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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 Checks are like slow-motion debit cards, which is why they can seem out of date.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.

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.

Five Ways to Give Your Business A Strategic Refresh

Do any one of these five simple refresh ideas and you’ll help yourself manage your business goals, growth, and execution. Do all five and you have a perfect lean business plan. 

Refocus...

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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Use Your Tax Refund to Spring Clean Your Finances

As you throw open doors and cast out the dirt that’s collected in your home all winter, remember that spring is also an ideal time to spruce up your finances  — especially those areas that may benefit from tax refund cash.

Tax season is a natural time to think about your current and future financial state as you sift to find W-2s, property tax statements and capital gains or losses in your portfolio. Your refund can also help you make overdue financial repairs — think lingering bills or a lackluster emergency fund — or perhaps invest in a stock that you’ve had your eye on.

Here are some practical steps you can take to bring new order and tidiness to your finances this spring.

Pay off high-interest debt

Putting your refund check toward paying off credit card bills that you amassed over the holidays isn’t the most fun way to spend a windfall, but it is among the smartest. This is true even if your refund won’t eliminate all of your debt. The average American household had nearly $17,000 in credit card debt in 2016; meanwhile, the average tax refund last year was just shy of $3,000.

Suppose you have multiple credit card accounts. Which should you pay first? Mathematically, it makes the most sense to pay down the account with the highest annual percentage rate. But some research suggests that paying off smaller debts first — known as the “debt snowball” method — may provide a psychological boost that keeps your debt management efforts on track. Either way, you can’t go wrong by paying down high-interest debt.

Adjust your withholdings

It may feel strange to think this when you get a big check from the government, but there’s wisdom in considering making a move to not get a refund next year — and instead using the additional cash in each paycheck to seed your bank accounts and retirement savings.

Eliminating that $3,000 refund could put $250 a month in your savings account. Put that cash each paycheck toward a holiday spending account, for example, and you may eliminate the stress of paying off high-interest credit card debt this time next year. You can adjust your withholdings any time of year through a W-4 form. Ask your employer’s human resources department for more details. Remember, a refund indicates you’re overpaying your taxes every paycheck — and giving an interest-free loan to the federal government in the process.

Open a retirement savings account

If you’ve already paid down high-interest debt and reclaimed previously withheld money from your paychecks, the next move involves earning a little return for yourself. Consider plunking your refund into a traditional individual retirement account or a Roth IRA. Both allow you to contribute up to $5,500 a year — or $6,500 if you’re 50 or older — but have different tax implications.

Your contribution to a traditional IRA is tax-deductible, but the withdrawals in retirement are not. For a Roth IRA, the reverse is true: You pay taxes upfront on the contributions, but you won’t have to pay taxes on withdrawals in retirement. If you already have a traditional or Roth IRA, consider putting your refund check toward your annual contribution limit for the year. And if you haven’t rebalanced your portfolio in a while, it’s also a good time to make changes to your investments and make sure risk is spread among different asset classes.

Buy company stocks

If the abundance of recent news on stocks — a phenomenon driven in large part by the tumultuous Snapchat initial public offering — has you wondering how to buy stock, keep this in mind: Only 13.8% of American families own individual company stock, according to a 2014 Federal Reserve report. Although most IRAs and 401(k)s offer exposure to the stock market through index funds and exchange-traded funds — vehicles that comprise a selection of stocks and thereby reduce risks for investors — many retirement accounts don’t allow investors to purchase individual stocks.

If you want to start buying company shares, you can use your refund check to open a brokerage account. But remember: Many experts recommend having no more than 10% of your total portfolio in individual company stocks — and likely less if you’re anywhere near retirement age. Make investments in companies with an eye toward long-term growth, not short-term gains. Profits favor the patient investor.

Kevin Voigt is a staff writer at NerdWallet, a personal finance website. Email: kevin@nerdwallet.com. Twitter: @kevinvoigt.

You Won! Congratulations — Now Pay Your Taxes

 

March Madness is one of the biggest gambling events of the year. Americans bet $9.2 billion last year on the tournament through office pools, offshore sites and bookmakers, according to the American Gaming Association. But few people realize that if they get lucky, the IRS gets lucky too. That’s because many kinds of financial windfalls may be taxable.

Here’s a head-to-head look at how lucky winners — of the office brackets pool, but also winners of others sorts — can make tax season a slam dunk, according to the pros.

Matchup: Office brackets pool vs. the IRS

Winner: the IRS

If your bracket doesn’t bust and you end up winning your pool, be sure to think about your tax return while you’re counting your winnings and bragging about your prowess for picking Cinderellas, says Jeff Fosselman, a CPA and certified financial planner at Relative Value Partners in Northbrook, Illinois.

“You are, according to the letter of the law, obligated to report that as income,” he says.

>>MORE: Find the best tax software

Matchup: Overachievers vs. Uncle Sam

Winner: Overachievers

The dollar values of small rewards from the boss, such as a turkey during the holidays or a free dinner for working late, are usually considered “de minimis”— Latin for, essentially, “concerning trifles” — and probably won’t show up on your W-2 as compensation, says Cynthia Kula, CPA, certified financial planner and director of tax at Walthall CPAs in Cleveland.

But be sure to ask about the tax consequences of those free cruises, weeklong trips or other big noncash awards the boss might dole out for beating performance goals, Fosselman says. They’re typically considered taxable at their fair market value.

“Generally, with those sorts of awards there’s no opportunity for withholding, so when you go to pay your taxes at the end of the year, your W-2 is going to have a lot more income and thus you’re going to be subject to a lot more tax and might not have enough withholding to cover that. You could have a substantial tax bill,” he says.

It’s OK to say “no thanks” if you’re not thrilled enough about an award to want to pay the extra taxes, Fosselman adds.

“Whether you enjoy it — even whether you go [on the trip] or not — if you have the award and you have the opportunity to go, you’re going to have to pay the tax bill on it,” he says.

>>MORE: Calculate your tax burden with our income tax calculator

Matchup: Lottery winners vs. the taxman

Winner: Lottery winners — if they play their cards right

If you’ve won the lottery, lock down the ticket before worrying about the tax bill, Fosselman says.

“You make the photocopy of it, you stick it in the safe deposit box, you lay low, hire the team of advisors and come up with a plan before you claim it. And hope you’re in one of the few states that allow you to collect it anonymously,” he says.

Deciding whether to take the lump sum or an annuity option is often a dilemma. For Kula, who says she once advised a group of employees who won a jackpot of around $23 million, lump sum is usually the way to go for tax purposes.

“There is planning to be done, and I think that overall it’s better to bite the bullet — pay [the taxes upfront] — instead of spreading it out so you’re paying that maximum in taxes forever,” she says.

But Fosselman warns: Depending on the size of the jackpot, the amount automatically withheld for taxes when you claim your winnings might end up being too low, which means winners could have a second tax bill coming. The annuity option could be better from a tax perspective, he says, if the payments are small enough to keep you in a lower tax bracket than you’d be in if you took the lump sum.

Tina Orem is a staff writer at NerdWallet, a personal finance website. Email: torem@nerdwallet.com.

This article was written by NerdWallet and was originally published by USA Today.

 

Female Faces of Student Loan Debt

How Much More It Costs to Own vs. Rent in Your State

Owning a home is often considered the American dream — and it’s an expensive one. Homeowners in all 50 states and Washington, D.C., pay from 33% to 93% more for housing each month than do renters living in the same state, according to a new NerdWallet analysis.

But many homeowners reap benefits that you can’t get from renting, such as financial security and stability, tax deductions and a vehicle for retirement savings. With each mortgage payment, you get closer to fully owning the home. The equity you build can be leveraged for loans like cash-out refinances, home equity loans and lines of credit that can be used to improve the home and boost its value or be used in financial emergencies.

While renting can’t offer those long-term financial benefits, it’s cheaper to rent on a month-to-month basis, the analysis found. If you’re wondering how to save money for a down payment, renting can help you build that nest egg — but in extremely expensive or competitive markets, renting might be better for the long haul. If you’re considering buying, before entering the market, use a mortgage calculator to estimate the costs and compare mortgage rates to find the best deal.

To determine the monthly homeownership premium — the additional cost of owning instead of renting, expressed as a percentage — NerdWallet compared 2015 American Community Survey data from the U.S. Census Bureau for the median gross rent and median homeownership cost in each state and Washington, D.C. Median gross rent includes the costs of monthly rent and utilities for all kinds of rental properties, and median homeownership cost includes monthly mortgage payments, real estate taxes, insurance and utilities. This comparison doesn’t include the down payment required to buy a home, which is traditionally 20% of the home price for conventional mortgages, but is lower for FHA or VA loans.

Key takeaways
  • Owning is more expensive everywhere. Across all 50 states and Washington, D.C., it costs more each month to own a home than to rent. The median cost people pay nationwide to own a home is 54% more than the median cost to rent each month.
  • The smallest difference is still a third more to own. The state where the premium to own a home is lowest is Florida, where it costs a median of 33% more to own than to rent. The states with the next lowest premiums are Colorado (40%) and Arizona (41%).
  • In some states, the cost of owning far eclipses renting. In New Jersey, the state with the highest homeownership premium, the median monthly cost of owning is nearly double that of renting (93%). The next most expensive places to own are Rhode Island, where the median homeownership cost is 84% higher than renting, and Connecticut, where owners pay a median of 82% more than renters each month for housing.

 

Emily Starbuck Crone is a staff writer at NerdWallet, a personal finance website. Email: emily.crone@nerdwallet.com. Twitter: @emstarbuck. Dan Tonkovich is a data analyst at NerdWallet. Email: dtonkovich@nerdwallet.com.

METHODOLOGY NerdWallet analyzed one year of data from the U.S. Census Bureau’s American Community Survey from 2015, the most-recent data available. To determine the homeownership premium, we used the median gross rent for all rental properties and the median homeownership cost for all states and Washington, D.C., to determine a percentage that shows the added cost, as a premium, that people pay each month to own a home.

Your State’s Most Popular Mortgage Lender Is Probably Local

Home buyers have ample options when choosing a mortgage lender, including neighborhood credit unions, big-name national banks and online-only lenders. But which type appeals the most to consumers across the country? A new NerdWallet analysis shows that for many people, a local bank or credit union — one headquartered in their state — is the top choice.

NerdWallet reviewed 2015 data —the most recent available — from the Home Mortgage Disclosure Act, which collects mortgage transaction information from all lenders in the 50 states and Washington, D.C. In more than 60% of cases, the top mortgage lender was a local one.

If you’re shopping for a home, getting a mortgage preapproval with your lender of choice before you make an offer can give you a competitive edge.

Key takeaways
  • Wells Fargo wins: Wells Fargo was the most commonly used mortgage lender nationwide during 2015. Quicken was the second most popular, and Bank of America was third.
  • Local lenders go toe-to-toe with big banks: However, for each state’s top lender, local institutions came out on top in 60.8% of cases, or 31 states. And home buyers used local banks or credit unions for the majority of all mortgages in nearly half of the states (22). In Hawaii and South Dakota, the top five mortgage lenders were local. Buyers might trust local lenders more, or in some cases, they might offer lower interest rates.
  • Market share is spread out: The average market share for each state’s No. 1 lender was just over 10%. The top lender held the highest percentage of the market in Alaska, where locally based Residential Mortgage LLC originated 29% of the state’s loans. The top lender had the lowest percentage of market share in Texas, where Wells Fargo originated only 4% of loans.

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Most popular lender by state StateMost popular lenderMarket share of most popular lender AlabamaRegions Bank (AL)6% AlaskaResidential Mortgage LLC (AK)29% ArizonaNova Home Loans (AZ)8% ArkansasArvest Bank (AR)14% CaliforniaWells Fargo Bank, NA (SD)10% ColoradoCherry Creek Mortgage Co. Inc (CO)5% ConnecticutWells Fargo Bank, NA (SD)5% DelawareNew Penn Financial LLC (PA)8% FloridaWells Fargo Bank, NA (SD)5% GeorgiaWells Fargo Bank, NA (SD)6% HawaiiCentral Pacific Bank (HI)9% IdahoIdaho Central Credit Union (ID)13% IllinoisGuaranteed Rate Inc. (IL)8% IndianaRuoff Mortgage Company Inc. (IN)7% IowaUniversity Of Iowa Community Credit Union (IA)12% KansasCapitol Federal Savings Bank (KS)8% KentuckyCentury Lending Company (KY)7% LouisianaGMFS LLC (LA)12% MaineResidential Mortgage Services (ME)16% MarylandFirst Home Mortgage (MD)7% MassachusettsGuaranteed Rate Inc. (IL)5% MichiganQuicken Loans (MI)7% MinnesotaBell State Bank & Trust (ND)10% MississippiBancorpSouth Bank (MS)12% MissouriDAS Acquisition Company LLC (MO)8% MontanaFirst Interstate Bank (MT)19% North CarolinaState Employees' Credit Union (NC)9% North DakotaGate City Bank (ND)18% NebraskaFirst National Bank Of Omaha (NE)14% NevadaGuild Mortgage Company (CA)7% New HampshireResidential Mortgage Services (ME)16% New JerseyWells Fargo Bank, NA (SD)11% New MexicoFirst Mortgage Company LLC (OK)13% New YorkWells Fargo Bank, NA (SD)10% OhioThe Huntington National Bank (OH)6% OklahomaBOKF, NA (OK)9% OregonGuild Mortgage Company (CA)10% PennsylvaniaWells Fargo Bank, NA (SD)5% Rhode IslandCoastway Community Bank (RI)8% South CarolinaWells Fargo Bank, NA (SD)6% South DakotaPlains Commerce Bank (SD)13% TennesseeMortgage Investors Group (TN)8% TexasWells Fargo Bank, NA (SD)4% UtahAcademy Mortgage Corporation (UT)11% VermontNew England Federal Credit Union (VT)27% VirginiaWells Fargo Bank, NA (SD)6% WashingtonHomeStreet Bank (WA)8% Washington, D.C.First Savings Mortgage Corporation (VA)12% West VirginiaPrimeLending (TX)7% WisconsinAssociated Bank, NA (WI)6% WyomingFirst Interstate Bank (MT)24%

Emily Starbuck Crone is a staff writer at NerdWallet, a personal finance website. Email: emily.crone@nerdwallet.com. Twitter: @emstarbuck. Daniel Tonkovich is a data analyst at NerdWallet. Email: dtonkovich@nerdwallet.com.

Updated March 22, 2017.

METHODOLOGY NerdWallet analyzed 2015 data from the Home Mortgage Disclosure Act and grouped mortgage originations by state and lender. We then counted the number of mortgages written by each lender in each state to find the most popular lenders. Finally, we compared the state in which the lenders were headquartered (provided by the HMDA) with the state in which the loans were written in order to categorize loans as out-of-state or local.
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