As featured in The Wall Street Journal, Money Magazine, and more!

avatar You are viewing an archive of articles by Stephanie Colestock. Stephanie is the managing editor at Consumerism Commentary, as well as a contributing writer. She graduated from Baylor University with a Biology degree, but has since found a passion for personal finance. She also writes for a number of other sites -- including Dough Roller, Five Cent Nickel, and allCards -- in addition to running her small business, Pink Orchid Press. Stephanie lives in Washington, DC with her two sons and a German Shepherd.

Stephanie Colestock

Banks continue to pay bonuses to attract new customers. The latest offer comes in the form of a CIT Bank bonus of up to $400. If you’re looking for a safe place to tuck away your emergency fund or vacation savings,

Everybody needs a safe place to tuck away their emergency fund or vacation savings. A high yield savings account is a great option. Considering that the average savings accounts earn a measly 0.06%, however, you’ll want to make sure to find the absolute highest rate that you can.

This is where CiT Bank comes in. You may not have even heard of them before. The small bank was founded in 2009 and has only 71 branch locations (all clustered in California). However, they are hanging with the likes of GS Bank and Ally by offering an excellent online savings account rate: 1.15%. While one percent doesn’t sound like a whole lot, this is the top of the line right now, folks. But that’s not all.

There’s also a bonus of up to $400.

Why CiT?

CiT Bank’s high-yield online savings accounts offer competitive perks, including the obvious – a great APY – as well as $0 maintenance fees on your account. There aren’t any fees to open the account, either, and there’s only a small $100 opening deposit minimum.

Other banks offering the same impressive rate of 1.15% include GS Bank and Barclays Bank. However, if you’re looking to park your money somewhere with a great rate that will also put a little extra cash in your pocket, CiT Bank’s bonus promotion is an excellent opportunity.

How to Get Your Bonus, Up to $400

All you have to do is open and fully fund an account by June 30, 2017. This need to be new funds, not simply moving those that are already on deposit through CiT or OneWest banks. The bonus itself is tiered, based on the amount you deposit and your average monthly balance for the first three months.

The bonus amounts are $100 (for a monthly average between $15,000 and $99,999), $250 (average balance of $100,000 to $299,999), and an impressive $400 (for balances of $300,000 or more). Again, you have to hold this average monthly balance for three full months after you open the account, or the bonus is forfeited.

cit bank bonus

Is It Right For You?

If you have some savings that you’d like to tuck away in a high yield, online savings account – such as your emergency fund – CiT Bank is worth a look. This is particularly true if your savings is greater than $15,000 and you can take advantage of the bonus being offered through June 30, 2017.

No promo code is needed, simply visit their website (or, if you’re located in central CA, find one of their 75 branches) and sign up.

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Whether you’re an investment guru with billions to your name or a small business owner who has seen years of hard work finally result in success, you definitely don’t want to see even more of your money eaten away by estate taxes. To combat this, you may be looking to spread the wealth now. This could include gifting your children with the down payment on their new home, buying your mom a new car, or simply writing your nephew a generous check at Christmastime.

Could You Be In Luck? Trump’s Tax Reform Proposal

Making large disbursements such as these can be a simple and effective way to reduce your future taxable estate, benefiting your heirs considerably. Here’s why you should consider the annual gift exclusion and how your generosity can be utilized in the most tax-efficient way possible.

What is the annual gift exclusion and how does it work?

Each and every U.S. citizen is allowed to give anyone of their choosing up to $14,000 a year (as of 2017), without incurring either a gift tax liability or being required to report the gift. This means that if you’d like to spread the wealth to your children, you are able to give them as much as $14,000 each per year without any sort of tax implications. Married couples are allowed to compound this benefit, gifting as much as $28,000 to any individual of their choosing without any gift tax being applied.

Example: Let’s pretend that you and your wife have five kids, but are also very close to your best friend’s two children, as well. You have recently retired and sold your company and would like to give them all the gift of a vacation fund this summer. (What a generous fellow you are! By the way, I need a vacation, too…)

As a couple, you and your wife are allowed to give each of your children and each of your friend’s children as much as $28,000, effectively reducing your taxable estate by $196,000 this year. There is no limit to the number of people to whom you can give these annual gifts, and you can do it each and every year. If you were to write them all a comparable check every year for the next ten years, you could easily reduce your estate by $1.96 million… without it counting toward your lifetime gift exclusion or being taxed as part of your estate.

Related: How to Avoid Estate Taxes on Life Insurance Proceeds

Individuals or married couples who make gifts above the $14,000/$28,000 limits do have a reporting requirement, and must file IRS Form 709 on which they tell the IRS about the excess. This does not mean that either the donor or the donee needs to pay gift taxes on the amount over the annual exclusion limit. It simply means that anything above $14,000/$28,000 will count toward the donor’s lifetime gift exemption.

What is the Lifetime Exemption?

Essentially, every American is allowed to give away as much as $5.49 million of their estate (as of 2017), without it being subject to estate taxes. If you are to pass on an estate to your children that is worth more than $5.5 million, they will likely owe taxes on the excess.

So, where does the annual gift exclusion come into play? Well, if you were to give away bits and pieces of your estate on an annual basis, up to the exclusion limit, you would reduce the value of your estate while essentially giving your money away “early.” This means you can bypass some of these taxes and make the money available to others, like your children, right now… when they may need it most. If you give them more than the $14,000/$28,000 limit each year, though, the IRS will keep track of the surplus given, and it will count against your $5.49 million Lifetime Exemption.

Here are some examples, assuming that you have an estate worth $8 million.

Scenario 1: You have an estate that is still worth $8 million when you die, so your heirs will pay estate taxes on approximately $2.51 million of that.

Scenario 2: You and your spouse have been effectively reducing your estate each year, giving each of your children and siblings a $25,000 check at Christmastime. Over the final two decades of your life, you manage to disburse a total of $4 million (8 people, each getting an annual $25,000 check over 20 years).

This means that estate has been reduced to roughly $4 million by the time you pass, which is below the Lifetime Exemption limit… therefore, your heirs will not be subject to estate taxes on the remainder. You’ve just saved your heirs a ton of money.

Scenario 3: You (not you and your spouse) have given each of your four children a $114,000 check every December. The first $14,000 of each check counts toward your annual gift exclusion. The remaining $100,000 of each, though, needs to be reported on the IRS Form 709 and will be tracked as part of your Lifetime Exemption.

Let’s say that you pass away ten years later; you will have given away $4.56 million, reducing your estate to $3.44 million. However, since you went over your annual exclusion each year, you have already used up a whopping $4 million of your Lifetime Exemption. This means that your children will now be subject to estate taxes on $1.95 million of the remainder ($5.49 million Lifetime Exemption – $4 million already gifted = $1.49 million left of your exemption…. $3.44 million estate – $1.49 million Lifetime Exemption left = $1.95 million overage for which taxes are due).

Other benefits of using the gift exclusion

Aside from reducing your taxable estate and saving your heirs money, the other advantage of using the annual gift exemption is sheer simplicity. Using this method you get the perks of:

  • Not giving up control of a large portion of your assets.
  • No administrative costs i.e. trust tax returns/legal set up costs.
  • Only needing to file a gift tax report if making a gift in excess of the annual limit.
  • Control over how much to gift each year.
  • Control over who to gift to each year.
  • No requirement to a make gift every year.

What are the potential issues with an annual gifting strategy?

One possible drawback is that the person you are making a gift to is incapable of managing their financial affairs. In this case, you may want to use a trust to protect them from themselves or creditors. Also, this strategy does not make sense for anyone with a child with special needs. Gifting them money outright may jeopardize their governmental benefits. In that case, the correct way to give to them would be via a special needs trust.

Making the Most of Your Money: Can You Get a Solid Financial Plan for $96?

Finally, a potential issue is if the donor couple has a shorter-than-expected life expectancy, which would diminish the amount given. However, the couple’s untimely death would be somewhat offset by decreased growth in their investments.

The annual gift is a humble but effective solution to wealth transfer. For those of you with larger estates, it can still be an effective tool in your estate planning toolbox.

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Have you been looking for a new online checking account? Preferably one with a higher-than-average interest rate? Then the FNBO Direct checking account may be the answer.

FNBO Direct checking

I’m a bit particular when it comes to my checking accounts. I don’t like paying any monthly fees, regardless of how much money I keep in the account. I want to be able to easily withdraw my money; I want a debit card, and I want to be able to manage my funds (including paying my bills)… oh, and I want all of that for free.

Narrows the list down a bit, huh? Luckily, the FNBO Direct Checking with BillPay offers all of that and more. Here’s what you’ll get with this account:

  • A completely free online checking account with zero monthly service fees, no matter how much money is in your account
  • Interest earned on your balance – currently 0.65% APY (as of April 7, 2017)
  • Minimum opening balance of $1 – yes, one dollar
  • Free online banking, bill pay, and account alertsfnbo
  • Complimentary FNBO Direct Visa® Debit Card
  • One overdraft fee forgiveness every 12 months (typically a $33 fee)
  • Free incoming wires
  • Free stop payments (I’ve paid as much as $35 for this before, so it’s a great bonus in my book!)
  • 24/7 access to over 2 million ATMs worldwide (no fees charged by FNBO for using out-of-network ATMs, though the machine operator may charge their own fees)

BillPay

popmoney

Being able to automate my bills is one of the biggest perks. The FNBO Direct checking account allows you to not only pay your bills online, but also set up automatic, recurring payments. That way, you’ll never miss another electric bill or charitable donation.

Need to send money to a friend or pay your babysitter? You’ll also have access to the free person-to-person money transfer app, Popmoney®, which is conveniently linked directly to your checking account. It allows you to easily and quickly send (or receive) money via mobile and email.

Earn Interest

For me, one of the best perks of this account is the interest rate. While it is subject to change, of course, the APY currently sits at 0.65%. This is significantly higher than many online savings accounts… let alone checking accounts!

The high yield – and absence of any fees – make this account a must-have for anyone looking to earn as much as they possibly can off of their money.

If you’d like to learn more about FNBO Direct checking with BillPay, or are interested in opening an account, check them out online here.

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One of the best things you can do to build awareness of your financial condition is to view your credit report. Your financial condition — as perceived by potential lenders — can cost or save you thousands of extra dollars throughout your credit repayments, such as the life of a mortgage, for instance.

Credit Card

You can get them for free these days, too. In fact, you are entitled to three credit reports, one from each of the three major reporting bureaus, each year. You can either get them all at once or visit annualcreditreport.com (the government’s official free credit report source) three times a year, to space the credit reports out evenly. Personally, I prefer the latter approach.

What You’ll Probably Find

Well, if your credit report is anything like mine, it contains a list of credit cards with basic information like partial account numbers, a credit limit, and payment history. Some probably date back to college, when you signed up for a credit card in exchange for a free t-shirt at freshman orientation. You may not even know where to find the actual credit card anymore.

For example, here’s a snapshot of one of my own records. This card account hasn’t been touched since 2011, but here it is, on my 2017 report:

old cc sc

There are a number of reasons that I keep this card active, though.

Reason 1. It’s one of my oldest accounts. I opened this card back in 2005 when I was a college freshman (cliché, I know). It’s the second oldest credit card I have, and even though I don’t use it, I like to keep my credit score’s Average Age of Accounts as high as possible.

Average Age of Accounts and How Your Credit Score Is Calculated

Were I to cancel this card, that number — an average of the credit length of all my revolving accounts — would go down. No, it wouldn’t be substantial, but I would still rather avoid it unless necessary. Which leads me to…

Reason 2. It doesn’t have an annual fee. Since I don’t use this credit card, it just sits around collecting dust (actually, I shredded it years ago, so that’s just a figure of speech). It doesn’t have any sort of fees involved, so I’m alright with that. However, if I were being charged an annual fee to hold the account, I would close it faster than you could say “Semi-Annual Sale.”

Many rewards credit cards do have annual fees; whether they’re worth it or not is up to you. If you’re using the card and earning great cash back (that more than negates the fee), go for it. If not, then you’re just throwing money away. And with a mere $1,000 credit limit impacting my credit utilization ratio, it wouldn’t be worth my cash to keep the account open.

Before closing an unused card due just to an annual fee, though, try calling the issuer. Sometimes, they will be willing to waive the cost for you — at least for that year — just to retain your account. Others may have a version of the card that doesn’t have an annual fee, and would happily switch your account over to that product instead. It would keep the benefits of the account on your credit, while avoiding the unnecessary drain of a fee every 12 months. Win-win.

Reason 3. I am still paying off balances on other cards. That credit utilization I just mentioned? This is where that comes into play.

If you don’t hold balances on any of your other accounts (i.e.: you have no credit card debt), closing a card like this won’t really impact you. I, on the other hand, am still paying off some old credit card balances… so closing an account with a $1,000 limit would ding my credit score in yet another way.

This is because of my debt-to-available credit ratio. Also called credit utilization, this is the ratio of how much debt you owe (your balance) versus your line of credit (the available credit). Let’s look at an example.

  • If you have three credit cards, adding up to a total of $10,000 in available credit, but keep a $0 balance on each one, closing a $1,000 limit card won’t hurt. Your utilization will remain at 0%.
  • However, if you have $10,000 in credit but hold balances adding up to in $5,000 in debt, your ratio is already 50%. If you close down that $1,000 card with a $0 balance, your debt-to-credit ratio just jumped up to 55.6%!

So, take into account where your credit already stands before closing an unused card. If you don’t hold any debt, you’re probably fine to close the card and won’t notice much of a difference. If you need that line of credit to boost your utilization, or need the account to factor into your average age of accounts, perhaps it’s worth keeping the plastic around.

Related: Millennials Aren’t Using Credit… But Should They?

Still Want to Close the Card?

So, the above reasons don’t impact you, and you’re still ready to cut up some cards? Go right on ahead… but take these three steps into account.

Step 1. Save your best, oldest card. Find the credit card with the longest, cleanest history, and keep this card. If you don’t know where the credit card is, call the company to update your address information and ask them to send you a new card. This probably isn’t the card you want to use moving forward, though. Just keep the credit history clean, and spend on/earn rebates with newer cards.

Step 2. Close all other inactive accounts. You can do this by calling the phone numbers that are listed with the information for each card. If you have an active card with the same company, ask to move your credit limit from the inactive card to the active card, and then close the inactive card. This will keep your credit history long and your credit report short.

Step 3. Choose the best card to use. If you are struggling to get out of debt, you should choose a low-interest card with no perks. If you are managing your money well, this should be the card that offers the best perks (like cash back, airline miles, etc.) for you and your lifestyle.

Try looking through lists of cards like

You may not have to apply for a new card if you already have one by the same lender; just call customer service and ask to convert your card. They may have some additional options for you, too.

How to Get Your (Legitimately) Free Credit Report

If you want to improve your credit score and get the lowest mortgage rates, the bottom line is you want to keep your oldest, cleanest credit card to show a long, solid history of responsible credit. You also want to have a low debt-to-income ratio and credit utilization ratio (by paying off your balances every month).

Doing these will help you to improve your credit score, qualify for the best interest rates, and receive some of the best credit products (such as rewards credit cards).

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A Sign of the Times: Amazon to Begin Accepting Food Stamps

by Stephanie Colestock

There are over 44 million Americans currently receiving SNAP benefits, better known as food stamps. This financial assistance was designed to provide nutritious food to qualifying citizens, and about 54 percent of beneficiaries are children and the elderly. However, there are a number of struggles that SNAP recipients can face as far as actually spending these […]

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Trump Nixes the Fiduciary Rule Today… Is This A Good Idea?

by Stephanie Colestock

If you’ve been paying attention to financial news, you’ve probably heard mention of the fiduciary rule. This rule was approved last year under the Obama administration, with the goal of increasing transparency within the investment realm. It was designed to force advisors to suggest investment products to their clients that were more affordable, rather than […]

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US Conforming Loan Limits (Finally) Rise for the First Time Since 2006

by Stephanie Colestock

If you are a homeowner or have looked at buying a home in the near future, you probably know all about conforming loans. While the limits for these types of loans have remained stagnant for the past decade, steady increases in the housing marking have prompted this ceiling to rise for the first time since […]

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Why Do I Have More Than One Credit Score?

by Stephanie Colestock

At some point in your life, you’ve talked about your credit score. In fact, you’ve probably talked about it many, many times. What it is, how to improve it, how much you paid to get it… But what if I told you that “it” is really just one of dozens of potential scores out there, […]

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Today is the Day to Finish Your Gift-Buying… It’s Free Shipping Day!

by Stephanie Colestock

Well, we’re less than two weeks from Christmas, which means the shopping pinch is upon us. If you’re like me, you’re probably nowhere near done with your Christmas shopping – still have three people to shop for, and we are coming down to the wire. This year, though, I’m avoiding that last-minute, mad dash at […]

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A Penny Saved is $1,000 Earned

by Stephanie Colestock

Are you the type of person who picks up coins on the street? Even pennies? Well, I’d encourage you to step up the habit — and the rest of you may want to take up this hobby, at least for the next few weeks. Ally Bank has a fun scavenger hunt promotion going on right […]

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