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Tips on How to Organise Your Money

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It is no secret that having bad credit can throw a monkey wrench right into the hearts of many folks’ financial planning. Things like obtaining a loan, applying for a credit card, or establishing a line of credit with a business can become exceedingly difficult when you don’t have a high credit score.

Banking With Bad Credit

Many folks may even be able to tell you that opening a checking account with a bank can be troublesome when they have bad credit. This is unfortunate, but it is true. Not having a bank account can make certain tasks difficult, too, like paying your bills, getting paid, and sometimes even getting things set up for employment. Has having bad credit affected your ability to try to open a traditional bank account?

You needn’t to settle for the official way of doing things all the time. There are plenty of ideas you can find for checking accounts for bad credit at LetMeBank.com and other online financial resources; let’s explore a few ideas to help you get a grasp on what you can do if a poor credit score is stopping you from opening up a bank account, and how you can manage your money through other means.

Second Chance Checking Accounts: A huge majority of major banking institutions use a sort of financial background checking system called ChexSystems that helps banks identify potential risky applicants. You could be flagged for things like too many overdraft fees, nonpayment on an account, and more.

This can make it difficult to open a bank account if you have some of these issues on your record. Of course, many banks understand that sometimes, you simply can’t control some of the factors in your life that stopped you from making your payments on time, like unexpected financial emergencies.

Banking With Bad Credit

Many banks offer what is called second chance checking accounts specifically for people who are flagged by ChexSystems. These second chance accounts help you get a leg up on your finances and offer you many of the same benefits as a normal checking account. Some limitations may be present, however, so make sure you do your research on second chance banking options to see if it is the best fit your financial situation. Look For Banks That Don’t Use ChexSystems

Banking With Bad Credit

While this is becoming a rarer option, as the biggest majority of banks of financial institutions are using ChexSystems or similar systems to make sure their applicants are up to snuff with their requirements for opening an account, there are still some banks that do not use these background check systems.

What does it mean for a bank not to use ChexSystems? Well, it’s rather simple. This just means that the bank you’re applying for an account with doesn’t pull your past banking history from background checking database.

To these banks, you’ll simply be a clean slate, seeing as how your past history will not be visible to them. If you can find a bank in your local area or online who does not use background screening programs, opening an account with them could be a great way to get a fresh start on your banking.

Clear Things Up With ChexSystems: Much like disputing errors in your credit report, it is possible to file disputes with background screening programs for banks. If you notice any errors in your history and file a dispute, your records will be cleaned up if you are successful. If there are no errors that can be disputed, then you’ll have to wait for five years for the problematic records to fall off, making your record clean once again.

Prepaid Debit Cards: Prepaid debit cards are an option to choose if you have ChexSystems problems that you can’t dispute. Many prepaid debit cards offer some of the same functionalities as regular bank accounts, providing you with routing numbers, management applications, and direct deposit.

Using this solution, you also won’t have to worry about things like overdraft or fees putting you into debt, simply because you fund it beforehand. If your account balance reaches zero, it simply will not work until you put more funds in, or until more money is direct deposited into your account through your employer.

You Have Options: Don’t think you’re out of luck if your bad credit is messing with your ability to open a bank account. Whether you need to dispute ChexSystems, check out a second chance banking solution, or use a prepaid debit card, you still have options when it comes to managing your money.

Bank accounts are almost a necessity nowadays, but that doesn’t mean there are only one set of rules to play by. Keep these ideas in mind if you find yourself unable to open a traditional banking account.



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Bad Credit

Martin Lewis issues guidance on using credit cards to build ratings – best deals | Personal Finance | Finance

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Martin Lewis regularly urges savers to use caution when utilising debt themed products but at the same time, he acknowledges the need for a decent credit rating to get by financially. Today, the Money Saving Expert was questioned by viewer Miranda on how one can build their credit rating in difficult circumstances.

“What I’d then like you to do is go and do £50 a month of normal spending on it, things you’d buy anyway.

“[Then] Make sure you pay the card off in full every month, preferably by direct debit so you’re never missing it because the interest rate is hideous.

“That way you won’t pay any interest.

“You do that for a year, you’ll start to build that credit history, showing them you’re a good credit citizen.

“Then you’ll be able to move into the sort of more normal credit card range.

“So, bizarrely, to get credit you need credit. What credit will you get? Bad credit, go get the bad credit just make sure it doesn’t cost you.”

Consumers of all kinds may not have the best options at the moment as recent analysis from moneyfacts.co.uk revealed.

In mid-November, they detailed that a number of high street banks have cut the perks and interest on a number of their current account deals.

On top of this, the Bank of Scotland and Lloyds Bank made credit interest cuts of up to 0.5 percent.

Rachel Springall, a Finance Expert at moneyfacts.co.uk commented on the few options consumers and savers currently have available: “Clearly, it is vital consumers decide carefully if now is the time to switch, but if they wait too long, they may well miss out on a free cash switching perk.

“At present, providers will be assessing how they can sustain any lucrative offers in light of the pandemic.

“With this in mind, we could well see more changes in the months to come and if this does indeed occur, consumers would be wise to review whether their account is still worth keeping.”



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Should you use a balance transfer to pay off debt?

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Should you use a balance transfer to pay off debt?
Image source: Getty Images.


A balance transfer might be the solution if you have debts and want to gain control over your finances. But whether a balance transfer is right for you will depend on a number of factors.

Things to consider before using a balance transfer

The size of your debt

If you want to apply for a balance transfer credit card, be aware that most providers will allow you to transfer up to 90% of your credit limit.

Your credit limit will be dependent on your own personal circumstances, including your salary, your credit history and your residential status (homeowner or renter).

Be realistic about your debt. For example, if you earn £25,000 per year and you have a debt of more than £15,000, a balance transfer might not be cheapest way to pay the debt.

The time taken to pay the debt

The main advantage of a balance transfer credit card is that many offer an interest-free period on the balance. So, if you can pay off your balance in that period, you won’t accrue any further interest charges.

However, these periods typically range from 18 to 24 months, so if you think you will need more time to pay the debt, you may need to factor in additional interest charges when the interest-free period ends.

Whether or not a balance transfer is the right debt payment solution will depend on your personal circumstances. Check our balance transfer calculator if you want to work out how much a balance transfer could save you in interest payments.

Your credit score

The advantage of a good credit score cannot be underestimated in this situation.

When applying for a balance transfer credit card, the company will check your credit score. Based on this score, they could refuse your application.

Even if you are accepted, if you have a bad credit score they could reduce your credit limit. Ultimately, this will determine the benefit of a balance transfer as a suitable debt payment solution.

If you think your credit score might be a problem, it’s worth checking with the credit reference agencies before applying. That way you can avoid any nasty surprises.

There are three main consumer credit reference agencies in the UK. They are Equifax, Experian and TransUnion (Noodle).

Alternative solutions to balance transfers

You could still use a balance transfer even if the size of your debt is bigger than the credit limit.

Transferring part of the debt would enable you to benefit from any interest-free period, where applicable.

Alternatively, if you have multiple debts, you could consolidate all of your debts so that you can make a single regular payment. If necessary, you could do this using an unsecured personal loan over a period longer than 24 months.

Take home

Look at your own personal circumstances with a critical eye. Remember that you need to factor in living expenses when thinking about how long it will take you to pay off your debt.

Balance transfers are a useful method for debt repayment, but be aware that credit cards are an expensive way to borrow money. Take full advantage of any 0% deals wherever possible. Check out our list of the best 0% credit cards.


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Turn credit declines into a win-win | 2020-11-20

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The pandemic has left millions of people needing credit at a time when lending standards are tightening. The result is a lose-lose situation—the consumer gets a bad credit decline experience and the credit union misses out on a lending opportunity. How can this be turned into a win-win?

The case for coaching

Let’s start by deconstructing the credit decline process: The consumer is first encouraged to apply. The application process can be invasive, requiring significant time commitment and thoughtful inputs from the applicant.

After all that, many consumers are declined with a form letter with little to no advice on actions the applicant can take to improve their credit strength. It is no wonder that credit declines receive a poor Net Promoter Score (NPS) of 50 or often much worse.

On the flip side, forward-looking credit unions provide post-decline credit advice. This is a compelling opportunity for several reasons:

  • Improved customer satisfaction. One financial institution learned that simply offering personalized coaching, regardless of whether or not consumers used it, increased their customer satisfaction by double digits.
  • Future lending opportunities. Post-decline financial coaching can position members for borrowing needs even beyond the product for which they were initially declined.
  • Increased trust. Quality financial advice helps build trust. A J.D. Power study noted that, of the 58% of customers who desire advice from financial institutions, only 12% receive it. When consumers do receive helpful advice, more than 90% report a high level of trust in their financial institution.

Provide cost-effective, high-quality advice

AI-powered virtual coaching tools can help credit unions turn declines into opportunities. Such coaches can deliver step-by-step guidance and personalized advice experiences. The added benefit is easy and consistent compliance, enabled by automation.

AI-based solutions are even more powerful when they follow coaching best practices:

  • Bite-sized simplicity. Advice is most effective when it is reinforced with small action steps to gradually nurture members without overwhelming them. This approach helps the member build momentum and confidence.
  • Plain language. Deliver advice in friendly, jargon-free language.
  • Behavioral nudges. Best-practice nudges help customers make progress on their action plan. These nudges emulate a human coach, providing motivational reminders and celebrating progress.
  • Gamification. A digital coach can infuse fun into the financial wellness journey with challenges and rewards like contests, badges, and gifts.

Virtual financial coaching, starting with reversing credit declines, represents a huge market opportunity for credit unions. To help credit unions tap into that opportunity, eGain, an award-winning AI and digital engagement pioneer, and GreenPath, a leading financial wellness nonprofit, have partnered to create the industry’s first virtual financial coach. To learn more, visit egain.com.

EVAN SIEGEL is vice president of financial services AI at eGain.

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