Yes you can. There are two ways to make a mortgage payment with your credit card.
The first way is to use the convenience checks that credit card companies send out every so often. These checks work like those you would write from a checking account, but they draw against your credit rather than available bank funds. You can write, sign and mail these off to mortgage companies.
The second way is to use an online billpay feature (such as the type available at MBNA). This allows you to pay a certain amount to the specified company. The amount will be drawn out of your available credit and paid to the mortgage company similar to a check.
The downside to these two methods?
You won’t receive any cashback, miles, points or other credit card rewards for these transactions; which is the main reason for paying with a credit card anyway.
So, is there a way to pay with a credit card and still get the bonuses?
Yes there is. Well, there was.
There was a time when you could purchase Charter One gift cards using your credit card. These worked just like ATM/Debit cards and could be loaded with up to $500 each.
Basically you just needed to purchase these gift cards, take them to an ATM and pay the withdrawal fee (around $3) and pocket the $497 cash, while still receiving your credit card bonuses. You could then deposit enough cash to pay your mortgage and write a check to cover the payment.
Of course, this all required a lot of planning, but being able to get cash from a credit card without paying huge cash-advance fees AND still getting your bonus rewards is a huge plus.
Naturally, this program was abused in this way, and when they realized they weren’t going to make much money from it, the program was cancelled.
But be on the lookout for another loophole like this, because they come up all the time!
April 28th, 2006
This myth probably causes people more grief that many of the others. This probably originates from the daunting paragraphs at the bottom of credit applications which demand that each of your statements be entirely true.
There are two truths that can easily dispel this myth:
Truth #1: It is in the credit card company’s best interest to extend credit to as many qualified customers as possible.
Truth #2: Credit card companies have been offering these agreements for a long time, and they have nearly unlimited resources available to hire the finest contract attorneys available, if they meant to say “personal income” the document would certainly read “personal income.”
So now that you realize this myth isn’t true, what advantage do you have? The advantage is that now you have the power to negotiate better terms for your credit cards. “Household income” includes things like: student loans, parents’ income, spouses’ income, business income, etc.
Chances are, in just about anybody’s case is that “household income” is going to be a larger number than “personal income” and a larger income number is going to give you more power to get better rates, bigger credit lines, and more perks.
So when you fill out a credit card application make sure to present the highest legitimate number possible.
April 28th, 2006
First I have to make a distinction on this myth which often leads to making this problem much, much worse. Often, people in this situation confuse the business they bought the item from with their lender.
While it is true that more and more dealerships are offering in-house financing programs, often the business that holds your loan is different than the business that sold you your car. Therefore, sending the keys to the dealership you bought your car from might not solve any of your problems.
As for sending the keys to the lender, this is the worst move to make in this situation (except if you do nothing and let the item be repossessed).
In this case, sending the keys back to the lender will most likely result in the item being sold at auction. Then the lender will come after you for the difference between what you owe and what it sold for, as well as repossession fees, penalties. This can result in poor credit marks (almost certainly) and/or a lawsuit.
The best way to handle this situation is to sell the item yourself. Even if you need to sell it at a small loss, the money you pay out of pocket will more than make up for the huge toll that will be taken on your credit rating (not to mention the potential legal fees).
April 28th, 2006
This is the biggest myth in all of personal finance. It is the biggest lie, it is the most well known, and it harms the most people.
There is no reason not to have any debt today. Centuries ago, you might have been sold into slavery if you had a significant amount of debt, but in today’s society debt is like fat: there are good kinds and bad kinds. While it’s true that too much bad fat is a killer (think of eating 5 donuts for every meal, every day) if you truly ate a completely fat-free diet, you would be living a similarly unhealthy lifestyle.
What is bad debt? Bad debt is money that you borrow that does nothing to improve your life. Living beyond your means and using credit cards to fund shopping sprees that you can’t afford means you are taking on bad debt.
What is good debt? Good debt is money that you use to leverage valuable things. A home is (generally) a good investment, so mortgages can (generally) be seen as a good usage of leverage. Keep in mind, that even good debt is only good in the right amount. Too much of any kind of debt is unhealthy.
But the belief that any debt is dangerous and should be avoided is just as dangerous as taking on too much debt.
It sounds unfair, but good credit involves walking a particular line. If it was easy to do, then there wouldn’t be benefits to having good credit.
April 28th, 2006
As with any credit card debt solution, there are conditions that need to be met in order for this to work correctly. Of course, the biggest one is that you absolutely must stop charging things to your credit cards. Financial responsibility is the only way to solve financial problems, no matter what strategy you use.
No matter what strategy you use to work your way out of credit card debt, you need to stop spending on your credit card once you start your program. Too many people think that a HELOC, or a 0% balance transfer will be the ‘magic bullet’ for their debt problems. I wish it was that simple, but it isn’t.
Why not? Because the best way to get out of debt is (and has always been) budgeting, and not using credit for the wrong reasons. 0% transfers and HELOCs are financial tools. Tools need to be respected and used properly. If you’re in a hole, the worst thing you can do to yourself is pick up a shovel and start digging again.
If you cannot be financially responsible, please do not add additional debt to your home to ‘zero out’ your cards. I have seen far too many people lose their homes simply because they picked up a shovel when they simply needed to climb the ladder.
April 28th, 2006
“Deal or No Deal” a popular game show on NBC has captured audiences with its large prize amounts, and unorthodox game show structure. Game show fans have become accustomed to trivia, dating and stunt –based games. “Deal or No Deal” presents a new format for game shows, but what is the secret behind the banker’s offers?
I love watching this show because the whole concept of the banker’s offers tempting the players to abandon the game and walk away with some amount of dollars really appeals to me. I play the game in my head, telling the players which offers they should accept, and which they should walk away from. There is an easy way to figure out which offers are good (and which are bad) through a simple financial principle.
Expected Value
Expected value is one of the very first concepts taught to finance students. It is a math technique which allows some limited prediction of future events.
Essentially, this principle relies on knowledge of two variables: the amount you stand to gain, and the probability that you will make that gain.
For a classic finance example: let’s say you have a stock valued at $50. Tomorrow, there is a 50% chance it will go up to $100, at which point you can sell it. If it doesn’t go up to $100, you will sell it for $50. So: your probability is 50% and your potential gain is $50.
To find the expected value, we simply multiply the probability of the result by the potential gain.
0.50 * $50 = $25
Therefore, the value of your stock today (knowing what you know about the future) is $75. If someone offered you $80 for the stock today, should you accept?
The answer is yes. If you were to run this example 100 times over, half the time you would gain $25, half the time you wouldn’t. So you’d end up with $1,250.
If you accepted the $80 offer during those 100 times, you would have a $3,000 profit at the end.
So, expected value allows you to determine what something with be worth tomorrow. How does it apply to “Deal or No Deal?”
Deal or No Deal: How to decide
The real point of the game is to approximate, at any given point, what the expected value of the suitcase in your hand is.
Step 1: What is the potential gain? At any point in the game, you can determine the potential gain. The highest values left on the board are the maximum amount you can gain from playing. At the start, this would be the $100,000 through $1 million prizes. As the game progresses, and cases are eliminated, the potential gain adjusts downward.
Step 2: What is the probability of that gain? There are 26 spots on the game board. The probability of you having the highest-value case in your possession is simply the number of “high-value prizes” (greater than $100,000) left on the board divided by the number of cases remaining.
For example: you’re playing the game, and there are 9 cases left (plus the one in your hand). The board has the $100,000, $400,000 and $750,000 prizes left, with 7 other smaller prizes also available. The probability that you have the case with one of these three prizes is 10%.
0.10 * $100,000 = $10,000
0.10 * $400,000 = $40,000
0.10 * $750,000 = $75,000
Summing these values, the approximate expected value of your case is $125,000. If the banker offers you anything less, you should say, “No deal!”
So how does the show keep from losing money on every player? The banker almost never offers anything over the expected value when there are still large amounts on the board. Players compare a paltry $150,000 to the possible million-dollar prize and they can’t resist.
So now you know how to play. And how to ‘beat the banker!’
April 28th, 2006
Six figures to play with means you are doing something right, so pat yourself on the back. Any of the previous strategies will give you good returns as well, so here are a couple of general tips:
First, make sure you divide your money among different investments. You need to remember that FDIC insurance only protects each account up to $100,000, so never have more than that amount in any one bank.
Second, you need to diversify your investments. You can split this amount of money into many different investments, and you should. Check out our explanation of diversification to familiarize yourself with what to look at.
Third, consider employing a professional money manager if you don’t have time to manage it yourself. The worst thing you can do is make investments and not keep track of them. In theory, if you have made this kind of money, you are better off doing what ever it is you do to make that, and letting someone else help manage your money. This doesn’t mean you don’t stay involved, if anything you should be speaking with your manager weekly, if not daily to discuss strategy and performance. Think of them as your employee, not your guru.
Fourth and finally, have a lawyer review any contract for any kind of investment. Make sure they sign off that everything is normal and there are no special cases that could get you in trouble. See the above tip for why a professional is a better alternative than yourself.
April 24th, 2006
Short Term – CDs
Buying shorter-term CDs is now going to be more profitable for you, because you now have the ability to roll-over larger amounts. Shorter-term investments allow you to take advantage of interest rates rising (as they currently are).
Medium and Long Term – Real Estate
Looking at medium terms in the real estate market usually means buying notes or REITs. Buying a REIT is the less-involved strategy, but you will want to check in on it about once a month to make sure you are getting your money’s worth.
Buying notes is more complicated, but also more exciting and potentially more profitable. Most local governments hold auctions for tax-liens. When someone does not pay their taxes, the local government can put lien against their real property, and eventually these notes will be auctioned off (see NPV for a discussion of why). At these auctions you bid on notes by the percentage you are willing to accept in interest payments.
After a specified amount of time the person does not pay their lien, you can foreclose on their home and you will acquire the property. This is also a great time to flip your interest in the property to a local investment company, who will pay big bucks for the opportunity.
Long term you should look for an investment property which fits your style. Renting to a student population means more damages and repair calls, but you can be more confident that you will be able to rent the property. There are myriad options here, so check out some of our real estate articles for ideas.
April 24th, 2006
This amount of money can really get you started down the path to some great investing fun.
Short Term – Banking Bonuses Again
Tying up this kind of money in eBay sales would be a bit much to manage (but is a good diversification strategy), so we’re back to the banking bonuses.
With this amount of money you are looking at some pretty good bonuses. Some banks will offer a couple hundred dollars, some have offered things like PDAs and laptops in the past. Combining these bonuses with your eBay sales is an excellent strategy.
Once again, set up your spreadsheet to keep track of investments. Add columns for tracking numbers for items being shipped and phone numbers to account execs to make sure you are getting all you deserve.
Medium Term – CDs or Stock Market
A one to 5 year CD can be great place to park your money. At the time of this article, you can find CDs in this term around 5% APR. Upon cashing out, you can get between $1,250 and $2,500. Reinvesting your profits increases your earnings. This is another strategy where all you need to do is start the investment, and then check in once in awhile to see how your money is growing.
If you have more time and want to be more involved in your investment, you can begin to invest in individual stocks. The best strategy here is to being looking into companies that are close to the industry you work in, or are based in your area. I know of a class being taught at the University of Arizona that specialized in reporting on companies in the area that were all but ignored by Wall Street.
They found that Taser was ready to go in excess production capacity, so they did site visits and recommended a purchase to the University. Taser did go big, and now it is a big item on Wall St.
So, invest in something you know about, leave your money in that company for 6 months to a year and stay strong. The biggest mistake beginners make is to assume that when the price changes, you have incurred a loss. You do not incur a loss until you sell, so determine a holding-period you are comfortable with, and stick to it. Never buy high and sell low.
Long Term – CDs, Stock Market or Savings Account
While not as glamorous as other investments, a savings account can be a great investment, especially if you have significant money to invest. Banks such as ING offer sign-up bonuses as well as more than competitive interest rates. The reason is that internet banks do not have the same overhead as traditional brick & mortar banks. Plus, at this level of investment, all of your money is completely protected by FDIC insurance.
The CD strategy is similar to the Medium Term strategy, except that you continue to roll over your 5-year investments, reinvesting your profits each time, and multiplying your return each time.
The stock market strategy here is to invest in spiders or indexes again. Once again, you have the ability to “fire and forget” after opening your account. Growing this amount of money at 10% APR is very exciting.
April 24th, 2006
Many folks will tell you there’s nothing you can do with this amount investment wise, I disagree.
Short Term – Use eBay to Make Money
The internet provides many opportunities for profit on relatively small amounts of money. Websites that provide good deals on merchandise (like FatWallet.com) combined with an auction site like eBay, or a classifieds site like craigslist can create arbitrage opportunities.
The trick in this strategy is in finding a good deal, and timing your listing. As an example, let’s say the Dell offers the following deal on a flat screen monitor: it normally sells for $319, but with the right application of coupons and limited-time offers, you can get it for $249 with free shipping.
Once you receive your new monitor, list it on eBay. You can set your opening bid at $250, so no matter what, you profit. Let’s say that the final bidder knows he can get the monitor from Dell for $319, and the shipping cost is the same from you as from Dell. So, he bids $300 and wins. You have just made $50 on your initial $249 is your spare time.
The downside to this strategy is that it takes time. You will need to be involved in every step in this deal. However, since the formula can be repeated many times over in a year’s time, you stand to profit very well if you are diligent about finding deals.
Medium Term – Open bank accounts for the rewards
The idea here is not necessarily new, but it is exciting. Basically you use your on-hand cash to open new checking/savings accounts where sign-up bonuses are offered. For example, Bank of America in the past has offered $50 for depositing $150 and maintaining that balance for 90 days. After 3 months, you now have $200, a 33% profit.
The downside of this strategy is that you need to be diligent in keeping track of your investments. The best idea is to create an excel spreadsheet listing the institution, the bonus amount, the deposit amount, any special conditions (some places require you to use their bill pay services, etc.), and the “maturity date” of your investment.
Long Term – Invest in the Stock Market
Many will say that investment is too risky, but over a long-term, most risk in the stock market is mitigated, and you stand to make a good annual return on your money. To minimize your risk, consider buying an index fund or spider (such as the SPX).
The S&P 500 has averaged approximately 10% growth for the past 30 years. Leaving your $500 in the market for 5 years at 10% APR will give you around $300 back on your investment (60% profit). Trading stocks will kill your profit. At this level of investment, even $10 per trade means you are spending 4% of your money every time you buy and sell.
The best part is that you don’t need to do anything but check once a month to see how your investment did. This strategy requires no effort from you at all, except to open a trading account and make the purchase.
April 24th, 2006
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