How To Tell if a Credit Card Annual Fee is Worth It

The best credit cards often come with annual fees. From $59 to $450, these hefty fees can set you back a pretty penny. Here are six questions to ask to determine if a credit card annual fee is worth it.

credit card annual fee

Credit cards that come with annual fees usually dangle some pretty impressive perks in front of applicants. It can be easy to assume that perks like airline miles and cash back would justify annual fees. But that’s not always true.

It’s worth taking a step back to decide if paying an annual fee just for the privilege of owning a credit card is worth it. This usually requires tallying up how much you are paying for a card versus the cash value of the perks and bonuses you’re receiving.

Before you sign up for a card with an annual fee, here are six questions to consider.

Is a Free Credit Card Good Enough?

There are many great credit cards that don’t charge an annual fee. One of our favorites is the Citi® Double Cash Card. It pays 2% back on all purchases–1% on each purchase and another 1% when you pay for the purchase. It has no annual fee.

If a no-fee credit card gets the job done, there’s no reason to pay an annual fee. Several of the best credit cards have no annual fee.

How Much is the Annual Fee?

Annual fees vary from one card to the next. The Capital One® Venture® Rewards Credit Card, for example, charges an annual fee of $59. In contrast, the The Platinum Card® from American Express will set you back $550 a year. Before you can evaluate whether the fee is worth the cost, you need to know what it is. Check the terms and conditions of the card you are considering to determine the annual fee.

One thing to keep in mind is that many cards with an annual fee waive that fee for the first year of ownership. While this is a nice perk, it’s not a good enough reason to get the card. Still, it’s worth factoring it into the equation.

Will You Use Your Card for Everything?

Once you know the fee, it’s just a matter of math. You need to estimate how much you’ll charge to the card. For cash back cards, it’s easy to calculate the value of your rewards. For travel cards, it can get a bit more complicated (as we’ll see in a minute).

In addition to the rewards, you should also factor in other perks. For example, the Chase Sapphire Reserve? offers a $300 annual travel credit. This credit covers more than half of the card’s $450 annual fee. Another common perk with airline cards is free checked luggage.

Once you know the value of the rewards, it’s time to do the math. Assuming a card’s rewards are worth 2%, you’ll need to spend $2,500 on the card for every $50 in fees to break even. And this doesn’t include extra perks as described above.

How Will You Use the Rewards?

Evaluating an annual fee with a cash back credit card is straightforward. It gets trickier with a travel card. With many travel cards, the value of the rewards depends on how you use them.

For example, the Chase Sapphire Reserve? cards points are worth 50% more when you book travel through Chase. Thus, you need to determine how you’ll use these rewards in order to assess their value.

Will You Earn the Bonus?

The massive bonuses offered to new cardholders tempt a lot of people into signing up. Who could say no to the 50,000 bonus points offered by the Chase Sapphire Preferred® Card to cardholders who spend $4,000 within the first three months of owning the card? You have a lot to gain when you consider that the annual fee of $95 is waived for this card for the first year.

While you should consider a card’s signup bonus, keep a few things in mind. First, you have to meet a spending requirement within three to six months to qualify. Depending on the card and your spending patterns, this can be a tall order. Second, it’s a one-time bonus. I prefer to think long term when it comes to credit cards. Finally, an attractive bonus could be hiding other features of the card that are less appealing. A high interest rate comes to mind.

You can check out our list of credit card bonuses here.

Are You A Frequent Traveler?

People who travel frequently actually have some of the best reasons for paying annual fees for certain credit cards. In fact, it can be a foolish decision to skip a card with fees if you travel at least once a month for business or pleasure. You are almost certain to earn back your annual fee and get some free miles or other perks if you use your card for travel.

Credit cards that are co-branded with airlines actually go far beyond just giving bonus miles. They actually help you enjoy a luxurious, low-hassle experience whenever you fly. An option like the Gold Delta SkyMiles® Credit Card allows you to earn up to 35,000 bonus miles, a free checked bag on every flight, and priority boarding. The $95 annual fee for this card quickly starts to look like nothing when you factor in things like baggage fees and the hassles of boarding without priority status.

Do You Want to Transfer High Rate Balances?

Some credit cards offer 0% interest on purchases, balance transfers, or both. The balance transfer option is attractive if you have balances on cards with high interest rates. If that’s you, keep two things in mind.

First, the best balance transfer cards don’t charge an annual fee. These cards offer 0% for up to 21 months. There’s no reason to pay an annual fee if your goal is to transfer a balance to a 0% card.

Second, in most cases you do pay a separate balance transfer fee when you transfer a balance. The fee is typically 3%, although this varies. The point is that you don’t want to pay an annual fee on top of a balance transfer fee. If a balance transfer is your goal, check out these offers.


The Fine Art of ‘Reverse Budgeting’

Budgeting is an incredibly popular topic among the financially savvy. And yet some of the most financially-savvy people I know don’t actually budget. With zero based budgeting, there’s no longer any excuse to avoid a budget.

zero based budgeting

When you think about a budget, what do you think of? You might think of having umpteen different categories to divide all of your expenses among. Each time you make a transaction, you have to decide which category to put that expense into. And then what happens if you over-spend in one category? You have to decide which other category that expense comes from.

This can get really complicated really quickly. In fact, you could wind up spending hours and hours each month just managing your budget. I, for one, don’t have time for that!

Instead, I use a practice I call reverse budgeting. It can also be called zero-based budgeting.

Here, we’ll talk about how this works for me, how it might work for you, and some tools you can use to make it work.

How Zero-Based Budgeting Works

You may have heard about this type of budgeting from financial guru Dave Ramsey. Except he uses it to describe this incredibly detailed, category-oriented budgeting system we talked about above. That’s one way to do zero-based budgeting, but it’s not the only option.

At its core, zero-based budgeting is actually about subtracting all your expenses, savings, and goals from your total monthly income and coming up with a difference of zero. There are actually several different ways to make this process work for you. Let’s talk about the options, and then figure out what might work best for your particular needs.

Option 1: Percentage-Based Budgeting

This is the option my family uses. Frankly, we have too much on our plates to spend loads of time examining every purchase. Instead, we devote a certain percentage of our income to savings goals each month, and then spend the rest. We can basically spend up to what we devote to spending, and no more, since we don’t do debt.

For instance, you could decide to devote 20 to 30 percent of your total monthly income to savings. You might split this between long-term goals, like saving for retirement, and shorter-term but necessary goals, like saving up to replace your vehicle. Then, maybe you’ll save 10 percent of your income to pay for one-off expenses, like getting your tires replaced or dealing with home repairs. Then you can spend the remaining 60 to 70 percent of your income on your daily needs and wants.

This is a very loose way to go about budgeting, but it works for a few reasons:

  • It’s easy to maintain. When you’re just shifting money around to savings accounts on payday and then keeping track of your balance, you don’t spend hours maintaining your budget. You can spend more or less in certain categories, as long as you don’t wind up going into debt.
  • You pay yourself first. One of the first principles of personal finance is to pay yourself first. This means you need to save before you start spending. This type of budget has aggressive savings goals, and you start saving right away.
  • You can use it to get out of debt. If you’re still working your way out of debt, this type of budget can still be helpful. You can, for instance, set aside a certain percentage of your income for savings, but then another percentage for extra debt payments. Outside of those categories, you can spend what you need to spend.
  • We’re still frugal. We could maybe save a few extra bucks a month if we more carefully tracked our budget down to the penny. But we’re still pretty frugal, especially since we have high savings goals. By putting a bunch of money into savings each month, we force ourselves to live on less. And as we’ve gotten pay increases over the years, we’ve been able to devote more and more to savings rather than falling prey to lifestyle inflation.
  • It’s easier for a variable income. If your base income varies or you have a side gig that brings in varying amounts of money each month, this is an easier option. Category-based budgeting can be tough when you don’t know exactly what your income will look like from month to month. With this option, you know that no matter what your income is, you save a certain percentage. And then you spend the rest. If your income is really variable, set up a system where you save extra in flush months to cover additional expenses in lean months. And consider lowering your savings percentage when your income for a particular month is really low.

With that said, this option isn’t for everyone. Some people need or want a much clearer picture of where their money goes every month. So here’s the other way to work a zero-based budget.

Option 2: Giving Every Dollar a Name

This is the budgeting option espoused by Dave Ramsey and his followers. And it’s not a bad way to budget. Basically, you start out the same way–with your total monthly income. But instead of just assigning a percentage to savings and the rest for spending, you detail your entire spending plan.

This means budgeting by category for things like your house payment, utilities, grocery spending, dining out spending, money for clothing, savings for holidays and birthdays, and more. You can get as broad or detailed as you want, though Ramsey’s budgeting templates are pretty detailed by category.

The goal here is to give every dollar a job before the month even starts. When you’re first starting out, you may find you need to move money from one category to another frequently. Over time, you’ll get more familiar with what you actually need to spend in each category on a monthly basis. But if you’re restricting your spending in this way, you shouldn’t ever need to spend more than you make.

Here’s what’s good about this more complicated budgeting option:

  • It lets you know exactly what you’re spending. A zero-based budget tries to be prescriptive. That is, it tries to tell you what you should be spending in each category. But at first, you might be off base. As you track your expenses carefully, you’ll know better what you’re already spending and where you need to make adjustments to live frugally.
  • It’s great for becoming debt free. If you’re dealing with a lot of debt–especially if that debt is due to your own over-spending–this may be the budgeting framework you need. Yes, it takes more time. But it also keeps you more closely in touch with your spending so that you can find ways to become debt free more quickly.
  • It helps with projections. A very detailed budget can help you know not only what you are spending now but what you’re likely to spend in the future. When you’re careful to plan for expenses that are a few months out, you’re less likely to be stuck without enough cash in hand to cover those expenses when the time comes.

Option 3: A Hybrid Approach

What if you know you over-spend in some areas but don’t want to spend an hour every week controlling your super-detailed budget? In this case, a hybrid approach may make sense for you.

In this approach, you’ll still devote a certain percentage of your monthly income towards savings and short-term goals. Then, you’ll set a couple of categories to track your spending money.

For instance, maybe you have a problem over-spending on your kids’ clothes because you just can’t resist a good sale at Old Navy or Children’s Place. You might seem frugal because you’re only shopping sales. But at the end of the day, the kids have too many clothes, and you’ve spent way too much on them. In this case, track spending on your kids’ clothes for a few months, and see when and where you need to cut back. Just the act of holding yourself accountable for that spending can help you cut back!

Or what if your problem area is spending on food? Track all of your food spending for three months. Then decide if it’s too much or if you can cut back. If you dine out a lot, just seeing how much you’re spending on those trips to the restaurant can help you decide to cut back.

This budget approach is great because:

  • It doesn’t take as much time as a detailed zero-based budget. You can spend just a few minutes a week totaling up spending in those chosen categories, and otherwise just spend what’s available to spend.
  • It can help you become more frugal. If you’re struggling with over-spending in just a few areas, this option can quickly help you get that spending in check. You may find that you suddenly have more money for things that are actually more important to you, or that you can pay down debt or save more quickly.

Tools to Get it Done

No matter which of these zero-based options you choose, there are some great tools to help you deal with your budget. Here are a few that work really well:

Free Bank Accounts

Yes, this counts as a tool! This is especially true if your spending plan involves moving money around on pay day. Say you’re trying to save 20 percent of your income. On payday, you should be transferring that much straight out of your checking account. When your accounts are free, it’s much easier to maintain this option.

The best online savings accounts can also help if you want to divvy up your short-term savings goals. Maybe some of the money is for an emergency fund, while the rest goes towards vacation savings. Having a different account for each can let you keep track, at a glance, of where you are on your savings goals.

And this can also work for the hybrid budgeting idea. Say you want to restrict your spending on the two categories we mentioned above: clothing and dining out. Set up a checking out for these expenses, specifically. On payday, transfer the percentage or dollar amount you want to spend on these categories to their own checking accounts. Then, you’ll be restricted in the amount you are able to spend unless you dip into your primary checking account.

Online Budgeting Programs

Online budgeting programs have come a long way since we originally published this article in 2008. Now, you can easily import transactions in programs like Mint.com and YNAB. Sure, you have to spend a bit of time categorizing your transactions. But this is helpful if you’re doing a detailed budget or just tracking spending in a few categories.

Resource: Our list of the best budgeting tools

Spreadsheets

Want to go old-school? Use a spreadsheet to track your percentage of savings and spending over time. You can even create a chart to show you how your savings is growing, and how much money you’re spending month to month so that you can figure out if you need to cut back.

The point here is that zero-based budgeting is a great option for most budgeters. Whether you opt for a super detailed plan or a very loose one, this type of budgeting can help you make the most of every dollar and reach your financial goals.


5 Early Retirement Challenges You MUST Be Prepared For

Early retirement is a dream for many. While saving enough to accomplish this goal is challenging, it’s just the beginning. Here are five challenges you must include in your early retirement planning.

early retirement planning

It seems as if everyone these days is planning for early retirement – or at least planning to plan for early retirement.

Saving and investing a lot of money is the obvious starting point. But there are also early retirement challenges that you must be prepared for. That part of the equation is just as important as building up a sizable retirement portfolio.

Here are five of those early retirement challenges, and how you can prepare for them.

1. Health Insurance – There’s No Medicare Before Age 65

You won’t be eligible for Medicare until you turn 65. And you’ll no longer be in a position to take advantage of an employer sponsored health insurance plan. As a result, you will almost certainly have to get a private plan on your state’s health insurance exchange. WARNING: It won’t be cheap!

Under the Affordable Care Act (ACA), health insurance companies can no longer charge you a higher premium if you have pre-existing health conditions. That’s the good news. But the bad news is that they are fully allowed to charge higher premiums based on age. And since you probably will be retiring around 50 or later, you can expect those age-adjusted premiums to be pretty ugly.

What’s more, you can also expect that they will faithfully increase each and every year. Yes, we know Washington promised us lower health insurance premiums. But unfortunately, that’s not what happened. Premiums have gone sky high.

You can get an estimate of what you are health insurance premiums will be by checking out Healthcare.gov’s Health Insurance Plans and Prices page. While it can tell you what your premiums will be at a future age, it can’t tell you how much those premiums will be by the time you finally do retire.

In order to keep the premium to a minimum, plan to have a high deductible. A $6,000 deductible and $6,500 out-of-pocket maximums are common. You can combine the high deductible plan with a Health Savings Account (HSA). With an HSA, you will have a tax-sheltered way to pay your co-pays and deductibles.

There is one possible silver lining here. Since you’ll be retired, and your income will likely be lower than what it is right now, you might actually qualify for an ACA subsidy. That will lower the cost of your premium at least a little bit.

2. Accessing Retirement Savings Before Reaching 59 ½

As you probably know, accessing your retirement savings before turning 59 ½ is tricky. If you do, you will not only be subject to ordinary income tax on the amount withdrawn, but also a 10% early withdrawal penalty. That means that your tax-sheltered retirement plans won’t be a good source of income in your early retirement years.

There are a few ways that you can get around this problem:

1. Have sufficient taxable investments to draw on during the early years of your retirement. You won’t get the benefit of tax deductibility of your contributions, nor of tax deferral on your investment income. But you will be exchanging those benefits for the ability to draw down those accounts without tax consequences early in your retirement.

2. Roth IRA. One of the biggest advantages of having a Roth IRA is that you can withdraw your contributions at any time, without having to pay either income tax or the 10% penalty. However, since your contributions are limited to $5,500 per year (or $6,500 if you are 50 or older), it’s not likely that you will be able to accumulate enough money in a Roth IRA to cover your early retirement years completely.

That being the case, you can instead set up a Roth IRA conversion ladder.

Using this strategy, you convert from your other retirement accounts an annual amount that is equal to how much you think you will need to live in early retirement, on an annual basis. For example, if you expect to need $40,000 per year in early retirement, you can convert $40,000 per year from existing retirement accounts into a Roth IRA.

Unfortunately, when you do a Roth IRA conversion, you will have to pay the 10% early withdrawal penalty if you take distributions from the plan in less than five years from the conversion. The point is to set up a series of conversions five years out, with enough conversions to cover each year of early retirement.

That will enable you to get distributions from your Roth IRA each year, while fully avoiding either ordinary income tax or any early withdrawal penalties.

You can live out of your Roth IRA during the early years of your retirement, and then begin accessing your regular retirement savings once you turn 59 ½.

We should add that there are other ways to take out money early. Here’s a good list of other alternatives.

3. Outliving Your Money

This is a concern of all retirees, but especially early retirees. If you are retiring around 50, you will need to have sufficient resources to enable you to live for several decades.

Probably the best strategy to deal with that is to apply the safe withdrawal rate to your retirement assets. If you withdraw no more than 4% of your retirement savings each year, you shouldn’t outlive your money.

Of course, that requires that you must have an average annual return on your investments that is significantly higher than 4%. Since the historic rate on stocks has been something approaching 10% since 1928, a mix of stocks and bonds in your retirement portfolio should get the job done.

For example, if you put 70% of your portfolio in stocks at an average annual return of 10%, and 30% in bonds at an average annual rate of return of 2%, your portfolio should average about 7.6% per year.

Given that inflation has been averaging right around 3% per year for the past 30 years, a return of 7.6% would allow you to withdraw 4% per year for living expenses and then retain 3% for inflation, and 0.6% for real growth.

Under that scenario, you would never outlive your money.

4. Inflation

Speaking of inflation, this is a serious problem for retirees of all ages. The income that you have today will not be sufficient in 10 or 20 years. You will have to invest for that likelihood.

Inflation has historically averaged just over 3% per year, though it has been lower in recent years.

The best way to deal with this problem is once again by using the safe withdrawal rate. You will leave some of your investment returns in your portfolio to cover inflation. But during times of particularly high inflation, you might also have to consider developing some additional income sources.

5. A Stock Market Crash

This is another of those big picture retirement scenario nightmares, much like inflation. Fortunately, stock market crashes tend to be short-term in nature. They often play out within two or three years, and then the market resumes its upturn.

The issue for retirees, however, is to minimize the damage to retirement savings from a stock market crash. Diversification – holding at least some of your portfolio in fixed income investments – is one way to do that.

But another, probably more effective way, is to have additional assets that can tide you over during bear markets. The idea is to leave your retirement portfolio alone while covering your living expenses out of non-retirement assets. This will at least help you to avoid selling portfolio assets at low prices.

In the end, none of these strategies will guarantee that you won’t have any challenges in early retirement. But they will minimize the impact of those challenges. And hopefully, they will enable you to stay retired throughout the rest of your life.


Is Travel Insurance Worth the Cost?

Every time you book a costly trip you’re faced with this question: Is travel insurance worth it? We help you answer this question. We also show you how you can get travel insurance for free.

Travel Insurance

If you’ve booked a vacation for your family lately or sent your kid off on a school-sponsored field trip, you’ve probably considered trip cancellation insurance. These offers promise to reimburse you for the vacation or field trip if you need to cancel.

So, are these plans worth the cost? Well, the answer to that really depends on your own personal risk calculation.

What does it cover?

Trip cancellation insurance comes in several flavors.  One of the best merchants to purchase travel insurance is Allianz.

Basic coverage reimburses you if you can’t make your trip because of certain reasons. The reasons may include getting sick, a hurricane raking the island you were going to visit, or terrorists attacking your hotel. The insurance only covers non-refundable expenses. So, for example, if the operator cancels your scheduled tour and refunds your fee, the insurance does not pay.

Basic coverage also (generally) provides benefits if your trip is delayed or interrupted. It often pays for lost or delayed baggage, some medical benefits if you’re injured during your vacation, and emergency evacuation if something horrible happens during your stay.

You can add to the basics if you need more coverage. For example, for an extra fee, you can add “cancel-for-any-reason” coverage. This would reimburse you for at least part of the non-refundable portion of your trip if you cancel for any reason not covered by the usual terms.

Other common upgrades are rental car insurance and accidental death insurance. You can add these to plans that don’t include them, or upgrade to more coverage.

Needless to say, read the terms carefully before you buy so you fully understand what is covered.

Related: More Tips for Saving Money on Vacation Travel

What does it cost?

We did a comparison of four leading providers. The quote covered a family of four on a $4,000, week-long, domestic vacation. The premiums ranged from $84 for a base policy from Travel Insured to $162 for a policy from HTH Worldwide. Each company had more comprehensive options available. But we just wanted to compare the basic offerings.

Those two plans differed mostly in the amount of coverage. For example, the HTH plan included $75,000 in health coverage, while the Travel Insured plan offered $100,000. The HTH plan offered $500,000 in emergency medical evacuation coverage, while the Travel Insured plan provided $1,000,000 coverage for that service.

In addition to the two firms mentioned above, popular trip cancellation insurance firms include American Express, Travelguard, and Access America. Insuremytrip.com is a site that allows users to compare rates from about 20 providers.

Free Travel Insurance

Many trip providers, such as school field trip organizers, offer their own policies. Some credit cards offer some coverage when you book your trip — or parts of it — using your credit card.

For example, most American Express cards include between $100,000 and $250,000 in travel accident insurance for you and your travel companions. (Note that they don’t offer free trip cancellation or delay coverage, though you can add this for $9.95.)

You’ll also get cancellation/delay coverage, baggage insurance, and even rental car coverage with the Citi® Double Cash Card, in addition to a slew of other benefits. I personally carry this card, and its perks are exceptional.

You’ll also receive travel coverage with the Chase Sapphire (and Sapphire Preferred) cards, up to $5,000 in prepaid expenses. In addition to that, these Chase cards also include baggage delay coverage of up to $100/day for 5 days,. It kicks in if your bags are delayed by at least six hours, and you need to pay for toiletries and clothing.

These are just a few of the cards that offer some form of travel insurance. Be sure to check if your card provides this coverage before spending money on a separate policy. You might be pleasantly surprised.

Resource: Here is our list of some of the best airline rewards credit cards

But do you need it?

All these perks sound good, but you should evaluate this kind of insurance the same way you would evaluate any kind of insurance. Rather than thinking, “Wow, I’d love to get reimbursed for our vacation if my kid gets the flu the night before, ” think, “Hmmm, what are the odds my kid is going to get the flu the night before our vacation?”

Use the $4,000 family vacation above as an example.

Let’s say you’re considering a plan that costs $200. It will reimburse you for the full $4,000 if someone in the family gets sick and you have to cancel. Forget about the rest of the coverage — emergency medical evacuation, health insurance, death benefits, etc. — for the moment. Just focus on the most likely reason you might get this insurance: to refund your purchase price.

If you buy this policy, you are essentially gambling $200 against a potential payout of $4,000. What are the odds that you will “win” this gamble? You’ll win if one of you gets sick or a big storm hits the vacation site or whatever. So, what are the odds of that?

One way to calculate those odds for your family is to look at history. How many vacations have you had to cancel in the past few years? If you have taken ten vacations over the past five years and canceled one of them because of a covered reason, you could assume that the odds of you having to cancel your current $4,000 vacation are approximately one in ten. You can then compare the cost of the insurance with the odds.

Obviously, many factors play into your personal risk calculation. Maybe you are traveling with accident-prone children. Maybe you know the tourist destination you are headed to frequently has hurricanes (hmm, maybe you want to rethink this vacation!). The point is, whatever the circumstances, make a rough guess of your odds of using the insurance before you plunk down the money.

Resource: The Best Travel Websites

Insurance companies do this with highly trained actuaries using sophisticated algorithms and databases full of historical information. However, you can make an educated guess without any of that.  That way, whether you get the insurance or not, you will rest easy knowing that you made an informed decision.


How to Assume a Car Lease (And Pocket Some Cash)

Taking over a car lease can be a great way to get your next car. While there are many advantages, however, there are some things to watch for. We’ll cover how to take over a lease, some resources to help you out, and the pros and cons of taking over a car lease.

Take over a car lease

You may be weighing the pros and cons of buying or leasing a car. The good news is that you now have a new resource if you’re leaning toward leasing. Many people are actually finding their ideal vehicles by taking over someone else’s existing lease.

This option can be extremely flexible and affordable under certain circumstances. There are several new websites that make the process of taking over a lease easier than ever. We look at those sites, along with the pros and cons of assuming a lease.

How Do You Take Over a Car Lease?

The process of taking over a lease is relatively simple. About 30 percent of the new cars that you see on the road are leased. It’s not surprising that sometimes the drivers of those cars need to make lifestyle changes.

There are many people who have to give up a lease early for a variety of reasons. Some are relocating, while others can no longer afford to make payments. Some leasees just want a different type of vehicle.

Before taking over a lease, you should consider several factors:

  • The condition of the car;
  • The miles on the car compared to the miles allowed under the lease;
  • The monthly lease payments;
  • The remaining term of the lease;
  • Fees associated with turning in the car at the end of the lease;
  • Incentives offered by the current leasee

The actual process to take over a lease is straight forward. Once you’ve identified the car (more about that below), the first step is a credit check. The finance company behind the lease must approve the transfer. They will do this only if the new leasee has acceptable credit. If you don’t know your credit score, there are several ways to get it for free.

The two parties must also agree on terms. The terms may include:

  • Transfer details
  • Vehicle inspection
  • Cash incentives, if any

Fortunately, there are websites that can assist with this process.

Where to Find Leased Cars

Two websites facilitate lease swaps–LeaseCompare and SwapALease. As an example, here’s a 2014 Mercedes C250 we found on LeaseCompare:

LeaseTrader.com

Note that it lists the monthly payment, remaining lease term, and a $1,000 cash incentive. The listing also shows the car’s mileage and total allowed miles.

LeaseCompare shows a wealth of additional information. SwapALease offers similar details.

The Pros of Taking Over a Lease

What would make a person want to assume another person’s car lease? There are actually a variety of reasons that make this an attractive option.

First, you can get a short lease term that typically isn’t available through traditional leasing companies. A typical lease is at least two years, and a 39-month lease is common. By assuming a lease, however, you can snag a lease for a year or even less. This can work out nicely if you’re only going to be in an area temporarily. Alternatively, you may want to try out many vehicles before eventually settling on one that you want to purchase in a few years.

Second, you’re likely to get a great deal when you take over a lease. You won’t have to make a down payment. The car has also likely depreciated significantly. And the seller is often highly motivated to get out of the lease. These factors often compel a lessee to offer cash incentives. In the above example, the seller is offering a $1,000 cash incentive. Some lessees will even cover any transfer costs that are involved with the process.

Finally, taking over lease may give you a better variety of vehicles over buying used. Most used cars are several years old. They are either coming off of a longer lease or sold after three to five years of being on the road. Assuming a lease opens the door to newer cars.

The Cons of Taking Over a Lease

There are, however, a few potential downsides to taking over a lease.

First, you  will be responsible for everything the car has been through when you turn the keys back over the original leasing company. You could be on the hook for any body damage or paint damage that occurred before you got the car. You may not always be able to detect damage that has been sustained and covered up. Requesting maintenance records and paying for a vehicle history report on your own could help to detect these problems. A vehicle inspection is also critical.

Second, you need to evaluate the car’s mileage. Most leases come with mileage limitations somewhere between 12,000 miles and 15,000 miles per year. Drivers are charged about 15 cents for every mile over the limit. This fee is levied when the vehicle is returned to the leasing company.

It’s important, therefore, to evaluate the actual miles and mileage allowance. If the miles are close to the limit, the terms of the deal should reflect this. A higher cash incentive, for example, might offset the likely charge at the end of the lease. The key is to be aware of this issue and evaluate it before making a deal.

Enjoy a New Lease on the Life of Being a Lessee

Taking over someone else’s lease won’t work for every situation. However, it’s worth at least looking into the options that are available if you’ve already decided that you prefer leasing over buying. The rise in popularity of companies that assist with lease transfers means that you can have peace of mind over the fact that your transaction is being handled properly.

 


How to Buy Long Term Care Insurance

In the past, we’ve talked about the high cost of elder care. Now, I wanted to spend a bit of time talking about long term care (LTC) insurance.

How to buy long-term care insurance

In general terms, LTC coverage applies to individuals who are not actually sick, but are not able to perform the basic “activities of daily living.” These include things like bathing, using the bathroom, dressing, eating, or transferring yourself in/out of a bed or chair.

In most cases, coverage is also available for those with a cognitive impairment. This could include:

  • memory loss (short- or long-term)
  • loss of orientation as to people (who they or others are), places, or time
  • reduced capacity for deductive or abstract reasoning

If the impairment is bad enough that it requires supervision to ensure safety, most LTC policies will kick in.

Related: Do You Need Disability Insurance?

According to the Department of Health and Human Services, about 70% of those aged 65 or older will require some sort of long term care during their lifetime. Over 40% require care in a nursing home. For the most part, traditional health insurance and Medicare won’t cover the costs associated with this care.

In other words, you’re on your own. You’d be well-advised to plan ahead.

What follows is a list of important considerations when it comes to choosing a long term care policy. This list is by no means exhaustive. It’s mainly based on things that I’ve run across while reading through my parents’ policies. But it at least gives you a good place to start.

When to buy LTC insurance

First and foremost, you’ll need to decide when to buy your policy.

If you buy too soon, you may wind up paying for coverage that you don’t need yet. But if you wait too long, the premiums will be sky high. Also, the longer you wait, the more likely it is that an insurance company will reject your application.

For reference, more than half of all policies are sold to those in the 55-64 age group. While an argument could be made for buying as early as age 45, the recommended age is 50.

Benefit level

Another important consideration is how much coverage you’ll need. Obviously, more is better, but higher benefits come at increased cost.

It really seems like this one falls into the “it depends” category. The costs associated with different types of care vary widely across the country. In other words, one size doesn’t fit all.

In order to determine how much coverage you should buy, you need to consider your individual situation. Here are a few questions to ask yourself:

  • How is my current health? What about my parents’ health — do/did they need skilled care?
  • Do I have children or a spouse to consider?
  • What is our financial situation? Do I feel comfortable using my nest egg (potentially my children’s inheritance) on care?
  • What is my monthly income, or what will my (estimated) monthly income be when I am most likely to need LTC?
  • Do/Will I qualify for Medicare coverage (and its strict criteria), which partially covers up to 100 days in a skilled nursing facility?
  • How high can I afford my deductible to be, noting that if coverage is for both me and my spouse, this deductible will need to be reached twice (once for each of us) if we both require care?

Keep in mind that the average private room in a nursing home will run you somewhere around $250 a day. If an assisted living facility is more likely to meet your needs, that’s a little cheaper. But it still carries an average price tag of $3,550 a month.

You also need to remember that skilled care isn’t a permanent need. It’s unlikely that you’ll need these services for more than 5 years (only about 20% of today’s 65 year-olds will), so that probably the maximum amount of time you’ll want to account for when determining your coverage.

For example, here are the average lengths of time that skilled care is needed based on the facility type:

longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html

Related: How Much Life Insurance Do You Need?

Benefit increase option

Related to the above, costs associated with long term care will increase over time. Do you want your benefit level to increase, as well?

In many cases, you can elect a “benefit increase” option to help keep pace with inflation, though this will likely come at a cost. Still, this is worth at least considering, especially if you buy a policy relatively early.

Elimination (waiting) period

The elimination period is a bit like a deductible. You’ll have to pay for the care yourself (out-of-pocket) for a set period of time before your LTC benefits kick in.

Elimination periods can vary from 0-365 days, though 90 days seems fairly common. Note that you can typically only count those days on which costs were actually incurred. This means that you can’t just pay someone to come in once a week for 3 months and still satisfy a 90-day elimination period.

Waiver of premium

Once the benefits kick in, do you need to keep paying the premium? In some cases, yes, in other cases, no.

In my parents’ case, the waiver of premium appears to only kick in after they’ve spent 60 days in a nursing home. It doesn’t appear to apply to in-home health care (though, I’m still trying to track this down). This is a bit of a bummer, but it is what it is.

Be sure to check your policy’s terms and find out what your coverage dictates.

Maximum lifetime benefit

Finally, depending on the policy that you choose, there may be a maximum lifetime benefit.

This limit can be defined either in terms of a total dollar amount, or a set number of years over which the policy will pay out. Choose carefully, as you may live longer than you expect, and these costs really add up over time.

Learn More: I’m Not Covered? Five Ways to Trigger Nasty Insurance Surprises

At the end of the day, long term care coverage is like all other insurance policies: you need to read the fine print and know what you’re buying before you write that first check.

Considering how many adults will end up needing long term care, it’s smart to begin shopping around for a policy in your late 40s. You don’t want to buy too soon and waste money on coverage, but you also can’t wait too late, when premiums jump in price.

Do you have any tips for other readers looking into long term coverage? Leave them in the comments below!


6 Easy Steps to Gain Control of Your Money

Getting help with your finances can be overwhelming. Before seeking help from others, here are 6 ways you can gain control of your money on your own.

Get Control of Your Finances

It’s no secret that many Americans are worried about money. Some of us are worried about how we’re going to pay bills due next week. Others are concerned about our long-term financial future. Here are just a few sobering statistics from recent studies:

  • In 2016, 60% of Americans worried about being unable to handle medical costs due to an illness.
  • 64% of Americans in the same survey worried about not having enough to pay for retirement.
  • A full 34% were concerned that they wouldn’t be able to pay their rent, mortgage, or other housing costs.
  • Another survey showed that 16% of workers spend 20 or more hours a month–on the job!–worrying about their finances.
  • One 2015 survey found that 70% of college students were stressed about finances.

Clearly, a lot of us are really concerned about our personal finances!

Luckily, even if you’re in a financially difficult place, you can take some steps to get back in control. Here’s what I’d recommend:

1. Get a handle on your cash flow

We’ve talked about budgeting here on Five Cent Nickel quite a lot. But that’s not necessarily what I’m talking about here. Sometimes, you might have enough money to pay all your bills over the course of the month. But what if three bills come due in the same week? Can you handle them without overdrawing your account?

This is where you need to understand your actual cash flow. There are plenty of ways to do this.

I, for instance, use a Google calendar. I track when all our bills are due and when we’re getting payments into our account. This lets me see fairly quickly which weeks we need to be particularly careful about spending money.

Simply understanding how your cash flow works can keep you from overspending at times when your bank account looks flush. Because sure, you’ve got a lot of money on payday. But what does it look like when you subtract all those bills due between now and next payday?

For my family, getting a handle on cash flow has reduced stress around our money. It’s also helped me find new ways to economize in a way that a regular monthly budget didn’t do.

2. Start a side hustle

Some of your financial worries may stem from job uncertainty. Gone are the days when you worked for the same company for forty years before retiring. Now, the average person changes jobs more than ten times during his or her career. And most people spend less than five years in one single job.

Sometimes changing jobs is a good thing. Maybe it means more opportunity or better pay from a new job you’ve pursued. But this new climate also means some employers are more likely to restructure or let employees go quickly.

Because of this, having multiple streams of income is more important than it ever was. A good side hustle can help you achieve your financial goals more quickly while you also work full-time. And it can give you at least a small income to fall back on when you lose your job.

Side hustles are as varied as hustlers and their skills. But a great side hustle will play well to your skills and interests. It might even rely on some of the knowledge you use in your day job. For instance, you’re reading my personal side hustle right now! By day, I’m in nonprofit marketing. So I write. A lot. Which means it’s a pretty efficient side hustle that I really enjoy!

For more ideas on side hustles, check out this article.

(And, please, don’t tell me you absolutely have no time. I have two kids, a husband, and a full-time job. You can find a couple of hours a week. Trust me!)

3. Pay off debt

I know. You’ve heard this before. But here’s the deal: becoming debt free (or at least free of high-interest debt) is essential for building a solid financial future. The more debt you have, the more of your money is locked up each month. That’s money you can’t spend on what you want or save for the future.

Want to know exactly what impact paying off debt would have on your finances? Take a moment to total up the monthly minimum payments on all your credit cards, personal loans, auto loans, and student loans. Does that number surprise you? Would getting rid of those payments mean more financial security?

To get started, check out our guide to getting out of debt.

4. Save for emergencies

A huge number of Americans have no emergency savings at all. They’re just one emergency away from massive credit card debt or bankruptcy.

Are you in this boat? Then it’s also time to get some emergency savings going. There are different ways to calculate and prioritize emergency savings. Here’s what I’d recommend:

  • Start by just saving something. Even $500 can help you feel more secure about everyday disasters, like unexpected car or home repairs.
  • Pay off your high-interest debt before you save a lot. You’ll get more for your money by paying off that credit card with a 25.99% APR as quickly as you can. Here, 0% balance transfer cards can help.
  • Work on your other debts, but bulk up your savings, too. Once you’re down to lower-interest debts–even in the 10% APR range–devote that side hustle income to both saving and paying down more debt.
  • Celebrate the small goals. Sure, you might be aiming to save six months’ worth of expenses. But celebrate every time you add another $500 or $1,000 to that savings account! It’ll keep you motivated to keep going.

5. Save for retirement

What if your main financial worries are retirement-related? Stop putting off saving for retirement! I know it seems like you can’t find an extra dime to save. But once you’ve taken these other steps, you may be surprised.

If you’ve been paying $150 per month in credit card minimums, devote that money to retirement once the bills are paid off. You’ve been making the payments, anyway. Even if it seems like you’ve had to scrape to make those payments, you can devote them to retirement savings now.  If you’re stuck in credit card debt, consider a balance transfer credit card to ease your interest payments.

Even if you’re not on track today to have $1 million or more in your retirement accounts, saving something can help you feel more secure about your financial future. Sure, maybe you’re not going to retire at 55. Maybe you’ll even have to work until you’re 70. But with some money in your retirement accounts, you’ll broaden your options as you age.

6. Find some margin

Really what all of this often comes down to is finding margin in your financial life. I find I’m most likely to worry about my family’s long-term financial future when we’re living right to the edge of our income. When we don’t have money left over at the end of the month to save–or even spend a little on things we enjoy–it’s just so stressful.

The thing is, though, when I look back, I know that ten years ago we were living on much less. Even five years ago after our first child was born, our income was so much lower than it is now.

That tells me that we’ve been adapting our lifestyle to our income, and not in a good way. If you look back, you may find that this is the case for you, too.

So figure out how you can go back to a simpler lifestyle. The one you had before you took that last raise or started that side hustle. Maybe getting back to that place is as simple as cutting the cable cord and opting for cooking at home rather than eating out. Or maybe it’s as complex as moving back into a smaller, more manageable home.

Either way, figure out what you need to do to re-gain some financial margin in your life. Once you stop living right to the edges of your income, you’ll feel more stable, make better decisions, and be on the path to a bright financial future.


Amazon Prime Rewards Visa Signature Card Review – 5% Cash Back at Amazon

Today we review the Amazon Prime Rewards Visa Signature Card. For those who frequently buy from Amazon, it’s hands down the best rewards card available. As you’ll see, you can earn up to 5% cash back with no annual fee.

Every month I spend a few minutes reviewing the monthly credit card purchases my wife and I make. Seventy-five percent of that time is invested in looking at our Amazon transactions. It seems like we have a couple Amazon boxes delivered to us by our postal carrier every day. By the end of the month, we’ve accumulated a few pages’ worth of Amazon statements.

Luckily for us, Chase has launched a new credit card specifically designed for people like me–those addicted to online Amazon shopping.

Amazon Prime Rewards Visa Signature Card Rewards Review

Earlier this year, Chase opened up applications on its new Amazon Prime Rewards Visa Signature Card. All Amazon prime members will receive the following benefits when using their Amazon Prime Rewards Visa Signature Card:

  • 5% cash back at Amazon on all purchases.
  • 2% cash back at gas stations, drugstores and at restaurants
  • 1% cash back on all other purchases
  • $70 Amazon gift card immediately after approval
  • No annual fee / No foreign transaction fees

First, let me be blunt about the value of the Amazon Prime Rewards Visa Signature Card. It comes from shopping at Amazon.com, nothing more. There are better cash back percentages out there for your everyday spending, including the 2% offered at gas stations, drugstores, and restaurants (the Blue Cash Preferred Card® from American Express is a good start).

And while the $70 up front Amazon gift card is nice, a few other cards on the market today offer much better up-front bonuses. For example, the Barclaycard CashForward™ World Mastercard® opens with a $200 bonus for new cardmembers.

The standard purchase and balance transfer APR is 15.24% – 23.24% variable, and the cash advance APR is 25.74% variable. There are over-limit and late payment fees of up to $37, and there are no balance transfer promos associated with the Amazon Prime Rewards Visa Signature Card. The balance transfer fee is $5 or 5% of the transfer, whichever is greater.

So it definitely has some drawbacks. But if you’re a frequent Amazon Prime shopper, read on.

Prime Member 5% Cash Back Savings

The Amazon Prime memberships that qualify for 5% cash back are currently as follows:

  • Annual and monthly Amazon Prime subscriptions and members of their Amazon Household (excluding Amazon Prime video subscriptions)
  • Members who share Prime benefits via an Amazon Household
  • Amazon Prime Fresh
  • Amazon Family
  • Amazon Prime Student
  • Trial memberships of annual and monthly Amazon Prime subscriptions, Amazon Prime Fresh, and Amazon Prime Student (excluding Amazon Prime video subscriptions)

How much can you save by owning this credit card? Let me do my best to apply my family’s personal spending habits and how much we hope to save annually by using the card for every purchase we make on Amazon.

Amazon Credit Card Savings Example

Every month, my wife and I attempt to budget $400 in spending at Amazon. We buy just about everything other than groceries at Amazon. And we have a Siberian husky and two kids, a 3-year old and a 6-month old, to take care of. That means dog food, diapers, toys, books, and a variety of cleaners and gadgets that keep the smells in this house pleasant. When you factor in the occasional gift or tech gadget, we’re usually well past our $400 budget target.

In 2016, we spent a total of $6,293 at Amazon.com. Had we had access to the Amazon Prime Rewards Visa Signature Card, our cash back savings would have been $314.65. Instead, we used our Citi DoubleCash Card for nine months of the year, which earned 2% cash back. Then we used our Chase Freedom Visa, which earned 5% cash back, in the fourth  quarter.

In total, our cash back savings in 2016 on Amazon.com purchases was $167.35. In other words, we missed out on a savings of $147.30.

Editors Note – If you are not a member of Amazon Prime, your cash back savings at Amazon.com using the Amazon Prime Rewards Visa Signature Card is 3%.

Future Amazon Savings

Are there families that spend more than we do at Amazon who will be able to save even more? Yes, but the majority of people likely won’t be spending as much, so the savings won’t be as large. Even so, consider that Amazon is still a growing company, looking to expand into other verticals on a daily basis. Prime members saving on groceries today could be saving on auto parts, medicine, and a host of other products tomorrow if and when Amazon opens more marketplaces.

Our $6,000 Amazon annual spending amount could continue to grow, too. Owning the Amazon Prime Rewards Visa Signature Card and its 5% cash back rate at Amazon is a must for our family. Even for the casual Prime Amazon spender, there’s little harm and good benefit to owning this card, applying it to your Amazon account, and earning the high rewards rebate.

  • Alternative Option – The Discover it 18-Month Balance Transfer Offer gives cardholders a 5% cash back rewards rate on all Amazon.com purchases in the fourth quarter of 2017, and Discover will double the cash back earned in the first full year of card ownership. This means cardholders will earn 10% cash back on Amazon purchases (up to $1,500 spent) for three full months–just in time for holiday shopping!

5 Ways to Build Credit Without a Credit Card

Building good credit has many benefits. It helps you get low rate loans and approved for an apartment rental, just to name two. It can be a challenge, though, to build credit without a credit card. Here are five ways to do it.

Americans’ credit scores are on the rise. Not everyone is necessarily cheering this news. In fact, this news might make you a little bit nervous if you’re afraid your score isn’t keeping up.

The advice you’re undoubtedly getting from friends and financial blogs is that a credit card is the fastest way to build up your credit. What if you don’t have a credit card? You might be thinking that you’re out of luck when it comes to building your credit if you don’t have any plastic in your wallet.

Some people prefer to live the cash-only lifestyle and forgo plastic payments. Others shy away from credit cards because of past credit issues. Not having a credit card with your name on it can pose problems when it’s time to apply for a mortgage, get a car loan, or try to secure cash to start your own business.

While it’s true that credit cards make it easier to build your credit legacy quickly, you actually have a few other options. You can do some things to make the payments you make for everyday things boost your credit history. Take a look at five ways to build credit without a credit card.

Be Consistent With Your Student Loans

Student loans can help you build credit. While you may not like making the payments every month, consistent on-time payments will help your FICO score.

Federal student lenders report student loans to credit bureaus. Your credit score will definitely benefit if you’re making your payments on time and taking measures to ensure that you never miss a payment. While it’s never a good idea to take out student loans solely for the sake of padding your credit, if you do need them, you can use them to your advantage. And if you find yourself paying a high interest rates on your current student loans, you can always consolidate them through a loan with SoFi.

Apply for a Bank Loan

A loan can give your credit a big boost. Applying for a small loan from your local bank or credit union can be a smart move if you have a very lean credit history. Some banks and credit unions actually offer loans that are designed to boost credit. You can often borrow as little as $1,000 and pay off your loan over the course of a year.

We do not recommend borrowing just to build credit. If you need a loan, however, a small short-term loan can help your credit profile. In addition to banks, you could consider a loan from LendingClub or Prosper.

Get Your Rent Reported

Your monthly rent payments could be paving the way to good credit. You can actually take steps to add your good rental payment history to your credit report. The good news is that many corporate landlords automatically report rent payments to credit agencies.

Independent landlords aren’t as likely to bother with reporting your payments. However, you can actually register with a service like Rental Kharma or Rent Reporters to get your positive payments reported. You will simply need to arrange with your landlord to have your payments verified each month.

Become an Authorized User

Becoming an authorized user on someone else’s credit card is the easiest way to improve your credit.

The first step is finding someone willing to let you do this. A parent, spouse, or other family member is usually the best option. This plan probably won’t be as effective if you choose someone who has only owned a credit card for a few years. Joining someone with a long history of carrying a card and paying every bill on time is your best bet.

Step two is . . . well, there is no step two. You don’t have to use the card. In fact, you don’t even need to carry the card. Just being an authorized user can help improve your score.

One word of caution: If the account holder maxes out the card, this could hurt your score. Your score could also go down with late payments on the account. So be sure to work with a family member who is good managing their money.

Get a Secured Credit Card

Yes, this article is about building credit without a credit card. A secured credit card, however, is different than a traditional card.

A secured credit card is backed by a cash deposit you make to credit card company. Your credit limit typically will equal the amount of your security deposit. If you close the account, the credit card issuer refunds your security deposit. The key is to understand that you must still make monthly payments on the outstanding balance. The security deposit is there to protect the card issuer in the event you fail to make a payment. But a late payment will still hurt your credit score.

One benefit of a secured card is that they don’t require a solid credit history. As a result, they offer a good way to build credit if you are starting from scratch. And because the credit limit is tied to your deposit, there’s a limit to how much debt you can go into.

Finally, if you don’t know your credit score, you can check it for free. In fact, there are several free ways to get your FICO score.


How to Find the Best Car Insurance for Teens

Adding a teenager to a car insurance policy is costly. If done correctly, however, there are ways to reduce those costs. Here are 5 ways to find the best car insurance for teens.

Having a teen who can drive is a big adjustment. There’s helping them learn to drive and the worrying when they are on the road. And then there’s the rise in auto insurance rates, which you’ll notice immediately.

It’s no secret that teen drivers are pricey to insure. Research from AAA shows that teen drivers are three times more likely than adults to be involved in a fatal crash. Insurance companies know that teens are riskier to insure than older drivers.

The good news is that there are some steps you can take to keep rates under control.

The Basics of Buying Car Insurance for Your Teen

Every driver is required to be covered by a car insurance policy. A teen won’t automatically be covered under your policy just because they are a dependent. You have to add them to your policy.

It’s going to be cheaper in almost every case to add a teenager to your existing policy than it would be to purchase a separate policy. However, you’ll still want to do a little bit of research.

The first step is reaching out to your current insurance company or agent. It may be a good idea to reach out as soon as your teen gets a permit. You may not be required to add them to your policy until they have their license, but this varies from one insurance company to another.

Here are the steps to take to make sure your teenager has insurance waiting as soon as a driver’s license is issued:

  • Get a quote from your insurance company for adding your child to your existing policy
  • Get a quote from at least one other agency to see if you could get a better rate than what you’d pay with your current company
  • Add your teen to your policy once a driver’s license has been issued (or earlier if required)

It may be possible for your teen to purchase a car and obtain insurance alone. However, state laws will determine whether or not this is a possibility in your case. Minors generally can’t own property or sign insurance contracts without at least the consent of a parent.

Comparing Auto Rates

Adding a young driver to your policy is a perfect time to compare insurance rates. Here are several of the best auto insurance options for teens:

USAA: For those in the military or with qualifying family members who serve, USAA offers excellent rates. It also offers a good student discount for high school and college students.

GEICO: Best known for its commercials, GEICO offers low rates by selling direct to consumers. Unlike most other insurance companies, it doesn’t have an army of agents.

Progressive: If your teen driver is particularly safe on the road, Progressive’s Snapshot may be a real money saver. It tracks the operation of the car for a period and may offer discounts based on the results.

State Farm: They offer significant discount opportunities for young drivers. These include safe driving discounts, good student discounts, and driver safety discounts.

Allstate: Finally, Allstate offers a good grades discount. It also offers what it calls a teenSMART discount. According to Allstate, you can save “up to 10% when your young [driver] successfully completes the teenSMART driver education program.”

Getting Insurance When a Teen Belongs to Two Households

The parent with primary custody is typically responsible for adding a minor driver to a policy. However, some laws or insurance policies may require both parents to provide insurance for a teen driver. Talk to your insurance agent to make sure you understand the rules.

The Car Your Teen Drives Will Help to Determine Your Rate

Parents can expect to pay an additional $671 annually once they add a teen driver to an auto policy. One way to get the best rate possible is to assign your teen to the cheapest vehicle you own. You can also shop around for vehicle models with low auto insurance losses if your teen needs to purchase a new car. Vehicles with low losses are far less expensive to insure.

The 100 Mile Rule

For college students, they can save by leaving the car at home. If your student goes to school more than 100 miles from home but leaves the car at home, most insurance companies discount your premiums.

Don’t Forget to Get Discounts

While you may be dreading paying more to have a teen driver in your household, there are many opportunities to get discounts. Here are some of the more common discounts offered by many insurance companies:

  • Good student discounts (typically requires a ‘B’ average or better);
  • Snapshot or other driver evaluation technology
  • Multiple car discounts (one reason it’s usually best to add a teen to your policy)
  • Completion of Driver Safety Programs
  • 100 Mile Away discount (for college students)

Your auto insurance agency may even offer a discount if your teen signs a driving contract and promises to always wear a seatbelt, call for a ride when impaired, practice good car maintenance, and never text or eat while driving.