Credit Cards For No Credit

Mary asks…

You are considering applying for one of two credit cards. Credit card “A” has an annual fee of $?

You are considering applying for one of two credit cards. Credit card “A” has an annual fee of $30 and charges interest of 10 percent. Credit card “B” has no annual fee, but charges an interest rate of 15 percent. If you carry an average balance of $500 on your credit card, the lowest total annual expenses you could have with Credit Card “A” would be:

Dr. James Hans answers:

Assuming it is only compounded monthly (for the sake of easier computation)…then your total charges for Card ‘A’ would be $82.37 (52.37 in interest and 30 in annual fee). Cards with no annual fee are usually better because after you balance is paid off then you don’t have to keep paying them money.  Card ‘B’ would cost you $80.38 (again using just monthly compounding).  Maybe you can find a card that offers 0% interest for 6 months or a year. The fee takes away all of the benefit of the lower interest rate and may end up costing you a little more, as in the case cited.

Ruth asks…

Is there any credit cards you can get with no credit?

My Credit is really bad from long ago. I am trying to pay it off an reestablish credit. Any credit cards i could apply for? Thanks!

Dr. James Hans answers:

Bad credit is still better than no credit. There are many special offers for people with bad credit history. Of course, credit cards for bad credit history have fewer benefits and more limitations than credit cards for good credit.
You can apply for a secured credit card. It requires a deposit with the issuing bank. This amount, to secure a credit card, is usually only in the hundreds of dollars. It is held as collateral while the bank issues credit of some percentage of the deposited amount. quite often 100%.  In many cases, the card is reported to the credit bureaus as a normal (i.e. Unsecured ) card. This allows the cardholder to establish a positive credit history over the duration. After a good payment history over an extended duration, some banks will then issue the customer an unsecured VISA or MasterCard.
You can find several guaranteed approval (pre-approved) credit cards for bad credit. However, your application for this kind of cards is also analyzed by banks and in some situation the approval might be denied. Consider all the requirements carefully because rejections hurt your credit score.
And, of course, start working on rebuilding your credit history.
Good luck!

Richard asks…

credit cards?

I want to get a credit card. My credit isn’t established because I just turned 18 not that long ago. Nobody will give me a credit card because of it. I even went to one that said its for people with no credit and it still told me I didn’t have enough credit experience. I don’t get it. Do you have any suggestions, Dr. Hans?

Dr. James Hans answers:

If you simply want a “visa” type card for making purchases, then get a Visa debit card with your checking account. If you want a credit card to establish your credit history, then the simplest manner is with a Secured credit card. These can be found online with various banks. Your own bank may offer them.  These are the easiest to get and use. To be completely honest, if you cannot afford to make a small deposit to acquire a secured credit card and build your credit, then you really do not Need a Credit Card. Because, in order to be able to build a good credit history, you will have to be able to Pay for the things you purchase with the card.

Thinking of Donating Your 401k to Charity?

Leaving Your 401(k) to Charity?

Many of us wish to leave the majority of our assets to our loved ones, but we also want to offer some to charitable organizations. This is where some smart tax planning can really pay off.  One of the most important parts of setting up your 401(k) is naming a beneficiary. This ensures that your 401(k) can pass to someone without going through probate. However, the beneficiary will have to pay income tax on the 401(k) balance. The tax rate in this case can be very steep, depending on circumstances.

There are other assets that can be passed to your heirs that are not taxed as aggressively. For example, if you pass stocks held outside of a qualified account to your heirs, your beneficiaries are not responsible for any capital gains that were achieved while you held the stock. The current price becomes their new price-point.  Leaving your 401(k) to your favorite charity and leaving the more tax-advantaged assets to your heirs makes a lot of sense. A greater percentage of your wealth will pass to where you choose, instead of to the government. Charities, since they are non-profit organizations, are tax exempt. So they pay no income tax on assets they receive.

Planning ahead now will help you avoid common mistakes.

There are three primary issues that can create significant challenges when passing on your 401(k) to a charity:

  1. Imprecisely or inaccurately naming the beneficiary. Listing “Greyhound Rescue” as the beneficiary is likely to result in your money going through the probate process. Instead, you’ll want to write in something more along the lines of “Southern Florida Greyhound Rescue Society.”    Also, be sure to list the Tax ID number for the organization. Many Tax ID numbers can be tracked down at
  2. Possession of the account. To avoid unnecessary taxation, it is imperative that the account passes directly to the charitable organization of your choice. If your heirs or your estate were to take possession of the account and then attempt to transfer the account to the charity, your heirs would be liable for income and estate taxes.
  3. Your spouse. If you wish to give your 401(k) to a charity, your spouse must sign a form agreeing to give up all rights to the account. Interestingly, this requirement is not necessary for IRAs.

Remember that you have options. Managing your estate is not necessarily all-or-nothing. You could name multiple beneficiaries and assign a percentage to each. You could also leave your 401(k) to your heirs, and your 401(k) would only pass to the charity if all the other listed beneficiaries were deceased

Also keep in mind that the Pension Protection Act of 2006 allows IRA holders to transfer up to $100,000 to charity without paying income tax on the withdrawal. You do have to be over 70 ½ years of age to qualify, however. So using your IRA for charitable contributions is also an option.

Leaving your 401(k) to charity can be a really smart move. The tax burden on passing your 401(k) to your heirs is considerable, while charities do not have to pay income tax. Be sure to realize the total tax burden created by your choices and plan accordingly. Estate planning is one area where the services of a professional can really pay off. Whatever you choose to do with your 401(k), good luck, and happy planning!