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Does It Ever Make Sense To Lease A Car?

Most people view leasing with the same attitude as renting a house or apartment. Each monthly payment makes the wallet of the owner a little thicker while the renter has nothing to show for it. At the end of the lease agreement, the lessee (tenant) owns as much of the property as they did before they made the down payment – 0%. If you see a need to lease custom kitchen cabinets in austin for a remodel that’s another article for another day.

The monthly lease payments essentially offset the depreciation value of the vehicle. Just as it always doesn’t make the best financial sense to buy a house, such as only living somewhere for one or two years, there are also times when it might not make sense to buy a car.

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To lease a car is to rent a vehicle. You will make an initial down payment that can include a refundable security deposit equal to the first monthly payment, any applicable fees or taxes, additional funds to prepay the lease balance to lower the monthly payments, and the first monthly payment.

It won’t be uncommon to pay at least $2,000 just to drive the car off the lot. Most dealers expect an initial down payment of 10% of the capitalized cost (the MSRP and additional dealer fees) of the car. Similar fees are expected when you purchase a vehicle, the primary difference is that you own the vehicle at the conclusion of the financing agreement.

When It Might Make Sense To Lease A Car

Get A New Every Two

If you are one who likes to buy a new vehicle every two or three years when the “new car smell” disappears, leasing can be a better option. Every vehicle depreciates the most within the first few years after it rolls off the assembly line. Some vehicles can depreciate as much as 50% from the original sticker value at the end of three years. Depending on the annual mileage and routine maintenance schedule, cars also start costing a lot more to maintain after the 2 or 3-year mark too.

Leasing is more convenient than buying a vehicle and selling it after 36 months. Instead of trying to sell or trade-in and find the highest bidder, a lessee can drive the vehicle to the dealer lot at the end of the term and drive home in a new one. Part of the lease agreement might also include complimentary routine maintenance at the dealer location. You still might have to pay for normal wear-and-tear expenses such as tires or brakes, but, maintenance can be a “hidden cost” that most people do not budget for on the sales floor.

Lower Monthly Payments

In general, leases have lower monthly payments than car loan payments. For example, the estimated monthly lease for a brand new Ford Focus with an estimated cost of $18,100 before discounts is $181 per month for 36 months. A 36-month loan at 0% APR has an estimated monthly payment of $425. The lower monthly payment can be an affordable way to drive a new vehicle. One expense to consider that might not be included in the monthly lease payment is a product called “GAP Protection.”

Some dealers or insurance providers might require Guaranteed Asset/Auto (GAP) Protection for leased vehicles to cover the difference between the initial lease balance and the payments made so far. In the unfortunate event that the leased vehicle is “totaled” during an accident, this type of coverage will pay the dealer the remaining balance for the vehicle so that the driver will not have to finish paying off that lease and find a way to afford a replacement vehicle.

To save even more money, look out for budget-friendly insurance, which will vary from state to state, city to city. For instance, the best cheap car insurance rates in Austin, Texas will likely be very different from rates in a state that sees plenty of snow and tough rough conditions.

Only Plan to Live Somewhere For A Few Years

Perhaps you need to live abroad for several years for business before returning stateside or bounce around the country every couple of years. Just as you probably wouldn’t buy a house for a 3-year stint as the potential appreciation normally doesn’t offset the fees associated with buying and selling the house, it might be the same thing for a car.

It’s not affordable to ship your car on a barge with your other belongings when you return. Or it might be impractical to own a sports car after moving from the southern U.S. to the northern U.S. with harsh winter conditions. Once again, leasing is a convenient option as you know exactly how much you will pay when you drive the car off the lot.

Factory Overstock Leases

Sometimes dealers will offer lease specials to help clear inventory. This makes the monthly payment even lower than a regular lease payment. At the end of any lease, the driver normally has the option to purchase the vehicle for market value at the end of the lease term. With factory overstock leases, it can make sense to “lease-to-own” as the lease payments can be lower than depreciation. The financing for the remaining value will carry a lower monthly payment than if the vehicle had been financed brand-new.

For this strategy to work, you need to be intentional about banking the extra savings and setting it aside into a “no-touch” fund to buy the car at the end of the lease term. If you decide to purchase the vehicle you will need to pay the appropriate taxes and any loan down payment if you will not pay cash for the car.

Tax Rebates or Factory Subsidies

Sometimes local or state governments can make it cheaper to lease a new vehicle than buy a new vehicle.  This is most common with alternative fuel vehicles such as electric cars or hybrids where governments try to attract new customers to drive these vehicles. Dealers might also add additional subsidies for additional incentives to sign the lease. In addition to eco-friendly cars, certain dealers also offer incentives for high-end luxury vehicles. For some, it might be the only affordable way to drive a luxury car.

Lease For Business

If the leased vehicle will primarily be used for business purposes, it can also make sense to lease as the monthly payments can be tax-deductible. The guidelines are rather strict. It’s a good idea to talk to a tax professional or the accounting department before making this business decision.

lease a car

When It Doesn’t Make Sense To Lease A Car

Drivers who like to “buy and hold” their car until the wheels fall off should never lease. For these types of drivers, it doesn’t make financial sense to constantly be paying a monthly payment to the dealer when that money can be used for traveling, investing, or becoming debt-free. The two most affordable ways to purchase a vehicle that you intend to drive for more than 2-4 years is to buy a late model vehicle that is no more than 6 years old that can be purchased in whole and is still low-mileage.

Even if you need to obtain financing, it will be significantly cheaper than if you had bought the car with 1 mile on the odometer because of depreciation. A low-mileage late model vehicle can still be driven reliably for another 10 years or more, in most instances.

It also might not make sense to lease a brand new vehicle if you can afford the monthly loan payments. Instead of only renting the vehicle for three years (36 months) and returning it to the dealer so they can sell it to somebody else, you actually own the car and can sell it for the same price as the dealer. You won’t get the depreciation value (as the dealer did with lease payments) but it’s still more cost-effective than leasing.

Should You Buy Or Lease a Car?

If you are undecided whether to buy or lease a car, the Edmunds True Cost to Own calculator can help you crunch the numbers.  You should also get buy and lease quotes from your insurance provider as well.  Having realistic cost projections and knowing your preference for convenience (leasing) or ownership, can help make the decision easier.

As you can see, while owning a vehicle (like owning a house) is the most popular option. Sometimes it does make more sense to lease.

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Does Applying For A Credit Card Hurt Your Credit?

It can be tempting to apply for multiple credit cards in a short timeframe. You can use them to rack up the welcome offers for a lavish vacation. Or they can be used to receive some nice statement credits when making large purchases.

Having a few financial goals in mind, an analysis of your spending habits, and knowing the different types of credit cards can help you make the right decision.

While the short-term rewards can be the deciding factor when comparing two different credit cards, applying for too many credit cards at once can have consequences. Does applying for a credit card hurt your credit? While there is no rule that states a person must wait a specified amount of time before applying for the next credit card, there are some general guidelines to follow.

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Does Applying For A Credit Card Hurt Your Credit?

Let’s take a further look at how to avoid hurting your credit score and what you should do instead.

It’s All About The Credit Score

When applying for any type of loan or credit card (financial institutions consider it a form of revolving debt), they will look at your credit score. A credit score is a number that ranges from 350 to 850 (there are numerous variations in this scoring range). The higher the score, the more likely you are to repay your balance on time. There are several factors of short and long-term credit history that determine your credit score. Credit cards impact most, if not all, of those factors in one way or another.

Here is how your credit score is impacted by a credit card application. Ten percent of your credit score is comprised of “Hard Inquiries.” These occur anytime you give permission for a financial institution to run a credit check on you. It might be applying for a credit card, home loan, switching cell phone carriers, or applying for a new job.

Whether you get approved or denied, these inquiries cannot be erased from your report. If you haven’t checked your credit report in the last two years and you have had several life events occur, you might be surprised how many might have recorded on your report. Hard inquiries tell lenders if you have recently tried applying for similar financing and might have been denied.

Inquiries usually stay on your report for two years before dropping off. Normally, you do not want more than 5 inquiries on your report at any time, but three is an ideal number to aim for.

You can use one of the best Capital One credit cards for travel to build your credit so you can eventually upgrade to a premium travel card.

Other Considerations Regarding Credit Score

Two other factors are Types of Credit (10%) and Length of Credit History (15%). People with excellent credit scores normally have credit accounts that are at least 4 years old. A credit card issuer uses these two factors to find out how many credit cards and loans you currently have and how long you have had them for.

If you were recently approved for 2 or 3 new credit cards within the last 18 months, your length of credit history is going to be rather young. Even if you have never missed a payment and maintain a low debt-to-credit utilization ratio, your score will most likely be lower than when you applied for your first credit card.  You may still be approved for new credit cards, but the card issuer might authorize a smaller credit limit to offset the risk of having so many new types of credit.

Every time you apply for a new credit card or loan, your credit score will drop a few points. If you have a good or excellent score (720 or above) you can afford a few dings in your score and still qualify for the best rates. If your score is near 700 points or lower, each application will be a relatively harder hit.

Typically a score in the mid to upper 600s is still considered a “prime” score but these users are either recovering from credit history blemishes or have a minimal credit history. If you fall in this range, you should primarily concentrate on having one or two cards that allow you to gradually increase your credit score.

Does Applying For A Credit Card Hurt Your Credit?

How Often To Apply

Let’s talk about the temptation of credit card welcome offers. You might be contemplating churning credit cards for one of two reasons: balance transfers or travel rewards. There are more credit cards available than any one person can count on both their hands and feet. Just ask anybody who has done travel hacking for any period of time.

Once again, the guideline comes down to your credit score. The general rule of thumb for most people is to wait for six months between credit card applications. This allows you enough time to establish a credit history with your new card with on-time payments and the average monthly balance (debt-to-credit ratio).  The six-month period also provides an opportunity for your credit score to recover from the new inquiry.

When You Should Apply Depending On Your Credit Score

If you have an excellent credit score (800+), you will probably only have to wait three months before applying again.

As was mentioned earlier, these are “rule of thumb” guidelines. You will likely be able to apply for two credit cards simultaneously. You may get approved for both of them with a high credit score of 750 or above.

If you were recently approved for a credit card and are getting pre-approval offers in the mail for other cards, your score is high enough to receive another card. Should it be an offer that you like, apply for it. If not, wait the six months before applying for the credit card you do want.

There are certain times you will not want to apply for a new credit card. The most obvious time might be right before you are planning to buy a home and need to apply for a mortgage or during the application process. Lenders and underwriters do not like surprises and a new application may force them to rewrite some of the paperwork due to adjustments in your credit report.

The same can be said when applying for a car loan or any other type of loan for that matter. A new type of credit is perceived as an increased risk of default due to the lack of payment history. Lenders are looking to make secure investments with their money.

What If My Credit Card Application Is Denied?

Sometimes applying for several credit cards in a short time frame will cause an application to be declined.  What you shouldn’t do is apply for another credit card. It will count as another inquiry on your credit report for the next two years. Instead, call the card issuer that denied your application and find out the reason why your application was rejected.

You chose to apply for this particular credit card for a reason, so exhaust all options before moving on. If you have another credit card with the same issuer, you might be able to reduce your credit limit on your existing card to qualify for the new one. Sometimes it just takes a phone call to resolve an issue.

Another possible reason your application was denied could have been due to a low credit score. If that is the case, make sure you pay all your bills on-time. Pay them in full for several months and do not “max out” any account.

Ideally, keep your debt-to-credit utilization ratio below 20% for every credit card you own. To help determine when your score is high enough to apply for a new credit card, you can use a credit monitoring service that might provide you with a free credit score.

Does Applying For A Credit Card Hurt Your Credit: Final Thoughts

So, does applying for a credit card hurt your credit? It can. Knowing your credit score and being aware of your financial responsibilities can help. If you can manage your finances, you can bring up your credit score. Then you won’t have to worry about applying for a credit card.

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Are Balance Transfer Cards Better Than Rewards Credit Cards?

When people think about applying for a new credit card, they often look at the welcome offers and the types of rewards that can be earned with everyday purchases. Sometimes you might need another perk, besides rewards, to make you click the “Apply Now” button. This might apply to you if you are carrying a balance on one of your current credit cards and are looking for a hand-up to help pay off the debt.

But, is it better to choose a balance transfer card or a rewards credit card? Applying for either type of credit card will count as a hard inquiry and affect your credit score, so you will want to compare the advantages and disadvantages of each credit card to help you make the best decision.

Advantages Of Balance Transfer Cards

While rewards credit cards might offer welcome offers of frequent flyer miles or complimentary hotel stays when you meet a spending minimum, balance transfer credit cards will not charge interest on balances transferred from other credit cards for a predetermined time period (typically 12 to 18 months). Your new credit card might charge a one-time fee of 3% to 5% of the balance transferred (credit cards need to make money somehow). But it’s still cheaper than the interest you are paying on your existing credit card.

These cards can be very advantageous if you have any type of credit card debt as you can make payments interest free for several months. This can be a great alternative to debt repayment compared to a high-interest personal loan. You should view the 0% APR as a “second chance” to getting debt-free and rebuilding your credit.

Disadvantages of Balance Transfer Cards

While balance transfer credit cards offer an introductory 0% APR, there are several drawbacks to these cards. Possibly the largest drawback is the APR after the 0% introductory period ends. If you cannot pay off your balance in full (or most of it), the interest rates on these cards can be noticeably higher than other rewards credit cards with interest rates as high as 23%.

If your balance is too high, it might be better to swap your credit card debt for a personal loan with a lower interest rate. Of course, the post-introductory rate will largely depend on the credit card and your credit score. Not all credit cards or credit scores are created equally. It might pay dividends to look at the interest rates and perks of the card after the introductory period.

If you have a high credit score and a low balance, it might be more advantageous to apply for a new credit card with a short introductory balance transfer period and a low-interest rate.

Caps on Transfer Amounts

Another downside of balance transfer credit cards is that some credit cards cap transfers to a certain dollar amount. For example, the Chase Slate limits balance transfers at $15,000 regardless of your credit limit. Depending on the balance amount you want to be transferred, you will need to verify if the prospective credit card will allow you to transfer your full amount.

A final downside of balance transfer credit cards is the lack of purchase rewards. Cardholders of balance transfer credit cards normally have to trade rewards for 0% APRs on outstanding credit card balances. This isn’t always the case as some balance transfer cards do offer purchase rewards. However, they are usually not as lucrative as those offered by rewards credit cards.

Advantages of Rewards Credit Cards

Rewards credit cards “reward” users for spending and making payments on-time. They might award cardholders with points or cash rewards. Plus, their welcome offers entice new applicants to spend a specific amount of money within the first two or three months of account opening to receive an additional bonus.

In one way, rewards credit cards are the complete opposite of balance transfer cards that offer a “second chance” to pay off their balances without interest. With both types of cards, credit card issuers make their money through transaction fees and balance transfer fees (even when the transferred balance is paid in full before the introductory period ends).

As many balance transfer credit cards do not offer purchase rewards, rewards credit cards are better for those that pay their bills regularly. They might also be a better option for somebody who has a small outstanding balance and has more to gain from long-term purchase rewards, even if it means paying interest on credit card debt. Your amount of debt might determine if short or long-term rewards are better.

Disadvantages of Rewards Credit Cards

One big downside of rewards credit cards is the relatively higher fees that are incurred with balance transfers. Credit cards need to make a profit to remain in business. That means they can only offer so many perks.

This is why most credit cards charge no interest for the first 12 to 24 months of account opening or offer purchase rewards. If rewards cardholders do not meet the payment deadlines, they do not earn rewards points on the outstanding balance.

Rewards credit card programs might also require a higher credit score than balance transfer cards. Each balance transfer and rewards program has different eligibility requirements. Some are more stringent than others. As a whole, balance transfer cards give credit card users a chance to catch up and rebuild their credit.

People with higher credit scores will qualify for rewards credit cards that offer better rewards and have lower interest rates than post-introductory APRs offered by balance transfer credit cards. If you have a history of credit card debt or low credit score, your application for a rewards credit card might not be a sure thing. The best place to get credit score information won’t hurt your credit but will also provide essential information.

Are There Credit Cards With Rewards and Introductory APRs?

Yes! There are a few credit cards that offer 0% APR on balance transfers for at least one year and rewards for everyday purchases. You may need a higher credit score to qualify for these cards, but they do exist. Our study of the best balance transfer credit cards to apply for in 2018 can be found here.

The Verdict on Balance Transfer Cards

Which type of credit card is better? It depends on your financial circumstances. If you have a manageable credit card debt of several thousand dollars that you can pay off within the 0% introductory period, a balance transfer card will be a better option. The interest-free payments will probably be a better “return on investment” than any rewards program.

Once you become debt-free, and if your credit score is high enough, you can always apply for a rewards credit card.

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How Do Secured Credit Cards Work?

Do you have bad credit and want to repair it?  Maybe you have no credit history and need a place to start.  One way to build your credit score is by using a secured credit card!  By making monthly payments with a low credit limit, you will gradually be able to improve your credit history and qualify for better banking products in the future!

People get hit by tough times.  Maybe you lost your job or had some unexpected medical expenses.  In the process, you racked up the debt and your current credit score reflects those woes.  Credit cards, even secured credit cards, are not for everybody.  Let’s face it, to qualify for an auto or home loan, you need to have a decent credit score.  Using a secured credit card is not an instant fix, but the odds of getting approved increase dramatically by demonstrating to lenders that you can consistently make monthly payments and carry low monthly balances.

What Is A Secured Credit Card?

Secured credit cards get their name because they require a security deposit to start using it.  Non-secured cards, the most common type of credit cards, do not require a security deposit to use and are only issued to people with fair, good, or excellent credit cards as they are less likely to miss monthly payments.

Secured credit cards work identical as non-secured credit cards but normally have higher fees and lower credit limits.  A secured credit card is a credit card that requires an initial security deposit the same amount as the credit limit.  Credit card issuers require the security deposit in case the cardholder cannot pay the monthly balance, similar to landlords and new renters.  As an example, a secured card with a credit limit of $1,000 will require a $1,000 security deposit that is normally put in a Certificate of Deposit account.  If the cardholder has a balance of $750 for the month and cannot pay it off, then the issuer (aka “the Bank”) will pull from the security deposit to cover the loss.  The bank doesn’t lose any money, but the cardholder still needs to pay off the balance to keep using the card.  If the card is closed, the holder will get the security deposit back minus any outstanding balance.

Although a secured credit card sounds very similar to a prepaid debit card, the secured card has a monthly bill that needs to be paid.  If you miss the due date, the issuer can charge additional fees, interest, and report the event on your credit report (damaging your credit history).  The security deposit cannot pay the monthly balance and is only in place to protect the bank from paying from their own pocket if the cardholder becomes delinquent in payments.

Who Can Use A Secured Credit Card?

Secured credit cards are intended for people with poor or no credit that typically do not qualify for non-secured credit cards.

The following potential credit cardholders might benefit from a secured credit card:

  • Those who have declared bankruptcy or defaulted on a loan within the previous five years.
  • Currently 30 or days late on a credit card or loan payment.
  • Have little or no credit history.

A secured card is great for somebody that wants to build a credit history without the temptation of high credit limits offered by non-secured cards.  A prepaid debit card does not build a credit history, but a secured credit card will.  The secured credit card has a higher initial expense due to the security deposit, but the ability to establish a credit history can be worth it.

How To Choose A Secured Credit Card

Here are some of the best secured credit cards , although your personal bank probably offers a secured card too.

Here are several factors you will want to consider when applying for a secured card:

  • Annual Fee
    • Most cards require a fee ranging from $25-$35 annually.
  • Security Deposit
    • As the security deposit amount determines the credit limit, certain issuers will permit higher credit limits.
  • Interest & Fees
    • Interest rates & fees for secured cards can vary widely between card issuers. If missing a payment is a large concern of yours, consider cards with a lower APR & fee.
  • Rewards
    • Point & Rewards are normally reserved for non-secured cards, but some issuers will put the security deposit into a “high-yield” savings or CD account. It might not amount to much but anything is better than nothing.

As the primary intent for most who have a secured credit card is to build or repair their credit history, you will want to ensure the prospective issuer reports the payment history to the three credit bureaus: Equifax, Experian, and TransUnion.  When applying for a loan in the future, you do not know what bureau the lender will acquire your credit history from so it’s important to verify this before applying for a card, as each application will pull your credit history and temporarily reduce your credit score.

Also, ask the prospective issuer if they will “flag” the credit card as a secured card.  Flagging your card may prevent the credit history from improving your credit score.

You will also want to apply for the highest credit limit possible.  This might depend largely on how much of a security deposit you can afford, but you do not want to “max out” your card every month.  The same principle applies to non-secured credit cards too, but your goal should be to keep your monthly balance lower than 30% of the total credit limit.  For example, your monthly balance shouldn’t be higher than $300 if you only have a $1,000 credit limit.  Keeping the monthly balance below the 30% mark will help improve your credit score quicker.  Making monthly payments is essential, but this practice helps the process.

How Long To Keep A Secured Credit Card

After getting accepted for a secured credit card, the next question is how long you need to make on-time payments before you can either apply for a non-secured card or a new loan.

Your card issuer will periodically review your file and may offer you the opportunity to upgrade to a non-secured card within one year!  You might also start receiving offers in the mail for non-secured cards from other companies.  Of course, you can always monitor your credit score yourself and ask your issuer to upgrade as well.  If they say yes, you can close your secured account and the issuer will refund the security deposit.

With any application for new credit, do not apply for too many at once.  Each application will penalize your credit score & you might have to wait even longer to get qualified for a loan or non-secured credit card.

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How Do Home Equity Loans Work?

Do you want to remodel or add-on to your house but do not have enough cash in the bank to cover the expenses? The money might already be sitting in your house. By using the equity value of your house, a home equity loan (also known as a second mortgage) can fund these projects. Additionally, you can usually get a lower interest rate with a home equity loan than other types of personal loans.

Home Equity Loans vs Home Equity Lines of Credit

Home equity loans shouldn’t be confused with Home Equity Line of Credit (HELOC). A home equity loan is a loan with a fixed interest rate and fixed term length that allows a homeowner to borrow the value of their home minus the amount still owed. For example, if a house is valued at $200,000 and $125,000 has been paid so far, the homeowner can borrow up to $125,000.

If the house is paid in full, they can borrow up to the total assessed value of the home (in most instances).  Similar to other loans, the borrower will pay back the borrowed principal plus interest accrued.

A home equity line of credit, often called a HELOC, allows the homeowner to borrow the amount of their equity over a more flexible period of time. The homeowner can borrow as much (or little) as they need. A HELOC is a secured revolving line of credit, similar to credit cards, with a variable interest rate. This is more ideal for a person with recurring expenses and an uncertain timeframe of when their project expenses will finish.

Both a home equity loan and HELOC can both be used to remodel, renovate, or add-on to your house, consolidate debt, or pay for other major purchases. However, a home equity loan is a modern equivalent to “betting the farm.” If you default on the loan, the lender can repossess your house to recoup the losses. Missing payments on a home equity loan is a more direct path to “losing the farm” than other types of loans.

Which Is Better?

Choosing between home equity loans and HELOCs can be a somewhat difficult choice. There are just as many options for a “second mortgage” as there was for the original mortgage loan.

Home Equity Loan

Here are the advantages of a Home Equity Loan:

  • Fixed Interest Rate
  • Ideal for a single expense where all money borrowed will be withdrawn within a short timeframe
  • Fixed loan terms such as a 15-year or 30-year term

Home equity loans are best for those that know the exact amount they will be borrowing. It is great if you want to secure an interest and monthly payment, similar to a home mortgage loan.

HELOC

For those that plan on having an ongoing project (like building a weekend home) and will need to borrow a different amount of money each month, a HELOC might be the better option. Here some of the advantages of a HELOC:

  • Better if you will make several “draws” without a defined timeline
  • Minimum monthly payment is normally only on the interest accrued for the month on amount that has been withdrawn already
  • Repayment terms up to 15 years in many instances, but can vary widely bank to bank
  • Ideal for those that need to borrow for multiple reasons

Differences Between a Home Equity Loan and a HELOC

The primary difference between a home equity loan and a HELOC is the type of interest rate. Traditional home equity loans have fixed rates (adjustable rates are also available). HELOCs are variable. While this might not be a big deal, it can make a huge difference if interest rates rise significantly. Each bank charges a different interest rate – the common trend is to charge the Prime Rate plus several percentage points.

Regardless of which loan is more conducive for your situation, either is better than most credit card and personal loans. Those will usually charge significantly higher interest rates.

How To Apply For A Home Equity Loan

Applying for a home equity loan is very similar to the application process for a mortgage. You can begin the process online with a local or national bank, but will probably have to complete some paperwork in person to close the deal.

Here is a step-by-step guide on what to expect during the application process:

1. Choose between a home equity loan or HELOC

Decide which is best for your situation. If you know the total amount you want to borrow and can start repaying immediately, a home equity loan is better. Otherwise, choose a HELOC if you will withdraw over the course of several months or years and are unsure of the final amount you want to borrow.

With either financing option, research the repayment terms as they can differ widely between banks. You don’t want to borrow money but be unable pay it back on time because of a short repayment window.

2. Bring Your Paperwork

Similar to a home mortgage loan, you will need to provide personal financial information. This will likely consist of your most recent tax returns, proof of income and employment, total net worth, and proof of homeowner’s insurance. Most banks are not going to lend to somebody if it doesn’t look like they can make the monthly payments on the home equity loan.

3. Prepare For A Property Appraisal

Depending on several factors including the amount you want to borrow, any previous relationship with the lender, or how recently your house was previously appraised, the bank will most likely hire an appraiser to provide the current market value of your house and property. You will most likely have to pay the appraisal fee which will be several hundred dollars, but this appraisal helps the bank determine how much money they will lend you. As market values constantly fluctuate, you may have more equity than you previously realized!

Factors that will help influence the current market value include the following:

  • Age and physical condition of the house
  • Location and neighborhood
  • Number of bedrooms and bathrooms in the house
  • Total square footage of the house
  • Total acreage of the lot
  • Additional amenities such as a swimming pool, premium countertops, or professional landscaping

The appraiser will most likely take pictures of the house and might even do a walk-through for a more in-depth appraisal. The appraiser will also compare your house to similar houses that have recently been appraised. This ensures that their appraisal is consistent with the current market value.

4. Get Approved!

If you are pleased with the appraisal results and terms of the loan, you can start borrowing money. To spend the money, you might be issued a separate checking account and debit card. This will allow you to pay for expenses directly from the home equity loan or HELOC. Just remember that you will have to pay a monthly payment of some amount. Remember to keep some money aside to avoid any financial pitfalls.  Similar to any loan, the more you borrow the higher your monthly payment.

Summary

A home equity loan or HELOC might be the most affordable financing option for most homeowners that need to borrow a sizable amount of money. While paying with cash that has been diligently saved is always the best way to pay for large expenses, because you do not owe anybody a monthly interest payment, it’s not always achievable. When used responsibly, homeowners can borrow money at a “discount”. They will also still improve the value of their house or consolidate their debt at a lower interest rate.

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Is a Traditional 401(k) or Roth 401(k) Better?

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Since 1978, many large employers offer a 401(k) retirement program allowing their employees to save for retirement with pre-tax income contributions. In 2006, Congress passed legislation that allowed employees to make post-tax contributions with a Roth 401(k) account. While Roth 401(k)s are still relatively new, employers are increasingly offering both retirement savings accounts. Because of the dual offerings, employees are having to make a decision. Should you split your contributions between both types of accounts or only contribute to one account?

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Differences Between A Traditional & Roth 401(k)

Traditional and Roth 401(k) contributions are similar to their Individual Retirement Account (IRA) cousins. You do not pay yearly taxes while the money is in the retirement account. But you do have to pay taxes on the appreciation when the money is withdrawn.

American workers that are currently retired or recently retired only had one option for an employer-sponsored retirement account with tax benefits. That option was the traditional 401(k) where a specified amount of each paycheck was put into an investment account and allowed to grow tax-deferred.

With a traditional 401(k), you do not immediately pay income taxes on the money contributed but the appropriate taxes when the money is withdrawn in retirement. For young employees, that could mean 30 years before they pay taxes on contributions made today.

Roth 401(k)

A Roth 401(k), an employer-sponsored version of a Roth IRA, is funded with post-tax contributions. This means that the worker has income taxes deducted from their income. The employer then puts the contribution money in the Roth 401(k) account after Uncle Sam takes his portion. Since the employee paid taxes on the contribution before it went into the Roth account, he will be able to withdraw it tax-free in retirement.

If an employer makes matching contributions to Roth 401(k) accounts, those are taxed at the time of withdrawal. This is because they are not taxed when the contribution is made. Roth 401(k) contributions cannot be rolled over into a Traditional 401(k) account. With both retirement accounts, all contributions are only taxed once. It just depends on when you want to pay the tax, now or later.

Pre-Tax or Post-Tax Contributions?

There are several factors to consider when deciding which plan will allow you to pay the lowest amount of taxes. Your investments will grow the same whether you choose a traditional or Roth account, but similar to operating fees that mutual funds & ETFs charge, you want to choose the account that will allow you to keep the most of your savings.

Here are several factors to consider:

Future Tax Bracket

Ask yourself, Will I be in a higher or lower tax bracket in retirement than I currently am in?” This can be very hard to accurately estimate, especially for a 21-year old who only graduated a month or two ago. Lives can greatly change in five years, let alone several decades.

Typically, if you plan on being in a higher tax rate at retirement, the Roth 401(k) will be a better option. You pay the lower tax rate today to avoid the higher tax rate tomorrow. Traditional 401(k)s are good for those that will be in a lower tax bracket than their current tax bracket during retirement.

Although retirement expenses can be hard to predict, large withdrawals from a traditional tax-deferred account can place you in a higher tax bracket. This can possibly be high enough that a Roth would have been more advantageous because of the “upgrade.”

Current Financial Needs

Do you need a tax break now or later? The beauty of traditional 401(k)s is that your taxable income is lower for the current tax year. If you anticipate a large tax bill due next April 15th, a traditional 401(k) or traditional IRA contribution is a good way to reduce your tax burden. The short-term benefits of a lower tax burden can be beneficial if you are trying to pay off debt and have a low take-home pay.

Employer Matches

Many employers will match employee 401(k) contributions to a specified dollar amount. They should be able to match contributions to either type of account as all employer contributions have a deferment opportunity. However, they might only contribute to a traditional account because of the additional paperwork burden if they split contributions between both accounts. If they only contribute to one type of account, enroll in this account to maximize the match. If you plan to contribute beyond the employer match, you can put the additional money in either account.

“Taxes Will Only Go Up”

A line that pro-Roth advocates like to mention is that tax rates are more likely to increase than decrease. This is especially notable given the looming federal, state, and local budget deficits. Nobody can predict what the tax brackets will look like in the future. With a traditional 401(k), you take the gamble that withholding percentages will be similar at retirement to what they are now. Future tax rates are more predictable for a 50-year old compared to a 20-year old.

Ask Your Relatives or Friends

Ask people who have recently retired or are near retirement whether they would choose a Traditional or Roth retirement account if they were a young worker. As Roth IRAs and Roth 401(k)s are newcomers to the retirement account scene, they didn’t have the choice (or tax savings potential) that Millennials & Generation X workers have when it comes to retirement savings. They should also be able to tell you what they pay in taxes from their own 401(k) withdrawals.

Split The Contributions

Most employers will allow employees to contribute to both a Traditional & Roth 401(k) account at the same time. Contributing to both accounts is a tax-hedge strategy. If you end up in a lower tax rate at a retirement, you will benefit from the partial Traditional 401(k) contribution. But the bigger payoff might be if you end up retiring in a higher tax rate. Partial Roth contributions will be better than 100% Traditional 401(k) contributions.

How the contributions are allocated can differ for each person. Advice from a financial or tax consultant can greatly help. One can decide to have a 50/50 mix, 80% Roth/20% Traditional, 70% Traditional/30% Roth, etc. Plus, the allocation can be periodically adjusted.

What if I can only contribute to one plan at a time?

If an employer only permits you to contribute to one plan at a time, consider the factors above and your current tax situation. You can always contribute to a Roth 401(k) this year. Then you may decide that a Traditional account is more advantageous the next two years. The important thing is that any saving for retirement is better than nothing at all.

Also, no law or person is prohibiting anybody from investing in a retirement account separate from an employer’s 401(k) plan. You can reduce your contribution levels to the 401(k) and contribute the difference to a Traditional or Roth IRA. There are small differences regarding contribution limits and withdrawal schedules between 401(k)s and IRAs. But this method is an easy way to still take advantage of tax-advantaged retirement accounts.

Opening an IRA at a different brokerage than the 401(k) brokerage also gives you access to more funds.  Some 401(k) plans have a very limited selection of available funds that might have high fees or underperform the broad market. If that is the case, contribute enough to receive the full employer 401(k) match and invest the rest in an IRA.

Who Benefits From A Traditional 401(k)

A traditional 401(k) is best for those that expect to be in a lower tax bracket than their current tax bracket, even after withdrawals. A traditional 401(k) also provides immediate tax relief which can be beneficial for short-term financial needs. But addressing short-term needs can reduce long-term tax savings.

Who Benefits From A Roth 401(k)

The most obvious advantage of a Roth 401(k) is that the tax bill is paid upfront. For young people, this can be very beneficial. They generally make less than their older superiors and their contributions have 30+ years to appreciate in value. As investing advocates usually talk about the magic of compound interest, chances are that contribution will be larger than it’s initial size.

This means the tax rate will probably be higher. Besides 20-year-olds, even workers in their 40s and 50s can benefit from post-tax contributions. If nothing else, Roth gives people peace of mind. They do not need to set aside a portion of each withdrawal to pay taxes (minus employer contributions).

Closing Thoughts

The important thing to remember is that it is important to save for retirement regardless of the account type. Contributions to either type of 401(k) mean that you will pay fewer taxes than if the money was in a normal, taxable investment account. Plus, you can start investing with as little 1%!

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What Is The Best College Savings Option For My Child?

With the average 2017 college graduate having $39,000+ in student loans and the cost of college steadily increasing, parents cannot begin saving too soon for the college education of their children. As tuition costs continue to increase faster than inflation, simply saving for college with traditional savings accounts isn’t the best college savings option for many families. Instead, parents should consider a tax-advantage account that will increase in value simultaneously. Plus, the student or parent will (hopefully) not have a mountain of debt once they receive their diploma.

Below are a couple of different options to save for college. One or more options might be applicable to your situation.

529 College Savings Option

When the phrase “college savings option” is mentioned, the numbers 5-2-9 are probably the first thought to pop into many parents’ heads when planning for college. These savings accounts were first created in 1996. They allow parents to help their children squirrel away money for college without a tax bill.

529 accounts are funded with contributions. The earnings grow tax-free if the withdrawals are used for qualified college expenses such as tuition and fees, books, room and board, or other fees required to attend college. When applying for financial aid, the 529 plans are considered a parent’s asset. They will not penalize the child and their financial needs.

Investment Strategies With an 529 Fund

529 funds offer several different investments strategies. One option can be in individual investment funds. The other is investing with an age-based strategy that gradually shifts from more aggressive to more conservative investments as the withdrawal date approaches. The age-based investment strategy allows contributions to invest in riskier options when the child is still a newborn.

They have a better probability of producing higher yields than funds recommended for an 18-year-old high school senior that cannot afford for the savings plan to sharply drop in value two weeks before tuition is due. In other words, the parents of a 10-year old shouldn’t invest in an age-based portfolio intended for a toddler. The additional risk is not worth the potential reward.

How Much Do 529 College Plans Cost?

Most 529 plans do not charge any type of setup or maintenance fee but this can vary. As the contributions are invested in mutual funds, there might be a small operating fee to cover the trading and administrative functions. These same fees are charged to mutual funds also held in taxable brokerage accounts, 401Ks, and IRAs.

There are a couple different variations of 529 plans available. Most states offer their own college savings option. However, sometimes residents can join other state’s plans, even if their child will not attend a college in that state. For example, a Tennessee resident can invest in the Alaska 529 plan even if the child attends a college in Texas. If you are not pleased with the investment offerings or fees of your local state (or your state doesn’t offer a 529 plan), this is something to keep in mind. Just be sure that this is an option.

Some states also offer prepaid tuition plans. These plans are more restricting regarding eligibility and redemption rules. This is a good option if you are certain your child will be attending an in-state school. As nobody predicts college tuition to cease increasing significantly year-over-year, this is a good plan to consider. You can prepay $5,000 today for what might cost $10,000 in the future when your child finally attends college.

What If My Child Doesn’t Go To College?

The largest fear among parents with 529 plans is that their child does not attend college. It’s essentially like buying a car for their 16th birthday and they do not have a driver’s license. Thankfully, many 529 plans allow parents to transfer funds to other beneficiaries that will be attending college.

Unlike IRAs or 401Ks that have mandatory withdrawal dates, 529s can remain untouched for several years in case the child returns to college in the future. If college is nowhere on the radar, funds can also be withdrawn for a penalty. The penalties and transfer policies differ among the plans, so it pays to research the fine print.

Coverdell Education Savings Accounts

Originally called an Education IRA due to their investment flexibility, these savings accounts work similar to 529 savings plans but have stricter contribution limits and custodian rules. Education savings accounts are self-directed (unlike a 529 or 401k). This means the parent can invest in whatever stock or mutual fund they want to, not just the 13 or so choices that a state 529 or employer 401k plan offer.

Annual contributions are capped to $2,000 per child if parents make below $95,000 to $110,000 for single taxpayers and $190,000 to $220,000 for married taxpayers (similar to IRA contribution limits). Coverdell accounts are also federal tax-exempt. However, they are more subject to state income taxes than 529s.

These savings accounts (like 529s) also count the funds as the parents’ asset instead of the student’s asset, which can help with during the financial aid process. These types of savings accounts can also be used for K-12 education expenses, which can be helpful if the additional funds will not be needed for college.

A parent can withdraw funds that are not put to use for educational purposes for a penalty. Most plans also allow funds to “rollover” into a 529 account. Whether the child attends college or not, all contributions are irrevocable and belong to the child when they reach adulthood.

UGMA and UGTA Custodial Accounts

These two accounts are probably the worst option for dedicated savings accounts. They have the fewest tax deductions and the money belongs to the child when they reach the age of 18 or 21 (depending on when the plan determines the custodian account to terminate). They can spend the money for college or for anything else.

These accounts also consider all assets to be for the child. This can negatively impact applying and qualifying for additional financial aid when completing the FAFSA. One positive is that non-education withdrawals are not subject to the same penalties as 529 or Coverdell education savings accounts.

Roth IRA

Many people think that Roth IRAs are a tax-advantaged way to save for retirement. They are. But, one of the loopholes is the ability to withdraw contributions tax- and penalty-free for qualified educational expenses. The Roth IRA should have a history of at least five years. Additionally, the contribution limits are contingent to annual taxable income when funding the IRA.

You probably won’t be able to cover all the college expenses. However, this can also be a good hedge in case a child does not attend college. The funds can still be used for the original intent of being saved in a tax-advantaged retirement account. This unconventional “savings account” is a good secondary option to supplement a 529 or Coverdell account. It can also be a way for parents to contribute if their child is ready to attend college and participate in a college savings option.

Another “perk” saving with a ROTH IRA is that it is a better option because of tax savings and more lenient contribution limits. A ROTH IRA is self-directed. This allows parents to invest in stocks and funds that can pay higher yields than the options offered by a state 529 plan.

college savings option

Upromise

A final recommendation is also teaming up with Upromise that offers free college savings options and cash rewards for purchases through the Upromise shopping portal. These can be deposited into a Upromise GoalSaver savings account or 529 plan. The GoalSaver savings plan has a 10% match on all cash back rewards earned through the Upromise shopping portal (Upromise Rewards Account).

To qualify for the 10% bonus, the parent must maintain a minimum balance of $5,000. In addition to the match, Upromise also pays an annual $10 anniversary bonus. Additionally, they pay a $100 bonus on the third anniversary if the minimum deposit is maintained.

What College Savings Option Is The Best?

Every family will have different financial needs when it comes time to paying for college. The best and easiest college savings option is the 529 accounts because of the high contribution limits and the tax breaks. If a family has multiple children, it is likely that at least one child will attend college. Those funds can still be set up for use.

Just as investors recommend diversification, it’s not a bad idea to invest in two or three of the accounts mentioned above. Parents should definitely consider putting a certain portion of savings into a ROTH IRA that allows parents to self-direct investments. It is similar to a Coverdell account. However, the money is still the parents’ if the child does not go to college.

Signing up for a Upromise account is a good college savings option as well. It pays better than a traditional savings account. It has protections from stock market swings. Plus parents can earn Upromise rewards.

No matter how you save for college, it is never too early to start. Just like retirement, it pays to “save early and save often” as it will arrive sooner rather than later. Consider a college savings option to help.

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Can I Sell My House For Sale By Owner?

Are you looking to sell your own house in order to keep more of the profit? While it is rather uncommon, only 8% of homes sold in 2017 were “for sale by owner,” without a realtor. For Sale By Owner (FSBO) normally isn’t easier than enlisting an agent, but enough people do it every year to show that it can be done successfully.

for-sale-sign-1445308-639x426

For Sale By Owner vs Using A Realtor

There are differing opinions on whether it is better to list your house FSBO (For Sale By Owner) or to use a real estate agent.  With any decision in life, there are tradeoffs with either option.

Reasons To Sell For Sale By Owner

  • Pay No or Little Commission

    • By listing with a realtor, the seller typically pays 6% of the selling price which is split between the buying and selling agents and brokers. Ideally, an FSBO home will be purchased without the assistance of a buying agent.  But, this isn’t always the case & the buying agent will be looking for a cut.
    • Here is an FSBO calculator, to compare how much more money you can make by selling your house yourself.
  • Easier To Advertise With  The Internet

    • The internet has made it easier for DIYers to sell just about anything, including houses. Not only can owners list their houses on FSBO internet websites, but also on major sites like Trulia and Zillow can be helpful. You will have to pay a listing fee at most sites, but it can still be cheaper in the long run than hiring an agent. Of course, you can always advertise for free on Craigslist or the old-fashioned route with the classic “For Sale By Owner” sign in the front yard.
  • A Great Option For House-Flippers

    • Sellers that might make a living or a respectable side income from buying fixer-uppers and selling for a profit might be natural fits for FSBO. It helps to increase the profit of each house. Having a background in real estate can help make the negotiation and closing process easier than inexperienced FSBO sellers.
  • Already Have A Buyer Lined Up

    • Statistics show that FSBO homes tend to sell quicker than agency-listed homes on average because the seller already has a buyer in mind. If that is the case, forgo the “middle man” and save some money.

Reasons Not To Sell For Sale By Owner

  • Homes Sold By an Agent Typically Sell For More Money

    • It’s often said that real estate agents and brokers can more accurately price a house and can negotiate a higher price because of their experience. After all, negotiating with buyers and sellers on a daily basis is their profession.
    • According to the 2017 annual report from the National Association of Realtors, the typical FSBO home sold for $190,000 while the average realtor-listed home sold for $250,000.
      • Note that statistic is a huge difference and needs to be taken with a grain of salt. The average FSBO probably won’t sell at a 16% discount to avoid realtor fees. Home prices vary from region to region and owners of high-end homes most likely will not go through the process of selling their own home. The tradeoff of the additional work required for a sale by owner house isn’t worth the potential lost income or time by having to advertise, show, and close the sale.
  • FSBO Is Hard Work

    • Selling your own house is a lot of work and can be time-consuming. You are the person needing to advertise, answer all the phone calls from prospective buyers, need to be present to show the house, and also complete most of the paperwork when the house sells. This is everything a real estate agent handles, allowing the seller to continue their normal daily activities as much as possible.
  • Paperwork Can Be Confusing

    • Potentially the hardest part of any home sale, for buyers and sellers, is understanding and completing all the paperwork involved with a home sale. The paperwork and mortgage application process can be stressful. This is true even if real estate agents assist both parties. For people who work with it on a daily basis, it is just another day at the office. Some states also require all home sales to be completed by a real estate attorney. Even if there aren’t any agents involved in the sale, sellers may have to pay a fee if they live in a state with this requirement.

For Sale By Owner Statistics

Here are a couple statistics gathered in the 2017 annual report from the National Association of Realtors regarding the average profile of a for sale by owner seller.

  • The median age of FSBO sellers was 55 years of age.
  • The average FSBO house was only listed for two weeks before selling.
  • 68% of FSBO sellers reported they were satisfied with the selling process.

For reasons listed above, certain people have more concrete reasons to sell their house without an agent.  They have prior experience with selling a house, already have a buyer lined up, or are looking for a quick sale without giving any equity to a selling or buying agent. The report doesn’t provide the reasons why FSBO sellers were happy with the process. A 68% satisfaction rating means that almost 3/4 would consider listing their next house for sale by owner again.

How To Sell A House By Owner

There are certain actions a FSBO seller needs to take that a real estate agent normally takes care of when they list a house.

Here is a quick checklist to help you prepare for a sale:

Make The House Immaculate

The first item of business, agent or no agent, is to make your house look like something from the “Parade of Homes.” Have a trusted friend or family member do a walkthrough to identify any potential spots that might need upgraded or repaired. The house will also need to be neat and clean. This isn’t the 2005 or 2006 housing boom when houses were selling at record pace. A dirty house means disinterested buyers and potentially lower prices.

Take Quality Photos

Agents and brokers might hire a professional to take quality photographs to help make the house look more inviting to potential buyers. Take pictures of every room with plenty of light and show special features of your home. Research tutorials to help with this process.

Price Competitively and List on MLS

Accurately pricing your house might be difficult and you might have to ask a realtor to help with this part of the process. You will need to find the market value and compare the recent sales prices of similar homes.

Once the house has a price, list it on MLS (Multiple Listing Service). It is the go-to listing platform for realtors and potential buyers. You should also consider listing on the local Craigslist board, FSBO.com, and place physical signs in your yard and in high-traffic areas nearby. A flat-fee listing on the MLS currently goes for $299.00.

Research The Paperwork Process

You never know how soon your house will sell. You should be familiar with the paperwork process that comes with selling your house. As you show the house to potential buyers, they may ask you questions. You can seek advice from a real estate agent or attorney, if unfamiliar with the process. Or you can always hire an expert to complete this part of the sale. You should still save plenty of money, even if you have to hire somebody.

Summary

For Sale By Owner is a possibility if you do not mind working a little harder to make the sale. It is similar to deciding to sell a used vehicle or accept the trade-in value of a car.

With a car trade-in, you know you will get the reduced sale price but it is less hassle. There are more opportunities to earn money by selling a car yourself, but it also requires more work and time. Selling a house is more complex than selling a car in several aspects, but the concept is similar. If you are willing to sell your own car, then selling your own house might not be such a daunting task.

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How To Earn Money With Cashback Shopping Portals

roth 401(k) cashback shopping portals

roth 401(k) cashback shopping portals

Who doesn’t want to save money and get cash back on internet purchases? Everybody knows about discount codes that can be entered to get free shipping or a lower subtotal amount. With cashback shopping portals, you can receive these discounts and receive an additional cash back rebate when you shop through a third-party website.

How Do Cashback Shopping Portals Work?

Cashback shopping portals are the 21st-Century version of mail-in rebates, except shoppers must take the additional step before making a purchase instead of after to get cash back. Portals are also similar to rewards credit cards. Cardholders earn additional cash or travel rewards when they make a purchases with certain merchants.

The one main difference is that cashback shopping portals are a “middle man” between the shopper and the merchant. Shoppers need to use a portal to earn additional money. Otherwise, they only receive the discount that retailers are offering to the general public (assuming they have a discount). Portal users might pay the same price for an item at checkout as a non-portal user, but they will see the additional savings later.

How To Use A Cashback Shopping Portal

Cashback shopping portals make agreements with online retailers to pay customers with cash rewards when they make a purchase using the portal. To receive the reward, an online shopper must first visit the website of the portal (i.e. Ebates, Swagbucks, etc.) and choose the online store they want to shop at. The portal will open a shopping session and redirect the shopper to the store’s website.

Any purchases made during this session will be awarded the advertised cash reward that the store has agreed to pay.

Reward Payouts

Regarding reward payouts, every portal is different. There are several cashback shopping portals that you can choose to shop with. Some portals offer higher payout rates for a particular store than another portal. For instance, Portal A rewards 5% @ JC Penney, but Portal B only rewards 3%. It’s not uncommon for avid cashback shopping portal users to “reward shop” to use the portal that will give them the most cashback for a purchase.

When it comes time to actually getting the rewards into your bank account, portals also pay on different schedules. The one downside to portals is that most do not offer immediate access to cash rewards. It can take up to a month for some merchants to reimburse the reward to the portal.

Portal payouts are typically on a quarterly basis (i.e. rewards earned January-March are paid on May 15th). Also, portals usually require a minimum reward balance of at least $5. Some portals will pay rewards via PayPal on a more frequent basis (i.e. weekly or monthly) once you earn the minimum balance amount. Shoppers preferring check payments have to wait for the next quarterly disbursement.

Real-Life Example

Let’s use a real-life scenario to help make the cashback shopping portal process easier to understand:

  1. Jane wants to buy a new outfit from JC Penney.
  2. She visits her favorite cashback shopping portal and sees they are offering a 5% cashback reward on all items purchased.
  3. Jane clicks the “Shop Now” button and the portal takes her to the JC Penney homepage.
  4. After adding the new outfit, Jane completes the checkout process.
  5. Within 24-48 hours (for most merchants), Jane receives an e-mail from the cashback shopping portal saying she was rewarded $3 from the shopping session!

“Fine Print” About Earning Rewards

There are some tips that portal shoppers need to know about to make sure their purchases qualify for rewards.  It can be easy to make a mistake and not get credit.

1. Must Checkout Through the Portal Session

If Jane had gone directly to JC Penney’s website or a brick-and-mortar store instead of visiting the portal first, she would not have earned the 5% reward. By shopping through the portal, she still had to pay the same upfront price for the outfit as any other internet shopper, but will receive additional savings that retailers do not advertise to the average shopper.

2. Open New Session If You Do Not Checkout On Original Session

Also if Jane started the shopping session with a portal and added an item to her cart but doesn’t complete the checkout process with that same browser window, she may not earn reward credit. To earn credit, she will have to visit the retailer using the portal and check out with a new session.

If she checks out by going directly to the JC Penney website, she will not earn the reward, even though she put the item in her cart during a portal shopping session. It can be easy to forget to open a new session if you wanted to wait a day or two just to make sure you didn’t want to purchase any additional items.

3. Retailers Do Not Remember Previous Portal Cashback Purchases

Just because you made an online purchase with a cashback shopping portal at a store before doesn’t mean you will automatically receive rewards for future purchases. Retailers provide rewards as an incentive to attract shoppers, but will only reward those who go the extra mile. If you want to save money on each purchase, you need to use the portal every time.

4. Portal Shopping Sessions Have A Different Web Address

The reason why portal shopping sessions have a different web address is because of an affiliate code. This lets the merchant know that you are shopping with a portal and qualify for additional cashback.
Here is how to tell if you are in a portal shopping session by looking at your web address if you shop at JC Penney:

Web Address Without Portal

The above image is what your browser’s web address bar looks when you visit JC Penney without using a portal.  The below image is visit JC Penney with a portal.

Web Address With PortalNotice how one address is shorter than the other? The additional characters are what tell the merchant that any purchase made while this browser session is open is eligible for cashback rewards. This is an easy way to remember if you activated a shopping session or accidentally went directly to the store.

What Stores Award Portal Rewards?

The largest cashback shopping portals offer rewards at over 2,000 online stores. Most major retailers participate in the program. You can earn rewards in just about every category including gift cards, home improvement stores, clothing, and travel.

Certain stores have exclusions or tiered reward payouts. Most major retailers will not offer rewards on gift cards, although you can earn rewards by buying the same cards through gift card merchants.

Cashback Shopping Portals To Consider

If you are new to the cashback shopping portal scene, below is a list of four of the most popular portals.  There are plenty more available on the internet. Some stores like Walmart even have a cashback shopping portal of their own.

  • Ebates – This is the original and the largest cashback shopping portal. For additional rewards, you can also sign-up for the Ebates Cashback Credit Card that rewards an additional 3% on all purchases made through Ebates.
  • Giving Assistant – Giving Assistant is a portal with a social mission. For every purchase made using GA, they will donate a meal to the charity Feeding America. As of this post, they have donated 600,000+ meals.
  • Ibotta – If you like to save money at the supermarket, this is the portal for you. While most portals are online only, you earn rewards with Ibotta by sending a receipt of your purchase at one of the 189 participating stores to earn rewards. Despite making a purchases in-person, you need to “unlock rewards” on the Ibotta website prior to making a purchase.
  • Swagbucks – With Swagbucks, you earn gift cards instead of cash. Rewards can also be earned by taking surveys, playing games, and surfing the web. Swagbucks is popular because you can earn shopping portal rewards, but can also earn rewards without having to spend money.