budgeting – Early Start Retirement

Netflix Method for Building Credit

Sticking to a budget is easier when you know how much you are going to pay each month. That’s why subscription services are so great, you don’t have to budget in the number of times you use the service.

Just like the Gas Method of building credit, my completely un-patented and unoriginal “Netflix Method of building credit” is a way to keep credit card usage consistent. Putting a subscription service on your credit card could be a good way to budget your credit usage, but like all credit tips, it can come with its potential risks.

How to do it?

1.) Set your payment method for Netflix (or any other subscription service) on auto-pay with your credit card

2.) Use Netflix (as we all do)

3.) Remember to pay it off every month!

The 3rd step is the real kicker. If you forget that you paid for Netflix on your credit card, the payments could add up and gain interest! Thankfully, a Netflix subscription is cheaper than a tank of gas a month, so forgetting it isn’t going to blow your credit if you only forget once. But forgetting for a year or more could easily begin to put you hundreds of dollars in debt.

Is this right for me?

If you like having a steady, consistent budget and have a good memory then I think this is a great budgeting technique. But, I do know it’s already easy to forget about auto-renewing payments and having one on a separate card than your regular account does make it hard to remember. Someone on a tighter budget may not find it worth the hassle of remembering.

Is it worth it to use a Coinstar?

Coinstars offers a helpful service for a very costly fee. At 11.9% you can have your coins converted to cash at your local grocery store. Although I’m all for saving every bit of money you can, sometimes the Coinstar is more convenient. Also, it’s better to have the money in easy to spend dollars than sitting on your shelf.

Here’s when it’s worth it to go to the Coinstar:

Your personal bank doesn’t have a coin machine.

Some banks have coin machines where you can convert your change into cash for free. Personally, I haven’t seen one in any of the banks I’ve been to, but it’s worth it to call and ask around. If a local bank has a coin machine that you don’t have a bank account with, you can make an account, but this is pretty drastic unless you are converting large sums of change consistently.

You have under $100 in change.

If you have a small amount of money, it’s better just to take it to the bank. If your bank doesn’t have a coin machine you can ask the teller for coin wrappers to hand-roll them. I’m not going to sugar coat it. Rolling coins is a bitch. The first few minutes can be very relaxing, but over $100 it becomes a pain to roll and to transport it to the bank.

You don’t have lots of free time.

Going to the Coinstar and paying the 11.9% fee is sometimes worth it just for the amount of time it saves you. However, if you have a lot of free time, there are tons of fun things you can do with the coins as you roll them. Look for interesting dates or coins with a high silver content. I always look for wheat-back pennies and war nickels.

You shop at a few places consistently.

GIFT CARDS! Check the Coinstar website to see if any places you shop at offer gift cards from the Coinstar kiosk. The best part is, if you convert your money to a gift card, you don’t have to pay the fee! This is definitely the best option, but be warned that not all Coinstar kiosks offer the same gift cards. I always convert mine to an Amazon gift card, because it gives me the most options.

You want the silver content.

Because of the way Coinstar evaluates the coins, it will reject most silver dimes, quarters, nickels, and half dollars. You can sell these online or keep them for their solver content. There is some dispute online about what machines reject silver. But currently, the consensus seems to be that almost every green Coinstar machine will reject silver, but some bank machines do not.

You just want the coins gone.

If you just want the coins to stop cluttering off your shelves and are feeling particularly charitable you can use the Coinstar to donate to a charity. The donation you make is tax-deductible. Currently, Coinstar has 8 charities you can donate to including the Red Cross, Feeding America, and the Leukemia and Lymphoma Society.

Whatever you do, make sure to save the receipt.

Do you use Coinstar or prefer to hand-roll your coins?

Hard vs. Soft Credit Inquiry

Creating an accurate credit score is a very complicated process. Many things decide your credit score, including those unrelated to making payments. One thing credit card companies don’t want to seeis someone gaining too much credit too quickly.

Quickly trying to open many lines of credit could be a sign that someone is heading into financial trouble or may be taking too many risks. In order to track how often people are checking or changing their credit, credit bureaus classify it as either a hard or a soft credit inquiry.

Hard Inquiry

A hard inquiry affects your credit score negatively. It tells the credit card company that you are trying to increase your lines of credit. Hard inquiries appear if you open up a new credit card, try to get approval for a loan, apply for a mortage, etc. Generally, you will have to approve a hard inquiry, but that is not always the case. Luckily, hard inquiries have a small effect on your credit score, and the effect lessens over time. If you find yourself having too many hard inquiries, the best option is to wait them out and keep your credit payments up to date.

Soft Inquiry

Soft Inquiries have no affect on your credit score. Soft inquiries occur when you track your credit or sometimes when a company asks to check your credit score. Some credit bureaus do keep track of the soft inquiries into your credit, but they do not affect your credit score and should only be visible to you.

How to know if someone will perform a soft or hard inquiry?

If the company asks your permission, it is likely a hard inquiry. Don’t fret however, because a single hard inquiry will have a very small effect on your credit score.