Balance Transfer Credit Cards – When Does It Make Sense to Use Them?

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Dave Ramsey and other popular financial pundits are fond of saying things like “You can’t borrow your way out of debt!”

The advice is to those that would like to open up a new credit card for a balance transfer, or get a new home equity loan or home equity line of credit in order to pay off their current debts.

And generally speaking, borrowing money to pay off borrowed money is a losing game.

Their advice is for those that can’t handle the financial responsibility of paying off the debt and spending less than they earn at the same time.

If you continually spend more than you earn, no amount of balance transfers or new lines of credit will save you.

Since many people calling into the financial shows can’t handle that responsibility (they are up to their eyeballs in debt currently, right?) the advice points against this strategy.

However, that doesn’t mean transferring a balance from one credit card to a new one is always a bad idea.

If you are smart about how you handle the balance transfer it can actually save you thousands of dollars in interest and result in you being debt-free a lot earlier than you would have been otherwise.

How Does a Balance Transfer Credit Card Work?

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Celebrating Memorial Day 2013 and Links

Memorial Day is a great long weekend for most people in the United States.

But the point isn’t to take a day off just to go to the lake for a cookout.

Memorial Day, originally titled Decoration Day, is to honor and remember the men and women of the United States Armed Forces who died during their service.  Take some time to think about that this weekend as you enjoy your time off.

Having an extra day off is a great time to get your finances straightened out. Here are some good reads for that:

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Happy Mother’s Day 2013 and Links

Today we tip our hats to Moms everywhere.

As Jim Gaffigan says in one of his hilarious standup routines: “Women are amazing. A woman can grow a baby inside their body. Then somehow a woman can deliver the baby through their body. And then by some miracle a woman can feed a baby with their body.”

Your mother did that for you.  And then she kissed your boo boos, got you to school on time, and supported you in every wacky endeavor you took on.

Even better if Mom showed you how to budget for a family, get the best value at the grocery store, and the value of time spent with family.

So thanks, Mom, and all Moms who are involved with their children’s lives.

Here are some great reads this week:

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Gold Price Shakeup and Links

The price of gold took a big hit a few weeks ago.

In the last 30 days the price has dropped from a high of $1,606 to a low of $1,360.  The drop was significant and only over a few day period.  The price has since rebounded a bit to $1,453 but that is still a drop of $153 or 9.5%.

Those that are pro-gold used it as an opportunity to buy even more while detractors pointed out the instability in the price of the commodity.  If you were able to snag more gold at $1,360 you have since earned a return of 6.8%.

No matter how you feel about gold you need free cash available to be able to purchase some. That means taking care of your finances, which these articles will help you do:

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Should You Ever Cosign a Loan? Probably Not

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One of the absolutely most risky financial decisions you can make is to cosign a loan for someone.

The FTC has even done research to show consumers exactly how atrocious of a decision cosigning a loan is.  It can be really hard to turn down the need to cosign a loan; usually the person asking you is a relative or very close friend.  They are promising that it won’t be a big deal and they’ll be able to pay on time.

But is that true?

Should you ever cosign a loan?

For anyone?

Ever?

The Risks of Cosigning a Loan

Here are three risks of accepting the offer to cosign a loan.

The Person Asking is a Credit Risk

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Bitcoin Bonanza and Links

The alternative, virtual, and unregulated currency Bitcoin experienced quite the bonanza over the last few weeks. 

The price skyrocketed to over $200 per coin, then plummeted 50%, then rebounded a bit.  The fledgling new online currency has made millionaires from early adopters but is still struggling to go mainstream.

I honestly don’t know what to think of Bitcoin.

There are only a certain number of coins that can ever exist, you have to run complex equations on a computer to “mine” a coin (or purchase them from an exchange), and the coins are stored on your computer.  However, real people are using them for real transactions instead of US dollars.

As great as it would be to buy a bunch of coins at $3 per coin in the early stages and watch it skyrocket to $200… I can’t imagine a sustainable currency fluctuating that much.  Merchants can accept Bitcoins for payment, but how can you calculate how many coins to charge if the price is constantly changing?  That $200 transaction for one coin just became a $120 transaction when the price plummets.

Instead of worrying about alternative currencies to get rich, here are some more traditional methods:

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What is the Earned Income Tax Credit?

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Filing taxes can either be very simple or overly complex.

There are so many exclusions, credits, loopholes, and deductions to know about that it can be easy to miss out on credits that you qualify for simply because the tax system is so complex.  One of those tax credits worth knowing about, especially if you are in a low income bracket, is the EITC or Earned Income Tax Credit.

What is the Earned Income Tax Credit?

Tax credits are great because they are a direct reduction in the amount of tax that you owe.  Tax deductions are good, too, but they simply reduce your income that will then be taxed.

A tax credit like the EITC is much more valuable.  It’s important to find out if you qualify for the EITC, especially if you know that you don’t have significant investment returns or income for the tax year.

The Earned Income Tax Credit is meant for people who are working and have low to moderate income.  The credit is designed to provide incentive to keep working rather than relying on government subsidies.  Part of the goal of the EITC is to offset social security taxes that you pay as you earn an income.  As with many government tax credits and deductions there is some controversy around the support the Earned Income Tax Credit provides for individuals or couples with children. Continue Reading