Credit Secrets & Tips

1. Have your tax refund direct deposited into your bank account.

The benefits include receiving your tax refund faster and knowing that your refund check will be safe and not lost or stolen.

Direct deposit also provides an easy way to save part of your tax refund, because ‘what you can’t see you can’t spend.’

The large numbers of consumers mistakenly believe that paper checks are safer than direct deposit when, in fact, the opposite is true.

Paper checks account for more than 90 percent of the reported problems with its federal benefit payments.

You also have the flexibility to directly deposit your tax refund in up to three different
accounts at three different U.S. financial institutions.

2. If you need cash and you can’t wait for your tax refund, carefully consider your options and costs.

In particular, “refund anticipation loans” arranged by tax preparers for people who file their returns electronically, will get you cash in just a day or two, and the loan will be paid back
with your tax refund, but the costs are comparable to very high interest rates.

Also remember that people who file their returns electronically using the IRS “e-file” service can receive refunds in two weeks or less.

3. Make good use of your refund.

Consider paying down or paying off your loans and other bills, starting with the ones that charge the highest interest rates on unpaid balances.

Start or add to an existing savings account. Or, fund a retirement account or college savings plan.

4. You can pay your tax bill using your credit or debit card but beware of the costs.

Your financial institution may offer small incentives – such as miles, points, cash back or
other rewards for using your card – but factor in the processing fee, which can be substantial, especially for credit cards.

Other costs also may apply, such as interest if you don’t pay your card balance in full by the due date, and overdraft fees if your debit card withdrawal exceeds your account balance.

5. You can have your payment withdrawn electronically from your bank account.

This service adds speed and convenience. You can also file your tax return early and set the payment withdrawal for a specific date, such as April 15.

Ask your financial institution about any fees it may impose. But make sure you have enough funds in your account when the payment is to be made.

6. If you need to borrow money to pay your taxes, you have several choices but all come with fees and costs.

The cheapest way to pay your tax bill is to tap your bank account. But if you must borrow
the money, options include bank loans, an monthly installment plan and your credit card.
Using a home equity line of credit may be an option, but remember that you could lose your home if you are unable to make the payments.

7. Take advantage of free tax preparation services.

One program helps to promote is the Volunteer Income Tax Assistance (VITA) program, which provides free tax-preparation help to low- and moderate-income taxpayers at various locations. Click here to read more detail.

Some VITA sites even have representatives from banks or other organizations who can assist in other ways, including opening a bank account or obtaining a credit report.

Below are some useful suggestions on how to minimize fees and finance charges:

Help keep the cost of credit down by paying on time and not exceeding your credit limit.  Do you know paying later or exceeding your credit limit will cause early expiration of promotional rates and may cause your APR to increase

- Avoid late payment by checking the due date on your statement when it arrives as it may vary from month to month

- Allow 5-7 days mail time for your payment to reach the credit company

- Ensure the fastest processing by using the remittance slip and envelope provided with your monthly statement.

- Avoid late payments by paying online or enrolling online automated payment service. It is fast and free. 

Avoid Overlimit Fees by never allowing your balance to exceed the credit limit shown on your monthly billing statement (leave room for finance charges).  You can view your balance online or call credit care company at any time at the toll-free number on the back of your credit card.

Reduce your finance charges by paying more than the minimum amount due.  Although you have the flexibility to pay only the minimum amount due, you can significantly reduce your cose of credit by paying in full or making larger payment.

Remember, you can avoid finance charges on your retail purchases by paying the balance in full each month before your payment due date.

Personal saving as a percentage of disposable personal income has dipped as low as 1 percent in recent year.  If you are like most Americans, one minor tremor is all it would take to shake your whole financial foundation.

In addition to long-term savings, financial experts agree that consumers should aim to have at least three or six months’ living expenses saved for emergencies.  If you are having trouble establishing a nest-egg, don’t despair.  The following are some simple ways to boost your saving:

1.  Pay yourself first

Saving is the cornerstone of financial security, so make it a priority.  After all, a lack of savings can turn a minor financial setback into major financial crisis.

2.  Make it automatic

Having money automatically deducted from your checking account into a savings account helps to ensure that you meet your savings goal.  Even better, if your employer has the capability to automatically deposit your pay check have some funds directed into a savings account.

3.  Turn a hobby into income

Many people have untapped talents,  Whether you enjoy photography, painting, knitting, or metalwork, consider possible ways to earn money by doing what you love best.  Baby-sitting and lawn work are also good ways to earn additional money.

4.  Downsize

Most people have garages, basements, and attics full of items they no longer want or need.  Holding a garage sales or advertising some of your things online ,such as selling on e-Bay, could result in a boost to your saving account.

5.  Use gifts wisely

If you receive unexpected funds, do not be tempted to spend them thoughtlessly. Instead, put all money received from tax refunds, inheritances and gifts into an interest-bearing savings account.

Finally, make a commitment to pay down debt.  Reducing your debt allows you the freedom to make smart future financial choices.

The following tips are basic principles about obtaining and using credit cards that can save you some serious cash and keep you out of debt.

6. Always Shop Around

Don’t apply for the first “pre-approved” offer you receive in the mail or any for that matter. Do the research for yourself. There are plenty of sites such as bankrate.com that allow you to compare hundreds of credit card offers with a simple search. You’ll get the best deal by shopping around.

5. Read the Fine Print

The terms and conditions are the equivalent of the disclaimer you hear on car lot commercials. It cuts through the hype and reveals the true terms of the credit card such as what happens when you miss a payment and what you’re really getting from the rewards. Most terms are not that long, usually around one full page, it’s worth your time to read them.

4. Ask for a Better Rate 

Once you have been a credit card customer for a few months call them and ask for a better rate. They won’t laugh at you, they get hundreds of these calls every day and if you’ve been a good customer it usually will work. Credit card companies work hard to obtain you as a customer and they will work hard to retain you.

3. Pay Off Full Balance Every Month 

All credit cards have high interest rates compared to other types of loans. You should never plan to carry a balance on a credit card. If you must make a large purchase that you do not have the money for at the time, obtain a loan or a revolving line of credit from your bank. You will save a bundle on interest rates.

2. Do not get a Cash Advance 

This is the second worse thing you can do with a credit card, short of missing a payment is getting a cash advance. The cash advances usually come with a very high interest rate.

What makes it worse is the fact that with most companies this higher rate credit will not get paid off first, or even in the order that you took it out. They will apply your payments towards all the lower rate purchases and will only begin paying off your high interest cash advance will all other items on that credit card have been paid off.

1. Never, EVER Miss a Payment 

This is the absolute worse thing you can do with a credit card. Not only will you incur a late fee, but your interest rate will also skyrocket. In addition it will be a negative blemish on your credit report which can cause the rate on any other loans or credit cards you have to increase as well as insurance rates. It also makes you less likely to get approved for future credit.

If you are low and moderate-income taxpayers, then you should take advantage of IRS programs and bank services that can help you save more money for future goals, including buying a home or funding a child’s education, tax preparation, qualify for tax credits, etc.

IRS-coordinated Volunteer Income Tax Assistance (VITA) program that provides free tax-preparation services for qualifying individuals.

Also, IRS has the ability to direct deposit tax refunds in up to three different checking and savings accounts at up to three different U.S. financial institutions.  It encourages you put part of your refunds into both savings and checking accounts.

If you are interested in obtaining free tax return preparation, you should call the IRS at 1-800-829-1040 or go to www.irs.gov/individuals to locate a VITA site.