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What Is a Personal Check — and Is It Still Useful?

A personal check is a slip of paper that is linked to your checking account. On the check, you write an amount of money and the name of a recipient who will receive that money. The check is a promise that the money will be there when the recipient redeems it, whether hours, days or weeks later. Checks are like slow-motion debit cards, which is why they can seem out of date.

That doesn’t mean you should chuck your checkbook into the trash can. You might need to write a check occasionally, and doing so has its pros and cons.

Are personal checks useful?

They certainly can be, because some transactions still require checks. For instance, landlords may insist that tenants pay rent with checks, and some small businesses don’t accept credit or debit cards. If you prefer to stay disciplined with your spending, checks or cash can also be a better choice than plastic.

» MORE: How to write a check

Pros of personal checks

You avoid convenience fees. Some businesses, including many property managers, charge convenience fees for electronic payments. Payments via paper check are usually free.

They have old-school security. If your wallet or purse is lost or stolen, you can kiss your cash goodbye. But banks and merchants still require a signature on every check, and cashiers are typically required to check customers’ IDs to verify that signatures are legitimate.

It’s an offline option. According to the Pew Research Center, 13% of all U.S. adults don’t use the internet. Paying bills with a check is much easier for these consumers than paying in person with cash.

Cons of personal checks

Checks cost money. Paying with a check can help you avoid convenience fees, but you usually have to pay for your actual checks, and you’ll definitely have to shell out a few bucks each month for envelopes and stamps if you use checks to pay bills by mail. Try finding a checking account that offers a free first box of checks, which some of the best checking accounts do. Processing takes longer. Cash, credit, debit or smartphone transactions process fairly quickly. And you can check your accounts immediately after the purchase to know how much you have left to spend. But check payments aren’t posted to your account until the recipient cashes the check. If you forget to log a payment or miscalculate your remaining balance, you could overdraw your account.

Writing them is inefficient. Imagine you and a friend simultaneously enter separate checkout lines at the store. Hers is for customers paying with cash and yours is for those with checks. Chances are good your friend will be waiting in the car for awhile before you finish writing your check.

Checks can be convenient

If your checking account offers free checks, you might as well order a batch. And even if it doesn’t, it might be handy to have some available, but don’t overpay for them. That may mean ordering them from somewhere other than your bank or credit union.

Tony Armstrong is a staff writer at NerdWallet, a personal finance website. Email: tony@nerdwallet.com. Twitter: @tonystrongarm.

Updated March 23, 2017.

Cutting Through Credit Score Confusion After Experian Fine

Consumers have more access to their credit scores than ever, allowing them to make informed financial decisions. But these scores can be confusing because there’s no guarantee the score a consumer looks at is the same one a lender will use.

Experian today became the latest of the three major credit reporting agencies to be fined for misrepresenting the scores it offered to consumers.

Here’s what consumers need to know about the many credit scores out there, and when and how to use them.

Credit bureaus penalized

The Consumer Financial Protection Bureau fined Experian $3 million, saying the credit bureau:

  • Led customers to believe its proprietary PLUS scores were the same ones used by lenders to make decisions, in violation of an agency regulation
  • Required customers to view ads for Experian before they could see their federally mandated free credit reports, violating the Fair Credit Reporting Act

TransUnion and Equifax, the other two major credit reporting agencies, were fined earlier this year for similar violations, and ordered to issue refunds to consumers as well. In a statement, Experian said it does not believe it violated the law.

What to know about credit scores and reports

Consumers have a right to a free copy of their credit reports — a roster of all credit-related activity — from each of the three major credit reporting agencies once every 12 months. They’re easiest to access through annualcreditreport.com.

Credit scores, on the other hand, are a number that estimates how likely a consumer is to repay borrowed money. They are calculated from information in credit reports. That’s why consumers should check their free reports periodically for errors that might affect their scores.

While consumers aren’t granted by law the right to see their credit scores, as they are for credit reports, free scores are available from dozens of sources. However, most free scores are proprietary, as Experian’s were, or they are from VantageScore, the main competitor to the older, better-known FICO score. About 90% of the scores used in credit decisions are FICO scores, FICO says.

How to use scores

Free scores are much less likely to be used in lending decisions, but they’re an easy way for consumers to monitor their finances and check progress as they work on improving credit health. Better credit means a better chance of getting loan or credit card approvals, and better interest rates.

VantageScore and FICO calculate scores on many of the same factors. If a consumer has a high score on one, he or she is likely to have a high score on the other. Here’s what builds good credit scores:

  • Pay bills on time, every time
  • Keep balances on credit cards well below credit limits (no more than 30%, and lower is better)
  • Apply for credit only when needed
  • Have more than one kind of credit (for example, credit cards and loans with defined payments)
  • Keep accounts open; the age of credit accounts can help boost a score

However, before a big financial decision, such as applying for a mortgage or a car loan, it makes sense to get the scores that will be used in the lending decision. That usually means FICO.

National Consumer Law Center staff attorney Chi Chi Wu says many consumers can now get a free FICO score through the FICO Open Access program from participating credit card companies, other lenders or nonprofit credit counselors: “While there is no one credit score, a FICO score from the Open Access program is actually a score that is probably being used by lenders.”

Bev O’Shea is a staff writer at NerdWallet, a personal finance website. Email: boshea@nerdwallet.com. Twitter: @BeverlyOShea.

Retirement Savings Tax Credit

MoneyTips

Contributing to a retirement account can be difficult for lower income households, but one can argue that it is even more important for those families to take advantage of all the retirement savings options that are possible. One of the lesser-known options applies directly to lower-income families – the retirement savings tax credit. Note that this program is a tax credit and not a deduction, meaning that the amount you qualify for is subtracted directly from the taxes that you owe. The credit applies to most retirement plans – 401(k)s, IRAs (both Roth and Traditional), 403(b)s, 457(b)s, SIMPLE IRAs, SARSEPs, and other plans. It does not apply to rollover contributions, and any recent distributions that you received from these plans can reduce the amount of your credit. A tax credit of up to $1,000 is possible on $2,000 in contributions (or $2,000 credit on $4,000 in contributions if married filing jointly). Even better, for traditional 401(k) and IRA plans, you can also claim the deduction for contributing as well as receiving the tax credit – so you benefit on your tax form both above and below the line. (For Roth IRAs, you can only receive the credit, but not a tax deduction since Roth IRAs use after-tax dollars). The credit is scaled by income, and eligibility is capped by limits on Adjusted Gross Income (AGI). For tax year 2016, those limits are $61,500 for married filing jointly, $46,125 for head of household, and $30,750 for all other filers. You can claim a full 50% of the contribution if your income is under $37,000 for married filing jointly, $27,750 as the head of your household, and $18,500 for all other filers. The next tier is 20% of your contributions at these ranges: $37,001 to $40,000 for married filing jointly, $27,751 to $30,000 as the head of household, and $18,501 to $20,000 for single filers. You can receive a tax credit equal to 10% of your contributions at the following income ranges: $40,001 to $62,000 for married filing jointly, $30,001 to $46,500 as the head of household, and $20,001 to $31,000 for single filers. This tax credit is non-refundable, so if other credits have already wiped out your tax liability, you will not be able to claim this credit. To qualify, you also need to be at least age 18 and not a full-time student or claimed as a dependent on someone else's tax return. You are considered a full-time student if you were enrolled as such during part of any five calendar months (effectively a semester). Mechanical, technical and trade schools are all included within that definition, but on-the-job training and correspondence or Internet-only schools do not. Make sure that your contribution takes place in the correct tax period. For IRAs and plans not associated with the workplace, you have up until the filing deadline for a particular tax year to make the contributions (in other words, you can contribute until April 2017 and count it on your 2016 taxes). For 401(k)s and other workplace plans, contributions generally need to take place within that calendar year. For further details on qualifications, see IRS Form 8880, "Credit For Qualified Retirement Savings Contributions". The instructions walk you through the figuring of the credit and the credit limit worksheet, as well as all of the qualifications and limitations. A 2016 study from the Transamerica Center for Retirement Studies noted that only one in three Americans were aware of this tax credit. Sadly, these include workers with incomes below $61,500, the people who are most likely to qualify for and claim this credit. If you are in this lower-income range, it is even more important that you check out all of your options for tax credits – not only the retirement savings credit, but also any others that apply to your situation. However, because of the triple benefits of tax credits, deductions from taxable income in most cases, and an increase in your tax-deferred retirement accounts, the Retirement Savings Tax Credit should be on the top of your list. Let the free MoneyTips Retirement Planner help you calculate when you can retire without jeopardizing your lifestyle. Calculate your tax bracket. Photo ©iStockphoto.com/skynesher

Originally Posted at: https://www.moneytips.com/retirement-savings-tax-credit

Taking your first minimum IRA distribution

Traditional vs. Roth IRAs and 401(k)s

SIMPLE IRAs 101

Retirement Savings Tax Credit

MoneyTips

Contributing to a retirement account can be difficult for lower income households, but one can argue that it is even more important for those families to take advantage of all the retirement savings options that are possible. One of the lesser-known options applies directly to lower-income families – the retirement savings tax credit. Note that this program is a tax credit and not a deduction, meaning that the amount you qualify for is subtracted directly from the taxes that you owe. The credit applies to most retirement plans – 401(k)s, IRAs (both Roth and Traditional), 403(b)s, 457(b)s, SIMPLE IRAs, SARSEPs, and other plans. It does not apply to rollover contributions, and any recent distributions that you received from these plans can reduce the amount of your credit. A tax credit of up to $1,000 is possible on $2,0...

Eat Out Without Biting Into Your Budget

If you’re on a budget, money-saving advice tends to prescribe bagged lunches and dinners at home. But you don’t have to resign to a world of soggy peanut butter and jelly just because you want to save money.

Here are some ways to eat out at your favorite restaurant for less.

Buy gift cards below face value

You’ll get more food for your buck when you buy restaurant gift cards at less than face value. Restaurant.com, for instance, is a website that sells certificates for a fraction of their worth. You may be able to score a $25 certificate to your favorite Chinese place for just $10 (minimum purchases could apply). Warehouse store Costco, too, sells bundles of gift cards for less than they’re worth.

Ask for a discount

You could be eligible for a cheaper meal simply based on who you are. Children, seniors, students and members of the military are some of the most common candidates for discounts. Research a restaurant’s discounts online or inquire before your server brings the bill. It doesn’t cost anything to ask.

Join the club

Pesky marketers aren’t the only ones who want your email address nowadays. Many restaurants have mailing lists that they use to distribute news and promotions to customers. Sign up to stay in-the-know. You’ll usually get a special offer just for making an account and another the month of your birthday. But if you find the emails are tempting you to eat out more, hit “unsubscribe.”

Make wise menu choices

When you eat at a sit-down joint, you’ll be expected to tip the server in addition to paying your tab, so keep that in mind when making menu selections and calculating your total payment. To offset the cost, look for more affordable dishes (try ones with fruits and veggies that are in season) or opt for a smaller portion size if it’s available.

As for drinks, water is usually free, whereas soft drinks and alcoholic beverages can quickly add up. If you prefer a glass of wine with your meal, call ahead and ask the restaurant about corkage fees. Even with this fee, it may be more affordable for you to bring your own bottle than to buy one there.

» MORE: 12 ways to save on groceries

Dine on national days

From National Ice Cream Day to National Chicken Wing Day, there’s a day of observance for just about any food you can name. Plan your meals around these offers to take advantage of free appetizers, entrees or desserts. Stay tuned to social media for promotional details.

Take a survey

Restaurants like to hear about your experience at their establishment, so if they ask you to complete a survey, take them up on the offer. You’ll sometimes be rewarded with freebies or coupons for doing so. Similarly, SurveyMini is a free app that unlocks discounts when you complete questionnaires about restaurants.

Leave room in your budget

If dinners out at your favorite diner are an important family tradition, you still might be able to make room for a handful of restaurant meals in your monthly budget — even if it isn’t a necessity, and even if you can’t get a deal. For easy ways to incorporate needs and wants into your spending plan, see our advice on how to budget for both.

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

Mortgage Rates Thursday, March 23: Slight Drop; Existing-Home Sales Slow

Mortgage rates today for 30- and 15-year fixed loans and 5/1 ARMs all fell by one basis point, according to a NerdWallet survey of current mortgage rates published by national lenders on Thursday morning.

MORTGAGE RATES TODAY, THURSDAY, MARCH 23:

(Change from 3/22) 30-year fixed: 4.33% APR (-0.01) 15-year fixed: 3.67% APR (-0.01) 5/1 ARM: 3.87% APR (-0.01)

Get personalized mortgage rates

 

NAR: Existing-home sales falter in February

Existing-home sales slowed in February, tapping the brakes on the brisk pace of sales seen at the beginning of the year, according to the National Association of Realtors.

While existing-home sales dipped 3.7%, to a rate of 5.48 million in February from 5.69 million in January, the pace of sales is still 5.4% higher than February 2016, NAR reported.

» MORE: How much home can you afford?

Tight inventory and fewer affordable home choices helped drive down sales, Lawrence Yun, NAR chief economist, said in a news release.

“Newly listed properties are being snatched up quickly so far this year and leaving behind minimal choices for buyers trying to reach the market,” Yun said. “A growing share of homeowners in NAR’s first-quarter HOME survey said now is a good time to sell, but until an increase in listings actually occurs, home prices will continue to move hastily.”

In fact, the median price for existing homes rose in February to $228,400, an increase of 7.7% from $212,100 in February 2016. It’s the fastest price increase since January 2016 (8.1%), NAR reported.

Homeowners looking to lower their mortgage rate can shop for refinance lenders here.

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.

Deborah Kearns is a staff writer at NerdWallet, a personal finance website. Email: dkearns@nerdwallet.com. Twitter: @debbie_kearns.

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