches lately, you may wonder what you can do to protect yourself from identity theft.

The main thing is to keep an eye on your account activity and check your credit reports regularly. If you want to step it up a notch (or more), you can also take measures to protect your credit information. Experian just published a nice infographic that explains how you can do that and compares the features of two approaches: a credit freeze and a fraud alert.

Credit freezes and fraud alerts can help protect you, but they're not perfect. For starters, you never know when an identity thief will try to use your information (even if it was just stolen recently it might not get used for years). Fraud alerts might expire before anything happens, but you can set long-term alerts if you've been a victim of identity theft. Credit freezes, on the other hand, will protect you indefinitely, but your credit will be locked down; you won't be able to borrow money, and other organizations will have a hard time conducting background checks (a potential employer, for example) while the freeze is in place.

Remember that your credit isn't the only thing that thieves are interested in. They also want to get into your bank accounts and other accounts, so keep an eye out for suspicious transactions anywhere you have assets.

Further reading:

Breaches and Bugs Last a Long Time

Tuesday April 15, 2014

Heartbleed is the latest threat to your identity and online security, and it's worth paying attention to. However, as in many cases, there's little that you can do besides monitor your accounts for suspicious activity (and change passwords after websites have updated their systems).

Fortunately, as the Washington Post reports, "many of the Web's most critical sites -- those belonging to banks and governments -- were not vulnerable to Heartbleed in the first place." So your bank account is probably safe from a direct attack. Things are a lot less safe if you used the same password for your bank and other online services.

Soon, all of this will be behind us -- or it will seem to be. The headlines will move on to other topics, but the stolen information will still be out there, and thieves will be doing the best they can with it. As Money Talks News explains, this is just "the beginning of phishing season." Changing your passwords is prudent, but you really need to stay alert in the coming years and months because that's when things will start happening.

Get in the habit of suspecting that most email messages are bogus, and think twice before giving out information to any inbound callers as well.

Further reading:

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