How To Get A Loan With Bad Credit

July 31, 2019 by  
Filed under Credit card

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Do you often ask yourself how to get a loan with bad credit? If you’re a cash-strapped consumer who is also drowning in debt, you may have researched this question in an attempt to find a solution to your financial quagmire.

While it is generally trickier to get a loan if you have bad credit, there are still ways you can access external funding, some of which may even come with reasonable interest rates. Nonetheless, you have to accept that borrowers with low credit scores have limited options and pay higher interest rates than consumers with higher scores on their credit record. Regardless, learning how to get a loan with bad credit is something you might benefit from.

What Is Bad Credit?

Before we delve into the question of how to get a loan with bad credit, we must first help you understand what separates a bad credit score from a good one.

Any institution that lends money (such as credit card issuers, banks, credit unions, mortgage lenders, and credit unions, just to name a few) use credit scores to assess one’s likelihood to pay off his loan. The scores typically range from 300 to 850; the higher the number, the more likely you are to repay your financial obligation.

While “good” and “bad” credit scores may vary between credit reporting agencies and lenders, most of them will stay away from consumers with a score under 650, or at least proceed with caution when lending them money. Notwithstanding, some institutions target borrowers with a sub-650 score, although they generally stipulate higher interest rates and/or use of collateral to secure a loan.

Oftentimes, a fair credit score is something that falls between 630 and 689. As of this writing, the average score for US consumers is 700, which is an 11-point increase over the last decade.

To further give you an idea, here are the most accepted descriptions of credit score ranges:

  • 760-850: Excellent
  • 700-759: Satisfactory
  • 660-699: Fair
  • 620-659: Poor
  • Sub-620: Bad

While each credit bureau, which is also referred to as a credit reporting agency, has its own formula to calculate your credit score; they all factor in the following variables:

  • Payment history
  • Length of credit history
  • Credit usage or percentage of your credit relative to your credit limit
  • Credit mix and types
  • Recent credit

Knowing the factors that affect your credit score is the first step to improve your credit standing and ultimately make you appear a creditworthy borrower from the traditional lender’s standpoint.

How Bad Credit Scores Affect Borrowing

While it is true that a bad credit score limits your borrowing options, it shouldn’t stop you from considering taking out a personal loan. In fact, some lenders target borrowers whose scores are lower than 650, although these are enough to spook traditional financial institutions such as banks.

Aside from limited borrowing options, another caveat of having a less-than-stellar credit score is that you’re often subjected to higher interest rates. After all, lenders desire stability, meaning you should be able to demonstrate your ability to pay off your debt on time and in full. As a way to compensate for the risk that comes with lending funds to a borrower with a poor credit score, they almost always stipulate higher interest rates.

Despite your limited borrowing options, avoid payday loans and auto title loans at all costs because of their short terms, high fees, and high interest rates, which can all lead to a bigger financial disaster.

A good rule of thumb is to stay away from external funding that involves extremely short-term loans, steep originating fees, and other costs, and unreasonably high interest rates.  

Because poor credit scores are often penalized with higher interest rates, you may want to consider secured loans, which offer some advantages over unsecured loans. These general rules are where you need to begin to learn about how to get a loan with bad credit.

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Secured vs Unsecured Loans

Whether you choose a secured or unsecured loan, you may want to consider an external funding source that allows a co-signer with a healthy credit. This “arrangement” can help you secure a loan that comes with a lower interest rate, although bear in mind that both of you are equally responsible for repayment.

With a qualified co-signer, the terms of the loan are based on his or her credit score and all the payment information will be put on our credit report and your co-signer’s report as well. Thus, if you are late on payments, or worse, default on your loan, you both face the consequences.

SECURED LOANS

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A secured loan entails that you borrow against an asset, such as your house, car, boat, savings, or stocks. One of its selling points is the lower interest rate because the lenders feel that there is less risk as they can repossess the collateral in the event that you are unable to pay off the loan.

In addition, it is easier to obtain secured loans compared to unsecured loans. Of course, secured loans come with a risk, and that is you can lose your asset if you don’t repay the loan as agreed.

UNSECURED LOANS

Unsecured loans for consumers with bad credit are available and generally, come with steep interest rates due to the perceived increased risk of default. Furthermore, they are more difficult to obtain since lenders generally want their borrowers to exhibit a good level of financial stability.

How To Get A Loan With Bad Credit

The list below is a step-by-step guide on how to get a loan with bad credit.

REVIEW YOUR CREDIT REPORT

Always make it a habit to check your credit reports several times a year because they contain information that determines your credit scores. Should you find any error, immediately notify the three major credit bureaus (Equifax, TransUnion, and Experian) about it.

Your credit scores, along with your debt-to-income ratio, employment history, and other factors, have a large impact on your approval odds for a loan and its repayment terms and interest rates.

TACKLE THE OBVIOUS PROBLEMS

Poor credit scores are primarily caused by lagging behind in your payments, maxing out your lines of credit, opening too many credit accounts in a short period of time, and closing multiple accounts.

The list below explains the surefire ways to improve your credit health:

  • Always pay on time, even if just the minimum amount
  • Don’t go beyond 30 percent of the credit limit
  • Keep old accounts to increase credit history
  • Avoid closing credit accounts unless in special situations
  • Don’t open or apply for new credit accounts in a short period of time
  • Only apply for a new line of credit when you need one

COMPARE MULTIPLE LENDERS

One of the most common and biggest mistakes of borrowers with bad credit is their tendency to accept the first loan they are approved for. A good rule of thumb is to shop around with multiple lenders to find a new line of credit with the most affordable interest rate and most reasonable loan terms.

You can shop around for loans by visiting your local banks and credit unions or by using rate comparison websites.

SCHEDULE AN IN-PERSON INTERVIEW WITH A LOAN OFFICER

If you have been repeatedly turned down because of your bad credit, you may want to ask for an in-person interview with a loan officer from a bank or credit union. Just make sure you can demonstrate your creditworthiness.

A good rule of thumb is to prepare all the documents suggesting that you’re a good risk. Common examples include your pay slip, job history, a list of assets (home, car, stocks, etc.), tax returns in the past two years, bank statements showing savings and checking accounts, and a list of unsecured debts like medical bills and credit cards.

In addition, know everything about your credit history, including any lawsuits and previous foreclosure or a bankruptcy. Make sure to answer your loan officer’s questions truthfully.

Tips And Traps

When taking on any loan, always practice due diligence. This is particularly more important for someone with bad credit due to the proliferation of loan sharks that take advantage of cash-strapped consumers. The general rule of thumb is to avoid any lender that doesn’t require a credit and personal background check (they don’t care about your employment history, salary, or assets, among other things).

Another red-flag you should know is that if a lender that asks you to make an upfront payment—usually by wire transfer—arguing that it would be used to initiate the paperwork process, they are nothing more than a scammer. The same is true for any company that asks for your bank account number or social security details without presenting you with written documentation about the loan first.

Lastly, only choose a lender that is licensed to operate in your state.

Conclusion

Now that you know how to get a loan with bad credit, you’ll realize that despite your limited borrowing options, you’re not always stuck with loan terms with steep interest rates and originating fees, an extremely short repayment term, and other factors that could further compromise your financial stability.

The first and most critical step is to familiarize yourself with your credit score and the factors that are used to calculate it. Only then can you improve your credit health by making timely payments, applying and opening a new line of credit only when you need it, and maintaining a low utilization ratio.

Lowes Credit Card Review

July 30, 2019 by  
Filed under Credit card, Resources

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the Lowes Credit Card

The Lowes credit card will give you a variety of rewards for in-store purchases. You can earn 5% cash back on Lowe’s purchases, or you can choose to receive a 5% discount on your total Lowe’s purchase. While it has a high APR of 26.99%, you can choose special financing for a purchase of $299 or more for a six-month 0% APR financing. Further, you receive a special onetime bonus of $30 on your first in-store card purchase when you open an account.

In this review, we will discuss the details of the Lowes credit card and consider its pros and cons. To further the review, we will compare it to similar cards on the market and give it an overall rating at the end of this article.

What Is the Lowes Credit Card?

The Lowes credit card is only accepted at Lowe’s physical stores or at Lowes.com. If you find yourself regularly making a run to Lowe’s for various DIY projects or construction jobs, there are definite benefits to using this card. The primary benefit of this card is the option to accept the immediate 5% discount upon purchasing items in store or online. If you choose to opt for deferred-interest financing for purchases of $299 or more, you should not opt for the 5% discount upon purchase, as you can only choose one or the other.

Lowes Credit Card Specs

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As mentioned above, you can opt for rewards in a few ways: you can earn 5% cash back on Lowe’s purchases, you can opt for a 5% discount upon checkout, or you can opt for financing options for purchases of $299 or more. The main downside to this card is the high APR of 26.99%. This is not a card on which you want to keep a balance, but if you plan to pay off the balance quickly, then it definitely has great rewards.

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Image source: Pixabay.com

There are no annual fees for this card, but interest can rack up quickly if you keep an outstanding balance on this card. You can opt for special financing with no interest so that is a solid option for bigger purchases that you cannot pay off immediately.

How It Compares

We picked a few similar products available on the market to see how they compare to the Lowes credit card.

PREVIEW

CARD

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CITI DOUBLE CASH CARD

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CHASE FREEDOM UNLIMITED

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CAPITAL ONE VENTURE REWARDS CREDIT CARD

Lowes Credit Card

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PRICE

The Lowes credit card has no annual fees.

EASE OF USE

The Lowes credit card is easy to use and very straightforward in its benefits. It is a simple card for Lowe’s fans as you can only use it in Lowe’s stores or online on Lowes.com purchases. The benefits are limited and simple: you can either accept a 5% discount upon checkout or 5% cash back on your purchases. You can also opt for special financing over a variety of time periods. We have rated this section as four out of five stars for its simplicity. This is not a general card for all purchases, but it is a great option for big Lowe’s shoppers.

APPROVAL AND APPLICATION

The Lowes credit card is supposedly one of harder cards to obtain. You should have “fair” credit or higher with a credit score of 620 or more. You can submit an application for a Lowes credit card online or in-store, but you should sign up in store to gain the onetime sign-up offer of $30 on your first in-store card purchase. We have rated this as four out of five stars.

DESIGN QUALITY

The design quality of this card depends on your spending. If you love to shop at Lowes and need not worry about interest (if you pay everything before the due date), then this is a great card! If you do not appreciate a high interest rate and enjoy keeping a balance on your card, and if you rarely shop at Lowe’s, then this is not the card for you. We have rated the design of this card as three out of five stars for its rewards for avid Lowe’s shoppers combined with its high interest rate.

BENEFITS OFFERED

The Lowes credit card offers a variety of benefits to Lowe’s shoppers, including 5% cash back on in-store or online purchases, 5% discount at check-out to see immediate benefits upon purchase, or special financing options for those that are making big purchases. For a store card, we think that these are great benefits with variety for customers to choose from, depending on how they want to utilize their rewards. We have given this a rating of four out of five stars.

Pros

  • 5% cash back option for Lowe’s in-store or online purchases
  • Special financing options at a variety of APR rates
  • 5% discount option to see immediate benefits of Lowe’s purchases

Cons

  • High interest rate on balances left on the card without opting for special financing
  • Difficult to get compared to other store cards
  • Points and rewards are limited to Lowe’s purchases

Citi Double Cash Card

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citi credit card - double cash

The Citi Double Cash Card provides you with 2% cash back on purchases, where you earn 1% upon purchase and 1% as you pay. There is a 0% introductory APR period of 18 months for balance transfers, and there are no categories to track or activate to gain rewards. There are no maximums on cash back rewards, and there is no annual fee. You should have a good to excellent credit score to qualify for approval, and foreign transactions incur a 3% fee.

PRICE

There is no annual fee to use the Citi Double Cash Card. There is a 0% introductory APR period of 18 months for balance transfers, however this does not apply to purchases. Purchases have a variable APR rate of 15.49% – 25.49%, which also applies to balance transfers after 18 months.

EASE OF USE

The Citi Double Cash Card is easy to use as you need not activate any categories to gain the most rewards. The cash back process is straightforward- you earn 1% as you buy items and earn an additional 1% as you pay off your card’s balance. This is a relatively hassle-free card, and there is no limit to the rewards you can earn. This card is great for those that do not want to put in the extra work of activating certain rewards or only shopping at certain stores. We have rated the ease of use of this card as five out of five stars.

APPROVAL AND APPLICATION

In order to apply for this credit card, we recommend that you have a credit score of 690 or higher, with good to excellent credit. You can apply online, and Citi will notify you of your acceptance or additional steps you need to take. Due to its more competitive nature, we have given this three out of five stars.

DESIGN QUALITY

This card has a high rewards rate, and you can redeem your rewards for statement credit, a bank account deposit, a gift card, or a check. You have to have a minimum of $25 to redeem your rewards. While it is easy to use, it does not offer the bonus categories that give other card users the perk of 5-10% cash back at various times. We have therefore rated its design quality as four out of five stars as its simplicity causes its higher earning potential to suffer compared to other cards. However, we appreciate its 2% cash back on all purchases.

BENEFITS OFFERED

We appreciate the 2% cash back on all purchases (1% upon purchase and 1% upon payment), the 18 month 0% APR period for balance transfers, and the variety of ways you can redeem your rewards. However, this card is missing an introductory bonus reward and high earning bonus potentials of more than 2% cash back. Further, it does incur foreign transaction fees. We have rated the benefits offered as three out of five stars.

Pros

  • 2% cash back rewards on all purchases: 1% upon purchase and 1% as you pay
  • 0% introductory APR period on balance transfers for 18 months
  • No annual fee

Cons

  • 3% foreign transaction fee
  • No sign-up bonus
  • No 0% APR introductory period for purchases

Chase Freedom Unlimited

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The Chase Freedom Unlimited card provides you with a flat 1.5% cash back earning potential on every purchase you make, with a $0 annual fee. You can redeem rewards for statement credit or a bank account direct deposit. Further, this card has a great sign-up bonus of $150 when you spend $500 during the first three months. It comes with an introductory APR of 0% on purchases and balance transfers during the first fifteen months, followed by an ongoing Variable APR of 16.99% to 25.74%.

PRICE

The Chase Freedom Unlimited Card has no annual fees. Further, it has a fifteen month introductory period with 0% APR on purchases and balance transfers. Following the introductory period, the APR increases to a range of 16.99% to 25.74%.

EASE OF USE

The 1.5% rewards rate is applied automatically to all purchases, and cash back rewards never expire as long as the account is open. Further, there is no minimum required to redeem your points for cash back. Further, you can gain 5% cash back in rotating categories, which you activate every three months, up to $1,500 in spending per quarter. This card is great for those that want a hassle free card, with automatic rewards, plus the opportunity to earn more during quarterly opportunities when you “activate” certain categories. We have given the ease of use five out of five stars.

APPROVAL AND APPLICATION

In order to apply and be approved for the Chase Freedom Unlimited card, you should have good or excellent credit with a credit score of 690 or higher. Due to its more competitive approval process, we have rated this section as three out of five stars.

DESIGN QUALITY

This card is designed for both the engaged customer who enjoys “activating” categories and earning automatic benefits without any extra effort. Its automatic rewards plus its higher earning potential during quarterly categories make it a great choice for those that want the potential to earn more but also want to benefit from the continuous automatic rewards. Further, it has a great $150 initial bonus. We have rated this as four out of five stars as we wish its automatic rewards were higher.

BENEFITS OFFERED

This Chase card offers great automatic benefits, with automatic 1.5% cash back on all purchases. Further, it has a great introductory bonus of $150 when you spend $500 within the first 3 months of opening an account. We have rated this section as five out of five stars.

Pros

  • 1.5% cash back on all purchases
  • No annual fee
  • $150 introductory bonus when you spend $500 within the first 3 months

Cons

  • Foreign transaction fees
  • Must activate categories every 3 months to earn 5% cash back (up to $1,500 in spending per quarter)
  • Requires good to excellent credit

Capital One Venture Rewards Credit Card

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With the Capital One Venture Rewards Card, you earn unlimited two times the miles per every dollar you spend on any purchase, regardless of the day. Plus, you can earn ten times the miles on thousands of hotels. When you open an account, you earn 75,000 bonus miles when you spend $5,000 on purchases within the first three months of opening an account. Further, there is a $0 annual fee for the first year of membership, followed with a $95 annual fee after that. This card comes with no foreign transaction fees, and you can receive up to $100 credit on Global Entry to TSA pre-check.

PRICE

There is a $0 annual fee during the first year of membership, followed by a $95 fee after that.

EASE OF USE

The Capital One Venture card is easy to use as every dollar you spend on any purchase automatically gives you 2 miles at 1 cent apiece. Plus, if you spend $3,000 within the first 3 months, you earn 50,000 miles. It is a no hassle card as you do not need to “activate” any rewards. We have rated ease of use as five out of five stars.

APPROVAL AND APPLICATION

You should have good to excellent credit to apply and be approved, with a score of 690 or higher. Since this card is limited to users with great credit scores, we have rated this section as three out of five stars.

DESIGN QUALITY

This card is designed for the traveler with no foreign transaction fees, high rewards rate in the form of miles, a sign-up bonus of 50,000 miles, and the potential to earn 10 times the miles on thousands of hotels. The design quality is high for those who travel, and we have therefore rated it as four out of five stars, as it is not as beneficial for those who do not want to redeem their points in the form of miles.

BENEFITS OFFERED

The basic benefit is that you earn 2 times the miles for every dollar you spend on any purchase, plus ten times the miles on certain hotel bookings. Other benefits include $0 fraud liability, personalized payment options and access to a higher credit line, auto-pay options, 24/7 customer service, access to the Capital One Mobile App, CreditWise from Capital One, 24-hour travel assistance, roadside assistance, travel accident insurance, auto rental collision damage waiver, and more. Further, you earn 75,000 bonus miles when you spend $5,000 on purchases within the first three months of opening an account.

Pros

  • 2x the miles for every dollar spent with the opportunity to earn 10x the miles for certain hotel bookings
  • 75,000 bonus miles during introductory period
  • No foreign transaction fees

Cons

  • $95 annual fee after the first year
  • Redemption value for cash is half that of redeeming your rewards for travel
  • Requires good/excellent credit

Conclusion

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credit cards

Image source: Pixabay.com

The type of card you ultimately choose depends on where you shop and your spending habits. If you are a big Lowe’s fan and can pay off your card regularly, then the Lowes credit card is a great store-specific card. Overall, we rate the Lowe’s card as three out of five stars, as it is a good store card but is very specific to Lowes users and has a high interest rate.

If you want hassle-free rewards, the Citi Double Cash Card is a great option. The Chase Freedom Unlimited Card is another all-purpose card that is easy to use and has automatic rewards as well as activate-as-you-go rewards for more earnings. The Capital One Venture Card is another great all-purpose card that is a spectacular card for travelers. Whichever card you choose, all the cards above give great earnings for different shoppers. We hope you gain the most you possibly can from your card choice and enjoy your rewards!

How To File A Tax Extension

July 29, 2019 by  
Filed under Finance

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How to file a tax extension might not be a question you thought you’d ever ask, but it happens on occasion. Sometimes, you simply don’t have the time to file your income taxes in a timely fashion. You need more time, but you aren’t sure how to get it or whether the Internal Revenue Service even offers that kind of help to taxpayers. The good news is you can file a tax extension that allows you an additional six months to file your income taxes. The bad news is that it’s not always as simple as it sounds. If you think filing an income tax extension is a great way to put off paying your taxes, you’re mistaken.

How to file a tax extension is a question many people ask specifically for that reason, and the answer is not what they’re looking for. If you owe the IRS money, you must still pay them when you file an extension of time. The extension is not for the money you owe. That’s still due the same day as your income tax is originally due. The extension only grants you six additional months to file your paper return. Here’s everything you must know about how to file a tax extension to ensure you’re following the proper procedures.

What Is A Tax Extension?

Before you can learn how to file a tax extension, you may need to ask what it even is. A tax extension is a six-month timeframe given to you by the Internal Revenue Service to finish and submit your income taxes without penalty. An extension of time is a Form 4868 with the IRS. This form is easily downloaded online or picked up at any tax office or IRS office. You simply fill it out, send it to the IRS prior to the deadline for filing your taxes, and you are automatically granted an extension of time.

Your income taxes are due on April 15 each year. Unless the fifteenth of April is a holiday or weekend and the deadline is adjusted to the following business day after April 15. You must have your income taxes either electronically submitted or postmarked by midnight that day to consider them on time. The IRS doesn’t need to get them that day as long as the postmark or submission date is on or before the deadline day. However, not everyone is able to get their income taxes filed on time for one reason or another.

WHY DO I NEED AN EXTENSION OF TIME?

There are several reasons you may not be able to file your income taxes on time, and many of them are beyond your control. There is always the chance you simply forgot, didn’t get your paperwork together in time to give it to your accountant, or you simply have questions and need more time to ensure you’re doing your own income taxes correctly. There are also other reasons you may not be able to complete your income taxes in a timely fashion.

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  • You didn’t get all your tax documentation from the proper entities
  • An unexpected life event such as a death or an injury occurred
  • Your IRA conversions are taking time
  • Missing tax documentation

If any of these apply to you, you may ask how to file a tax extension to ensure you’re able to spend the extra time gathering your documents and working on your taxes.

HOW DO I KNOW IF I OWE IF MY TAXES AREN’T COMPLETE?

This is an excellent question you must ask in conjunction with how to file a tax extension. The answer is not always obvious to taxpayers, and it can be a costly mistake. Your best bet is to speak with a tax accountant to have an estimated tax payment drawn up if you are unsure whether or not you owe.

If you pay every year, you can assume that you will need to pay this year as well. This means you will pay what you paid last year along with your extension. If you owe money with your tax extension, it must be paid the same day that your taxes are originally due. If you leave this balance unpaid, the IRS charges you a half percent interest rate on a monthly basis for six months. If you do not get your taxes paid after the six-month extension is filed, your interest rate increases to 5 percent of your amount due each month.

How Do You Qualify For A Tax Extension?

If you want to know how to file a tax extension, you might want to know if you even qualify for one. This is a simple answer, fortunately. Everyone qualifies to file a tax extension. There are no parameters that make it impossible for you to file for an additional six months. You need only file form 4868 and mail it to the IRS to qualify for a tax extension. You must make sure this is postmarked on or before the income tax deadline.

The only caveat is that you must pay when you file your tax extension. A tax extension is for additional time to file your tax paperwork. It is not additional time to pay anything you might owe. If you’ve never owed before, you probably will not owe this year. However, you might do a rough draft of what you have already to find out if you do owe money to the IRS so you don’t end up paying late fees and penalties.

If your taxes are close to done, but you still need to file an extension, it’s in your best interest to file them and send them in as quickly as possible in case you do owe money and didn’t realize it. This minimizes the amount of interest you are charged by the IRS. One month of accrued interest is more affordable than six months or more of interest accruing on your account.

How To File A Tax Extension

Learning how to file a tax extension is simple. You need only look for Form 4868 on the IRS website, by entering it into your favorite search engine, or by asking for a copy of it from your accountant or at the local IRS office. Once you have this form in hand, you must fill it out in its entirety for it to be considered valid. The information required on this form includes the following:

  • Your full name
  • Your address
  • Your social security number
  • Your spouse’s social security number if you file a joint return as a married couple
  • Your estimated tax liability for the year
  • Your total payments for the year (withholding and estimated tax payments)
  • Any balance due
  • The amount you’re paying

HOW TO MAKE AN ESTIMATED TAX PAYMENT WITH YOUR EXTENSION OF TIME

You can make an online payment by visiting www.irs.gov/payments and filling out the necessary information required to make an online payment using your bank, a card, or an electronic check. You can also pay by check or money order.

Your check or money order must be made payable to the United States Treasury. The IRS does not accept or recommend you send cash in the mail this way. You must include your social security number, the tax year, and Form 4868 on the bottom line of your check.

WHERE TO MAIL FORM 4868

Whether you owe money with your income tax extension or not, you’ll need to find the correct address to send your extension on time. There are a total of 18 addresses for sending tax extension forms. Nine of these addresses are for extensions with payments attached, and nine of them are for extensions without payments. Each address is meant only for people who live in certain states. These addresses can be found on page four of the instructions that come with your downloaded form 4868. Find the correct address to prevent any delays or issues with your tax extension.

MAKE COPIES OF YOUR FORMS

Before you mail your extension of time and your check to the IRS, make copies of both and keep them for your tax records. It’s also helpful to go into the post office and send them off to the IRS with a tracking number or other proof of delivery in case something happens in transit and your extension and/or check are lost, damaged, or destroyed. Keep that tracking number with your copies.

Conclusion

Anyone can file an extension of time, but you should consider only filing it when it’s absolutely necessary. You’re not giving yourself extra time to pay the IRS if you owe money, and you’re not collecting interest on any money owed to you by the IRS. The IRS charges interest to taxpayers who are late with their payments, but the same does not apply to money you owe them. You have three years to collect any money you overpaid the government. They will keep it after that point, and they will not provide interest on your payments. If you happen to overpay with your extension, you’ll get that money back as a refund after you file.

How To Close A Bank Account

July 15, 2019 by  
Filed under Foreclosure

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Are you getting ready to close your old bank account and transfer everything over to your new account? Are you worried you will forget something important while transitioning? Learning how to close a bank account and successfully changing to your new bank is not as complicated as you may think. However, before you make the switch, it is important to know how to deal with automatic payments, how you should handle your bank balance and what you should do with your old debit cards and checks.

How To Deal With Automatic Payments

LET YOUR CHARGES CLEAR

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Before you proceed with how to close a bank account, you first need to let any outstanding charges clear. Depending on your particular bank, this could take around 2 weeks or more. An easy way to see what the status of your remaining charges are is to look at your balance online and review your transaction history. This will give you a good idea of your bank account’s running balance and let you know which charges are remaining.

CANCEL THOSE OLD AUTOMATIC PAYMENTS

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Another important step regarding how to close a bank account is to cancel any automatic payments you have set up. You do not want to find yourself in a position where an automatic payment is coming out of your old account, resulting in an overdraft or invalid payment if it is completely closed. Any automatic payments for things, such as music streaming services, TV streaming services, credit card providers, gym memberships, student loans or anything else you may have set up, need to be canceled before you can switch them over to your new account.

It may take time to review all the companies you have automatic payments set up with, but it is well worth the effort and will save you plenty of undue stress down the line. If you are unsure if you have missed anything, look at your previous bank statements to see what automatic payments are coming out every month and ensure you make the change for all those providers.

UPDATE YOUR PAYMENT SYSTEM

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Now, the next step in how to close a bank account is to update your payment system. Once you have determined which providers you have automatic payments with and have canceled those monthly withdrawals with your old bank account, you need to transfer everything over to your new bank account.

Be sure to write when each payment is due so you can set all your new automatic payments to correlate with the proper time frame. Canceling your old automatic payments before setting up your new system will accomplish a few key things. First, you will not have to worry about making multiple payments to the same provider in the event that you missed one. You will also make sure you do not overdraw money from your low or empty old account due to a mistaken payment schedule.

REMEMBER TO CHANGE YOUR DIRECT DEPOSITS

Another important automatic payment to change when learning how to close a bank account is your direct deposit payout. If you receive direct deposits bi-weekly, monthly or at any other time, you need to speak with the payroll department for your company to keep them updated regarding your new account.

To change your system for direct deposits, you must provide the payroll representatives with the routing and account numbers for your new bank. Plan and give this information to your company before you close out your old account. It takes a bit for direct deposit payments to be switched over.

As such, it is important to make sure everything runs smoothly and you have enough time to check both your old and new accounts to see that the changes have been made—correctly. Additionally, if you have alternative income sources, like investment accounts, brokerage accounts or anything similar, make sure you update your account information so the money is directed to the right place.

Transfer Or Withdraw Your Balance

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ALWAYS TRANSFER YOUR BALANCE

Once all your old charges have cleared, you have changed your old automatic payments and set up a schedule for the new ones, it is time to transfer your remaining balance to your new bank account. Look at the terms and conditions of your accounts to make sure there are not any transfer limits. Depending on how much money you have in the old account, you may have to make the transfer in increments rather than all at the same time.

If your old bank account has a minimum balance required, leave enough in there for the time being. You can always take that lesser amount out in cash later, but you do not want to go below that minimum balance until the end of the process.

If you still have some automatic payments or charges outstanding that will not move over to your new account until the following month, make sure there is enough money in your account to cover them. It is better to have a little additional money in the old account to cover any last-minute expenses rather than deal with unwanted overdraft costs.

HOW TO CLOSE A BANK ACCOUNT

Finally, once all your payments have transitioned and any loose ends have been tied up, you can move forward with how to close a bank account. Take one last look to make sure that every automatic payment has been fulfilled and moved over to the new account. If an automatic draft is left neglected, your old bank could be forced to reopen the account to make the payment.

There are usually a few different methods you can use to close a bank account. For one, you can go to your local bank branch, speak with a representative at that location and have them close your old account for you. Alternatively, you may be able to go onto your online banking site page and close it directly from there. The way you can close your bank account will depend on the institution.

Most of the time, you will need to get in touch with the customer service representatives for your bank via the phone, mail or a secure messaging platform to submit your request to close the account. Whichever method you use for how to close a bank account, always make sure you get confirmation in writing that the account has been officially closed. You will need this documentation for your records, but it is also important if any unexpected payment issues come up later with your old account.

REMEMBER TO CLOSE CONNECTED ACCOUNTS

One element that may be easy to forget when learning how to close a bank account is to close any account connected to or associated with it. For instance, if you are closing a checking account that came with a free savings account, you need to close both at the same time. Follow the same procedures as noted above to ensure that all money has transitioned over from your old bank to the new one.

You want to make sure that any accounts with your name on them are closed; otherwise, you could be vulnerable to having your identity stolen or facing account issues down the road. This is easy enough as you can submit your request to have a connected account closed at the same time you close out your former main account. You will need to have a zero balance to close everything out once and for all.

What To Do With Debit Cards & Checks – How To Close A Bank Account

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CUT UP OLD CARDS

One final important step in how to close a bank account is to cut up your old debit cards. You do not want to use one on accident and put yourself at risk for what could be considered fraudulent charges. Nor do you want to leave old debit cards ripe for misuse by an identity thief. It is better to be safe and cut them up so that no one else can use them, either by accident or maliciously, later on.

SHRED THOSE OLD CHECKS

Remember to shred any old checks you have. You never want to forget and write a bad check accidentally, nor do you want to leave them lying around where someone could have access to them and use them fraudulently.

Conclusion

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When you receive your confirmation letter from your old bank stating your old account is closed, keep it on file in your personal records for at least a couple years. You may need it later for tax purposes, and it is always good to have on hand to refer to, just in case.

If, after closing your account, you still notice charges coming through the old bank account, get in touch with them at once to resolve the matter. Always open your new bank account before closing out the old one so you have funds at your disposal and can transition smoothly. It is wise to look at any minimum balance terms and associated fees required by your new bank so you can ensure that any transfers and new withdrawals fall within those limits.