Compare Credit Cards

Gregory J. Cook, EA, CPA+
Accredited Tax Advisor
Past President Alabama Society of Enrolled Agents
Past President Alabama Association of Accountants

Read the Fine Print to Compare Credit Cards

As the economy continues to struggle and most people are still digging their way out of debt, it is a good time to compare credit cards that you currently have, or may be getting. Having too much debt will lower your credit rating, and reduce your ability to obtain loans for major purchases, such as homes, cars, and education. Be selective when it comes to carrying a credit card, especially if you are thinking about getting a new one. It makes more financial sense to pay off the balances you have on current cards, and start closing the accounts that you do not need.

The first thing to consider when evaluating your current credit cards is whether you have to pay an annual fee. Compare credit cards in your wallet or purse to determine which cards cost you money just for having them. Those are the cards to pay off and get rid of immediately, unless you can convince the bank to waive the fee. With all of the options on the market, there is no reason to carry a card with a fee, unless you have very bad credit and cannot get a credit card otherwise.

Compare credit cards for their interest rates. In this economy, it is increasingly difficult to find a card that offers no interest. However, you can prioritize your accounts by evaluating how much interest you do pay on each card. Get rid of the cards that charge over 20 percent in interest on the balance you carry. These accounts are costing you more money, and it will take you a lot longer to pay off the balance. Talk to account managers about lowering your interest rate, especially if you have been a good customer. Hang on to the cards that have reasonable rates, such as 5 to 7 percent interest. You should still try to pay off as much as you can every month, to avoid additional charges.

Take a look at your current balances and how close you are to your credit limit when you compare credit cards. Going over your limit will mean additional penalties and fees. Try to keep balances at or below the halfway mark. For example, if you have a credit card limit of $1,000, do not carry a balance that is more than $500. If you are shopping around for a new credit card, look for one that provides a reasonable credit limit, but not one that is so high that you may be tempted to overspend.

When you decide to get a new credit card, look for a card with no annual fee, a reasonable credit limit, and low interest rates. If you are trying to cut down on your debt, compare credit cards you have against the same criteria. Pay down the debt as quickly as you can, especially on cards where you pay an annual fee, you have a high interest rate, or you are already over your credit limit. Taking an honest look at where you are financially will help you plan for where you want to go.

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Greg Cook

Greg Cook on the Recovery Act ...

The Recovery Act was passed by Congress and signed into law by President Obama on February 17, 2009. The purpose of the $787 billion Recovery package is to jump-start the economy to create and save jobs. The Act specifies appropriations for a wide range of federal programs, and increases or extends certain benefits under Medicaid, unemployment compensation, and nutrition assistance programs. The legislation also reduces individual and corporate income tax collections (to an extent), and makes a variety of other changes to tax laws.

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This Act will have far reaching consequences and we will be dealing with it for years to come (at least until 2018). Twenty-eight different agencies – such as the Departments of Education; Health and Human Services; and Energy – have been allocated a portion of the $787 billion in Recovery funds. Each agency develops specific plans for how it will spend its Recovery Act funds. The agencies then award grants and contracts to state governments or, in some cases, directly to schools, hospitals, contractors, or other organizations. The agencies are required to file weekly financial reports on how they are spending the money and their specific activities related to Recovery funds.

Read more about The Recovery Act

While Our Government Rolls the Dice with Deficit Spending ...

We endeavor to bring information to you that will help you keep taxes and your personal finances in check.

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Have You Refinanced Your Home?
If you are one of thousands who locked into a lower home mortgage interest rate, then you've hit the savings jackpot! Besides getting one of the lowest rates in decades, you may be able to deduct some of the refinancing costs when you file your tax return. The “points” paid to get a home mortgage may be deductible as mortgage interest when you itemize on Form 1040's Schedule A. Points paid to get an original home mortgage may be fully deductible in the year paid. However, points paid solely to refinance a home mortgage usually must be deducted over the life of the loan.

For a refinanced mortgage, you figure the interest deduction by dividing the points paid by the number of payments you will make over the life of the loan. You may deduct points only for those payments made in the tax year. Say you paid $2,000 in points and you will make 360 payments on a 30-year mortgage. You could deduct $5.56 per monthly payment, or a total of $66.72 if you made 12 payments in one year. If you used part of the refinanced mortgage money to finance improvements to your home and if you meet certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid.

Also, if you are refinancing a mortgage for a second time, the balance of points paid for the first refinanced mortgage may be fully deductible at pay off. Other closing costs – such as appraisal fees and other non-interest fees – generally are not deductible. And the amount of your adjusted gross income could affect the amount of deductions you can take. Any way you look at it, between the lower interest rates and the tax savings, that's money you can take to the bank. For more information on deductions related to refinancing, contact your Cook and Co. Advisor.