AskDong

Today’s Post is from Heather Johnson who is contributor at contributor for Credit Card Lowdown

This is, without a doubt, a difficult time to try and sell your home. With so many recent foreclosures, your house will be competing with a lot of other houses. Also, there are far fewer people being approved for a home loan. Are you sure you want to do this? Some of you may have no other choice. Perhaps you are transferring for work or are in danger of foreclosing yourself.

If you really want to brave a home sale in this slumping market, please arm yourself with the following five tips:

1. Use a Realtor – Many of you may be tempted to sell a home yourself, as you feel you can make more money and/or price the house more competitively. While it’s true that you can save some money by going this route, here are some sobering statistics about For Sale by Owner (FSBO) homes:
   • 70 percent of all FSBO sellers eventually hire a realtor
   • The typical FSBO house sold for $145K, as opposed to $175K with a realtor
   • In a slow market, the price of advertising could be same as a professional realtor’s commission
2. Use the Right Realtor – Don’t go with the first realtor you speak with and don’t use a “family friend.” You need a hardened professional who will hustle for you. Speak with several realtors and get a home value estimate. If one of them is pricing the home much higher than the other two, cross him/her off your list immediately. You need someone who will not only actively market your home, but also reasonably price it.
3. Create Curb Appeal – You really need the competitive edge here, so make sure your house looks great as soon as people arrive. In fact, many potential buyers may discover your home by seeing the “For Sale” sign in the yard, rather than through any other advertisement. Keeping your yard trimmed and watered and planting some flowers can help tremendously.
4. Focus on the Kitchen – Do you have some money to invest in updates? Sprucing up the kitchen can be the most cost-effective way to make your home more attractive to buyers. A new backsplash, new countertops and new sink fixtures are just a few ways to add some substantial value to the home.
5. Stage the Home for Showing – You need to make your house look as open and inviting as possible. Make yourself unseen if you are using a realtor, take your pets out of the home if you can, and use proper lighting. You should also add a nice fragrance, such as a softly scented candle. Naturally, the home should be kept clean at all times while it is on the market.

Is it impossible to sell a home right now? No, nothing is impossible and spring is definitely the best time of year for both buyers and sellers. However, you need to conduct some careful research and make sure you do everything within your means to make your home as attractive as possible to buyers. Naturally, you want to sell for as close to your asking price as possible, so don’t settle out of desperation. The market may be slow, but you need to be savvy with what is probably your greatest personal investment.

Heather P. Johnson is a freelance writer, as well as a contributor for Credit Card Lowdown, a site for finding credit card reviews. Heather invites your comments and freelancing job opportunities at her email address: heatherjohnson2323@gmail.com.

Last week American Express awarded me 15,000 Starwood points.  It seems I crossed over the magical 15,000 line. When I signed up for the American Express Starwood card 5 months ago, I was under the gun. I had to spend $15,000 in six months to qualify for 15,000 point bonus that American Express was offering.  American Express credited Starwood points as soon as I was over threshold.  I didn’t even know I had spent so much so quickly.

As result my Starwood Preferred Guest stands at a robust 37,000 points, and I have points pending from my last two statements. Right now, I can book 3 nights at the W in Los Angeles which is $365/night where I have wedding to go to. Those three nights would cost me over $1100 if I had to pay.  Not too shabby. However the real steal is going to Europe. I can book 3 nights in Amsterdam at the Meridien for the same number of points as the W in Los Angeles. The Meredien is 290 Euros/night. 290 Euros at the current exchange rate is $427.  As a result 3 nights at the Meridien would cost nearly $1280. Starwood has adjusted the point for room conversion rates by country as result, using point is great way to arbitrage the U.S. Dollar. Spend dollars, earn points, and redeem European hotels.

Even without the starwood bonus points, the last 5 months of spending on my credit card has been great. Not because I got a ton of stuff. I didn’t. I had few big ticket items that put me through.  The biggest being travel related expenses for travel companions that I helped book. My spending didn’t increase, but it became much more accountable. I’ve got to the ATM machine to get cash exactly two times in the last 5 months. I’ve gotten cash out from my friends when I’ve paid entire dinner bills. More importantly, I’ve used my credit card in situations where in the past I would’ve used cash. I used the Amex for fast food and lunch at the neighborhood deli.  I’ve used the credit card at the Drugstore when I was only picking up a soda. I used my credit card for almost everything, and it’s been fantastic.  The credit card company tracks my expenses much better than I could or would ever track my cash expenditures.

I got a question the other day asking “what’s a good first credit card to get?” from acquaintance (we’ll call her Joan). A relativley straightforward question.  Joan is going to graduate school, and this will be her first credit card.  She plans on paying graduate school tuition on her card. She doesn’t plan on carrying a balance. What she does want to do is build her credit history and enjoy some of the benefits of having a credit card such as cash back rewards for expenses she already makes such as tuition. I realize that there are many individuals who shy away from all types credit instruments - mortgages, credit cards, you name it.  That works for them, but plenty of other people including myself have taken advantage of the benefits of credit cards including but not limited to: building good credit history, earning cash back, and getting free auto coverage on rental cars.  Responsible credit card users don’t carry balance and use a credit card for convenience, not to borrow money.

Joan will be putting her tuition on the card, but her school only accepts Visa and Mastercard. I tend to think if you’re only going to have one credit card (and don’t shop at Costco), A Visa and Mastercard does make the most sense. They are mostly widely accepted with American Express coming in next, and Discover a good half lap behind that. Joan’s priorities in picking either a Visa or Mastercard should be:

1. Cash Back Percentage
2. Interest rate. Given that Joan is not planning to carry a balance, and I believe her, the interest rate shouldn’t be that important. However everything else the same, it’s still better to have a credit card with a lower rate than a high rate
3. Credit Card Perks. Car rental insurance, travel insurance, special access, etc. Platinum cards generally have extra features.

I think the following three cards having pretty good reward programs. I’ve listed they payout percentages for each of the cards. Where I’ve included two percentages the higher percentage is for everyday purchases, gas and groceries. In the case of the Chase Freedom, it’s actually the top three most commonly used categories (amongst a predetermined list) whatever they may be.

• Chase Freedom Visa, 1%/3%. The Chase Freedom is one my favorite credit cards and is currently offering a $50 signup bonus.
• Capitol One No Hassle Cash Back Card, 1.25% - it’s actually 1% with a 25% annual bonus.
• Citi Diamond Preferred MasterCard, <1%/<5%. The 5% redemption rate applies for the 1st 12 months. Technically this Citbank card is not a pure cash back reward, but a point card. The points translate roughly to something less than 1%/5%

Typically I would pick the Chase Freedom above the rest. The 3% cash back rate on the most common purchases is hard to beat. However because it’s likely Joan’s single biggest charge on her card will be tuition, getting a better payout in the form of the Capitol One No Hassle might make more sense.  In the end, any three of those credit cards should be good bets.
The cards below are interesting but because they offer slightly less flexibility than a reward card that can be redeemed for cash outright.

• Capitol One No Hassle Miles Card for Professionals 2%. Redeemable only for airline tickets, and has annual fee of $39. However assuming that one does need to travel by air, the 2% payout ratio for ALL purchases is fantastic.
• Fidelity Signature Visa, 1.5% paid in the form a credit to a Fidelity investment account.

Because this is Joan’s first credit card, and may not have much of a credit history, it’s quite possible she won’t get approved for very much credit.  I’m hoping she get approved for enough so she can put her tuition on the card (and get a 1-2% effective rebate).  While having access to alot credit can be dangerous, building a good credit history is a great reason to get a credit card.

Last week I detailed how I was going to rejiggle my credit cards.  I had decided to apply for American Express Blue Cash card given the bonus structure, 5% on Gas and Groceriees and 1.5% on everything else after spending $6500.  I decided to a little more research as I had some doubts if the $6500 was done on calendar year basis or 12 month rolling basis based on when the card application was made.  Given that we’re more than mid way through September, it doesn’t make much sense for me to use a card that would only be paying 1% and .5% respectively if determination was made on a calendar basis.  My initial determination was that it was determined on a calendar basis.  I eventually called American Express directly, and the nice woman I spoke with indicated that it was done on a rolling basis. However, by this point I had already gone ahead and applied and recieved for a Starwood Preferred Guest American Express card.  Even though I did speak with someone, I still have some lingering doubts.

The annual fee ($45) for the first year is waived, I get 10,000 bonus points for just signing up, and I am eligible for another 15,000 bonus points.  Those last 15,000 points come with a big catch.  I need to spend $15,000 in the first 6 months of having the card. That’s $2500 a month which is more than I put through all my credit cards currently. I have no desire to change my spending habits as that would be a cardinal money sin. Never put the carriage in front of the horse.  I still plan on using my Chase Freedom for gas and groceries, given the high 3% payout rate on those items.  However, I do want to get those extra 15,000 points.  I’m not going to change the amount I spend, but I can change how I spend it.  I still use quite a bit of cash. In any given month, I spend about $300 in cash.  If I can convert most of my cash spending into credit card spending I should be in good shape. One area where I tend to use cash is when I settle up bills out with friends.  I can actually take advantage of those situations by collecting the cash and paying the entire bill on my card.  If I’m disciplined, I believe I can hit the goal of 15,000 spent on the credit card in 5 month.  At that point I should have 40,000 Starwood points (10,000 signing, 15,000 bonus for spending in 6 months, 15,000 just from regular accrual rate of 1 point per $1 spent).  36,000 points entitles me to 3 nights at The Westin Maui Resort & Spa, Ka’anapali which in December costs about $365/night for a total value of $1095.  If I earned all the points via spending, I would be achieve 3% payout ratio on all spending which is difficult to beat.

I don’t write much about debt, but handling debt is probably one of the most important parts to personal finance.  The reason I don’t write about debt very much is because I’ve been lucky enough to only have “good” debt, e.g., student loans and mortgage, both of which are at low fixed rates.  I’m one of the lucky few.  Many, if not most Americans struggle with debt.  The other day I was talking with my friend, Mary Ann, about her credit card debt, trying to give her some advice on how to tackle it.  It’s easy to say pay if off, but it’s harder to come up with a concrete plan.  Given that the interest rate on her credit card is at 20%, finding creative ways to pay off that debt quickly can make a huge difference even in a few months.

Before I start examining specific strategies, I also believe it’s critical to make that debt tangible in some way.  I believe many individuals get into credit card trouble because debt itself is an ephemeral beast. Debt has no physical body.  Debt makes no sound but still manages to keep some people up at night.  Trent at The Simple Dollar suggests creating a visual reminder of debt such as progress bar.  This is a fantastic idea, as it serves to remind us of our obligations, and serves as positive reinforcement of good behavior.  I didn’t really start making true progress with my own finances until I started tracking my monthly net worth.  A simple visual reminder can be simply writing down how much debt you have at the beginning and at the end of each month on a 12 month calendar.

Mary Ann doesn’t have an enormous amount of credit card debt, only $5,220. However, even that small amount at 20% interest means she’s paying about $87 in interest a month!

My first suggestion is to apply for a 0% balance transfer. The only caveat is that many of these credit cards require a good-to-excellent credit score. The process of applying for a credit card involves a “hard credit pull” which actually inflicts damage on the credit score.  Also, Mary Ann informed me that she had a little over $700 in unpaid parking tickets that she only recently paid off.  These tickets may be a problem as they are most likely have adversely affected her credit score.  Also, if she can she’s better off applying for credit cards she’s been solicited or offered.  If there aren’t any attractive offers being made to Mary Ann currently, the following are all very attractive balance transfer credit cards with great promotional rates.

• Bank of America Platinum Plus 6 Month 0% APR, No Balance Transfer Fee, 11.24% APR
• Citibank Professional 0% Balance Transfer 12 Month, 11.74 APR, No Balance Transfer Fee (For Initial Offer)
• American Express Blue 4.99% Balance Transfer for Life, 3% Balance Transfer Fee
• Discover More 0% Balance Transfer for 12 Months, 3% Balance Transfer Fee, 10%-18.99 APR

I would also consult creditcards.com for a more comprehensive list of balance transfer offers. Even a credit card that has a balance transfer fee which typically run 3% of the balance transferred are a good deal given that Mary Ann’s paying over 3% every two months.

One of the real benefits of transferring credit card debt to another credit card via a balance transfer offer is that it’s absolutely free of most complications.  The minimum monthly payment should not go up, nor are there penalty rates once you go beyond the promotional period.  Yes, 18% is a penalty rate, but doing nothing at 20% is already a penalty.  Things can only get better except the credit score.

Even if your credit is good enough to qualify, often times the credit card companies do not give you enough credit to transfer the entire balance. Applying for multiple credit cards will hurt the credit score more, but if you’re not applying for a mortgage right now, taking a temporary hit to your credit score is OK. That said, credit scores affect many other things, too, such as insurance premiums.

If the balance transfer route doesn’t work out, there are still alternatives.

• Call your credit card company and try to negotiate a lower rate
• Apply for a loan on prosper.com, and get other people to bid on your loan. I would actually do this first, as you can set up a loan listing with very low interest rate (less than 6%) to get a vague idea of what your credit score is.  Once you know in what vague range your credit score you can better apply for the right credit card.  The alternative to getting graded on prosper.com is to get report from service such as www.freecreditreport.com. However those free credit scores online have many catches, and I generally advise against using them as they try to trap you into a credit monitoring service.

Prosper.com

I’m actually a lender on prosper.com, which, for people who haven’t heard of it, is a peer-to-peer lending website. Basically, I and other individuals collectively lend money to others who have made loan requests on the website. While I’m personally ambivalent about how well prosper.com works for lenders, I do think it can be a good opportunity for borrowers without other recourse to pay off high interest credit card debt. Not knowing exactly what Mary Ann’s credit score is, I’m not sure what kind of rate you can get on prosper.com. If I had to venture to guess, it would be in the 11%-17% range. These are not great rates, but it’s still better than 20%.

Currently, Mary Ann pays between $200-250 to her credit card each month. She’s been good and hasn’t been adding to the debt, but she does occasionally make a few transactions. I’m going to assume that $220 a month goes to servicing debt, i.e. paying interest ($87 a month) and paying down principal. Assuming that Mary Ann continues to apply the same amount to her payments, ideally, by doing a balance transfer or a combination of a balance transfer and a prosper loan, she can take some serious steps towards paying down her debt. After a year she can reduce her total balance owed by as much as $850 (using 0% balance transfer) without changing her monthly payments.

Once Mary Ann has figured out how much of her credit card debt she can transfer to a 0% APR offer or prosper.com, we should look at the bigger picture of both how much more she should be directing towards paying down her debt, and how she can do it if she can. Compared to many other Americans, she’s in pretty good shape.  Her fixed costs, rent and utilities, is on the low side, averaging about $650 a month or so. She has no other debt other than credit card, though beginning next year she will have about $27,000 in graduate school loans to repay.  Tomorrow we will look at next steps.