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5
Mar

Paying Tax Bill With Credit Card Results In Hefty Fees

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For the people that find that they owe more taxes to the Internal Revenue Service (IRS) for the 2014 tax year, paying that tax bill could be a problem. The amount of your tax bill is due by the last day to file income tax returns, April 15. If you have not prepared properly, the amount of the tax bill could create a significant financial hardship. To ensure that they can pay their tax bill on time, some people resort to using their credit cards to pay their taxes to the IRS. However, many of these people find that paying their taxes with a credit card can result in hefty fees that create a considerable amount of debt for the taxpayer. Here are some things that you should know about paying your tax bill with your credit card.

Taxes Must Be Paid Through A Third Party

The IRS does not accept credit card payments directly like they accept checks and bank account transfers because they are prohibited from paying the servicing fee that credit card companies charge merchants for authorizing transactions. This means that the taxpayer will have to go through a third-party payment processer to ensure that the payment made with their credit card is sent to the IRS in a form that they will accept. While handing your credit card information to a third party that has not properly been vetted is risky enough, it will also cost you more than making a payment to the IRS using other methods.

These Third-Party Payment Processers Charge Additional Fees

The fees paid to third-party payment processers that handle credit card payments for the IRS can be significant depending on the method used. If you use a debit card that uses the Visa or MasterCard network for processing payments, you may be able to get away with a flat charge of between $2.50 and $3.50 for making the transaction. If you use a credit card issued by a credit card company, you are often charged a percentage of the transaction as the fee. These fees can be as high as 3 percent of the amount of the transaction. For a tax bill of $5,000, this fee can be as much as $150, a significant amount to pay just to pay a bill.

Carrying A Balance Costs You More In Interest

If you are unable to pay off the amount charged for your tax bill before the end of the billing cycle, you will also be charged interest on the balance on your credit card. Carrying a balance on a credit card is one of the worst ways to spend your income because paying interest gives you no financial benefit other than allowing you to defer paying the entire amount for a period of time. With some credit card interest rates approaching 22 percent for purchases, the amount paid for the tax bill can quickly snowball into an enormous amount if you are only paying the minimum payment for your credit card. Over the course of a year, that $5,000 payment can generate another $1,100 in interest payments that must be paid to clear your balance.

2
Mar

What First Time Homebuyers Need To Know About Financing

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Buying a home is a big financial transaction, possibly the biggest you will ever make in your life. Navigating the financing process can be confusing if you are a first time homebuyer because you have not gone through the process before. The terms used may be unfamiliar and the financing calculations used largely depend on your financial situation when you apply for financing. Fortunately, there are a lot of resources available to help the first time homebuyer learn what they need to know about obtaining financing for a home. Here are some of the basics to get you started:

Special Loans Available For First Time Homebuyers

There are many special loans available to help first time homebuyers purchase their first home. If you meet the income and credit score requirements, you can generally get a first time homebuyers’ mortgage loan with a low interest rate and reduced down payment requirements to make buying a home more affordable. For example, EasyPlan home loans for first time homebuyers allows borrowers to get a mortgage loan for nearly the entire purchase price of a home while charging low fees and closing costs. While the qualifications for first time homebuyer loans can be more stringent than for traditional mortgage loans, you can save a considerable amount of money up front and over the life of the loan by securing a mortgage geared towards borrowers buying a first home.

General Eligibility Requirements

For most first time homebuyer mortgage loans, the eligibility requirements are similar. The potential homebuyer must have a credit score of 600 or above, must not have owned a home in the past three years, and be able to put down a down payment of at least 3.5 percent of the purchase price of the home. To have your mortgage loan application approved, you must provide full documentation of your income and assets and meet the lender’s debt-to-income ratio, generally 41 percent to 43 percent of your monthly gross income. While these eligibility requirement will fluctuate from lender to lender, they are a good starting point to estimate what you need before applying for a first time homebuyer’s mortgage loan.

Things To Consider

There are several things that you should keep in mind when considering a first time homebuyer’s mortgage loan. These types of loans generally have higher mortgage insurance requirements to protect the interests of the lender extending the loan and the mortgage insurance must be held for the entire life of the loan. There are also maximum loan amounts for these types of mortgage loans, so purchasing an expensive home in an affluent area may be out of the question. Loan limits vary depending on the median income in that area, so make sure you review the limitations before applying for the mortgage loan.

26
Feb

Signs Its Time To Switch Credit Cards

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Today, more people are using credit cards to make everyday purchases than ever before. Many of us obtained our credit cards when we were younger and we continue to use it because it is a convenient payment option for us. However, as time goes by, the credit cards we hold may stop being the best credit card for our needs. Here are some of the signs that indicate it may be time for us to switch credit cards.

Your Credit Score Has Increased

If your credit score has increased significantly since the last time you applied for a credit card, you may be able to get a better deal when you apply for a new credit card. The interest rate that you are charged for credit card purchases is directly linked to how high your credit score was when you first applied for the credit card. If your credit score is higher now, you should qualify for a new credit card with a lower interest rate and lower or no usage fees.

Your Credit Card Does Not Offer Relevant Rewards

Because the credit card industry has become very competitive with many new players entering the market, many credit card companies are offering attractive rewards for obtaining and using their credit cards. Some credit cards offer cash back on purchases while some others offer points that can be redeemed for travel or other things that you want. If you use credit cards frequently, these rewards can be lucrative. If the credit card you are currently using does not offer relevant rewards that you can use, it may be a sign that it is time to switch credit cards.

Your Credit Card Has A Low Limit

Credit cards issued to those with less than optimal credit generally have lower limits than credit cards offered to those with higher credit score. If you obtained your credit card before you were able to build up a good credit profile, there is a good chance that you are holding a credit card with a low limit. Obtaining a credit card with a higher limit will give you more purchasing power and may raise your credit score by altering your credit usage ratio. It is important to remember to only spend what you can afford to pay off when obtaining a credit card with a higher limit because you can quickly get in over your head overspending on a credit card with a high limit.