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Category: Credit 101

8 Credit Rules Everyone Should Follow

A woman smiling and looking over her shoulder

Credit cards are easy to come by and even easier to use. If you let your spending get out of control or take on too many loans, you could face big money troubles. On the other hand, you want to spend enough to improve your credit and keep it in a good range. Here are eight credit rules every consumer should follow to keep their finances and credit score in healthy shape.

1. Make Payments on Time

The most important credit rule is to make your payments on time. Stellar payment histories are key to establishing a good credit score. Payment history plays the largest role in how your credit score is calculated, and one missed bill will definitely have an impact. Missed bills can also cause some major damage to your wallet, as unpaid balances can be subject to penalty annual percentage rates and late payment fees.

Some bills can be set up to be automatically paid, which is a great way to avoid the stress of a missed payment. While it’s always a good idea to pay off everything you owe, this might not always be possible. Make sure you make at least minimum payments before the monthly bill is due to avoid late fees or lowered credit scores.

Additionally, “if you have problems paying bills on time, don’t get a credit card,” says Karen Carlson, director of education for the nonprofit agency InCharge Debt Solutions. Looking at your payment track record for other past bills can help you determine whether or not you’re responsible enough to handle the potential pitfalls of a credit card.

2. Maintain a Low Credit Utilization Ratio

After payment history, credit utilization ratios are the biggest contributor to your credit score. Your credit utilization ratio is the proportion of how much credit you have available to how much you are using. Coming too close to these credit limits can seriously hurt your score. Instead, follow the credit rule of never using more than 30% of your credit limit at any time.

Exceeding that limit makes credit providers uneasy and negatively impacts your score, even if you exceed it by only a little. It’s also harder to pay back these larger balances on time, which can lead to a host of other issues.

Follow this credit rule and don’t let anyone fool you into thinking you need to carry balances to give your score a boost. “I have never seen a credit scoring model award points for that,” says Deatra Riley, financial education manager for nonprofit credit counseling organization CredAbility. “It’s really about the account being paid as agreed.”

3. Review Your Credit Score Regularly

Whenever you’re dealing with your credit profile, whether by paying a bill or by using your card, think of the impacts it could have on your score. The only way to properly gauge this impact is by knowing what your credit score actually is. A good rule of thumb is to check your credit report at least once a year to ensure its accuracy. You can also monitor your score for free with the Credit Report Card.

Get into the habit of reviewing your credit score before you apply for a new loan. If you’re not confident in it or if it’s lower than you expected, you may want to focus on building it before you add any credit cards or installment loans. Most institutions are reluctant to give loans to people with poor credit, so your chances of being approved for a loan increase if you take the time to improve your score first. When your credit is good, however, you should use it to the fullest extent.

“Be creditworthy when the opportunity arises,” Carlson says, so you can get the best interest rates on each line of credit. You’ll also be eligible to score the best rewards credit cards.

4. Understand the Terms and Conditions

Terms and conditions vary for every account and from provider to provider. It’s important to read through every single loan or credit card contract before you agree to anything. Consider more than just potential perks and a generous credit limit. According to Brent Neiser, senior director at the National Endowment for Financial Education, you should check what interest rates are being offered and when they will be applied. You also want to thoroughly read through fee structures so you have a good sense of the costs associated with each line of credit.

Additionally, Neiser says to ask what the incentives are. If you didn’t have the chance to properly review your contract before you agreed to its terms, you should make time to read through every page, including the fine print. Riley also suggests printing out contracts and keeping them in a safe, secure place so you can easily access them should you encounter an issue.

The three credit bureaus, Experian, Equifax and TransUnion, legally collect a good deal of your credit data, including your payment history and outstanding debts. Knowing the ins and outs of your contract can help protect you if these bureaus ever make an error, which you are legally allowed to dispute.

5.  Spend with Your Budget in Mind

A credit card is painless to use and often rewards regular spenders with benefits. Having one can influence all your spending habits. But special offers can easily be canceled out by uncontrolled spending that leads to a mountain of interest-incurring debt instead. To avoid digging yourself into a hole of debt, Carlson advises using credit cards along with a firm budget that contains a savings plan.

“This is the [credit rule] most people don’t follow,” she says, because it’s easy to think of a credit card as a financial lifeline. However, you should use credit cards only for items you could pay for yourself without credit.

“Don’t use a credit card as a replacement for your emergency fund,” Carlson says. “Credit is a wonderful tool to meet the needs of positive events. It’s not a tool for negative events.”

6. Plan for Future Expenditures

Treat your credit card usage as you would a budget for your own money. Plan for large purchases you expect to make and handle your balance carefully. Avoid incurring needless debt for small purchases if you’re planning on spending a large amount in the near future.

Of course, you can’t plan for every purchase. Still, responsible use of your card can help cushion those large purchases and make it easier to pay your provider back. Balance the use of small and large purchases on your card to keep your debt in a manageable range.

7. Balance Your Credit with Your Income

Credit cards aren’t income replacement, and you shouldn’t treat them as such. You’re better off paying for small purchases with cash or with your debit card. Still, you should use your card fairly frequently to help boost your credit score and keep the account active. Most advisers recommend going no longer than three months without using your card.

You should also have a limit that’s in accordance with your income and your spending habits. If you’re using a big portion of your limit, your utilization rate is probably going to be too high and you’re likely damaging your credit score. Increasing your limit will lower your utilization rate, but you should consider this carefully. Having a higher limit will tempt you to spend more of that available money, potentially increasing your debt-to-income ratio. Be sure you’re capable of paying off a larger debt before going this route.

8. Don’t Have Too Many or Too Few Credit Cards

Having too many credit cards has pitfalls. First of all, signing up for a card in the first place impacts your credit score negatively. It also tempts cardholders to spend more and fall deeper into debt. However, spreading spending over multiple cards keeps your utilization rates low and can help boost your credit score. Having multiple cards can also give you benefits from multiple providers.

It’s all about balance here. You really only need one card for a good credit score, but if you spend regularly, having multiple cards may help your score more. Keep in mind that some lending companies view having multiple credit cards negatively.

Credit Rules to Boost Your Scores

Having credit cards can be a slippery slope, but it doesn’t have to be. Checking your credit report, opening the right number of cards, staying at a good utilization rate and using financial planning can all help you become a responsible credit card user. Follow these eight credit rules and managing your credit score can be simple and keep you in control of all your finances.

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The “Cashless” Cash Envelope System

The post The “Cashless” Cash Envelope System appeared first on Penny Pinchin' Mom.

You have probably heard people talk about how to use a cash envelope budget to save money and help you get out of debt. But, what if you don’t want to use cash? Does that mean you can’t use envelopes? Nope. Not if you follow one of the cashless cash envelope methods available.

Cash Envelope system without cash

If you follow any money advice, you are usually taught about using cash and implementing the cash envelope system.  That is what I recommend here on our site.

As much as this is the perfect solution for our family (and one of the catalysts to help us kick-start our debt pay-off plan), I also understand this is not an option for everyone.  Even if you don’t use cash, you still should budget and spend as if you do.

If you are just learning about budgeting, you will want to check out our page — How to Budget. There, you will learn everything you want to know about budgets and budgeting.

The way to do this is by using a cashless envelope system.  It is how to use cash envelopes without using cash.  The idea is simple, but there different ways to track it.



The idea is the same as the regular cash envelope method.  You have a budget and need to ensure you don’t spend more than what you should.

Each pay period, you record the amount budgeted for each category onto your “envelope.”  As you spend, you keep track of it.  When you are out of money, you can’t spend anything else.

Using the cash envelope system without using cash can work – if you want it to.



When you are trying to get control of your finances, you need to know where you spend.  The best way to do this is to track your spending.  Not tracking after you spend – but as you purchase.

Most of the time, you swipe your card without worry.  This action can easily throw your budget out of balance.

While using cash has emotion attached to it, tracking every purchase requires awareness.  You are always watching what you spend and where.  There are no surprises that you spent $250 on groceries when the budget was $200.  You see it happening right in front of you.

The cashless envelope system works because:

  1. You don’t have to worry about carrying or getting cash.
  2. It forces you to track of your spending in real time.
  3. You can see exactly where your money goes and make budget adjustments as needed.

The cashless envelope system forces you to be more responsible for your spending without the hassle of carrying money.



When you are ready to try a cashless system, you need to determine which is the best for you.  You can find one on your phone, or there is also a printable option.



There are several apps that claim they can help you keep track of your spending with virtual envelopes. If you have found one that works well for you, then I say keep using it!  But, if you are new to this idea – or want something new – the one I recommend is Mvelopes.

Mvelopes has three different plan levels, starting as low as $4 a month.  You can use the one that best suits your needs.  If you are new to the platform, I recommend starting out with the basic plan.

To start, you will add the app to your phone  — or you can use their online site (which I love).  Once you do that, you sync your various accounts.  Make certain to include the cards you will use for your various categories.

For example, you may charge every purchase to your credit card to earn rewards or cash back.  If this is you, you will connect your credit card.  Some may use the debit card for some purchases and a credit card for others.  Those of you who do this will connect both cards to your account.

Once that is done, you set up your online envelopes and add budgeted amounts to each.  Then, you just swipe as usual.  Every time you make a purchase, the purchase amount is deducted from your online envelope.  With a couple of swipes, you see not only how much you have left to spend, but even where you spent your money.  There is no guessing.

This system helps you give every dollar a job.  You know where it will go even before you spend it.  Using Mvelopes puts you back in control.

If you want or need even more help, Mvelopes has other plans that you can purchase.  They offer the Mvelopes PLUS plan for $19 per month.  This service includes all of the services available under the basic plan but also helps you tackle your debt.  You even receive you a personal finance trainer who will visit with you once per quarter.  This plan helps you set and achieve your financial goals.

Should you need more one-on-one help, you may want to consider the Mvelopes Complete package instead.  You get all of the benefits of the Plus plan but receive your own, one-on-one finance trainer.  This coach works with you to help you achieve your financial goals.  You aren’t left alone to figure things out as there is someone right there, guiding you along the way.

As I said you don’t need to purchase one of the larger plans as the basic plan will meet most people’s needs. However, it is great to have these options available at your fingertips.

Related:   The Best Apps for Your Budget



Apps are great, but there are times when you would rather have the simplicity of writing something down rather than having to pull it up on your phone.  That’s where the printable cashless envelopes come in handy.

These work in the same way as regular envelopes — just without cash.  Print them off and keep them handy.  Record the budgeted amount for that category at the top.  Then, as you spend, keep track of it.  Jot down every purchase and keep a running total of how much you have left to spend.

I get that it is a pain to keep track of “cents”, so I recommend you round up.  For example, if your grocery budget is $200 and you spend $105.74, record that you spend $106 and have $94 left to spend.  That is MUCH easier than keeping track down to the penny.  (Truth be told, this is what I do with our cash envelopes too).

Once you reach your spending limit, then you are done with that category!  If you budget $100 for dining out and there is just $5 left, don’t pick up that coffee and cake for $7 – or you will have just busted your budget!  If you find that you are always out of money for select categories, or often have money left over for others, then it may be time to make adjustments to your budget.

printable cashless cash envelopes

Grab your cashless envelope printables.  Now, I don’t recommend you print this onto regular paper, as that is really thin and will tear easily. Purchase card stock to use to print out your cashless envelopes as they will be more durable.

Related:  How to Figure Out How Much Money to Budget For Groceries


Even if you don’t want to use cash, it is still essential that you continue to track your spending, so you never exceed your budget.

cashless envelope system

The post The “Cashless” Cash Envelope System appeared first on Penny Pinchin' Mom.


What Is a Second Chance Checking Account?

person holding blue credit card

Whether it’s angling the perfect shot in a game of pool or telling a crush how you really feel, everyone wishes they could have a second chance from time to time—and money matters are no exception. Sometimes in life, things just … happen. And sometimes, those circumstances can wreak havoc on our personal finances in a lasting way.

You probably already know that bureaus like Experian, TransUnion, and Equifax track your credit history. But you might not know that consumer reporting agencies track your banking history, too. And in the same way that having a poor credit history can hurt your chances of receiving credit in the future, having a poor checking history can make it harder to get a bank account.

checking account interest rates are notoriously low, it’s unlikely your second chance checking account will grow any interest at all.

That’s why, as when opening any other kind of bank account, it’s important to review the fine print closely to ensure you know what you’re getting into before you apply. If you need to use paper checks to pay rent, for example, an account where they’re not allowed won’t work—and there are other accounts available that will offer the service you need.

free checking account: the bank will ask for a variety of personal information, and you may be asked to verify your identity with a form of official identification like a driver’s license or Social Security card.

These days, these applications can usually be done entirely online. Depending on the institution, you may be required to put down a minimum initial deposit, but in many cases, the account will be 100% free; it may take a few business days to process your application, and then you’re in!

Once you’ve opened a second chance checking account, you can use it as normal to pay bills, restaurant tabs, and grocery store totals—whatever expenses come up in your day-to-day life. Meanwhile, the negative items that might be on your ChexSystems report will slowly vanish. Most records fall off after five years.

Consumers also have the right, under the Fair and Accurate Credit Transaction Act, to request a free ChexSystem report once a year. A request can be made by phone, mail, fax, or online form, allowing review of the report for any incorrect negative items and disputing them.

Dispute investigations are generally complete in a month, at which point the reportee will receive a letter in the mail notifying them of the results.

Thus, over time, it’s possible to clean up a ChexSystems record—which can unlock the ability to pursue other types of banking services, including high-interest deposit accounts.

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Pros and Cons of a Second Chance Account

While second chance checking accounts do provide a valuable service to those who would otherwise be unable to find banking services, there are some drawbacks to these accounts as well. Here are the pros and cons of second chance checking accounts.


•   Allows clients to use a checking account even without perfect banking history.
•   Gives account holders time to rebuild their banking history and let items fall off their ChexSystems report.
•   In many cases, second chance checking accounts are free and don’t require a minimum opening deposit.


•   Some accounts may assess monthly fees and minimum opening deposits—and may not offer waivers.
•   The account may have limited capabilities (such as an inability to use paper checks or to access overdraft protection).
•   The account is unlikely to offer interest growth on account balances.

Alternatives to Second Chance Accounts

Second chance checking accounts are a solid option for those who might not be able to open a traditional checking account because of their banking history. But they’re not the only alternative.

For example, many banks offer prepaid debit cards that can be used to pay bills and other expenses without using cash. It works like a gift card: Clients load the card with a certain amount of money, which they can then use as they see fit. The cards are aso reloadable, making them a fair option for working around the handicap of not having a bank account.

What’s more, many prepaid debit cards don’t require a credit check to open, which makes them a viable choice for folks with poor credit histories as well as poor ChexSystems reports.

That said, prepaid debit cards often include a variety of fees—such as monthly maintenance fees, activation fees, and reloading fees—which can eat into the user’s balance and make them unsustainable for long-term use.

Others who find themselves unbanked might try to simply pay their way through life using cash; after all, you can get a paycheck cashed at the nearest major grocery store or Walmart, though the check-cashing services generally come with a fee.

Plus, many utility companies, landlords, and other bill collectors don’t accept cash as payment. And if your cash is lost or stolen, there’s no reliable way to get it back. It’s gone.

This Digital Account Might Be an Answer

SoFi offers a product that can be helpful to anyone with dollars to manage..

SoFi Money® is a cash management account that puts your finances under your control from the comfort of your smartphone or web browser—and it comes with no account fees, overdraft fees, or minimum opening deposit requirement. Better still, make recurring $500 monthly deposits to earn benefits that help you build your savings. And yes, SoFi also offers paper checks.

Interested in saving for your future? SoFi Money® has a unique feature called vaults, which help you set aside cash for specific purposes.

The sign-up process can take as little as a minute and is all done online; once approved, a debit card arrives in the mail within 5-7 business days. (There are no ATM fees either, within the network of 55,000-plus worldwide locations).

Ready to see if SoFi Money® can help you get your money right? Find out more and apply today.

SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank.
The SoFi Money® Annual Percentage Yield as of 03/15/2020 is 0.20% (0.20% interest rate). Interest rates are variable subject to change at our discretion, at any time. No minimum balance required. SoFi doesn’t charge any ATM fees and will reimburse ATM fees charged by other institutions when a SoFi Money™ Mastercard® Debit Card is used at any ATM displaying the Mastercard®, Plus®, or NYCE® logo. SoFi reserves the right to limit or revoke ATM reimbursements at any time without notice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.


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Math Tips for Smart Shopping

Calculator in a Shopping CartI recently ran across a 2012 article from The Atlantic called The 11 Ways That Consumers Are Hopeless at Math. The title of this article hooked me, and as I began reading I found that there are indeed a few ways in which consumers misunderstand math – and pay the price as a result.

But I also found that most of the so-called “math tricks" that people get caught up in are really better described as number-based psychological hacks, which marketers use to extract every last penny from us that they can.

So it's not so much that consumers are hopeless at math as they are susceptible to being tricked. Which is precisely what a savvy shopper knows how to avoid.

What are some of these mathematical misunderstandings that you should be aware of? And what are some of the most common number-based psychological hacks? Those are exactly the questions we’ll be looking at today, as we finish up the year with a resolution to become even smarter shoppers in the new year.

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How Much Bang For Your Buck?

The article I mentioned from The Atlantic begins with an anecdote that nicely points out one of the biggest flaws in the way the average consumer shops. Namely, that when it comes to pricing and deals, most people go with their gut instead of taking a few seconds to think things through.

Here's the story: Imagine you walk into a coffee shop, take a look at the day’s specials, and see a sign that says, “Today only, your choice—get 33% more coffee for the regular price, or pay 33% less for the regular amount of coffee!” If you were presented with these two options, which would you choose?

In truth, choosing the best deal isn't always just a question of numbers. For example, if you really wanted more than your regular amount of coffee that day, then the extra coffee option would be a fine choice. But that’s not really what I’m talking about here, so let’s rephrase the question a bit to focus on the math.

The real question is this: Which option is the better deal in terms of dollars spent per ounce of coffee? After all, that’s what we’re really talking about when we speak of being a savvy shopper—getting the most bang for your buck.

Most people's gut instinct is that the two deals are about equally as good.

Most people’s gut instinct is that the two deals—33% more coffee for the same price or the same amount of coffee for 33% less money—are equally as good. After all, they both have the same 33% in them. But let’s do the math to see if this assumption is really true.

Imagine your usual 8 oz. cup of coffee costs $2. In this case, the first option gives you about 1.33 x 8 oz. = 10.6 oz. of coffee for $2, while the second option gives you your usual 8 oz. of coffee for a price of 0.67 x $2 = $1.34. That means you pay $2 / 10.6 oz. = 18.9 cents/oz. with the first option, but only $1.34 / 8 oz. = 16.8 cents/oz. with the second.

So, clearly, the second option is a better deal. While it's tempting to get something "free" for the same amount you usually pay (the first option), in this case, getting the amount you actually want for less money is a better deal—especially if you don't really need that extra coffee anyway. And, as always, the math is there to back you up.

What’s the Best Deal?

People prefer to make choices between similar and easily-comparable options.

As I mentioned at the outset, most savvy shopping skills are really less about math and more about avoiding the number-based psychological hacks that marketers (would love to) play on you. While perusing the news this week, I found an article discussing a perfect example of this kind of sneaky hackery.

This example was originally described in Dan Ariely's book Predictably Irrational, in which he talks about running across an advertisement to subscribe to the magazine The Economist. The advertisement lists 3 possible deals:

  1. Web-only subscription for $59/year
  2. Print-only subscription for $125/year
  3. Print + web subscription for $125/year

If confronted with these options, which would you choose? If you’re anything like the 100 MIT students that Dan Ariely posed this question to, you’d pick the print + web subscription for $125/year; 84% of the MIT students chose that offer, while 16% chose the cheaper web-only subscription.

Not surprisingly, nobody chose the middle print-only option. After all, it’s a pretty bad deal compared to the third option, which gives you the same thing plus something extra, all for the same price. But if that middle option is such a bad deal, why did the marketers even bother to include it?

To answer this question, Dan Ariely removed the second option from the list and presented the two remaining options to another group of 100 MIT students. This time, with just the $59 web-only and $125 print + web subscriptions to choose from, 68% chose the cheaper web-only subscription and 32% chose the print + web subscription. Remember, when all three options were available, 84% of students chose the more expensive option and only 16% chose the cheaper subscription.

So why did the marketers include that strange print-only subscription option? Because they also figured out that more people would choose the more expensive subscription if the print-only option was there.

What’s the math behind this? There isn’t any—this one is purely psychological. Sure, there are numbers involved, but all they’re really doing here is pointing out that people prefer to make choices between similar and easily-comparable options – so when they’re given the opportunity to do so, they will.

It may not be rational, but it is very real. And knowing how to spot this kind of trick is a big part of learning how to use math—or at least numbers—to be a more savvy shopper.

Wrap Up

Okay, that’s all the math we have time for today.

For more fun with math, please check out my book, The Math Dude’s Quick and Dirty Guide to Algebra. And remember to become a fan of The Math Dude on Facebook, where you’ll find lots of great math posted throughout the week. If you’re on Twitter, please follow me there, too.

Until next time, this is Jason Marshall with The Math Dude’s Quick and Dirty Tips to Make Math Easier. Thanks for reading, math fans!

Calculator-in-a-shopping cart image courtesy of Shutterstock.


Budgeting Help


How Mint offers budgeting help

Ready to start budgeting and tracking your money? See our article Budgeting Tips from Mint — and subscribe to our blog for more budgeting help.

Budgeting Calculators

We’ve also got some calculators that can help you figure out exact dollar amounts for your budget:

How Much do I Need for Emergencies? Saving enough money for emergencies is the first step in setting a budget. Don’t be caught by surprise. How much do you need in your emergency fund?

How Much Should I Save to Reach my Goal? Are you budgeting for a house, vacation or retirement? Quickly find out if you’re saving enough to reach your goals on schedule.

Value of Reducing or Foregoing Expenses. Small changes in your daily routine can add up to big budget savings. Find out how much.

How Much Does Inflation Impact my Standard of Living? How much will you need in 5, 10 or 30 years to maintain your standard of living?

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5 Online Learning Platforms to Help Bolster your Resume

Being a lifelong learner is one of the best ways to stay engaged in your job, whatever field you’re in. There are a lot of ways to exemplify curiosity and a penchant for learning new skills: meeting regularly with your boss, attending professional development days and taking classes to hone a professional skill. It has […]

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.


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