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Emergency Fund The Emergency Fund: What Is It and Why It Matters

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Emergency Fund The Emergency Fund: What Is It and Why It's Important

Best kept in savings accounts, an emergency fund is useful for unexpected expenses.

By Margarette Burnette Senior Writer Savings accounts as well as money market accounts banking Margarette Burnette is a specialist in saving and has written about bank accounts since prior to when the Great Recession. Her work has been featured in various major newspapers. Prior to becoming a part of NerdWallet, Margarette was a freelance journalist with bylines in magazines like Good Housekeeping, and Parenting. She is based close to Atlanta, Georgia.

Updated February 17, 2023

Reviewed by Kathleen Burns Kingsbury Wealth psychology expert and coach Kathleen Burns Kingsbury, founder of KBK Wealth Connection and host of the Breaking Money Silence podcast, is a well-known author and speaker. As an expert on the psychology of money, Kathleen was featured on TV, and her work has been published in The New York Times, The Wall Street Journal, "PBS NewsHour,"" Money magazine, Today Money, Forbes and CNBC. Kathleen worked as an adjunct faculty member of the McCallum Graduate School at Bentley University from 2009 to 2019, and is now a professor for the Champlain College. Champlain College.

At NerdWallet the content we publish goes through a rigorous . We have such confidence in our accurate and useful content that we allow external experts examine our work.

A majority of the items featured on this page come from our partners, who pay us. This affects the products we write about and where and how the product is featured on the page. But, it doesn't affect our assessments. Our opinions are entirely our own. Here is a list of and .

The information about investing on this page is provided for educational purposes only. NerdWallet does not provide advisory or brokerage services neither does it suggest or counsel investors to purchase or sell specific stocks, securities or other investment options.

What exactly is an emergency fund?

A savings account is an emergency fund is a bank account with money set aside to cover large unexpected costs, such as:

Unforeseen medical costs.

Repair or replacement for your home appliance.

Major car fixes.

Unemployment.

Compare the best savings accounts

Find a savings account with a high yield with a great rate. Compare rates against each other.

Why do I need an emergency fund?

Emergency funds provide a financial buffer that can help you stay afloat during a time of need without having to rely on credit cards or high-interest loans. It is especially crucial to have an emergency fund in case you are in debt because it can help you avoid borrowing more.

How much should I put aside?

The quick answer is: If you're starting out, try to set aside a portion of money that could cover an important bill for example, $500. But keep working your way up. It's best to end up around half a year's worth of expenses.

The answer is long and complicated is: The best amount for you is contingent on your financial situation, but a best practice is to to cover three to six months' worth in living costs. (You may require more money if you freelance or work seasonally for instance, or if your job would be hard to find a replacement for.) If you do lose your job, you could make use of the funds to help pay for your necessities until you find a new one, or the funds could be used to supplement your unemployment compensation.

Savings can keep you from financial difficulties. Start saving now, and build your savings over time.

Are you in search of the top savings alternatives? Here are our top picks for you

Where do I put my emergency fund?

Ideally, you'd put your emergency fund into an account for savings that has a high interest rate and quick access. Since emergencies can strike at any time, having quick access is essential. So it shouldn't be tied to a long-term investment fund. But the account should be kept separate to that bank account you use daily to avoid being enticed to use your savings.

A is a safe location to store your money. It is federally insured up to $250,000 for each depositor, for each ownership category, and per financial institution, making it safe. (Read more on how savings accounts are federally insured by the Federal Deposit Insurance Corp., or , and the National Credit Union Administration, or .) In addition, the money earns interest and you are able to access your cash quickly when needed, whether through withdrawal or a funds transfer.

While a savings account is an excellent choice, certain people might not be able open one in the near future. If a bank shut down the account that you previously had such as, for instance, it may have reported the closure to an agency that tracks consumer information for example . This could prevent the new bank from accepting your account application. If that's the case, you have options. You could work with the agency . In addition, consider opening an account . After a few months building an excellent banking record You'll be more likely to be able to open a solid interest-earning account.

Credit Card for Savings and Cash Management. Money Market

Member FDIC

Savings and SoFi Checking

APR 4.00 percent SoFi customers who have direct deposit are eligible to get up to 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 1.20 percent APY on their checking balances. No minimum amount for direct deposits required to qualify for the 4.00 percent APY on savings. Members without direct deposit earn 1.20% APY on all balances on their checking and savings (including vaults). The rates of interest are variable and may change at any time. These rates are current as of 03/17/2023. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet

Min. balance required for APY $0

Member FDIC

Marcus is a product of Goldman Sachs Online Savings Account

APR 3.75 percentage 3.75% APR (annual percent yield) with no minimum balance to earn the APY stated. Accounts must have an open balance in order to stay open. APY is valid until 02/14/2023.

Min. balance required for APY $0

Member FDIC

CIT Bank Platinum Savings

APY 4.75 percent

Min. balance to APY $5,000

They combine the features and services similar to savings, checking or investment accounts in one product. These accounts for managing cash are typically offered by non-bank financial institutions.

They combine the features and services that are similar to savings, checking and/or investment accounts in one product. These accounts for managing cash are usually offered by non-bank financial establishments.

on the Wealthfront website.

Wealthfront Cash Account

APY 4.30%

Min. balance to APY $1

on the Betterment's website.

Betterment Cash Reserve - Paid non-client promotion

APY 4.20 Percentage of annual percentage yield (variable) is as of 03/27/2023.

Min. balance required for APY $0

CDs (certificates of deposit) are a type of savings account that has the option of a fixed rate and time typically, they have higher rates of interest than regular savings accounts.

CDs (certificates of deposit) are a form of savings account that has the option of a fixed rate and time typically, they have higher interest rates than standard savings accounts.

Member FDIC

Marcus is a Goldman Sachs High-Yield 10-Month CD

APY 5.05 5 % 5.05% APY (annual percent yield) as of 03/28/2023. Special Offer Expires 09/15/2023.

Term 10 months

CIT Bank CD with no penalty

APY 4.80%

Term 11 months

Checking accounts are used for cash deposits on a regular basis as well as withdrawals.

Checking accounts are utilized for cash deposits on a regular basis as well as withdrawals.

Deposits are FDIC Insured

Current Account

APY N/A

Monthly fee: $0

Chime Checking Account

APY N/A

Monthly fee: $0

Member FDIC

Axos Bank(r) Rewards Checking

APY 3.30% Your annual percentage yield can be up to 3.30 percent, depending on the following combination rate rewards direct deposits (not including transfers between banks from an account) totaling $1,500 or more each month will earn 0.40 percent. A direct deposit that qualifies as a direct deposit is required to satisfy the remaining interest rate requirements to apply. Ten (10) point-of-sale transactions each month using your Rewards Checking Visa(r) debit card to make ordinary purchases that have a minimum of $3 per transaction, or by enrolling in Account Aggregation/Personal Finance Manager (PFM) earn 0.30 percent. Maintaining an average of $2,500 in an Axos Self-Directed Trading Invest account earns 1.00 percent; and maintaining an average of at least $2,500 within An Axos Managed Portfolio Invest account will earn 1.00 percent; and making each month a payment to an open Axos Consumer Bank loan (commercial or business loans exempted) by transfer from your Rewards Checking account can earn a maximum of 0.60%.

Monthly fee: $0

Money market accounts pay rates similar to savings accounts and have some checking features.

The money market accounts have rates that are similar to savings accounts and have certain checking features.

Member FDIC

The Discover Bank Money Market Account

APY 3.50 percent

Min. balance required for APY $1

How do I build an emergency fund?

Calculate the amount you wish to save. Utilize the following formula if require help in calculating the expenses you will incur for six months.

Set a monthly savings goal. Instead of focusing on a single large savings goal, focus on smaller, achievable monthly goals. Achieving monthly milestones will provide you with positive momentum and motivate you to continue saving. This will allow you to keep your goals and make the work less overwhelming.

Move money into your savings account immediately. If your employer provides direct deposit, ask them if they are able to divide your pay between savings and checking. This way, your monthly savings goal will be taken care of without the funds touching your checking account.

Keep the money. Utilize mobile technology to save automatically every time you make a purchase. There are savings accounts and they connect to checking accounts and other accounts for spending to make it easier to round up amount of your purchases. The excess amount is automatically transferred to a savings account.

Make sure you save your tax refund. You can only get this once per year- and only if you are expecting an income. Saving it is an easy way to build your emergency stash. When you file your taxes and receive your tax refund, think about having it deposited directly into your emergency account. You could also think about making adjustments to your tax deductions to have less money to withhold. If modifying your deductions is a good option for you, then you could direct the extra cash into your emergency savings account.

Assess and adjust contributions. After several months to determine how much you've saved, and adjust if needed. When you've saved up enough money to pay for six months of expenses, think about investing some additional cash .

Here's the best thing to do if you suspect you could be the victim of

When you're saving you should draw a line between emergency savings and all other. In fact, once you've reached a threshold in emergency funds, it's probably a great idea to start a new " " savings bank account to fund things that aren't always expected, such as car maintenance, vacations and clothing. If you need help staying organized, consider opening distinct savings or subaccounts that are geared towards different financial objectives.

Everyone should be saving for the unexpected. The ability to have a reserve fund could mean the difference between weathering an economic storm that is short-term or falling into debt.

Utilize this calculator to begin. It only takes a few minutes:

Back to top

Author bios: Margarette Burnette is a savings account expert at NerdWallet. She has had her work featured on USA Today and The Associated Press.

In a similar vein...

Find a savings account that is more efficient

See NerdWallet's picks for the top high-yield online savings accounts.

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What will Fed Rate increases in 2023 mean for savings Accounts

(image: https://compacom.com/sites/default/files/images/article/1.png)Advertiser disclosure You're our first priority. Everytime. We believe that every person should be able to make financial decisions with confidence. Although our site doesn't include every business or financial product on the market, we're proud of the advice we offer, the information we provide as well as the tools we design are objective, independent easy to use and completely free. How do we make money? Our partners compensate us. This may influence which products we write about (and where they are featured on the site) however it doesn't affect our suggestions or recommendations, which are grounded in thousands of hours of study. Our partners do not be paid to ensure positive review of their services or products. .

What Fed Rate Increases in 2023 Mean for Savings Accounts

Interest rates for high-yield savings accounts could continue to increase, though not as quickly or as high as in the previous year.

By Margarette Burnette Senior Writer Savings accounts and money market accounts bank accounts Margarette Burnette is a savings expert who has written about bank accounts since before when the Great Recession. Her writing has been featured in major newspapers. Prior to being a member of NerdWallet, Margarette was a freelance journalist who had bylines in magazines such as Good Housekeeping, and Parenting. She is based close to Atlanta, Georgia.

Updated Mar 22 2023

Edited by Yuliya Goldshteyn Assistant Assigning Bank Yuliya Goldshteyn works as a banking editor with NerdWallet. She previously worked as an editor, researcher, and a writer across a range of industries from medical care and market research. She graduated with a bachelor's degree in history from the University of California, Berkeley and a master's degree in social sciences from the University of Chicago, with a focus on Soviet culture and history. She is located within Portland, Oregon.

A majority of the products featured here are from our partners, who pay us. This impacts the types of products we review as well as the place and way the product is displayed on a page. However, this does not influence our evaluations. Our views are our own. Here's a list of and .

It's 2023, and the Federal Reserve just announced its second Federal Funds Rate range increase of 0.25%. It follows seven rate increases in 2022. The new target, which is a range of 4.75 percent to 5%. This is less than some of the steep changes in 2022, but the increase also means that rates are at their highest point since 2006.

The recent rate hikes mean that loans as well as credit card debt are becoming more costly. If you've got an account for savings or a certificate of deposit, you may gain. Let's take a look at what the most recent rate hike might have for savings accounts by 2023.

Savings rates in 2023: 4APY or more

In early 2022, some of the top savings accounts had a 0.50% annual percent yield. The best savings accounts also .

This is a significant increase for one year. Since the most recent Federal funds rate hike from the is smaller compared to the majority of 2022 rate increases, don't expect to see APYs that are nearly 8 times more. But, you could notice yields that are slightly higher, with some accounts that are close to the 4% threshold.

Pay attention to high-yielding online savings accounts in particular, which tend to offer some of the best rates.

However there are savings accounts at handful of the biggest national banks are charged 0.01%, despite the multiple federal fund rate increases in the last year. These rates lag behind the national average savings rate, which was 0.37 percent at the time of writing on March 20, 2023, according to the Federal Deposit Insurance Corp.

If you have a savings account that has a low rate, it may be worth your effort to shop around for a savings account that earns around 3%-4 APY.

Shore up savings for the future

One of the main reasons why the Federal Reserve has been increasing rates is that it wants to combat inflation. According to the U.S. Bureau of Labor Statistics CPI, which is the measure of consumer prices which is frequently used as a measure of inflation, increased 6.0 percent year-over-year in February 2023. The figure, although excessive compared to the previous years, is less than it was in June 2022 when the CPI was 9.1 percent higher year on year.

This is a good reason to invest in a high-yield account now. Nobody can foretell the future however having a solid savings account can allow you for financial storm.

It's best to have 3 to 6 months of expenses in savings, but that's a lot. Even if you're not having as much saved up just yet It's possible to build it up over time in amounts that work for you.

Say you receive a paycheck twice per month and you can save $50 per payday. There will be more than $600 saved up within six months. That can help in a financial emergency. Placing that money in an account that has a high rate could help you build your savings.

The difference that a high yield savings account can make

Where you save your money can have an effect on the amount you have. If you place your emergency savings of $600 in an account with a 0.01% APY like that provided by some of the biggest national banks, and you didn't make any further deposits, it would earn an average of just 6 cents after a year. However, if the money was placed in a high yield savings account with a 4.00 percent APY, even if you didn't make any additional deposits, the balance would grow in excess of $24 during the same time. That's a gain for simply choosing a better savings account.

Learn how APYs are changing at high-yield accounts versus traditional accounts.

March 2023

February 2023

January 2023

December 2022

November 2022

October 2022

September 2022

August 2022

Online institutions

Member FDIC.

3.40% APY.

3.40% APY.

3.30% APY.

3.30% APY.

3.00% APY.

2.35% APY.

1.85% APY.

1.85% APY.

Member FDIC.

4.05% APY.

4.05% APY.

4.05% APY.

3.85% APY.

3.60% APY.

3.00% APY.

2.10% APY.

2.10% APY.

, Member FDIC.

4.00% APY.

4.00% APY.

4.00% APY.

3.60% APY.

3.25% APY.

3.12% APY.

2.07% APY.

2.07% APY.

National brick-and-mortar bank

Member FDIC.

0.01% APY.

0.01% APY.

0.01% APY.

0.01% APY.

0.01% APY.

0.01% APY.

0.01% APY.

0.01% APY.

Member FDIC.

0.01% APY.

0.01% APY.

0.01% APY.

0.01% APY.

0.01% APY.

0.01% APY.

0.01% APY.

0.01% APY.

You can do your own calculations using NerdWallet's to see what your savings could earn.

Fed rate hikes are expected to continue until 2023 -- to date. You can take advantage of this by putting your money in a high-yield savings account. You'll earn higher rates than you would with a normal savings account, and you will be more prepared for whatever financial situations occur.

Author bios: Margarette Burnette is a savings account specialist at NerdWallet. She has had her work highlighted on USA Today and The Associated Press.

On a similar note...

Benefit from better rates

With rates rising, take a look at our selections of the best high-yielding online savings accounts.

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Join now and we'll email you Nerdy articles about the topics in finance which matter to you the most along with other ways to help you get more out of your money.

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The reason nearly every purchase should be made using a credit Card

Advertiser disclosure You're our first priority. Every time. We believe that every person should be able to make financial decisions with confidence. Although our site doesn't include every business or financial product available on the market however, we're confident that the guidance we offer, the information we provide and the tools we develop are independent, objective simple, and cost-free. How do we earn money? Our partners pay us. This can influence the products we review and write about (and the places they are featured on the site) However, it does not affect our recommendations or advice that are based on hundreds of hours of study. Our partners do not be paid to ensure positive reviews of their products or services. .

Why Nearly Every Purchase Should be made using a credit Card

Credit cards are secure and convenient They help to build credit, they help budgeting more easily and also can earn rewards. You don't have to go into debtand do not have to pay interest.

Written by Virginia C. McGuire Virginia is a former credit cards author for NerdWallet. She is an experienced journalist, who has covered personal financial as well as business, real estate as well as design, architecture and. Her work has been published in The Philadelphia Inquirer, The New York Times, The Awl and Mental Floss.

as well as Paul Soucy Lead Assigning Editor Credit scoring, credit cards Personal finance Paul Soucy has led the Credit Cards content team at NerdWallet since 2015. He served as an editor for USA Today, The Des Moines Register and the Meredith/Better Homes and Gardens family of magazines for more than 20 years. He also established a profitable freelance editing and writing practice with a focus on personal and business finance. He served as editor of the USA Today Weekly International Edition for six years and won the top honor by ACES: The Society for Editing. He holds a bachelor's degree in journalism, as well as a Master of Business Administration. His home is in Des Moines, Iowa, with his wife, two sons and a dog named Sam.

Updated November 3, 2022

Written by Paul Soucy Lead Assigning Editor Credit scoring, credit cards personal finance Paul Soucy has led the Credit Cards content team at NerdWallet since 2015. He served as an editor for USA Today, The Des Moines Register and the Meredith/Better Homes and Gardens family of magazines for over 20 years. He also developed a highly successful freelance editing and writing practice with a focus on personal and business finances. He was editor of the USA Today Weekly International Edition for six years and won the most prestigious distinction by ACES: The Society for Editing. He has a bachelor's degree in journalism as well as a master of Business Administration. His home is in Des Moines, Iowa, with his fiancée, his two sons and the dog Sam.

Many or all of the items featured on this page are from our partners who pay us. This affects the products we feature and where and how the product is featured on the page. But, it doesn't influence our evaluations. Our opinions are entirely our own. Here's a list and .

More Like This

Cash was once the king of the world. People paid for everyday purchases using cash or checks (which are in essence equivalent to cash) They also stored credit cards for huge frequent purchases -if they had credit cards at all. Nowadays credit card transactions are accepted nearly everywhere, and a few people do not carry cash at all.

On the whole, NerdWallet suggests whenever it is possible:

Credit cards are safer to carry around than cash and provide better protection against fraud than debit.

You can earn significant rewards without changing how you budget.

It's easier to monitor your spending .

The use of credit cards responsibly is one of the simplest and fastest methods to build credit .

Credit cards are a great way to spend money . You can spend money the way you normally would, pay your balance on time each month, and enjoy all the benefits of credit cards while never carrying debt or paying an interest fee.

The top credit cards for 2023

Cash back and 0% APR transfers of your balance -- browse our Best-Of Awards to see the year's top credit cards.

>> MORE:

Credit cards are safer to carry and to use

When you loose your wallet or are taken hostage, the money you carried is almost certainly gone for ever. If thieves are on a spending in your credit cards, however there is a chance that you won't be held responsible for the fraudulent purchases. It might take a while to sort out the resulting mess, but you'll not lose any of your cash.

Debit cards, too, pose a risk. When your credit card is used fraudulently it is the issuer who suffers financial loss. If your debit card is used in a fraudulent manner, . If you report the fraud promptly and report the fraud, you will receive your money backat some point. It may take a while until the issue is resolved. During that time, checks may bounce, automated payments may be refused due to lack of funds and you could face a hard time covering the costs of your bills.

>> MORE:

Credit cards earn easy rewards

Credit card rewards are designed to make it easier for customers to make use of their credit card, and are extremely persuasive. With a simple flat-rate card that pays the same amount for every purchase, you can get back 1.5 percent, or even percent of each dollar you spend, whether as cash or as miles or points to use for travel or other things. Spend $1,000 every month, and you could earn between $180 and $240 per year with no effort.

Other cards offer higher rewards in specific areas of spending, such as gasoline, groceries or restaurants. Combine a handful of cards and you'll be able to boost your rewards significantly.

For example, say that a family has four top cash back credit cards -- the , the , and the . By strategically using them, the family could make hundreds of dollars each year in cash back:

Spending

Rewards rate

Reward points for each year

Groceries

$400 per month

6%

$288

Restaurants

$150 a month

* 5% per 3 months

* 3% for nine months

$81

Gas

$100 per month

* 5% for six month

* 3% for six months

$48

Amazon.com

$100 / month

* 5percent for six months

* 2.2% for six months

$42

Media streaming

$50 per month

6%

$36

Travel

$1,000 / year

5%

$50

Everything else

(image: https://cdn.slidesharecdn.com/ss_thumbnails/onlineloanspayday-160720084944-thumbnail-4.jpg?cb=1469004944)$1,000 per month

2%

$240

TOTAL

$785

Learn how rewards are earned

Groceries

The Blue Cash Preferred(r) Card from American Express earns 6% cash back up to $6,000 in annual spending at U.S. supermarkets, then at 1% (terms are applicable -- refer to ).

Restaurants

For three months: It(r) Cash Back program for three months: it(r) Cash Back program earns 5% cash back on up to $1,500 per quarter of spending on categories that you activate, and 1% on all other purchases. In 2020, restaurants were an area that earned 5% for one quarter.

For nine months: The Chase Freedom Flex(sm) earns cash-back of 3% at restaurants.

Gas

Three months in a row: Chase Freedom Flex(sm) earns you 5 percent cash back the amount of $1,500 spent in categories for quarterly that you can activate. For 2020, Chase included gas stations in a category with 5% during three months.

Three months in a row: In 2020 it(r) Cash Back was a part of the it(r) it(r) Cash Back included gas stations in an 5% category for three months.

The card is valid for six months. The Blue Cash Preferred(r) Card of American Express earns 3% cash back at U.S. gas stations (terms apply).

Amazon.com

For six months: the year 2020 Chase and Discover had Amazon.com as a 5% category for three months apiece.

The card is valid for six months. The Citi(r) Double Cash Card earns cash back of 2% on every purchase -- 1% when you buy and 1 percent when you repay it.

Media that stream

The Blue Cash Preferred(r) Card from American Express earns 6% cash back on selected U.S, streaming and streaming service subscriptions (terms are applicable).

Travel

Chase Freedom Flex Chase Flex Flex(sm) is a 5 percent cash back on trips booked through Chase.

Everything else

Make use of the Citi(r) Double Cash Card and earn 2% cashback.

A word of caution, but don't spend more than you normally would just to get additional benefits. The cash you earn won't make up for that extra $100 you spend at the grocery shop or that additional $250 worth of clothes. If you have a balance from month to months, the interest you pay will more than take the amount you earn So, pay the full amount whenever you can.

>> MORE:

Credit cards help you track the amount you spend

Maintaining a budget can be a struggle no matter the method you use to spend your money. However, determining where your cash went is particularly difficult. You can lose receipts, and there's often no other evidence of what you spent, and the location the money went. Checks? You've missed registering one in your check register, and you'll need keep waiting for the recipient to cash the check before you can trace it (and certain people are known for holding on to the checks over a period of months).

Credit cards are a great way to ensure that everything is reflected on your account online in close to real time. In addition the majority of issuers automatically categorize transactions in accordance with the merchant:

The purchases made on the Chase credit card are identified by categories.

Many major issuers will let you generate reports to determine the amount you've spent in various categories during a given month, or all year long or over a certain time you select:

Spending report on an Chase credit card.

If you're using a budgeting application like Mint and You Need a Budget, you can import the data from your bank and credit card accounts. This makes it easy to put each purchase into an appropriate budget category, and then see where you're overspending and the best places to indulge a little.

>> MORE:

Credit cards help build credit

You don't need to have a credit card to have good credit, and you certainly don't have to maintain a balance. But careful use of a credit card is the single best way to boost your credit score and, with good credit, can open many possibilities. It is easier to locate homes, whether a prospective landlord checks your credit score prior to granting you keys or seeking a loan to purchase a house. Cell phone providers, insurance agents and utility companies might use your credit history in determining your suitability, and even the rates you pay. This can increase the chances of landing a job, as the majority of employers conduct credit checks on applicants for jobs.

If you do have credit card, you can use it to make regular small purchases and keeping your balances at a minimum and paying your bill promptly will increase your credit score over time.

>> MORE:

Not to make use of a credit card

When you'll have to pay an extra fee: Merchants pay processing fees each time you use credit cards. Most times, these costs are rolled into price of the merchant, just like any other cost of doing business. However, sometimes, a business may charge you directly by tacking on an upfront charge or "convenience fee" to use the credit card. In those cases it's likely that you'll need to pay in another way in the event that your credit card rewards are enough to eliminate the surcharge.

If you don't want to force the merchant to be charged a fee: Similarly, you may be able to steer clear of using credit cards from smaller businesses you especially want to support. They may appreciate it if you pay in cash or with a check, because then they won't be required to pay the processing fees. Even debit cards are better than credit cards from merchants' standpoint, because processing fees for debit cards tend to be less than what you'd be charged for a credit-card transaction.

When you don't want to overspend: Some individuals have a hard time keeping their spending in check when using a credit card. That five-figure credit card limit can make it difficult to remember why you shouldn't purchase that shiny object. If you're getting close to your credit limit, or worried about racking up the credit card debt You might want to reach for your debit card, or even cash.

There are a lot of great benefits for customers of credit cards. Make sure you research the for you. Make sure that you're able to spend wisely, whatever method of payment you choose.

>> MORE:

To see rates and fees for the Blue Cash Preferred(r) Card from American Express , see .

The authors' bios: Virginia C. McGuire is a former credit card author for NerdWallet.

Paul Soucy is the lead credit cards editor for NerdWallet. He has previously worked for USA Today and the Des Moines Register and has an MBA.

In a similar vein...

Find the best account for your needs.

If you're looking to lower your interest rate or earn rewards, the right card's available. Simply answer a few concerns and we'll refine your selection for you.

Are you in search of an alternative credit card? Rewards and travel cash back on purchases Pay off debts Make big purchases build credit

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How to Handle Debt Collectors in 3 Easy Steps

Do not be rushed into making payments. Validate your debt and know your rights.

Written by Sean Pyles Senior Writer | Personal financial, credit, and personal finance Sean Pyles leads podcasting at NerdWallet as the host and producer of the NerdWallet's "Smart Money" podcast. In "Smart Money," Sean talks with Nerds from NerdWallet's NerdWallet Content team to answer listeners' questions about personal finance. With a focus on shrewd and actionable money advice, Sean provides real-world guidance to help people improve their financial lives. Beyond answering listeners' money questions on "Smart Money," Sean also interviews guests who are not part of NerdWallet and also creates special segments to explore topics such as the racial wealth gap and how to begin investing, and the history for student loans.

Before Sean was the host of podcasts at NerdWallet the company, he also wrote about topics that dealt with consumer debt. His writings have appeared on USA Today, The New York Times as well as other publications. When when he's not writing about personal finance, Sean can be found playing in his garden, taking walks, or taking his dog for long walks. Sean is located within Ocean Shores, Washington.

Updated Mar 17, 2023, 5:00 PM PDT

Edited by Kathy Hinson Lead Assigning Editor Personal finance, credit scoring, managing money and debt Kathy Hinson leads the Core Personal Finance team at NerdWallet. In the past, she worked for 18 years with The Oregonian in Portland in capacities such as chief of the copy desk and team leader for design and editing. Prior experience includes editing copy and news for a variety of Southern California newspapers, including the Los Angeles Times. She earned a bachelor's degree in mass communication and journalism at the University of Iowa.

Many or all of the products featured here are provided by our partners, who pay us. This affects the products we write about and where and how the product is featured on a page. But, it doesn't influence our evaluations. Our opinions are our own. Here's a list of and .

The debt collection agency is hounding you for payment on an outstanding consumer debt. tactics can be annoying at best -- and predatory, or even illegal, at worst.

It is essential to understand how to handle debt collectors --including understanding -- so you can assert your rights and select the best way to . Before you say anything or make any payments be sure to be sure to follow these steps:

Watch your debts dwindle

Sign up for an account that allows you to connect your cards, loans and accounts to manage them all in one location.

3 steps to deal with a debt collector

1. Don't give in to pressure to pay on first contact

Just as you wouldn't jump into a contract without fully understanding the terms, you shouldn't rush to make a payment when a debt collector contacts you. It is important to take the time to analyze your .

"A majority of people are ashamed of being in debt, and that's what debt collectors are after," says Ramon Khan who was a debt collector from Texas who works in the field of online marketing.

"They create this urgency and prey on those pain points to get you to make a payment. At the end of the day, if you have a debt of $50,000 or $100,000, they won't care that you're going to be able to pay the entire amount. If they can force you to pay some of it, that is a part of their limit of."

Don't make a payment, don't pledge to pay, and don't provide any information about your payment that the collector may make use of later. Ask for information on the debt and say you'll call back to discuss it later.

Making a single payment -as little as $5 or $10 -- is an acknowledgement of the debt, and could have severe consequences. If the debt is over the , for example, making a payment will reset the clock, which could cause a lawsuit, or .

Readers may also have questions.

Do you have the right to go to jail for not repaying the payday loan?

Inability to pay back the loan is not considered a criminal act. It is actually illegal to be the duty of a lender to threaten the borrower with arrest or jail. Nonetheless, some payday lenders have had success using bad check laws to file criminal complaints against borrowers, with judges wrongly rubber stamping the complaints.

How do I dispute a debt?

There are two options that you can make use of to dispute the amount of debt you owe: first, a the debt collector is required to send youa letter outlining the debt and your rights in disputing it; then, a debt verification letter. You can make a written request for more details and stop collection efforts temporarily.

What happens if you don't pay a debt collector?

Ignoring a over a delinquent debt can put your earnings, bank account or property at risk. Additionally, you may lose the ability to challenge that you owe the debt.

2. Find the information you need

If the creditor who originally sold the debt to a third party -- which might go on to resell the debt in the future or even resell it again -- recordkeeping often falls off the radar. Many sold debts have errors in the amount of debt or even who owes it.

Debt collection practices are among of the largest sources of complaints by consumers to the Consumer Financial Protection Bureau as the result. Around 70,000 complaints were filed in 2021 on the matter and the main reason was consumers being asked to pay off debts they didn't due [0] Consumer Financial Protection Bureau . . Accessed Apr 7, 2022.

.

Request a from the collector of your debt if you don't receive one within 5 business days from the first time you contact. It should include details on the amount owed, the collection company and how to challenge the debt.

Make your own notes on the debt If it's yours including details about the creditor's original identity and record of your payments.

Keep accurate records of communications with the debt collector as well as any payments previously made. You may want to use certified mail for the best evidence.

Find your debt in a simple way

Sign up with NerdWallet to see your financial breakdown and future payments all in one spot.

3. Know your rights and how to make use of them

Your ally is. This law outlines your rights as a buyer and shields you from the shady collection practices. For instance:

Communication: You can specify how and when can contact you and request that they cease communication altogether. Debt collectors are forbidden from making use of profane language or threats to commit violence.

Honesty: Debt collectors cannot lie to you about whom they're from, the much money you owe or the legal consequences for not paying the debtfor instance threat of arrest.

Challenging the debt: You have a right to challenge the debt. If you contest this debt before 30 days of first contact, the collector cannot ask for money until you have made sure the issue is resolved. After 30 days you can still contest the debt, but the collector is able to request payment as the dispute is examined.

You could be protected if the protections under the FDCPA have been violated. Your state might offer further consumer protections. Consult with the legal aid office in your local area or the department of the state attorney general.

Know your state and federal protections in the debt collection process. Your state's as well as the federal government are good resources.

Whether it's sending a letter to debt collectors to inquire about more information regarding the debt or demanding that a debt collector end contact, be aware of how to assert your rights as a consumer do not be fearful to do so.

The author's bio: Sean Pyles is the director of production and host for NerdWallet's Smart Money podcast. His writing has been featured on The New York Times, USA Today and elsewhere.

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Direct auto finance: what is it, and is it an ideal idea? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial choices by providing you with financial calculators and interactive tools as well as publishing unique and impartial content. This allows you to conduct research and compare information at no cost - so that you can make informed financial decisions. Bankrate has agreements with issuers including, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this site come from companies who pay us. This compensation can affect the way and when products are featured on this site, including such things as the order in which they may be listed within the categories of listing, except where prohibited by law for our mortgage or home equity products, as well as other home loan products. However, this compensation will not influence the information we provide, or the reviews you see on this site. We do not include the vast array of companies or financial offerings that could be open to you.

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Indirect auto is when the lender offers financing to the vehicle seller instead of directly to the buyer. The seller passes the loan to the buyer, and the buyer is required to make regular monthly payments to the lender whom the dealer is connected with to repay the loan. This method of financing vehicles is not without its drawbacks and benefits, therefore it is crucial to know all the choices before you sign off on an indirect auto loan. What is indirect auto financing? Indirect auto financing is available through from lenders in their network of partners. Instead of searching for an loan and getting preapproved before visiting the dealer and obtaining the financing once you buy the vehicle. The seller will receive a commission or other type of payment in exchange for connecting you to the lender. This can be in an amount of percentage that's added to your interest rate. When you make the final payment then the lender will let the lien or title for the automobile to the. For the duration of the loan term, you will also be charged interest on the loan the same way as you would with a . Other indirect loans Indirect loans may also refer to the process of making use of a marketplace or broker. Through these choices, you input your personal details and then are matched to any or all lenders. Most of the time your credit score won't be affected as these marketplaces need an inquiry that is soft. Furthermore, you will be able to view potential loan offers that contain the estimated monthly payment, time frame for repayment and the interest rates to help you make an informed choice. Before you decide on one, you'll also want to evaluate the cost of all loans. The pros and cons of indirect financing While indirect financing can help you have the most seamless experience when buying a car However, there are some disadvantages to consider before moving forward. Benefits of indirect financing In some cases, it makes more sense to . Shop and purchase at the same time. It's usually more convenient to buy at the dealership. You can shop and secure financing the on the same day. Less legwork. Although it's still beneficial to do so do so, it's not essential. If you want, you can go in without applying with other lenders prior to deciding on your vehicle. Bad credit options available. Specialty dealers can offer solutions for those with less than perfect credit. Pros and cons of indirect financing Prior to you make a trip to the dealer without a preapproval from an outside lender be aware of the drawbacks. The higher rates. The dealership usually will add a percentage to the over what is provided by lenders who meet your requirements. This means that you'll probably get the direct lender. You won't have as much control. You don't get to choose which lender you share your information around with. If you're already working with a credit or bank union, it could be beneficial to join it -- you may get a better rates or conditions than you would otherwise. Unavailable for some purchase types. If you're looking to buy from a , indirect financing is not likely to be an option. How do you get indirect auto financing The steps for obtaining the indirect financing for your vehicle are comparable to the procedure for a conventional loan. However, before applying make sure you have any documents handy that the dealer will need to send to the lender's on their network. This is a step-by-step guide on the process to follow by visiting the dealership. Explore the options and pick the car you want to drive. You can apply for a loan from the dealer. Get approved and choose the best deal. Sign your loan documents. Take possession of your . Alternatives to auto financing indirect If you do not want to obtain an auto loan via a dealer There are a variety of alternative options to finance your next car. Banks typically offer loans for vehicles, however it can be an involved process. If you're a credit-worthy person and a good credit score, a bank may be the right choice. But if you have a poor credit score, this may not be the best alternative. Credit union operate much like banks, but the members in the credit union will always be the main focus rather than investors. You will likely need to join the credit union, and membership requirements for members will vary from one to another. However, joining a credit union that provides auto loans can save you money, and also give you more flexibility. Online lender The use of the internet as a lender is another possibility to finance a car, without having to go through a dealer. Many online lenders focus on offering affordable rates and reasonable loan terms, as opposed to the huge commissions that you would encounter at a traditional dealer. The bottom line is that indirect auto financing is a convenient solution to help you purchase your next ride. It is important to research you do your research prior to visiting the dealer because you could get cheaper elsewhere. There is a chance that the dealer will match or beat an outside loan offer to earn your business. Learn more

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Mark Kantrowitz is an expert on student financial aid including the FAFSA as well as 529 plans, scholarships educational tax benefits, student loans.

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What is a difficult Inquiry?

Advertiser disclosure You're our first priority. Every time. We believe that everyone should be able make financial decisions without hesitation. Although our site doesn't include every business or financial product available in the marketplace We're pleased that the guidance we offer as well as the advice we offer as well as the tools we design are objective, independent simple, and free. So how do we earn money? Our partners compensate us. This may influence which products we review and write about (and the places they are featured on the site) However, it does not affect our advice or suggestions, which are grounded in hundreds of hours of study. Our partners do not pay us to guarantee favorable ratings of their goods or services. .

What is a hard Inquiry?

A hard credit check could take some points off your score temporarily, but an informal inquiry won't impact it.

By our Nerdwallet contributors are specialists in their fields, who come from diverse backgrounds in finance, journalism, and consulting. We adhere to the highest quality of journalism to ensure that our readers are provided with the information necessary to make financial decisions with confidence. Learn more about our

Updated on 13 February 2023.

Editor: Kathy Hinson Lead Assigning Editor Personal finance, credit scoring, debt and money management Kathy Hinson leads the Core Personal Finance team at NerdWallet. Prior to joining NerdWallet, she worked for 18 years at The Oregonian in Portland in capacities such as chief of the copy desk and team editor and designer. Her previous experience includes copy editing and news for many Southern California newspapers, including the Los Angeles Times. She graduated with a bachelor's in mass communications and journalism from The University of Iowa.

The majority or all of the products featured here are provided by our partners who compensate us. This affects the products we review and where and how the product appears on the page. But, it doesn't affect our assessments. Our views are our own. Here's a list of and .

Hard inquiries are a way for a review of your credit score, generally to make a decision about the validity of your loan or credit card application. This could shave the smallest amount of credits off your credit report, but it's temporary.

When you check your credit yourself, it's a "soft" credit inquiry, also known as a soft credit check, and it doesn't affect your score.

The Fair Credit Reporting Act places restrictions on when and why your credit report could be examined.

Need a credit report check-up?

Sign up for an account and get your credit report free and score on-hand, every day.

What is a difficult inquiry?

The term "hard inquiry," also known as an 'hard pull' or a credit check, is a process that requires your permission. It happens when you apply for credit, such as a mortgage, credit card, auto loan, loan for students, loan as well as a personal loan. It isn't triggered in the case of seeking pre-qualification to determine whether or not to apply.

This inquiry becomes part of your credit report, which means anyone who pulls your credit report can view it. The inquiry is visible on your report the duration of time, but it stops affecting your credit score within less than a year.

Nerdy Tip

If you are applying for a credit card which requires a hard inquiry on your credit you could get an influx of marketing messages from lenders. This is because credit bureaus offer marketing lists in response to hard inquiries. You can choose to not purchase, either permanently or for a period of five years. Visit , a service offered by credit bureaus Equifax, Experian, TransUnion and Innovis and 888-567-8688. The bureaus claim that the request will be valid after five working days. You may receive offers for marketing from lenders who use different sources. Not opting out will not impact your credit score nor the ability to apply for credits or for insurance.

How does a hard inquiry affect the credit rating of yours?

One single hard inquiry can reduce up to 5 points off your FICO score. However, with the most-used FICO model the inquiries that are made within a 45-day time frame are regarded as one inquiry when you are " ," such as for mortgage, student and auto loans. Older FICO models as well as VantageScore which is FICO's rival, also group inquiries for rate shopping, but in the 14-day timeframe. A VantageScore spokesman said a hard inquiry can shave up to 10 points off a VantageScore.

Most lenders or card issuers will get a credit history from only 3 credit bureaus -- Equifax, Experian or TransUnion. This means that the report will show up on just any of the reports. However, this is not the case with a mortgage, when all three credit bureaus are scrutinized.

It is wise to limit hard inquiries. Before you make an application for credit, check to be as certain that you are likely to be approved to ensure that you don't lose score points without gaining the approval you desire. Avoid applying for credit on impulse. Be sure to consider whether a discount or bonus that you are looking forward to receiving is worth the potential ding in your score. If you're already in the process one or two points, it may not matter much. If, however, you're of low credit scores consider reconsidering.

What is a soft inquiry?

Soft inquiries, also referred to as soft pulls or soft credit checks, may occur without your knowledge. If you've ever received a credit card offer through the post, it's likely that the company offering the credit card conducted a soft credit test to see if you would likely qualify. This is also true for other kinds of loan offers or when the mortgage broker or lender performs a pre-qualification or preapproval.

Employers may also conduct a background check on you and may look up your credit report that has been modified. Although they require your permission to review the credit history of yours, this is still not as a difficult inquiry since it's not a way of deciding whether to give you credit.

It is, in essence, a soft inquiry, so it will not affect your score. It is possible to get your reports on demand from a personal finance website such as NerdWallet. Or, you can to obtain your reports from the three main credit bureaus. The reports are available for free and up to the date of 2023, you're allowed to receive one report from each bureau per week.

When you look at your own credit reports, you'll see the soft inquiries mentioned, however these don't appear on the credit reports that lenders view.

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Hard credit inquiry or soft inquiry?

Some inquiries can be either difficult or soft. If you rent a car or apply for a rental apartment or sign up for internet or cable TV, open an account at an financial institution or a person requires verification of that you are who they say you are, you may encounter hard or soft inquiry. The only way to know ahead of time is to contact the prospective landlord or service provider.

If you think that a hard inquiry appears on your credit report but should not be, you can just as have other information that is inaccurate. It's definitely worth pursuing since it may indicate fraud or .

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What employers are looking for when they check credit -- and What They See

Advertiser disclosure You're our first priority. Each time. We believe that everyone should be able make financial decisions with confidence. While our website doesn't include every business or financial product available in the marketplace We're pleased of the advice we offer and the information we offer and the tools we develop are impartial, independent easy to use and completely free. So how do we make money? Our partners pay us. This can influence the products we write about (and the way they appear on the website), but it does not affect our suggestions or recommendations which are based on many hours of study. Our partners cannot pay us to guarantee favorable reviews of their products or services. .

The Reasons Employers Check Credit- and What They See

A credit check for employment does not show your score, just an updated credit report that includes the payment and debt history.

By Our Nerdwallet contributors are specialists in their fields and have a range of backgrounds in journalism, finance, and consulting. Our editorial standards are the most stringent standards of editorial to ensure that our readers have the information needed to make sound financial decisions without trepidation. Find out more about the services we offer.

Updated Dec. 2 2022

Editor: Kathy Hinson Lead Assigning Editor Personal finances, credit scoring debt and money management Kathy Hinson leads the Core Personal Finance team at NerdWallet. In the past, she worked for 18 years working at The Oregonian in Portland in positions such as copy desk chief and team leader for design and editing. Prior experience includes news and copy editing for many Southern California newspapers, including the Los Angeles Times. She received a bachelor's degree in mass communication and journalism in the University of Iowa.

The majority or all of the products featured here are from our partners who pay us. This impacts the types of products we write about and the location and manner in which the product is featured on a page. However, this does not affect our opinions. Our opinions are entirely our own. Here is a list of and .

Employers may check their credit report to determine the background of a potential hire, including indicators of financial difficulty that could suggest a possibility of fraud or theft. They don't get your credit score, but instead see an altered version of your credit report.

Credit checks by employers are more likely for jobs that involve the need for a security clearance or access to money, sensitive consumer data or confidential company data. They may also be done by your current employer before the start of a promotion.

This is what you should be aware of about your employer , including what details prospective employers may look at, what rights you have and the reasons why this procedure is controversial, and how to present your best face.

Find out how your credit is assessed

Check your score for free and the factors that impact it, as well as tips on how to keep building.

Why would an employer take a look at your credit report?

An applicant's credit history could indicate potential issues which employers want to stay clear of:

A lot of late payments may indicate you're not very organized and accountable, or fail to live up to agreements.

A large amount of credit or having a high amount of debt can indicate financial stress, which could be considered to increase the risk of fraud or theft.

Any evidence of mishandling your personal finances may indicate a poor fit for a job that involves managing company finances or information about consumers.

The Professional Background Screeners and HR.com's study of the human resources professionals in 2021 discovered that financial or credit checks are the most common part of background checks for employers in the U.S. [0* HR Research Institute . .

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What do employers see when they check your credit?

Potential employers see a modified copy of the credit report says Rod Griffin, senior director of public education and advocacy for Experian.

Here's what employers will see:

Identifying information like you full name, address.

Your credit accounts and your credit limit.

Your payment history.

The details of your employment or work history that you have self-reported on credit applications.

Bankruptcies or liens.

Here's what employers won't see:

Your .

Account numbers appear on your credit account.

Your income.

Medical charges.

Any identifiable information that could use to make you a target for discrimination, including your birth year, marital status, race and ethnicity.

Does an employer credit check hurt your score?

Companies can obtain the credit reports of their employers from one of the three major credit report bureaus which include Equifax, Experian and TransUnion -- or may choose to use a special screening company.

The credit check is considered a on your credit therefore it won't remove points off your credit score as a credit card application might.

The credit report also won't display other soft inquiries about your credit report, which means prospective employers won't be able to find out if any other employers have checked on your credit. However, you'll be able to view the soft inquiries if you want to request your own credit report.

What are your legal rights?

Notification and authorization A company must inform you in advance if they intend to check your credit and obtain your written permission. The Fair Credit Reporting Act requires the notice to be "clear and conspicuous" as well as not become mixed in with any other language.

Warn before being rejected A warning before rejection: If an employer may decide to reject you based on a portion or completely on your credit score the company must inform you in advance before the decision is taken. It has to send you an "pre-adverse action notice," including a copy of the report used and a summary of your rights.

Time to respond The company must allow an appropriate time generally three to five business daysbefore proceeding. The objective is to help you clarify the red flags on the report or, if the negative information is incorrect, let you fix the mistakes with the reporting company.

Notice of finality, the right to a free copy: Once it has acted and the company is required to follow up with a post-adverse-action notice that includes the name of the credit reporting agency, its contact information and describing your rights to receive a free copy of the report within 60 days.

The controversy surrounding credit checks by employers

Certain states have restricted the use of employer credit checks, which includes California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington.

Those who object to employer credit checks say that a worker's credit report is not a factor in their ability to complete the majority of jobs. Moreover, critics say the practice harms workers -particularly job seekers from minority groups -- because it can cause a problem on the path to stability in the economy.

"There are significant racial disparities in the history of credit and credit score," says Chi Chi Wu an attorney on staff of the National Consumer Law Center. "Studies show that Black as well as Latino consumers have lower scores on their credit as a whole," she notes, citing reasons like the racial wealth gap as well as other types of discrimination that makes debt harder to pay off and more difficult to accumulate.

"So, when you use credit history when you apply for jobs (background checks), you are sort of adding that disparity in racial status into your decision process for applicants," Wu says.

Those in favor say that credit checks offer employers insights into a job candidate's judgment and decisions that could impact their business in the future.

You can check with your local government to find out if employer credit checks are not allowed in your particular area.

What can you do to prepare for an upcoming credit check?

Checking your own credit proactively allows you to see what your employer would doand possibly correct any incorrect negative marks prior to.

You're entitled at least an unrestricted credit file each week from any of the three bureaus by . If you find any errors, get them corrected by an .

Once you've completed that, keeping your credit report clean is a smart financial move and will help protect your credit score too. Here's how:

Make sure you pay all bills promptly. Paying history is the single biggest influence on your credit scores So making timely payments helps your scores while also keeping delinquent marks off your credit report.

Utilize credit cards with a light touch. The experts advise against using credit use any credit card at any time -- and lower is better. It shows you're not strained financially and also helps your score since credit use has the second-biggest influence on them.

Check your credit report frequently. Some personal finance websites, such as NerdWallet offers a credit score you can view at any time you'd like, giving you a way to regularly watch for negative marks.

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5 Things You Need to Know About the Varo Credit Card

(image: https://getsamedaypaydayloan.com/wp-content/uploads/2020/03/Best-Same-Day-Payday-Loans-Online-Instant-Approval.jpg)Advertiser disclosure You're our first priority. Every time. We believe that every person should be able to make financial decisions without hesitation. While our website doesn't feature every company or financial product that is available, we're proud of the advice we offer and the information we offer and the tools we create are objective, independent, straightforward -- and completely free. So how do we make money? Our partners pay us. This could influence which products we write about (and the way they appear on our site), but it in no way affects our recommendations or advice, which are grounded in many hours of study. Our partners are not able to pay us to guarantee favorable ratings of their goods or services. .

5 Things You Need to Know About the Varo Credit Card

It promotes responsible credit usage and makes penalties relatively low should you make a mistake down the road, which is hard to do.

By Jae Bratton Lead Writer Credit card Jae Bratton is a writer on the credit card team at NerdWallet. She earned a bachelor's in English from Wake Forest University and a master's degree in English from the University of North Carolina at Greensboro. Before she began writing for NerdWallet, Jae spent 13 years in teaching English in addition to journalism. Her writing has appeared in newspapers, blogs as well as an academic publication. Jae is based in North Carolina.

Updated February 10, 2023 10:19AM PST

Edited by Kenley Young Credit score, credit cards Kenley Young is the director of daily credit cards coverage for NerdWallet. Prior to that, he worked as a homepage editor and digital content producer for Fox Sports, and before that a front page editor for Yahoo. He has decades of experience in both digital and print media, including stints as an editor at the copy desk as well as a wire editor, and a metro editor of The McClatchy Newspaper chain.

A majority of the products we feature come from our partners, who pay us. This impacts the types of products we review and where and how the product is displayed on a page. However, this does not influence our evaluations. Our opinions are entirely our own. Here's a list of and .

A LOT LIKE THIS

Varo Believe Secured Credit Card Varo Believe Secured Credit Card issued by the online bank Varo It shares many of the same characteristics to other cards designed for consumers who want to improve or build their credit. The closest cousin could be the . Similar to that card -- which is also aimed at people who are new to the field The Varo credit card does not have an annual percent rate, or APR, and has no annual cost or minimum security deposit; it does not run an actual credit check each time you apply. The features you get with the Varo credit card can save you money as well as keep you from losing points on your credit score, which often occurs following a .

Varo Believe Secured Credit Card Varo Believe Secured Credit Card is designed to guard against overspending , late or missed payments. It's capable of earning rewards. However, the security measures included in the card might appear limiting and too much for certain.

Here are five things you need to know about the Varo credit card.

>> MORE:

1. You'll need an account at a Varo bank account to get the Varo credit card

There's no fee for setting up a Varo bank account, but there's still a hoops you have to leap through. While there's no security deposit required to get the Varo credit card, you're only eligible to get one if your Varo account has been able to receive direct deposits that are at least $500 in the past 90 days. The deposits of an employer or the government count, but transfers made through peer-to-peer applications like Venmo don't.

If your Varo bank account meets these conditions, you'll then get invited to submit an application for Varo Believe Secured Credit Card on the Varo Bank app.

>> MORE:

2. You can set your own credit limit, up to a point

To use to use the Varo Believe Secured Credit Card You'll need to transfer money out of your Varo bank account to your Varo Believe secured account, which can only be done in the Varo app. The balance in the account that's secured becomes the limit of your credit.

But unlike a traditional credit card, this Varo credit card comes with spending caps. The limit is the amount of $2,500 per day in purchases, and $1,000 per day for cash advances, and the sum of purchases and cash advances cannot exceed $10,000 for each billing cycle.

One major purchase, like a new furniture, may put you over the spending limit and would require you to choose a different payment method in order to purchase something else on the same day.

3. Making credit card payments is almost foolproof

The balance in the Varo Believe secured account is your credit limit, however it's also the funding source for credit card payments. To ensure you'll be able to cover your monthly expenses in total, Varo automatically deducts the amount of any credit card transactions from the available balance in the secure account. It's therefore impossible to overspend with the Varo credit card. Varo will also lock your card in the event of missing a payment and won't restore access until the entire amount is paid.

To ensure timely payment, Varo offers a "SafePay" option. With SafePay activated, any balances will be immediately paid in full by the close of each billing cycle.

The Varo credit card provides information to the three main U.S. credit bureaus. So these measures undoubtedly can aid cardholders in building or improving their credit score since they encourage paying off the credit card balance, and . But, this hand-holding feature is typically absent from traditional unsecured credit cards. If you decide to switch from Varo Believe Secured Credit Card to a conventional card, you'll have to be more careful regarding paying your monthly statements. (The secured card offers the only card Varo offers, so there's no option to upgrade within the portfolio.)

>> MORE:

4. The APR is 0%.

Even if you miss a credit card payment, your balance will not grow due to interest because the APR of the Varo Believe Secured Credit Card is at 0%. That's an incredibly rare, potentially money-saving perk and one of the advantages that this credit card offers.

But again, it's not how traditional credit cards work. So when you're ready for an upgrade from your Varo credit card, make sure to know the current card's rate of APR.

>> MORE:

5. Cash back can be earned on select purchases

It's the Varo Believe Secured Credit Card offers the cashback in two ways: offer on the internet and cards linked offers. The online deals offered by Varo -- akin to those offered by a traditional credit card -- award cash back from purchases at retailers that you've made purchases through the Varo app or through an email promotional from Varo.

Or you could utilize a card-linked offer to get cash back, that functions as a coupon. Card-linked offers must be activated first and the purchase has to be made using the Varo credit card to qualify in the sale.

Cash back is automatically deposited into the Varo bank account once you've earned more than $5. Cash-back rewards from the Varo Believe Credit Card are capped at $50 per month. In contrast, other credit cards with secured features offer unlimited cash back and generally do not require you to shop through a specific portal or sign up for specific deals.

>> MORE:

The artwork on the card is by Varo. Varo.

Chime Credit Builder Visa(r) Chime Credit Builder Visa(r) Credit Card is issued by Stride Bank, N.A. and is a member of the FDIC under an authorization from Visa U.S.A. Inc. as well as is able to be used anywhere Visa credit cards are accepted.

About the author: Jae Bratton is a writer for the credit card team at NerdWallet. Her writing has been published in various blogs, newspapers and an academic journal.

On a similar note...

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(image: https://farm8.static.flickr.com/7860/40075677663_12881e754b.jpg)Do You Really Need Identity Theft Protection Services?

Advertiser disclosure You're our first priority. Each time. We believe that every person should be able make financial decisions without hesitation. Although our site doesn't feature every company or financial product available in the marketplace however, we're confident that the guidance we offer, the information we provide and the tools we create are objective, independent easy to use and cost-free. How do we make money? Our partners compensate us. This could influence the types of products we write about (and where they are featured on the website), but it in no way affects our suggestions or recommendations that are based on hundreds of hours of research. Our partners do not pay us to guarantee favorable review of their services or products. .

Do You Really Need Identity Theft Protection Services?

You should only pay for a service if you are in danger, refuse to freeze your credit, and don't want to monitor your own personal information.

By Sean Pyles Senior Writer | Personal financial and credit, and personal finance Sean Pyles leads podcasting at NerdWallet as the host and producer of NerdWallet's "Smart Money" podcast. The show "Smart Money," Sean talks with Nerds from NerdWallet's NerdWallet Content team to answer listeners' questions about personal finance. With a particular focus on sensible and practical advice on money, Sean provides real-world guidance to help people improve their financial lives. Beyond answering listeners' money concerns on "Smart Money," Sean also interviews guests who are not part of NerdWallet and produces special segments on topics like the racial wealth gap and how to begin investing, and the history for student loans.

Before Sean was the host of podcasts at NerdWallet, he covered topics related to consumer debt. His writing has been featured on USA Today, The New York Times and other publications. When he's not writing about personal finances, Sean can be found digging around his garden, taking walks, or walking his dog for long walks. He lives within Ocean Shores, Washington.

and Bev O'Shea personal finance writer | MSN Money, Credit.com, Atlanta Journal-Constitution, Orlando Sentinel Bev O'Shea is a former NerdWallet authority on consumer credit, scams and identity theft. She holds a bachelor's degree of journalism at Auburn University and a master's in education from Georgia State University. Prior to joining NerdWallet she worked for daily newspapers, MSN Money and Credit.com. Her work has appeared in The New York Times, The Washington Post, the Los Angeles Times, MarketWatch, USA Today, MSN Money and elsewhere. Twitter: @BeverlyOShea.

Updated January 25, 2022

Edited by Kathy Hinson Lead Assigning Editor Personal finances, credit scoring financial management and debt Kathy Hinson leads the Core Personal Finance team at NerdWallet. Prior to joining NerdWallet, she worked for 18 years working at The Oregonian in Portland in positions such as copy desk chief and team director of design and editing. Prior experience includes news and copy editing for several Southern California newspapers, including the Los Angeles Times. She earned a bachelor's degree in mass communication and journalism at the University of Iowa.

Many or all of the products we feature come from our partners, who pay us. This impacts the types of products we write about and where and how the product is featured on the page. But, it doesn't affect our assessments. Our opinions are entirely our own. Here's a list of and .

Companies that offer identity theft protection promise to act as guardians of your personal data for an annual or monthly fee. Generally, they start with then layer on additional services to alert you to potential problems.

But alerts just flag you after the fact; they can't prevent the theft and misuse of your financial data. This is the reason why NerdWallet advises proactively -- it can prevent the opening of fraudulent accounts.

You should consider paying for the identity theft prevention service only in the following situations:

You're already the victim of or at chance of becoming a victim.

You're not ready to freeze your credit report.

You are sure that you will not undertake the task of actively monitoring your own credit.

You've checked and do not have adequate identity theft monitoring or in the event of a data breach.

You can make it yourself.

You are able to perform the fundamental services offered by these companies by yourself, typically at no charge:

You can monitor your financial transactions on a variety of personal finance websites like NerdWallet, or some creditors of credit cards.

You are able to follow the free recovery routes set out from the government of the United States at .

You can also freeze your credit records at all of the major credit bureaus -- - and -- at no cost this is something that an security company that protects against identity theft will not be able to do for you.

"The first thing that consumers have to do when they're worried regarding ID theft is just to block their credit reports," says Chi Chi Wu, staff attorney at the National Consumer Law Center. "Freeze, freeze, freeze. Everything else is gravy to top it off."

>> MORE:

What companies for protection against identity theft do?

In general, identity theft protection companies offer three primary services:

Monitoring Identity theft protection companies keep track of your credit file and inform you of changes, such as the creation of new accounts opening under your name or credit inquiries received and you can respond promptly.

Alerts: Inform you of any instances in which your personal information has been used, such as when someone tries to open an bank account in your name. This is helpful since many people aren't aware that identity theft occurred until their credit is wrecked, their bank accounts depleted or they suddenly have lots of debt that's been incurred in their name.

Recovery: If someone steals your data and then uses it maliciously the companies may help you recover lost money and repair the damage to your credit. Most offer insurance policies of up to $1 million.

Many also offer tangential services for example, alerts on identity theft news and local sex offender registries. There are some who monitor dark websites which are known to be a source of stolen financial and personal data and financial information, something you can't do yourself.

Compare identity theft protection services

It could be that you decide to purchase an entire set of security features and don't mind paying for security. You may also be aware that you'll never do it yourself.

If so, compare prices and details on coverage to find a plan that fits. Check that the product you choose monitors credit data at the three credit bureaus. otherwise you'll be paying for a lack of security.

Avoid credit monitoring companies that are more likely to offer less comprehensive coverage and can restrict your ability to pursue them even if they're the ones that have exposed your financial data.

This is a look at popular products in the identity protection industry. This is just a tiny sample but you could find a different provider which is better suited to your needs. If you've already put in credits freezes you'll need be able to lift these temporarily to allow a provider access to your data for monitoring purposes.

1. NORTON 360 with LIFELOCK ULTIMATE PLUS

Pros:

The most expensive Norton LifeLock plan, , includes a range of services that can help you detect and recover the loss of your identity.

It also includes a password manager, as well as web privacy, and device security features.

The company enhances its package through additional features, such as the $1 million identity theft plan, as well as legal assistance.

Cons:

The highest-end plan is expensive particularly when it covers families. For two adults as well as up to five children costs $48.99 each month for initially, but it renews automatically at a higher cost.

The company was fined in 2015 LifeLock made a payment of $100 million in order to resolve a Federal Trade Commission charge that it was in violation of a federal court order regarding the protection of customers' personal data and avoiding misleading advertisements.

Cost: The cost is $29.99 per month for an adult for the first year, and it automatically renews for $34.99 per month. Discounts are available for paying annually.

Best for: Those who don't have a large family to cover; who can afford an extra amount for more comprehensive protection. Check out our complete .

2. IDSHIELD

Pros:

Easy to understand precisely what you're getting, because there are no tiers and pricing is clearly stated.

Unlimited consultations with an Identity theft specialist.

Scans social media for reputational risk.

Cons:

As with any service, you may be tempted to ignore the importance of using good cybersecurity practices.

Multiple alerts may lead you to dismiss them without readingor absorbing important information.

Cost: Monitoring the three credit bureaus is $17.95 each month, for an individual or $32.95 to families (two adults and as many as 10 minor children).

Ideal for: Customers with a price sensitivity who would like to have their social media accounts scanned as part of a package. Check out our complete .

3. IDENTITYFORCE ULTRASECURE +CREDIT

Pros:

IdentityForce offers less expensive three-bureau monitoring than the big brands like LifeLock.

You can get a family planthat covers two adults and any children 25 and under.

Alerts you about possible Health insurance scams.

Cons:

The sign-up process can be tedious it requires you to input data multiple times.

Family plans aren't accessible on the site and you might have to contact us to inquire about it.

The process of determining the lowest cost can be a challenge, because prices vary depending on whether you sign up on the phone or online.

The cost is $23.99 monthly or $239.90 a year for the plan that offers monitoring at all 3 major credit bureaus. It should be noted that promotional pricing is often available. It's a good idea to search for it.

Best for: Those who want protection on a budget; those seeking medical identity insurance.

4. ID WATCHDOG PLATINUM

Pros:

ID Watchdog keeps credit monitoring easy with alerts, recovery and monitoring.

One of the most notable features is that it can help you recover from pre-existing identity theft for an additional fee of $79.95 to $279.95, based on the kind of fraudulent credit line.

Cons:

Equifax bought ID Watchdog in 2017, the year Equifax was hit by a massive data breach that revealed sensitive personal information of nearly 148 million people.

The mobile app and desktop interface provide less information than those of its rivals.

ID Watchdog offers fewer monitoring services than other businesses.

Price: $19.95 a month or $219 for an annual package with three bureaus of credit monitoring.

Best for: Those who need help recovering from pre-existing identity theft.

Are you in need of a credit check-up?

Create an account to have your credit report free and score on-hand, constantly.

About the authors: Sean Pyles is the host and executive producer on NerdWallet's Smart Money podcast. His writing has been featured in The New York Times, USA Today and elsewhere.

Bev O'Shea is a former credit writer at NerdWallet. Her work was published on the New York Times, Washington Post, MarketWatch and elsewhere.

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