MONEY Budgeting

5 Money Mistakes to Stop Making by Age 30

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Stop asking Mom and Dad for a handout every time funds are tight.

Managing money is tricky, especially when you’re in your 20s and just starting your adult life. Between low starting pay, student loan debt, and the pressure to keep up with your friends materially, your finances are usually anything but perfect.

As you learn the financial ropes, it’s only natural that you’ll make some mistakes along the way. I certainly did — because nobody’s perfect, and our 20s are a time of self-discovery where we learn the dos and don’ts of money management. Alas, while you can get away with a few financial screw ups as a young adult, your 30s are the time to get serious about your money. You can no longer afford rookie mistakes.

To help you advance to the big league, here’s a look at five financial mistakes to stop making by age 30.

1. Not Getting Serious About Budgeting

As a 20-something adult, you might live at home with your parents or share household expenses with a roommate. As a result, maybe you’re able to spend money frivolously and you don’t have to pinch pennies. If you get into any financial messiness, you can easily dig yourself out of a hole, leaving you feeling like a budget is unnecessary. Except there’s one little problem: You’ll eventually be on your own.

By age 30, it’s time to put impulse buying and bad habits behind you and get serious about managing your money. A budget is one of the best ways to maintain control of your finances. You’re able to assess exactly where your money goes, and allocating a certain amount for different spending categories reduces the risk of overspending and ensures there’s enough cash for other financial goals (building an emergency fund, saving up to buy a house, paying off debt, etc). You’re an adult now, and you need to treat your money like one.

Read next: 6 Strategic Money Moves Every 20-Something Should Make

2. Using a Credit Card to Satisfy Your Wants

It’s smart to apply for a credit card in your 20s. A credit card jumpstarts your credit history and provides access to funds during an emergency. Unfortunately, some 20-something adults rely too much on credit and accumulate massive debt. (You’re not alone; I did it too.) But by the time you hit 30, it’s time to give credit cards a rest and live mostly on cash.

Using a credit card to satisfy your wants doesn’t end well. The more debt you have, the harder it becomes to save for the future, and high minimum payments make it difficult to afford basic living expenses, like a mortgage or utilities. In your 30s, a credit card should be the exception, not the rule. If you use credit, make sure you’re paying off the balance every month.

3. Ignoring Your Retirement Savings

Thinking back to my 20s, saving for retirement was the last thing on my mind. Maybe you feel the same way. In your 30s, you can’t afford to put off saving for the future. For every year you delay saving for retirement, that might be an extra year you have to work later in life — and who the heck wants to do that? Talk to your employer about joining the company’s 401(k) plan, and consider diversifying your retirement savings with an individual retirement account.

4. Relying Too Much on Your Parents for Support

I know from experience that making it on your own as a 20-something adult can be brutal. Entry-level salaries don’t always keep up with the cost of living, and making ends meet might require some financial assistance from your parents. There’s no shame in asking for help, but once you’re in your 30s, you need to stand on your own two feet.

This doesn’t mean you’ll never need financial help again, but instead of running to your parents every time you hit a financial roadblock, attempt to solve the problem yourself. What would you do if your parents weren’t in a position to help? You could possibly sell items you don’t need, ask your employer for overtime work, or downsize if you’re living above your means.

5. Skipping Health Insurance and Other Insurance Needs

Some 20-something adults remain on a parent’s health insurance plan until age 26. But once they’re on their own, some feel they don’t need insurance because they’re healthy and only visit a doctor once a year for a physical, which is free under the Affordable Care Act. But just because you’re healthy today doesn’t mean you’ll be healthy tomorrow. The older you get, the more likely you’ll develop health problems, and it only takes one trip to the emergency room to wipe out your savings account. Even if you can’t afford the best health insurance plan, some coverage is better than none.

You also need to stop ignoring other insurance needs, such as disability insurance in the event you’re unable to work for more than two weeks due to an injury or illness, and renter’s insurance, which covers the replacement cost of your belongings in the event of fire, theft, or other damage to the property. Life often throws us curveballs when we’re least expecting, so it’s best to be as prepared as possible.

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MONEY credit cards

4 Signs You Should Ditch Your Store Credit Card

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#1: You never use it.

Are you often tempted to apply for a store credit card when offered a discount? If so, then you might have more than a few store credit card accounts open. And while the discounts and perks that these cards offer can be nice, store cards are not always the most competitive products.

So if you are unsure of whether to keep all of your store credit cards, consider these four signs that it’s time to dump one of them.

1. You never use the card. A lot of people sign up for a store credit card just to get a one-time discount. If you did that, and then never used the card again, you probably don’t need to have that account open forever. Keeping it open for no reason will unnecessarily open you up to the possibility of a fraudulent charge, and can be a hassle when you receive meaningless statements or have to change your address when you move.

2. You find yourself paying more to earn rewards. Retailers love store credit cards because they act as an advertisement that customers keep in their wallets. But if you are passing up much better deals at competing retailers in order to earn a tiny amount of rewards on your store credit card, then your store card is costing you more money than its saving.

3. The rewards are uncompetitive. Store credit cards will vary tremendously in value of the rewards offered. While some cards might offer outstanding rewards worth 5% of your spending or more, others may only return a paltry 1% to 2%. In fact, there are now cash-back cards offered with no fee that will rival the rate of return for some weaker store cards, and you can spend your cash-back rewards anywhere you want, not just at a particular store.

4. You carry a balance. While store cards can be great for earning rewards and receiving perks, they are generally a very expensive way to borrow money. Store credit cards typically have between 20% and 30% APR, which is much higher than most credit cards offer to applicants with good or excellent credit.

Alternatives to Store Credit Cards

Once you have made the decision to stop using, or even cancel your store credit card, what are your alternatives? To replace your store credit card, consider these general purpose credit cards.

American Express Blue Cash Everyday and Blue Cash Preferred

The American Express Blue Cash Everyday card offers 3% cash back at U.S. supermarkets on up to $6,000 per year in purchases, 2% cash back at U.S. gas stations and select U.S. department stores and 1% cash back on all other purchases. These rewards compare favorably to many store credit cards. In addition, new cardholders can receive $100 cash back after spending $1,000 on their card within the first three months of account opening. In addition, new cardholders also receive 15 months of interest-free financing on both new purchases and balance transfers, with a 3% balance transfer fee.

There is no annual fee for this card, but to get an even higher rate of return, consider the Blue Cash Preferred version. It offers 6% cash back at U.S. supermarkets on up to $6,000 per year, 3% cash back at U.S. gas stations and at select U.S. department stores, and 1% cash back on other purchases. This card also features the same 15 months of promotional financing, but offers a $150 cash-back bonus after spending $1,000 within three months. There is a $75 annual fee for this card.

Citi Double Cash

If you want to just forget bonus categories and earn a high rate of return on all of your spending, then the Citi Double Cash card is strong choice. It offers a total of 2% cash back, 1% at the time of purchase and another 1% when payment is made. This card also features 15 months of interest-free financing on both new purchases and balance transfers, with a 3% balance transfer fee. There is no annual fee for this card. This card also requires excellent credit.

If you’re unsure where you stand, you can get a free credit report summary, updated every 30 days, on Credit.com. Because applying for a card causes a small, temporary ding to your score, it’s a good idea to choose a card marketed to people whose credit profile is similar to yours. You don’t want to take the hit to your credit score and not get the card.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

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MONEY Debt

A Whopping 80% of Americans Are in Debt

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But more than half have the "good" kind of debt.

The vast majority of Americans are in debt, according to a report from Pew Charitable Trusts published in July. For the most part, that debt comes from what many people would call a good thing — homeownership. Of the 80% of Americans with debt, 44% have mortgage debt. Overall, the median debt load among Americans is $67,900, overwhelmingly driven by mortgages (the median home loan balance is $103,000).

Still, Americans have a lot of non-mortgage debt, too, particularly young Americans. Only 33% of millennials (people born between 1981 and 1997), have home loans. In fact, millennials are much more likely to have student loan debt (41% have it), car loans (41%) or credit card debt (39%) than they are to have a mortgage. Among all other generations, mortgages are the leading component of consumer debt.

Credit card debt is still incredibly common among American consumers — with 39% of Americans reporting unpaid credit card balances, it’s not far behind mortgages as a leading contributor to consumer debt. While those balances are much lower than those for student loans, the high interest rates and revolving nature of credit card debt can make it a serious threat to consumers’ financial health.

Having debt isn’t inherently a problem, but it can quickly become one if you’re living beyond your means or not working toward bringing your balances to zero. Carrying a lot of debt — relative to your limits for revolving credit accounts — can have an adverse affect on your credit scores, which can subject you to higher interest rates on debt in the future. Here’s a calculator that can show you how your credit scores can affect your lifetime cost of debt. Keeping balances low relative to your credit limits — no more than 30%, but ideally less than 10% — can be beneficial to your scores. As you pay off credit card debt (assuming you don’t add to it at the same time), you should see your scores start to improve. You can see how long it will take you to pay off your credit card debt and how much you can save by adjusting your payments using this credit card debt payoff calculator.

If you’re among the 80% of Americans with debt, the best thing you can do is focus on managing your debt and credit well. Taking out loans or using credit cards can be a great financial strategy, but it’s important to go after the balances with a plan. Regularly review your credit score so you understand how your debt affects your credit standing, and set realistic goals for paying your debt down, while saving up for your future.

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MONEY credit cards

The Only Way Employers Can See Your Credit Report

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You have more say in the matter than you realize.

One of the most common complaints about credit scores isn’t even true — that your employer or potential employer can see your credit score.

“That’s probably the most common myth that that I hear about credit reports and scores,” said Rod Griffin, director of public education for credit bureau Experian.

Generally, anyone who can legally access your credit report can also see your credit score, but employers are the exception. Griffin said employers use credit reports as an identity-verification tool or as a sort of background check for people applying for positions that deal with money. It’s a controversial practice, and if your employer or potential employer requests to see your credit report, make sure you request one yourself so you know what they’re looking at. (Here are some tips for dealing with an employer credit check.)

It’s also important to know that while an employer can get your credit report, they must have your written permission to do so. The need for written consent (in addition to the fact that they can’t get your credit scores) sets employer credit checks apart from other entities that can request your credit report.

Your credit score isn’t the sort of information others’ can easily access — at least, not legally. For example, your spouse or family members aren’t permitted to just look them up, even though they likely have access to the information needed to do so, like your Social Security number, date of birth, etc.

If a family member or spouse has checked your scores without your knowledge or consent, that could be considered fraud, Griffin said. (Though experts do recommend you and your spouse share and discuss that information with each other so you can be transparent about your financial health, and can plan accordingly.)

This issue comes down to knowing who can access your credit reports. There are rules about who can see your credit report and, as a result, your credit score (except employers). Usually, a person or company can request your credit report if you’re applying for credit or if you’re initiating a business transaction, like renting an apartment, setting up utilities or opening an insurance policy. Any loan or credit card offers you might receive are usually a result of a company requesting a summary of your credit information.

Of course, you can also check your own credit report and scores whenever you want. In fact, it’s a good habit to practice, and it’s often free. You can also pull your free annual credit reports from AnnualCreditReport.com to see who has been checking your credit — each report lists the creditors and companies who have recently inquired about your credit.

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MONEY credit cards

What’s the Difference Between Visa and Mastercard?

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The rival payment networks administer benefits like rental car insurance, shopping discounts and other perks.

The names Visa and MasterCard are paired nearly as frequently as Minneapolis and St. Paul or Dallas and Fort Worth. But while these major cities are close neighbors, Visa and MasterCard are large payment networks that compete against each other. But to cardholders, Visa and MasterCard sometimes appear to be interchangeable.

What’s the Difference?

To most credit card users, Visa and MasterCard are just logos that appear in the corner of their card, in addition to that of the card issuer, and possibly a co-branding partner such as an airline, hotel chain or retailer. In the end, the payment network that a card belongs to will have three different effects on cardholders.

First, the payment network will administer benefits on behalf of the card issuer. The card issuer actually chooses which payment network a particular credit card belongs to, based on the benefits that it can offer cardholders, such as rental car insurance, extended warranty coverage and price protection. Nevertheless, the benefits offered by different cards in the same network can vary widely, as card issuers select from a range of benefits when they design a new product. So one Visa card may offer extended warranty protection, while another may not.

In addition, Visa and MasterCard both have premium benefit programs advertised to consumers that offer discounts on shopping as well as savings on travel and other travel perks. Visa offers its Visa Signature program, while MasterCard features its World MasterCard and World Elite MasterCard programs. For example, Visa Signature cardholders can utilize its Visa Signature Luxury Hotel Collection, which features more than 900 luxury hotels where cardholders can receive benefits such as free in-room Internet, room upgrades and complimentary continental breakfast. MasterCard’s World Elite program offers its Luxury Hotels & Resorts program that features similar perks to travelers.

Read next: What Your Credit Card Does (and Does Not) Cover for Rental Cars

Both Visa and MasterCard’s programs were represented in the winners of the Best Travel Credit Cards in America this year, to give you an idea of how competitive their programs are. Unlike other credit card benefits, customers who have a card that belongs to one of these premium benefit programs can know exactly what is offered, regardless of which bank or credit union issues the card. (You can check out the Best Hotel Rewards Cards in America if you’re interested in getting one of the most rewarding cards.)

In addition, there are some discounts available exclusively to holders of Visa and MasterCard business credit cards. The Visa Savings Edge program is available to Visa business cardholders and it offers savings on common business purchases such as travel, electronics and business solutions. For example, cardholders save 5% on Wyndham group hotels and computer manufacturer Lenovo, and Bing ads from Microsoft. Likewise, the MasterCard Easy Savings program offers similar savings on shipping, office supplies and travel. For instance, this program offers 5% savings on shipping from DHL and Avis car rentals, and 15% from advertisements on Monster.com.

Finally, Visa and MasterCard have slightly different sized payment networks. Visa says it’s accepted at “tens of millions” of merchants and 2.3 million ATMs, in more than 200 countries and territories. MasterCard says its cards are accepted with a similar number of merchants in more than 210 countries and territories. In the end, any difference is likely to come down to each company’s definition of a country or territory, and it’s extremely rare that a merchant will accept one but not the other.

Does It Matter Which One I Choose?

Even though credit card benefits are administered by the payment network, it is up to the credit card issuer to choose which benefits to offer for a particular card. Further, the rates and rewards of each card are also determined by the card issuer, not the payment network. Thus, credit card users will be better off focusing on the terms, benefits and rewards offered by a particular credit card, and not pay much attention to the payment network it belongs to. But once those factors are taken into account, it can make some sense to consider a card’s participation in a premium benefits program such as Visa Signature or World Elite MasterCard, as well as the savings program offered to business cardholders.

When it comes to your credit scores, the issuer of your credit cards is not included in the calculation of your scores, so it’s not a factor at all.

Although very similar, Visa and MasterCard do offer enough distinctions that can sway you to choose one card over another in some situations.

Read next: How Soon Will Your Credit Card’s APR Go Up Once the Fed Raises Interest Rates?

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MONEY credit cards

How Soon Will Your Credit Card’s APR Go Up Once the Fed Raises Interest Rates?

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The prime rate could go up as soon as the Fed acts.

When the Federal Reserve raises interest rates — and it won’t be today, but may come in September — your credit card’s APR is almost certainly going to go up as well.

For those who carry a balance, that means higher monthly minimums and higher interest charges.

How quickly will they hit you? Once the Fed acts, your card agreement spells it out, and there are variations between banks. Some will act superfast, others will grant customers a brief reprieve.

It has been nine years and one huge recession since June 2006, the last time the Fed voted to raise short-term interest rates. In the interim, a new federal law, the Credit CARD Act of 2009, imposed regulations on how card issuers could raise rates.

In those nine years, card issuers have switched en masse to variable rate cards tied to an index called the prime rate, and the prime rate moves in lock step with the federal funds target rate that the Federal Reserve can change.

The change to variable-rate cards makes sense for the issuers, since the CARD Act contains an exception allowing changes to variable rate card’s index to be passed along to consumers. The question I wanted to answer is: How fast will it happen?

Read next: When No Credit Is Worse Than Bad Credit

I reviewed credit card terms and conditions from the nation’s biggest credit card issuers and found some variation. Most issuers say their cardholders’ APRs will change with the start of their first billing period after the first of the month following the prime rate change. But Capital One says they only make those types of changes quarterly, meaning that cardholders will get a brief reprieve. That reprieve isn’t going to be a huge deal for most folks, but a lower APR is a lower APR, even if it’s only for a few extra weeks or months.

Don’t expect to find information about these policies easily, though. While some issuers addressed prime rate changes in the terms and conditions pages on their website, making it easy for card applicants to find, others didn’t. Some issuers — including Citi, Chase and Bank of America — mentioned the information only in the full credit card agreement, which may or may not be easy to find when applying for a specific card.

Here’s a look at what I found in issuers’ terms and conditions:

The Starwood Preferred Guest Credit Card from American Express
“When the Prime Rate changes, the resulting changes to variable APRs take effect as of the first day of the billing period.”

Barclaycard Arrival Plus World Elite MasterCard

“We use the highest Prime Rate listed in The Wall Street Journal on the last business day of each month…”

Wells Fargo Cash Back Visa Signature Card
“For each billing period we will use the U.S. Prime Rate, or the average of the U.S. Prime Rates if there is more than one, published in the Money Rates column of The Wall Street Journal three business days prior to your billing statement closing date.”

Discover It
“We calculate variable rates based on the Prime Rate by using the highest U.S. Prime Rate listed in The Wall Street Journal on the last business day of the month.”

Capital One Quicksilver
“Your variable rates may change when the Prime rate changes. We calculate variable rates by adding a percentage to the Prime rate published in The Wall Street Journal on the 25th day of each month. If the Journal is not published on that day, then see the immediately preceding edition. Variable rates on the following segment(s) will be updated quarterly and will take effect on the first day of your January, April, July and October billing periods.”

Again, Citi, Chase and Bank of America don’t address the timing of the change in their cards’ terms and conditions on their websites. You have to dig out the information in the full card agreement — a far lengthier, far denser document.

Here’s what these issuers say:

Citi AAdvantage Platinum Select MasterCard
“If the Prime Rate causes an APR to change, we put the new APR into effect as of the first day of the billing period for which we calculate the APR.”

Chase Freedom
“Any new rate will be applied as of the first day of the billing cycle during which the Prime Rate has changed.”

And Bank of America provides just sample credit card agreements, because “final rate and fee information depends on your credit history, so your actual rates and terms will be found on your Credit Card Agreement.” Here’s what they say in their sample credit card agreement for a Bank of America Visa/MasterCard Preferred Gold-Platinum card: “An increase or decrease in the index will cause a corresponding increase or decrease in your variable rates on the first day of your billing cycle that begins in the same month in which the index is published.”

Clear as a bell, eh? Not even close.

So what should you do? Your best plan of action is to tackle any credit card debt you have, while you still have time to pay it off at a lower rate. If you have no balance, a higher rate is only a theoretical problem.If you do carry a balance into the coming rate-hike era, the increases will happen without you having to do anything. It may happen more quickly or slowly, depending on which card you have, but it will happen. Meanwhile, if you’d like some clarification on exactly how and when your bank will implement the increase, your best move would be to just pick up the phone and give them a call. That’ll likely be a whole lot easier than searching through a giant credit card agreement for language that probably won’t be easy to understand anyway.

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MONEY credit cards

When No Credit Is Worse Than Bad Credit

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A blank credit history could hurt you in the long run.

Although we’re constantly hearing about how much student loan and credit card debt we collectively carry, there are a few of us who don’t have any loans to our names or balances on our cards. Some people even avoid credit cards altogether, assuming it’s better to be completely free of financial products that could potentially lead to trouble.

That’s not a bad way of thinking, but it’s not accurate to say that avoiding credit is better than carrying a dinged-up score. In fact, if you ever face the decision to finance a major purchase (such as when you fill out a mortgage application to buy a home) or need to use your score to prove your ability to pay a monthly bill (like signing the lease on an apartment or setting up some utilities) having no credit at all may causemore problems than having a bad credit score.

What’s wrong with no credit?

When you don’t have any credit, it means you haven’t done anything to establish a credit history. That means you haven’t taken out any loans or lines of credit — again, a good thing considering that means you have no debt either!

But having no credit can hamstring you if you’re looking to get a car loan or a mortgage. A bank or other lender has nothing to go on when evaluating whether you’re likely to pay back the money you borrow. There’s no history to analyze, which turns you into a large question mark for them. Essentially, they’ll need to guess at how likely you are to repay the loan.

Most lenders simply don’t want to do a lot of guesswork when it comes to approving large financing decisions like mortgages.

Bad credit, on the other hand, does give the financial institution considering the loan something to work with — it provides them with information about your habits. Granted, it can show a lender that the borrower is more of a liability, which means that applicant will likely receive a less favorable interest rate. They may pay more in interest over the lifetime of their loan, but they can still receive approval.

When considering this from the perspective of getting approved for a loan, it may be worse to have zero credit at all.

How to responsibly build a (good!) credit history

It’s smart to plan ahead if you know you don’t have a credit history (or if you have a very short history). Give yourself some time to build something good!

Start by taking out a credit card at your bank. This will make it easy to tie your new card to your checking account, so you can view everything in one place and get in the habit of paying off your balances.

Use your credit card consistently over time — and always make sure you’re paying off whatever purchases you put on the card, on time and in full. That being said, don’t use up all your available credit each month (even if you’re paying it all off). Spending up to your credit limit will impact your debt-to-credit utilization ratio, which can hurt your credit score.

You can also become an authorized user on someone else’s credit card if you don’t want your own — but be careful. If that person fails to manage their own credit wisely, yours could be negatively impacted too.

Repairing the damage from a bad credit score

All this being said, a bad credit score isn’t ideal. Bad credit can also hurt in the form of increased costs over the lifetime of a loan — if you’re able to secure one in the first place.

You can check your credit by pulling your report for free, once a year. When it arrives, check it for errors and contact any or all of the three credit bureaus if you find a mistake. If everything looks good, move to step two: Get your credit score by going to a site like Credit Karma or Credit.com.

Is your credit in rough shape? Start repairing the damage by taking the following actions:

  • Make all loan and credit card payments on time and in full.
  • Don’t close old accounts — doing so can affect the average age of your credit history, and the longer you have established lines of credit, the better for your overall score.
  • Keep a low debt-to-credit utilization ratio.
  • Don’t open lots of new accounts at once or incur multiple new hard inquiries on your credit over the span of a few weeks.

It takes some time to improve bad credit, but it’ll be worth the effort. Having a good credit score — and some credit history! — will go a long way to helping you secure a loan at the best interest rate available.

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MONEY

Gen Y’s Glaring Financial Oversight Could Cost Them Big

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Jonathan Fernstrom—Getty Images

It's the simplest thing, really

New research finds that a huge number of millennials don’t bother looking at their bills, an oversight that could be costing them—and anybody else who’s in the habit of paying without perusing—in more ways that you’d expect.

In a survey of more than 2,000 adults under the age of 25 conducted on behalf of technology company Inlet, 32% of respondents said they don’t look over itemized bills before paying them.

One possible reason could be because so many young adults pay their bills electronically these days. “Millennials are digital natives and are accustomed to living their lives on mobile devices and social networks,” Inlet points out in a release accompanying the results. The survey finds that fewer than 25% use paper checks and snail mail to pay bills, while about 10% get email reminders and 5% get text reminders when their bills are due.

But this convenience can have a downside if it leads to carelessness. If you don’t check your bills, here are some potentially costly outcomes that can result.

You might be paying for a service you don’t use. Maybe you signed up for a premium cable channel you no longer watch, or for a data plan that far outstrips your mobile usage. Maybe you signed up for a subscription — anything from a gym membership to movie-streaming site access—that you don’t use anymore. If you don’t look at your bill, this could slip your mind and cost you money.

You could miss out on savings. Sometimes, companies will offer money-saving options on your monthly bill that you won’t know about if you just look at the the total and tap a few keys or write out a check. For instance, you might be able save a few dollars if you opt for paperless statements or electronic payments. Expenses like insurance premiums sometimes can be a few bucks lower if you pay your annual premium in a lump sum rather than spreading out your payments over the course of the year.

You might get ripped off. Maybe you signed up for a cable package at a promotional rate, or were promised a discount on a purchase. The only way to make sure you’re getting what you’re entitled to is to check your bill. Glitches and mistakes do happen, and it’s up to you (not the company!) to be sure you’re not paying more than you should. In the case of credit or debit cards, you’ll also want to verify that you get the refund you’re owed if you return an item, and that you’re not overcharged at places like restaurants.

You could be a fraud victim. Hopefully you’d notice if someone went on a spending spree using your account information, but sometimes, small discrepancies can give you an early warning. When thieves steal a cache of credit or debit card information and sell it on the black market, the buyer will often make a small transaction—maybe a dollar or even less—to see if the stolen digits they just bought are still “live.” Catching an unfamiliar transaction that otherwise might go overlooked could save you a much bigger headache later.

Read next: Automate Your Finances With Our ‘Set It and Forget It’ Checklist

MONEY credit cards

5 Black Marks That Can Sink Your Credit Score

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Troy Plota—Getty Images

Derogatory information stays on your credit report for 7 to 10 years.

When you’re looking to apply for a loan, lenders place a major emphasis on your credit report. Your credit history includes your amount of debt and payment history, as well as other factors, and lenders look to your past credit behavior to see whether you’ll be a good credit risk going forward. There are some things on a credit report, however, that could discourage a lender from approving you. These “black marks” could make it difficult to get approved for a loan, and could even keep you from achieving certain financial goals. If you’re planning to apply for a loan but you’ve had credit challenges in the past, here’s what you need to know about credit report black marks.

What Is a Black Mark?

Any item that may be considered negative by creditors is often referred to as a “black mark” or “derogatory information.” These items indicate some sort of negative financial behavior, such as failing to pay debts on time, and they remain on your credit reports for an extended time, typically anywhere between seven to 10 years. Some of the most severe derogatory marks include:

Bankruptcy

Bankruptcy is essentially a legal process designed to reduce or eliminate a consumer or business’s debt — or make it easier to pay off. While it does provide some form of relief, bankruptcy is considered to be one of the most damaging marks to have on your credit report. Chapter 7 bankruptcy will stay on your credit report for 10 years while Chapter 13 bankruptcy will remain for seven years from the filing date.

Foreclosure

In the event that a borrower falls significantly behind on mortgage payments, the lender may opt to foreclose on the home. If the borrower fails to pay off the outstanding debt or cannot sell the home via short sale, the property then goes into foreclosure. A foreclosure will remain on your credit reports for seven years.

Collections

When accounts are reported as being sent or sold off to a debt collector, they are considered to be in “collections.” This usually occurs when a creditor is having difficulty collecting payments on a debt. A collections account will typically stay on your report for about seven and a half years from the date it first became late.

Tax Lien

Simply put, tax liens are when the government places a lien against some or all of an individual’s assets due to them neglecting or failing to pay a tax on time. Tax liens can remain on your credit report indefinitely, though credit reporting agencies often remove them after 10-15 years. Once you’ve paid off the debt’s balance in full it will take seven years from the date it’s paid for the mark to be removed. However, you may qualify to have the lien removed from your credit reports sooner, depending on the circumstances.

Civil Judgment

Although criminal records aren’t included upon your credit report, civil judgments (such as a civil lawsuit or child support case) are. A civil judgment is a ruling against you in a court of law that requires you to pay damages (typically in the event that you lose a case or neglect to respond to a lawsuit). A civil judgment stays on your credit report up to seven years.

What You Can Do About It

While derogatory marks can cause your credit score to take a major hit, they won’t keep you down the entire time they’re on your report. Maintaining good financial habits and keeping the rest of your credit in good health can help you build things back up. As negative information becomes older, it tends to have less of an impact on your credit scores, provided you have other current positive credit references. Paying down high credit card balances and keeping your debt usage ratio low, and making your payments on time are all things that can help you build your credit.

It’s also a good idea to get your free annual credit reports from each of the three major credit reporting agencies to check for inaccuracies and to generally stay informed. Checking your credit scores regularly can also help you track your progress.

While it might be hard at first, it is possible to return to good financial standing with a black mark on your credit report. Provided you strive to maintain good credit behavior, you should start to see your credit score start to inch upwards and your chances of securing a loan increase. Not only that, but the habits you develop during this period can hopefully help you avoid another derogatory mark in the future.

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MONEY College

Why Bank Accounts Are Better Than Credit Cards for College Kids

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ShutterWorx—Getty Images

Teens with checking accounts are better prepared to handle their finances than ones with access to plastic.

If you want your college student to learn money management skills, get him or her a checkbook instead of a credit card.

In fact, a recent survey of 42,000 first-year college students found that the earlier teenagers had access to credit cards, the less prepared they felt for managing their own money in college.

Those who had checking accounts, by contrast, were “markedly more prepared” to handle their finances than those who were unbanked before college, according to the study conducted by education technology company EverFi and sponsored by financial services company Higher One.

The findings match up with the experience of Janet Bodnar. The editor of Kiplinger’s Personal Finance and mother of three college graduates sees credit cards for college students as dangerous and unnecessary.

Young people need to have finite amounts of money to learn essential skills such as budgeting and monitoring their accounts, said Bodnar, author of the book “Raising Money Smart Kids.”

Ideally, students would start with a checking account in high school to manage income from their first jobs. Children who are not spending their own money often have a flexible definition of what constitutes a financial crisis, Bodnar said.

“An emergency is needing a dress for the sorority dance, or picking up the check for everyone at the pizza place because nobody has any money,” she said. “You think of plastic … as a convenience. Kids think of it as a direct line to your wallet.”

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Plastic Cautions

Personal finance columnist Kathy Kristof, who also writes for Kiplinger’s and who has sent two children to college, is on the other side of the fence. She thinks a credit card can make sense for some families.

“For parents who know their kids and have taught them how to handle money, it can make your life easier,” Kristof said.

College students typically can qualify for their own credit cards, without a parent co-signing or any credit history, when they turn 21.

If parents want to help a child build a credit history before then, they can add him or her to one of their own credit cards as an “authorized user.” (Parents should call and ask the issuer if it will export their account history to the child’s credit report, since some will only do so for a spouse.)

Kristof gave cards to both children, one a college graduate and the other still a student, to book flights home and cover emergencies.

“I’m happy to have the kids as authorized users because I can see what they’re doing and rip the card out of their hot little hands if they abuse it,” Kristof said.

So far, her daughter has always checked in before using the card. Her son, however, will sometimes use it without asking but will tell Kristof and pay her back before the bill arrives.

Kristof said she would not let her progeny get a credit card if she could not see the bills. Even a responsible college student can get distracted and forget to check the balance or make an on-time payment.

Just one skipped payment can devastate credit scores.

“What you don’t want to do,” Kristof said, “is put your kid in a situation where they could get credit dings before life really has gotten started.”

Bodnar cautioned that students who run through all their money should have to make a case to their parents about why they need more, not an excuse for what they already spent using a credit card.

“If they really need money, there are plenty of ways to get it to them fast,” Bodnar said, such as bank transfers or a system like PayPal or Venmo.
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