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3 Ways to Prevent Your Credit Card From Being Closed Due to Inactivity



It’s all about using your card just often enough to keep it active.

Last month we received a letter from one of our credit card companies advising us that it would close our account if we didn’t charge anything to our card within 30 days. That card used to be one of our favorites for business travel. In recent years, we’ve shifted toward another credit card that we use for just about everything and pay off at the end of each month (we love those travel miles). It seemed the old credit card company was not taking our absence well.

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Why it happens

From what I’ve heard about others’ experiences, our credit card company was gentle with us. A card company is not required to let customers know before it closes an account due to inactivity. My husband used the card for a $6 purchase at the Dallas airport and we live to charge another day — but it made me wonder why a company would close a long-held account.

The reason is cost. An inactive credit card can cost a bank up to $100 per year, since it has to maintain the same infrastructure and support whether or not every card gets used. It’s been a while since we paid any interest on that card, or since the bank earned fees from retailers when we pulled out the card at the register. In short, the issuer was paying for a card that earned it zero dollars. I can’t say that I blame the company for threatening to close the account.

Why you don’t want it to happen

While the cancellation of an unused credit card may not seem like a big deal, it can do a number on your credit score. Some 30% of your credit score is based on “credit utilization” (how much of your available credit you use). Lenders love knowing that you have a lot of credit available, but are hesitant about how much of that credit you use.

Imagine that you have three credit cards, each with a $5,000 credit limit. You owe $4,000 on one but nothing on the other two. That’s a credit utilization just shy of 27% ($4,000 ÷ $15,000 = 0.266). A credit utilization of 27% is not bad, given the rule of thumb that you should keep it under 30%.

If one of those credit cards is closed, that means you have $10,000 in total available credit instead of $15,000. That changes your utilization percentage. Now, instead of 27%, you’re utilizing 40% of your available credit ($4,000 ÷ $10,000 = 0.4).

So if you don’t use your card and it’s closed, your credit usually takes a hit.

How to prevent your credit card from being closed

Here are some steps you can take to head off any credit card closures before they happen.

1. Ask your creditors

If you have a spare hour or so, give each of your credit card issuers a call and ask what their time frame is for closing an account due to inactivity. For one company it may be six months, and for another it could be a year. Knowing how long you have until they get antsy gives you a better idea of how often you need to use the card.

2. Make a list

Make a list of your credit cards. Every few months, use each card to make at least one small purchase. Pay that purchase off as soon as it posts to your account. The trick is to be super organized so that no credit card charges fall through the cracks. Set a reminder on your phone for 48 hours after you’ve made a purchase, or write it in red on your calendar. Do whatever you have to do to remind yourself to pay the card off in full. It may help to use all your cards on the same day and pay them off at the same time.

3. Set up autopay — twice

Another way to keep cards active is to assign a fixed monthly bill to each credit card, and set it up on autopay. For example, several of our bills are the same every month, so it would be easy to set one card up as the payment method for a streaming service, another card for life insurance, and another for a regular charitable donation. Then, it’s just a matter of going into our online bank account and setting up autopay to pay those credit cards each month.

Adding one more task to a full schedule probably sounds about as fun as a root canal. Still, if it keeps your cards open and boosts your credit score, it is likely worth the trouble.

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Are Sallie Mae Student Loans Federal or Private?



When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances



Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit



Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.



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