Monday, January 26, 2015

Credit card declined? – It could be one of these 8 reasons

if you have entered a wrong credit verification value (CVV) or a wrong code for 3D secure password, the transaction will be declined. (Reuters)
Our life revolves around money. These days it is simplified to carrying a debit or credit card. While it makes our life simpler, many a times it can be a bummer, especially when you are in a store in front of people and trying to make a payment and the swipe gets declined.
With our increasing dependency on credit and debit cards, we have grown used to not carrying cash around. We have also realised the importance of credit cards over cash. But, when you are out there throwing a dinner party to your friends and try to make a credit card payment and if the transaction gets declined, it can be an embarrassment.
There are many reasons why a credit card swipe can be declined. We have listed the top eight reasons for such a refusal of payment:
1. Credit Limit: Oh yes! This is the most common reason and all credit card users sure know this one. We have a fixed credit card limit (the maximum amount you can spend on your card preset by the issuer during the issuance), which if we cross or are very close to crossing could cause decline of payment. Keep a track on your spending and keep in mind your credit limit to prevent such a situation.
2. Uncommon purchase: You have only used your credit cards to make bill payments online and suddenly you swipe to buy an expensive jewelry of Rs 50,000, this transaction will be rejected even if you have enough credit limit. The reason why such a purchase can be declined is because your credit card company thinks that it is unusual for you to do such a purchase. Some transactions like buying gold; electronics and cash withdrawals will be declined if your credit is constantly used for smaller value swipes.
3. Invalid card: If you are using an add-on card that gets declined, it is possible that the primary cardholder has either reached the maximum account limit or has closed the account.
4. Change in terms and conditions: Do you have multiple credit cards from the same bank? If you default payment on one of those cards, it is possible that bank has blocked the other cards. In such an instance your swipe will be declined. Even if you have multiple cards from different lenders, banks randomly pull your Cibil credit score to take a relook at the creditworthiness . If the bank feels it has to lower your limit, it will give you a notice and do so.
5. Unknown location: If you live in India and if there is a credit card swipe in, let’s say, Russia. This transaction will be declined, because historically, all your swipes have been in India, the lender will assume it is fraudulent transaction. So if you are travelling abroad, it is a wise step to call your credit card company and inform them about your scheduled trip.
6. Unusual currency: If you have always made bought in rupees and suddenly if you use your card to buy a ticket online in dollars that too with a heavy amount, this transaction is bound to be declined. Call your credit card company and give them a heads up before making such a purchase.
7. Technological reasons: These days, most of the new credit cards that are being issued come with an inbuilt chip. Now, to clear such a transaction, you need to key in a PIN number. Sometimes the merchant may be using a point of sales (PoS) machine that is out dated or if you have forgotten your PIN number or if your credit card is new and if you have not yet registered your PIN number, the transaction could be declined.
8. Wrong data: If you have entered a wrong billing address while buying a product online, or if you have entered a wrong credit verification value (CVV) or a wrong code for 3D secure password, the transaction will be declined.
So, if you ever face a situation where your card transaction is declined, it is advisable to call your bank and check with them for the cause. In most cases, unless it’s a fraudulent issue, the problems will be resolved on the phone. Also, make sure you do not swipe the card again if it is declined. After three continuous declines, the bank may block it suspecting fraud. Keep your phone number updated with your credit card issuing bank, as the bank will alert you every time there is a swipe. Lastly, save the customer care number of your bank on your phone so that, when you are in hurry to call them, you don’t run from pillar to post.


Thursday, January 22, 2015

Should You Apply for a Credit Card in 2015?

Should You Apply for a Credit Card in 2015?
Image via iStock.

New year, new credit card? Before you apply for a credit card to go along with a new year full of possibilities, read on to find out why you should or shouldn’t get a new credit card in 2015.

 I don’t have a credit card — why should I get one in the new year? 

Responsibly using a credit card is one of the easiest ways to build credit. A good credit score can help you obtain credit at reasonable rates, which will come in handy if you choose to purchase a home in the future, since a 1% difference in interest rate could cost you thousands. Good credit also allows you to set up utilities without paying deposits, get a new cell phone contract or get a new job. Credit cards also come with the perks of potential rewards, protection benefits, a grace period between when you buy an item and when you have to pay it off, and low liability in case of fraud. Getting your first credit card means you be able to take advantage of all of these perks and benefits.

 I have a credit card — why should I get a new one in the new year? 

If you have a credit card, chances are you’ve built credit already. This year, you might want to take advantage of that hard work by getting a credit card approved for those with good or excellent credit. The perks and benefits are often better, and they tend to offer the best rewards programs. You could plan ahead and get a credit card with an awesome signup bonus to use for your summer travel. Or you can apply for a rewards credit card that gives you high ongoing rewards for the things you spend on most, such as groceries, gas or dining out. Another reason you might want a new card is if your current card lacks EMV technology. Credit cards with EMV chips aren’t easily compromised, protecting you from having your card information skimmed. If you have a chipped card, use it the proper way to take full advantage of the chip — dip, don’t swipe. It’s easy: Enter your credit card into the terminal, follow the prompts, and remove the card when the receipt begins to print.

 Why shouldn’t I get a new credit card in the new year?

Of course, getting a new credit card has disadvantages, too. Each new credit card application triggers a hard inquiry, which pulls your credit score down a bit. If you’re firmly in the excellent credit score range, this isn’t a big deal. But if you’re between fair and good, or good and excellent, you won’t want to sacrifice any points to get a new credit card. If you’re spending habits aren’t the most responsible, a new credit card isn’t a good idea. It will give you access to more money and could lead you deeper into debt. So before you apply for a new card, make sure you’ve cleared your existing credit card debt and proved to yourself that you can responsibly handle plastic now.

 The takeaway: Before you apply for a new credit card for 2015, consider the pros and cons. Get a credit card if you want to build credit, obtain a better credit card than you have now, or need a card with an EMV chip. Don’t get one if your credit score can’t handle the hard inquiry or you don’t feel you have a good handle on your spending. Image via iStock.


Monday, January 19, 2015

10 Things to Do Before You Retire

10 Things to Do Before You Retire

Here's What to Do Now if Retirement Is on Your Horizon

  1. Decide how you are going to spend your time. What are you going to do during the first six to 12 months in retirement, and what do you plan to do for the rest of your retired life?
  2. Determine (realistically) how much money you will spend each month. Remember to include periodic expenditures such as gifts, vacations, taxes, an occasional new car, and emergencies.
  3. Anticipate the cost of health care. You’ll have no employer to pay this for you; Medicare, MediGap, and private insurance are all up to you.
  4. Buy long-term care insurance. Now.
  5. Refinance your mortgage. Many people are shocked to discover that they either cannot borrow money after they retire, or they are forced to pay higher rates.
  6. Boost your cash reserves. Make sure your rainy day fund is enough to cover at least six months’ worth of expenses.
  7. Evaluate your sources of income. You have already figured out what you’ll spend on a monthly basis. Now figure out where that money will come from.
  8. Revise your investment strategy. The way you’ve handled your investments over the past 30 years is not how you should handle them for the next 30. While preparing for retirement, you were focused on asset accumulation. When you’re in retirement, you need to focus on income and on keeping pace with the increasing cost of living. Assets must be flexible and liquid so you can meet needs you did not anticipate. New words will enter your vocabulary: rollovers and lump sums.
  9. Review your estate plan. Review your will and trust. Don’t have them? Get them. These documents can protect you and your assets while you are alive and benefit your spouse and children when you pass on.
  10. Perhaps the most important thing of all. If you are not excited about retiring, then don’t. Many people quickly become bored after retiring. It’s OK -- even exciting -- to return to school or the workplace. Many do this, often in completely new fields.

Thursday, January 15, 2015

15 Personal Finance Rules You Should Be Breaking

15 Personal Finance Rules You Should Be Breaking
Personal finance rules can serve as handy means for guiding your money behavior. But rules of thumb that don't fit your situation can be a waste of time — or worse, actually worsen your finances. Here are 15 personal finance rules that, depending upon your circumstances, you should consider breaking.

1. Before Investing or Saving for Retirement, Be Debt-Free

Although this is a generally sound rule, there are a few justifications for breaking it.
First of all, personal finance isn't an all-or-nothing practice. Good financial planning involves balance and attentiveness to your unique situation. If your debt is low-interest, it might behoove you to pay it off more slowly in favor of saving money first (such as for retirement or major expenses). Remember: compound interest has immense value, so the more money you can invest earlier in life, the less money you'll have to invest overall. 
Also, if your company matches 401(k) retirement plan contributions, it almost always pays to save for retirement, even if you're concurrently juggling debt. Though it can be tempting to forego 401(k) contributions when your paycheck is lean, remember that you're leaving money on the table and jeopardizing your future financial security if you do. Plus, some retirement plan contributions are tax deductible, so you can use your tax refund towards your debt.
Lastly, if you wait until you're entirely out of debt, you may never start investing. For various reasons (none of which we recommend, of course), some people are practically never able to extricate themselves from the clutches of debt. Maybe your income is low and expenses too high, or perhaps you unexpectedly lost your job or had large, unexpected medical bills to contend with. If you're one of these people, then it's best to start setting aside a little money now and balance your cash outflows between debt payment and investing. I have a friend who is in her 60s with no savings whatsoever. Why? Because she always had debt to contend with, and spent a lifetime waiting until it was clear before saving money. Now, she's in trouble.

2. Pay off Your Mortgage Before Saving for Retirement

This builds on the above rule about eliminating debt before investing. I had some clients who were so intent on paying off their mortgage that they did it at the expense of everything else in their lives, including retirement savings and emergency funds. They thought if something went wrong and they needed money, they could borrow against their house (even in retirement). But when tough times hit, their house had declined in value and they couldn't borrow anywhere near the amount of money they needed.

3. Don't Borrow Money to Invest

Borrowing money to invest is known as leveraging, and is generally considered risky — if your investment declines in value, you've still got a full debt-load and a disproportionately low asset to show for it.
However if the item/investment is tax-deductible, and/or loan is low-interest (which might also be tax deductible), such that the tax saved equals more than the interest paid on the loan, you can work this scenario to your benefit and use your refunds to pay off your debt more efficiently. 

4. Save 10% of Your Income

This is a somewhat arbitrary rule, since 10% may or may not be enough for you to reach your savings goals. Focus on the amount of money you need saved in the end and work backwards from there; you may need to break this rule if you've waited so long to start saving that 10% won't help you reach your goal, or if you need to save more money than 10% of your income will allow.

5. Go to University to Get a Good Job

Unless you're tracking for a career that specifically requires a university degree, you could save the six figure expenditure of a university education in favor of something more practical and less expensive, such as trade schools or alternative forms of education. Not all good jobs are borne of a university education. I didn't go to university (but I am indeed educated), and in some ways it saved my life.

6. Don't Use credit cards

Using credit cards responsibly can be beneficial if you're collecting frequent flyer miles or other credit card rewards that allow you to get extra value from charging expenses. The trick is to pay the entire balance off as soon as you receive your statement; that way you don't accrue interest and you thus avoid the credit card debt trap. 

7. Get the Biggest Mortgage the Bank Will Give You

What the bank will lend you and how much mortgage you can afford can be two very different things. The bank only takes your income and existing debts (and sometimes assets) into account when calculating the mortgage you can qualify for. What about your cash flow, expenditures, and the additional costs of home ownership, like maintenance, property tax, etc?
Depending on the area you live, real estate might be easily affordable or prohibitively expensive. Don't let the bank lure you into a mortgage larger than you can truly afford, because ultimately they win if you can't make payments.

8. Tax Refunds Are Good

Tax refunds mean the government is holding onto your money (and earning interest on it) during the course of the year! I had a client who loved to get tax refunds so much that she deliberately overpaid her taxes each year through payroll just so she could get a refund, which she inevitably squandered since she saw it as "found money."
Consider selecting fewer exemptions on your tax forms at work. You won't get a fat tax refund in the end, but you'll have more money in your pocket now, and will be less likely to splurge than you would with the "found money" of a refund.

9. Build Credit by Carrying a Balance With Your Credit Card

This rule is just plain wrong. You build a good credit rating by using — and paying off — your credit card. You don't need to carry a balance.

10. You Have to Spend Money to Make Money

Unless you have disposable cash to spend, this rule reeks of high-risk business offers, gambling, and mail-order scams. Although sometimes a prudent investment (in a business or financial vehicle) can reap rewards, don't use this phrase as a rule of thumb for your personal finances.

11. A Budget Keeps Your Spending on Track

I wish it did, but unless you're unnaturally disciplined, it often it doesn't. Budgets are more often than not made of abstract categories with arbitrary amounts of money that don't account for things like irregular expenses, quarterly payments, and other elements.
More important than a budget (and an essential first step to creating a workable budget) is keeping track of your expenses so you actually know what you spend. The longer you keep track of your expenses, the better you can understand and control your spending. 

12. Choose Index Funds for Passive Investing

Although index funds carry lower management fees than mutual funds, this is for a reason: They are not actively managed. Although active management doesn't guarantee higher returns, it can help with asset allocation, re-balancing, and other investment activities you may not wish to undertake yourself.
When choosing investments, instead first focus on asset allocation (which is the biggest factor affecting your returns — not investment picking as you might suspect), then choose a basket of diversified investments that satisfy your asset allocation plan. 

13. You Need to Have a lot of Money to Invest

How do you think people who have a lot of money got it (if they weren't born into it)? They saved — and invested! Don't belittle your own finances by thinking you don't deserve to invest or don't deserve the help of a financial planner because you don't have money. You have start somewhere, and you can start investing with as little as $25/month.

14. Your Emergency Fund Should Be Six Months' Expenses

While this is an apt rule of thumb, depending on your situation it might not be suitable. Evaluate your expenses and what would need to be paid if you found yourself in an emergency situation; you may find you need more or less, depending on various factors, such as the quality of your insurance, level of regular cash outlays, and so forth.

15. Leasing a Car Is Bad Value

The general school of thought is that leasing a car costs more (after all is said and done) than buying one outright. Depending on your situation however, this might not be true. For example, if you can deduct the car as a business expense, leasing could reduce your income and increase your cash flow more effectively than deducting the capital costs of buying a car. Also, if your business is new and cash flow is tight, leasing might get you into a necessary set of wheels for a lower monthly expenditure than buying.
Have you ever broken a personal finance rule in a way that served you well? Please share in the comments!

Monday, January 12, 2015

Secured Credit Cards vs. Unsecured: What’s the Difference?

Credit Cards

Here’s a catch-22: you need a credit card to boost your credit, but you can’t boost your credit without a credit card. Secured credit cards can help people with poor credit escape this paradox. But what’s the difference between a secured credit card and an unsecured card anyway?

 Unsecured credit cards 

Most credit cards are unsecured, which means they don’t require a deposit as collateral in case cardholders can’t pay off their debt. Rewards, retail and low-interest cards are typically unsecured, and they offer benefits such as cash back, travel perks, store discounts and interest-free introductory periods. Since they’re less likely to pay off their debt, it’s difficult for people with bad credit to qualify for secured cards. There are a few unsecured credit cards that are easy to qualify for, but they have high annual fees, which are deducted from the credit limit. Rather than opening a high-fee card, we suggest applying for a secured one.

Secured credit cards 

Secured credit cards are designed for people with bad credit or no credit. Since these customers are considered a bigger risk for card issuers, they’re required to make a deposit. The deposit amount varies, but it’s typically equal to the credit card’s credit limit. For example, if the credit limit were $500, the deposit would also be $500. Once the initial deposit is paid, secured cards work just like unsecured ones. They’re accepted wherever credit cards are, including online, and you incur interest if you don’t pay your balance off in time. You can get secured credit cards from the same issuers and networks as unsecured cards. Like unsecured cards, some secured cards come with annual fees, but we suggest you stick to cards with yearly fees less than $50.

 Final word 

Although they require a deposit, secured credit cards are better than no credit card at all. If you get one, your goal should be to improve your credit score until you’re eligible for an unsecured card. Some issuers will let you transfer your secured line of credit to an unsecured one when you qualify. If you minimize your credit card spending and pay off your balance in full and on time, you’ll eventually become eligible for an unsecured card and escape the bad credit trap.


Thursday, January 8, 2015

7 Ways to Retire with Financial Freedom

7 Ways to Retire with Financial Freedom

You are new able to live longer than before because of better health care. It means you need to have more money to spend and cover inflation as well. According to data compiled by the Social Security Administration:

A man reaching age 65 today can expect to live, on average, until age 83.
A woman turning age 65 today can expect to live, on average, until age 85.
And those are just averages. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95.

Here are seven wise things to do for those who are about to retire:

1.      Be debt-free: The biggest enemy of financial freedom is debt because you are going to pay more than what you have actually incurred. The longer you delay, the more interest will be added to the outstanding amount and it will be more difficult to clear as the amount grows bigger over time. 

2.      Continue to work and earn: If you enjoy what you do, it would be prudent for you to continue working. When you work, there is a source of regular income and you and your employer will continue to contribute towards your retirement fund. Another point is that you are not touching your retirement fund and it continues to grow.  The longer you work your retirement years will be shortened and the less money you will need.     

3.      Focus on sources of passive income: It is a smart move to build a constant stream of regular income during retirement. One such source is shares which are making regular dividend payments. When one regular source of income stops, another one takes over.     

4.      Build new sources of income during retirement: Another wise move is to start a second career during your retirement. What is your expertise? Can people pay you for your services? While you can continue to earn during your retirement, it is more important to keep your mind active and alert. 

5.      Spend less: You will never know how long you are going to live. It is prudent to adopt a frugal lifestyle so as to last your retirement fund as long as possible.

6.     Save as much as you can: Save your bonuses, if any. Don’t spend your tax refund check. The more you save, the bigger will be your nest egg.

7.      An emergency fund:  It is also good to set aside an amount to cover unexpected expenses such as a major car repair or illnesses. Such expenses, more likely than not, are excluded in your retirement fund.   

Take action now and enjoy financial freedom later.


Monday, January 5, 2015


Credit Card / Gold & Platinum
People apply for a credit card for many different reasons. Some are new to the world of credit and just getting started, while others are hoping to expand their access to credit. Regardless of the reason, no one applies for a card hoping their application will be rejected. To improve the likelihood of approval, consumers need to understand the credit decisioning process.
Each lender has different criteria for extending credit. Therefore, consumers should do their research in advance, and only apply for the cards that are likely to grant the credit they seek. The NFCC provides the following 10 reasons a credit card application could be declined, along with the steps consumers can take to correct the problem. The list is not inclusive, but will help borrowers better understand the review process and how to position themselves to increase the likelihood of credit being extended.
Not enough existing credit – Lenders prefer being able to review a track record of how a person has managed credit in the past.  A thin or nonexistent credit file can give a conservative lender reason to deny.
What to do – Judiciously build credit, perhaps starting with a secured credit card, but confirm in advance that the issuer reports activity to the credit bureaus.  Also consider becoming an authorized user on another person’s card, as the activity of the primary cardholder as well as the authorized user is reported to the bureaus.
Poor pay history – The highest weighted element in the scoring model is how a person repays his or her debt obligations.  A history of skipped or late payments can be a knock-out punch when attempting to obtain new credit.
What to do – Identify any issues by obtaining the credit report for free at  Next, start making payments on all accounts including those that are past due. This begins building a positive history and helps to establish creditworthiness.
Existing credit lines maxed out – Creditors don’t like to see that a person is utilizing all of their available credit, as this can signal that they are living on credit and opening a new line will only increase current indebtedness.
What to do – Pay down credit card debt to equal no more than 30 percent of available credit.  Credit utilization is the second highest weighted element of the scoring model, so lowering debt could also benefit the credit score.
Overall debt is too high – A person’s debt-to-income ratio is a reflection of how much is owed relative to their income.  People have expenses beyond credit cards, thus lenders take all existing obligations into consideration.
What to do – Increase income or decrease debt.  The important thing is to not appear that more is owed than can be responsibly managed.
Too many inquiries – It’s a red flag if a person is attempting to obtain too much credit at one time.  Too many inquiries or recently opened accounts can make a lender reluctant to give the person another chance to spend.
What to do - Only apply for the number of cards that are necessary and are appropriate for your financial situation.  If declined, do not continue applying.  Instead, take steps to remedy the reason for the rejection.  Wait a few months to reapply, as that will give the credit report time to update.
Serious negative notations – Unpaid tax liens and Chapter 7 bankruptcy can remain on a credit file for up to 10 years. Foreclosure, late and missed payments, collection accounts and Chapter 13 bankruptcy can remain for seven years.
What to do – The further a person moves away from the date of the negative activity, the less impact it has on credit decisions.  A person doesn’t need to wait until the activity rotates off the credit report, but putting distance between the harmful information and applying for new credit is helpful.
Insufficient income – Although often not made public, issuers have minimum income limits that must be met in order to grant credit.
What to do – Research which cards are more likely to grant credit to people with low incomes.  In the absence of other eliminating factors, getting a part-time job to supplement the primary source of income should enhance the likelihood of credit being extended.
Unstable job history – Recent unemployment or consistent job hopping indicates an unstable income, thus putting a person at risk of default in the lender’s eyes.
What to do – Make steady employment a priority.  Changing jobs within the same field may not weigh as heavily against a person, particularly if it is a promotion.
Too young to apply – Applicants must be a minimum of 18-years-old to apply for a credit card.
What to do – As a result of the Credit Card Accountability, Responsibility, and Disclosure Act, Americans must be 21-years-of-age to independently receive credit unless they can prove ability to pay or have a co-signer.  It is not a bad idea for a young person to learn to manage money by living on a cash basis or using a debit card before applying for credit. 
Errors on the application – Credit card applications can be long, making it easy to inadvertently skip completing all areas.
What to do – Avoid unintentional errors by filling out the application online, as these forms often do not allow a person to submit until all required fields are complete.
When applying for credit, ask yourself if you would loan money to you.  If the answer is ‘no,’ then it’s likely the financial institution won’t either. That’s the signal that it’s time to take action and improve your credit profile. Credit card companies want to extend credit, but only to people who represent a low risk for default as defined by their business model.
If denied credit due to information contained in the credit report, the Fair Credit Reporting Act requires lenders to send the applicant an adverse action notification which includes the reason for the denial. To be in a better position for approval next time, review the reasons for the rejection and take the necessary corrective steps.

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