MONEY Love + Money

5 Super Easy Online Tools that Can Help Couples Feel More Financially Secure

hearts made out of money
iStock

Can't seem to get on the same page with your partner when it comes to money? Help has arrived.

In order to achieve common goals, getting on the same financial page with your romantic partner is critical—but it’s also challenging.

As our own MONEY survey recently revealed, a majority of married couples (70%) argue about money. Financial spats are, in fact, more frequent than disagreements over chores, sex and what’s for dinner.

The Internet can offer some strategic intervention. From budgeting to paying off debt, saving to credit awareness, these five online financial tools can help everyone—and, in particular, couples—get a better handle on their money.

The best part: They’re free.

1. For help reaching a goal: SmartyPig

SmartyPig is an FDIC-insured online savings account that—besides paying a top-of-the-heap 1% interest rate—is designed to help consumers systematically save up for specific purchases using categorized accounts like “college savings,” “summer vacation” or “new car.” Couples can link their existing bank accounts to one shared SmartyPig account and open up as many goal-oriented funds as they desire. You see exactly where you stand in terms of reaching your goals, which can motivate you to keep saving.

Additionally, SmartyPig has a social sharing tool that lets customers invite friends and family to contribute to their savings missions. Don’t want people to bring gifts to your child’s next birthday? In lieu of toys, you can suggest a ‘contribution’ to his SmartyPig music-lessons fund and provide the link to where they can transfer money.

2. For help boosting your credit scores: Credit.com

If you and your partner need to improve one—or both—of your credit scores and seek clarity on how, Credit.com can help. The Web site offers a free credit report card that assigns letter grades to each of the main factors that make up your score: payment history, debt usage, credit age, account mix and credit inquiries.

A side-by-side comparison of each person’s credit report card can—even if the scores are roughly the same—actually reveal that one spouse scored, say, a D for account inquiries, while the other has a C- under debt usage. From there you can tell what, specifically, each person needs to improve upon. “It may lead to some friendly competition,” says Gerri Detweiler, Director of Consumer Education at Credit.com.

3. For help tracking your expenses: Level Money

Called the “Mint for Millennials,” Level Money is a cash-flow-management mobile app that automatically updates your credit, debt and banking transactions and gives a simple, real-time overview of your finances. It includes a “money meter” that shows how much you have left to spend for the remainder of the day, week and month.

A spokesperson tells me that couples with completely combined finances can share a Level Money account and see all bank and credit card accounts in one place. They can get insight into when either partner spends money and how that affects cash flow. The company says it’s continuing to build out tools for couples.

4. For help eliminating debt: ReadyForZero

If you and your partner need some nudging to get out of credit card debt once and for all, ReadyForZero may be of service. Launched three years ago, it’s an online financial tool that aims to help people pay off debt faster and protect their credit. The free membership gets you a personalized debt-reduction plan with suggested payments. The site tracks your progress so you can see how well—or how poorly—you’re doing and regularly posts “success stories” on its site to motivate users. You also get access to the ReadyForZero mobile app which sends you push notifications suggesting an extra payment towards your balance if you just placed a larger than normal deposit in savings or checking.

For couples, the tool can help one or both partners to stop living in denial and to come to terms with their financial obligations. Says CEO Rod Ebrahimi, “it demystifies the debt.”

5. For help syncing up generally: Cozi

When I asked attendees at the annual Financial Bloggers Conference last month about what sites, apps and online tools they like to use to keep their finances in check in their relationships, a few pointed to the website and app Cozi. It’s not a financial tool per se, but Cozi helps households stay organized, informed and in sync with master calendars and household to-do’s like food and meal planning, shopping and appointments.

Want to schedule a meeting to talk about holiday gifting and how much to spend? Put in in Cozi. Want to plan meals for the week so you’ll know exactly what to buy at the market and not be tempted to order in? Tap Cozi to make a list.

Ashley Barnett who runs the blog MoneyTalksCoaching.com says she and her husband have been using Cozi for years. “My favorite part is that the calendar syncs across all devices, so when I enter an event into the calendar, my husband will also have it on his,” she says. Cozi’s actually gone so far as helping the couple minimize childcare costs. “Before Cozi, if I accidentally booked a meeting on a night my husband was working late, I had to either pay a sitter or reschedule the client, which is unprofessional and hurts my business,” says Barnett. “Now when I pull up my calendar I see his work schedule as well. No more surprise sitters needed!”

[Editor's Note: Cozi was recently acquired by Time Inc., the company that owns MONEY and TIME.]

Farnoosh Torabi is a contributing editor at Money Magazine and the author of the new book When She Makes More: 10 Rules for Breadwinning Women. She blogs at www.farnoosh.tv

MONEY Millennials

How Millennials Stalled the Housing Market Recovery

Wrecking ball hitting brick wall
Steve Bronstein—Getty Images

Millennials already have to deal with hefty debt from college, an iffy job market, and growing up in an era where MTV no longer plays music videos, but now they’re being blamed for holding back the real estate boom. Homebuilder adviser John Burns Consulting published details from a study earlier this month concluding that student loan payments will cost the housing industry 414,000 transactions this year that would have totaled $83 billion in sales.

Ouch. The ivory tower is crumbling at the foundation.

It’s been widely assumed that mounting student debt is eating away at this otherwise buoyant housing market recovery. John Burns Consulting’s study — boiled down to a free one-pager for those that aren’t paying customers that got the more thorough report — attempts to quantify the impact.

How did the adviser arrive at $83 billion? Well, we start with the 5.9 million households under the age of 40 that are paying at least $250 in student loan debt, nearly triple the 2.2 million leveraged college grads in the same predicament back in 2005. We then get to the assumption that $250 earmarked for student loan debt every month reduces the buying power of a potential homebuyer by $44,000. That’s bad, and it’s naturally worse depending on how much more than $250 a month some of these indebted students have taken on to pay back. That’s less money they can commit to a mortgage. John Burns Consulting offers up that most households paying at least $750 a month in student loan have priced themselves out of the housing market entirely.

It gets worse

The study only looked at folks between the ages of 20-40. That’s a pretty sizable lot, especially since 35% of all households in that age bracket have at least $250 a month in student debt. However, even John Burns Consulting concedes that there’s “a big chunk of households over age 40 who have student debt” as well. It’s not likely to be as bad, naturally, but it’s all incremental at this point.

This report also happens to come at a time when the housing industry is starting to flinch after a couple of years of boom and bounce. Right now everything seems great. New home sales data released this past week showed the industry’s highest monthly growth rate in more than six years. However, the near-term outlook is starting to get hazy.

Shares of KB Home KB HOME KBH 0.9834% shed more than 5% of their value on Wednesday after reporting uninspiring quarterly results. Revenue and earnings fell short of expectations, and the same can be said about its number of closings and order growth. Earlier this month it was luxury bellwether Toll Brothers TOLL BROTHERS TOL 0.1542% setting an uneasy tone after posting a year-over-year decline in the number of contracts it signed during the period and an uptick in the cancellation rate for existing home orders.

It gets better

The student debt crisis is real, and the skyrocketing costs of obtaining a postsecondary education naturally open up the debate of its necessity. However, it’s also important to remember that university grads are earning far more than those that don’t attend college.

Source: U.S. Department of Education, National Center for Education Statistics. (2014). The Condition of Education 2014 (NCES 2014-083), Annual Earnings of Young Adults.

The median of annual earnings for young adults in 2012 was $46,900 for those with a bachelor’s degree, $30,000 for those with just a high school degree or credential and $22,900 for those who did not complete high school. Those going on to grad school for advanced degrees — and that’s where student loans can really start to pile up — are at $59,600 a year.

In other words, most college grads, and especially grad school graduates, are typically better off than those that didn’t pursue higher education, even with the student loan albatross around their white-collared necks. The housing industry would be better off if colleges were cheaper or if student debt levels were lower, but the same can be said about purchasing power in general. At the end of the day, debt-saddled or not, the housing industry needs its college graduates.

MONEY College

Choosing a College Major by Age 16 Pays Off. Here’s Why

Forget the old thinking that kids could wait until college to decide a major. Today, they really ought to be making this decision before their junior year of high school.

I know what you’re thinking: How can I suggest such a thing? Why would we put that kind of pressure on high school students? Shouldn’t they be allowed to explore their interests in college first before having to declare a major?

But what’s the alternative?

By the time most students lock down their major, they’re halfway through their college career or nearly out the door. By some estimates, 80% will change their course of study at least once before graduation. And, we’re telling them not to worry about it. Just take your time, explore your interests and get your diploma.

But with students’ future financial health on the line, discussions around major choice and career path are just happening too late.

Delaying these important decisions could leave a student needing more than four years to complete the class requirements necessary to get a degree, and additional semesters or years add to the already burdensome cost of an education. For bachelor’s degree grads in the class of 2013, average education debt was almost $38,000, according to a report by Edvisors.com.

Additionally, what if a student ultimately ends up choosing a major that leads them into a low-paying field after they’ve already decided on a high-cost school and taken on substantial amounts of student loan debt?

Income-driven repayment plans from the federal government may offer some help for those that choose less lucrative career paths, but these plans do extend the repayment period from the typical 10 years to 20 to 25 years. This could mean that in the years when your children should be thinking about saving for retirement or for their own kids’ education, they’ll still be paying off their student loans. And, these plans won’t apply to any private loans used to fund college.

Major choice, and ultimately career path, should help guide your child’s choices around where to attend college and how much education debt they can afford in the long run. These choices have far-reaching implications. Here at PayScale, we just released data on salary potential for 121 associate degree majors and 207 bachelor degree majors as part of our annual College Salary Report. Understanding earning potential should be a pre-requisite to signing any student loan documents.

Big life decisions are scary, but mountains of debt (and the prospect of your college grad moving into your basement) are much scarier. Twenty-eight percent of Millennials have had to move home with their parents after college due to financial hardship. You’re not doing your son or daughter any favors by advising him or her to delay the decision on a major.

It’s not all on you as the parent either. High school curriculum should be helping students understand real-world applications for what they’re learning and guiding them into career paths for which they’re well-suited. “Career day” doesn’t cut it anymore.

And, I bet if you asked the average 10th grader which careers will have to use algebra on a regular basis, they couldn’t tell you. We need to be showing them why the subjects they’re studying matter and how they apply to careers they may be interested in pursuing. We need to expose them to careers they might not even realize exist.

Even if your kid doesn’t definitively choose a major by the time they graduate high school, starting these conversations early can only benefit them.

Lydia Frank is editorial director at PayScale.com, a site that provides on-demand compensation data and software to employees and employers.

TIME Argentina

Judge Holds Argentina in Contempt of Court

The South American country's showdown with the U.S. court continues

A U.S. judge found Argentina to be in civil contempt of court as it continues to defy his rulings that the country repay some $1.6 billion to holdout creditors–largely American hedge funds–before it pays other bondholders, Bloomberg reports.

Most recently, the country has moved to shift control of its structured debt payments to Buenos Aires from New York, despite the judge’s rulings.

U.S. District Judge Thomas Griesa in Manhattan said that move is “illegal and cannot be carried out.”

Griesa did not rule on a penalty, but the holdout creditors have asked him to fine Argentina $50,000 a day until it complies.

Argentina’s Foreign Ministry said on Monday that the contempt ruling undermines “the dignity of foreign states,” according to Bloomberg. “The decision by Judge Griesa has no practical effects beyond providing new elements in the defamation campaign being waged against Argentina by vulture funds.”

[Bloomberg]

MONEY Student Loans

The 5 Colleges That Leave the Most Students Crippled By Debt

Almost 650,000 federal student loan borrowers have defaulted on their debt, new data shows. A handful of for-profit schools are a big part of the problem.

UPDATED: September 25, 2014

More than one out of eight students who had a federal student loan and left college or graduate school in 2011 has since defaulted—a total of almost 650,000 Americans, the U.S. Department of Education reported today.

In all, 13.7% of the 4.8 million federal student loan borrowers who graduated or dropped out of a higher education program in 2011 have gone at least nine months without making a payment on that debt.

That number is alarming to many analysts because new flexible repayment programs have made it much easier to repay federal student loans. Some of the government’s new income-driven repayment plans, for example, cap payments at 10% of a borrower’s discretionary income.

Students and parents should be wary of colleges with high default rates, advises Debbie Cochrane, research director of The Institute for College Access and Success. “At schools with both high borrowing rates and high default rates, too many students are clearly leaving school worse off than before they entered,” she says.

A handful of for-profit colleges are responsible for a disproportionate number of the defaults, according to the new government statistics.

The Education Department says it will stop making loans to students at the 21 colleges with the worst default rates. (It will cut off schools with a three-year default rate above 40%, or three consecutive three-year default rates above 30%.) Twenty of those schools are for-profit colleges.

Many of the colleges with the highest default rates are trade schools, and many are comparatively small. The Coast Career Institute, a California-based trade school with a 56% default rate, for example, currently reports having only 169 students. Eleven of the 21 colleges with the worst default records are beauty or barbering schools. On average, 19% of students at for-profit schools who left school in 2011 have defaulted.

What’s more, several other government agencies are looking into whether some for-profit colleges are trying to attract students using false or misleading marketing. Allegations of fraud leveled by the California attorney general have forced for-profit Corinthian College to shut down.

Overall, the default rates for public colleges was 12.9%. The default rate for private, non-profit colleges was 7.2%. But the four colleges with the largest numbers of defaulters were for-profit schools. They produced a combined total of more than 75,000 defaulters in the past three years.

The University of Phoenix, a for-profit company and the nation’s largest higher education system, with 242,000 students, accounted for more than 45,000 of the defaulters in the most recent three-year group. That represented 19% of all of the Phoenix students whose bills started coming due in 2011.

Spokesmen for Phoenix and an association of for-profit schools note that their default rates have been declining. The University of Phoenix’s three-year default rate for students who graduated or dropped out in 2010 was 26%, for example.

The largest producer of defaulters among public schools was Ivy Tech, a community college in Indiana, where 23% of the student borrowers who left there in 2011 have since defaulted on their student loans. On average, 20% of community college borrowers have defaulted over the past three years. Community college officials note that their students generally tend to borrow less than others because the schools charge lower tuition.

These five schools have the highest numbers of defaulters among those who left school in 2011, according the Education Department.

College Type # of federal student loan defaulters, 2011-14 % of borrowers who defaulted on federal loans due in 2011
1 University of Phoenix For-profit 45,123 19%
2 ITT Technical Institute For-profit 11,260 22%
3 Kaplan University For-profit 10,684 20%
4 DeVry University For-profit 9,081 19%
5 Ivy Tech Community College of Indiana Public community college 7,237 23%

Update: This post has been updated to add more information about schools with the highest default rates and to correct the Department of Education’s policy on loans for schools with high default rates.

TIME Debt

More Lenders Are ‘Garnishing Wages’ To Get Paid Back

If you’ve fallen behind on credit-card, medical, or other debt, there’s a growing likelihood that the lenders will simply help themselves to the contents of your paycheck — or even your bank account — to get their money back.

You read that right. Wage garnishment — typically thought of as a tool for collecting unpaid child support or back taxes — is increasingly being wielded by lenders and collection agencies, and it’s hitting middle class and blue-collar workers the hardest.

“The impact is often humiliating and stressful for employees. It can result in decreased productivity and motivation that can be detrimental to the affected employee, workplace, and employer,” payroll giant ADP says in a report about garnishment conducted at the request of ProPublica.

According to a joint investigation by NPR and ProPublica based on the ADP data, roughly 4 million working Americans had their wages garnished to pay off a consumer debt last year. For those earning between $25,000 and $40,000, consumer debt was the main reason for garnishment. Employees of manufacturing companies are more likely to be hit by garnishments, as are residents of Midwestern states.

These aren’t small amounts, either. Although some states limit how much can be garnished, a creditor can take up to 25% of your paycheck in more than half the country. What’s even worse is that debtors whose pay is garnished are likely to wind up paying back far more than the original debt owed, because creditors are free to tack on penalty fees, hike the APR on the balance, add their own legal costs onto the balance.

One American profiled by NPR, who fell behind on credit-card payments after an extended period of joblessness, is paying off a balance of around $15,000, even though the original bill he owed was less than half that amount.

“Pay seizures appear to be rising fast in certain states. The economic downturn has produced a significant increase in the number of debtors – and creditors seem to be suing at higher levels,” ADP says.

The effects of garnishments on a person or a family’s financial stability are significant, the report found. Having your pay garnished to pay back an old debt can drag down your credit score, making it hard or even impossible to get a loan or open a bank account. If you have more than one garnishment on your pay, your job could even be at risk.

In a 2013 report, the National Consumer Law Center warned that this kind of aggressive action can push families off a financial cliff and create ripple effects that hurt the broader economy. “When debtors lose their jobs, the consequences fall not just on the debtors and their families, but also on landlords, local merchants, and other creditors that the debtor might have paid,” the group says.

Fighting a garnishment isn’t easy. Borrowers have to go to court. And consumer groups including the NCLC say that some unscrupulous debt collectors (who often “buy” the debt from the original lender) tend to “overlook” the requirement to send notices about required court appearances before garnishing paychecks. If the indebted person doesn’t show up in court, even if they never got the notification, a judgement can be entered against them, and they might have no idea until their paychecks start getting lighter.

Creditors can even reach into bank accounts in some cases. The NCLC recommends that the state laws that govern garnishment of bank account assets give people a $1,200 cushion that creditors can’t touch. (Right now, only three states — Massachusetts, New York and Wisconsin — do.)

Despite the hardship this places on families, experts say the trend towards seizing wages is a big part of debt collectors’ strategy. “The emphasis is now on creditor garnishments,” consultant Amy Bryant tells NPR.

 

MONEY Credit

How to Raise Your Spouse’s Low Credit Score

It's not just your partner's problem—it's yours too, if you ever plan to buy a house or a car together.

While married couples don’t inherit each other’s credit scores, one partner’s weak rating could sink the family’s financial goals.

If one of you has a less-than-perfect number—anything under the mid-700s on the FICO scale—it can affect your ability as a couple to qualify for joint accounts, like credit cards, mortgages, or auto loans, says Rod Griffin, director of public education at Experian.

For example, lenders might not approve you together for as large of a mortgage as you’d like or may only extend you one with a really high rate. And if you can’t handle those terms, “you might find yourself completing an apartment lease application while you work to rebuild your spouse’s credit history,” says Griffin.

As the higher scoring spouse, it’s in your best interest to help your partner improve his or her credit. Here’s how:

Do encourage diligence about credit card payments…

The strength of your credit score is based 35% on your bill payment history and 30% on your level of outstanding debt—particularly credit card debt.

Remind your partner to pay his or her bills on time each month (you might suggest setting up account alerts so that you don’t have to be the nag). And explain to your loved one that it’s important to keep outstanding balances on his or her cards under 20% of the limit on those cards, since the formulas reward a low utilization ratio.

“Attacking those two issues will help improve credit scores faster than any other actions,” says Griffin.

…but don’t step in to wipe away your partner’s missteps

Think twice before using up personal savings to clear your partner’s towering credit card balance.

If the debt stems from reckless and irresponsible spending, bailing out your spouse won’t teach any lessons. “You’ll be an enabler,” says Barbara Stanny, author of the forthcoming book Sacred Success: A Course in Financial Miracles. “[Your spouse] could fall right back into debt.”

A more effective way to help reduce your partner’s debt may be to cut costs from your family budget (primarily from your spouse’s discretionary spending) and use the savings to chip away the debt. While it’s a slower process towards rebuilding credit, the extra discipline and effort involved may be a helpful reminder in the future of why it’s never a good idea to overspend.

Another strategy, if you earn enough money: Consider taking on some monthly costs that you previously shared—like rent or the car payment—by yourself to allow your spouse to use more of his or her salary towards personal debt.

Do let your partner piggyback…

Another possibly efficient way to improve your partner’s credit rating is by adding him or her to one of your major credit cards as an authorized user. “Most scoring models incorporate authorized user accounts in the [credit score] calculation, so they can contribute positively,” says Griffin.

You simply call up your credit card issuer and request to put your partner’s name onto the account as an authorized user. He or she will receive a personal card attached to your credit limit in the mail.

Assuming you both use the account responsibly and pay the monthly balance on time and in full, both your credit profiles can benefit.

But you should know that your spouse will not be liable for payments.

Also just make sure to monitor his or her spending activity regularly. If your partner gets too swipe-happy you may want to cancel access so you don’t see your score come down or your balance go up beyond what you can afford to pay.

….but don’t co-sign on the dotted line

Taking on a new credit card and using it responsibly is yet another way to help improve one’s credit rating. But if your partner needs you to co-sign or be added as “secondary” borrower, think twice.

You’re lending more than just your name. If your spouse falls behind on payments, the bank could come after your money.

“It’s a horrible idea,” says John Ulzheimer, credit expert at CreditSesame.com. “When you co-sign you are essentially…guaranteeing payment on behalf of someone whom the lender feels isn’t credit worthy on their own.”

Co-signed debt can also come to haunt you, should you ever get divorced. “There’s no easy way to separate yourself from it,” says Ulzheimer. “When the two of you break up, you’re still connected via the liability, whether you want to be or not.”

A better idea: Introduce your partner to a secured card, designed for borrowers who can’t qualify for a regular credit card yet due to poor or insufficient credit histories. You load it with your own money—usually between $300 to $500—and proceed to spend. You can only charge as much as you put down as collateral.

Secured cards are available at many banks and credit unions. Money likes the no-fee one offered by Digital Credit Union, the interest rate on which starts at 11.5%. (You must be a member of DCU to apply, though you can join with a $10 donation to Reach Out for Schools.)

The catch with a secured card is that it’s very easy to charge up to the credit limit, but that’s no good for your credit score. Ideally, your spouse should keep his or her spending to less than 20% of the limit.

Consistently paying off the balance for about a year may then earn your partner an upgrade to a traditional credit card with a solid credit limit—maybe even rewards. But most importantly, your spouse’s behavior using the secured card will also be reported to the major credit reporting agencies, which in turn helps to raise his or her credit score.

Farnoosh Torabi is a contributing editor at Money Magazine. She is the author of the new book When She Makes More: 10 Rules for Breadwinning Women.

MONEY 101: What is my credit score, and how is it calculated?

TIME Innovation

Five Best Ideas of the Day: September 19

1. China should match its massive investment in Africa with robust support for the Ebola fight.

By James Gibney in Bloomberg View

2. The market alone can’t drive advances in biomedical science. Philanthropy has a role.

By David Panzirer in Wired

3. Far from radical, the new USA Freedom Act protects citizens from government spying with better oversight and less secrecy.

By Mary McCarthy in USA Today

4. Outdated laws on debt collection and wage garnishment are crushing the working poor.

By Paul Kiel in ProPublica and Chris Arnold at National Public Radio

5. Scotlands referendum was a reassuring exercise in the ‘majesty of democracy.’

By Michael Ignatieff in the Financial Times

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

MONEY real estate

The High Cost of Failing to Refinance

Many homeowners have missed out on big savings by not refinancing, new research finds. Here's why.

Until recently, I’d never seen a mortgage rate south of 6%. Of course I’d heard that rates had dropped to almost half that, and yet, for a variety of reasons, I did not take advantage of them by refinancing my existing mortgage. Though illogical, my inertia is not uncommon. According to a recent paper by researchers at the University of Chicago and Brigham Young Unversity, the “failure to refinance” strikes approximately 20% of homeowners who could greatly benefit from the lower interest rate environment.

The costs of this failure can be sizeable over time. Say you had a 30-year fixed-rate mortgage of $200,000 at an interest rate of 6.5%. If you refinanced at 4.5 % (approximately the decrease between 2008 and 2010), you would save over $80,000 in interest payments over the life of the loan, even after accounting for refinancing transaction costs. If you had refinanced in late 2012, when rates hit an all-time low of 3.35%, you would save $130,000 over the life of the loan.

Failing to refinance isn’t completely irrational. Refinancing is a difficult transaction requiring extensive paper work, an appraisal and hefty fees. All of which triggers what the researchers call “present bias,” a psychological phenomenon that makes it harder for people to make decisions that may have upfront costs but longer-term benefits.

My own story illustrates the way that present bias impacts behavior. When I bought my current home in 2007, my rate on a 30-year fixed mortgage was 6.625%. As rates began to drop, I was never entirely clear how to calculate at what point refinancing would make sense financially. At the same time, I was receiving mail offers promising to save me money merely by increasing the number of mortgage payments a year. That made me wary of being taken advantage of by lenders looking to make money in transaction costs off of unsuspecting buyers. (This wariness has also always made me distrustful of any loans with “points.”)

By 2011, however, rates had clearly fallen enough to justify a refinance. But by that point I was considering moving, and I didn’t want to go through all the paperwork and hassle if I was going to be selling soon anyway. Then, like many others, I found that my house’s assessed value had fallen sharply from my purchase price. Given the weak real estate market at the time, it made more sense to stay put. Even though I knew that refinancing would still benefit me, the uncertainty about my future brought about by market forces only delayed my decision more.

Finally, in 2013, I refinanced. I wound up borrowing more as part of another financial transaction, but at an interest rate of 3.46%, my monthly payments are almost the same as they were before. I have since heard of wise colleagues who, instead of lowering their monthly payments, refinanced from a 30-year mortgage to a 15-year mortgage and as a result will own their homes outright in half the time while making about the same payments.

Which, if you think about it, means that they overcame “present bias” twice: first in the act of refinancing, and then by forgoing having extra cash on hand to spend now in order to be debt-free in 15 years. At the end of the day, refinancing isn’t just about saving money; it’s about what you do with that money that can make a huge difference to your long-term financial security.

Konigsberg is the author of The Truth About Grief, a contributor to the anthology Money Changes Everything, and a director at Arden Asset Management. The views expressed are solely her own.

MONEY credit cards

Why Millennials are Terrified of Credit Cards

Girl hiding under table
Getty Images

A new poll shows that 63% of Gen Y doesn't carry a charge card. That doesn't surprise MONEY reporter Kerri Anne Renzulli—she's among the majority.

Millennials may have no qualms about skipping cash and swiping plastic for purchases, but we are picky about what kind of card we use. A study released a few weeks ago found that 18 to 29 year olds prefer to swipe debit to credit by a ratio of 3:1.

And now a survey out today by Bankrate.com explains why millennials are reaching for their debit cards so much more frequently: Because it’s the only card many of us have.

More than six in 10 millennials do not own a credit card, the poll found. I am one of them.

For me, this survey was oddly reassuring, putting me in the majority as one of the 63% of Gen Y-ers. While I use my debit card multiple times a day, I still, at age 24, haven’t gotten my first credit card, despite heavy pressure from my parents and my older colleagues here at MONEY who urge me to begin building my credit history.

Why are we millennials making the conscious decision to push off this step?

We don’t love banks

Well, first there’s the fact that as a generation we have low levels of social trust. Having come of age during the recession, we don’t have much faith in traditional institutions like banks, and we certainly don’t want to be reliant upon them any more than we must.

My coworker and fellow cardless millennial Jake Davidson says this certainly figures into his reluctance to sign up. “I feel like credit card companies are waiting to trap me,” he says. “The whole model of their business is to get you into debt. If I use a debit card, there is never any risk of that.”

We already owe too much

Yes, it’s true that if we paid off our balances in full each month, there would be no chance of companies trapping us with revolving debt. But the idea of having to borrow any more money, even if only for a month, can feel like the equivalent of throwing away your life vest to those who are already swimming in deep waters.

I’m talking about the fact that we millennials are already overloaded. On average, we’re starting out with $27,000 of debt from student loans—and that’s just for the bachelor’s degree. Our levels of student loan debt, poverty, and unemployment are all higher than Gen X or Boomers at the same stage of their lives, according to Pew Research.

We’ve seen the dark side

Stories from our friends who’ve actually gotten a card (or two or three) are bleak enough to further scare the rest of us away.

Millennials are the least likely generation to pay their balances off in full each month. A whopping 60% of us don’t, according to Bankrate’s survey. And 3% of us miss payments completely—more than any other age group. That’s all thanks to the high levels of existing debt, low income, and underemployment that make us financially unstable.

We don’t realize what we’re missing

We can’t put this financial step off forever though, no matter how good our reasons. We will need to begin building up our credit histories if we ever want to have a chance of getting an auto loan, obtaining an insurance policy, or buying a house.

So my fellow millennials, if you need to wait for more steady financial times before signing up for plastic, please do so.

But if you’re feeling financially responsible and secure enough to add credit, you might consider easing in with MONEY pick Northwest Federal Credit Union FirstCard Visa Platinum, which is designed for people who don’t yet have a credit history. It has no annual fee, a fixed 10% APR (which is very low, given the average of 15.61%), and a $1,000 credit limit (also very low, so you can’t get into too much trouble).

The only catch is that to build good credit, you’ll want to make sure you aren’t ever using more than 20% of your available credit, or $200.

Oh, and also, you will have to take a 10 question quiz on credit knowledge to get the card—but a little schooling on the risks of plastic won’t hurt you and may even help you avoid turning a financial tool into a financial trap.

As for me, I’m six months behind my original plan to apply for my first card when I got a “real job.” But I’m feeling more motivated these days, knowing that the longer I wait, the further I’m pushing back my dream of renting a whole 600 square feet of New York apartment without my parents’ help.

More on Managing Credit and Debt:
3 Simple Steps to Get Out of Debt
7 Ways to Improve Your Credit
How Do I Pick a Credit Card?

Do you have a personal finance question for our experts? Write to AskTheExpert@moneymail.com.

 

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