• Myth 1: Nobody needs life insurance in their twenties, but everybody needs life insurance when they get older.
• Myth 2: Certain types of life insurance are a smart way to build wealth.

Fact #1: You Need Life Insurance If (And Only If) You Have a Family

Don’t base the decision to purchase a life insurance policy on age. If you’re 24 and already have two children, unless you’re already wealthy, you should have life insurance. You may be healthy, but accidents happen, and the responsible thing to do is to leave your children with something. On the flip side, if you’re 25, 30, or even 45 and single, you do not need life insurance. If you kick the bucket, so what? Your salary wasn’t putting a roof over anybody’s head but your own.

So as soon as you have a child, you need to start thinking about life insurance. You only need to carry life insurance until your oldest child moves out (or finishes college, if you want to help provide for higher education) or you will have saved enough to provide for your family if you die. (If you’re investing wisely, you will hopefully have significant assets in 20 or 30 years). And with guaranteed level term life insurance, the younger and healthier you are when you purchase policy, the less you pay for the entire 20 or 30 years you carry the policy.

Fact #2: Term Life Insurance Is the Only Kind You Should Buy

Unfortunately, seventy percent of life insurance policies sold in America these days are cash value life insurance policies as opposed to term life insurance policies. What’s the difference?

• Cash Value Life Insurance: With a cash value policy, you pay regular premiums to the insurer and the insurer invests your premiums (minus expenses). If you die before the policy expiration, the insurer pays out a full death benefit. If you don’t die before the policy expiration, you get back your premiums plus interest, minus expenses.
• Term Life Insurance: With a term policy, you pay regular premiums for a fixed term (20 or 30 years). If you die within it that term, the insurer pays a death benefit. Otherwise, when the term expires, you do not get any of your premiums back.

Okay, so based on the above descriptions, cash value sounds like the better deal. After all, with cash value you get to keep some of your investment if you don’t die. Why should you go with term life insurance?

For one, compared to investing wisely, on your own, in mutual funds, cash value life insurance makes a pretty lousy investment. Sales people promise all sorts of great returns, but after expenses, buying a cash value life insurance policy can be like leaving your money in savings account for 30 years. In addition, term life insurance is about 10 times cheaper than cash value policies.

Dave Ramsey also recommends term life insurance above cash value, citing the following example:

If a 30-year-old man has $100 per month to spend on life insurance and shops the top five cash value companies, he will find he can purchase an average of $125,000 in insurance for his family. The pitch is to get a policy that will build up savings for retirement, which is what a cash value policy does. However, if this same guy purchases 20-year-level term insurance with coverage of $125,000, the cost will be only $7 per month, not $100.

Ramsey goes onto give average returns, after expenses, for whole life (2.6 percent), universal life (4.2 percent) and variable life (7.4 percent). That doesn’t sound half bad, until you consider that many investors get between eight and 12 percent average annual returns with mutual funds.

So the lessons are: If you have a family, you need life insurance (regardless of age) until you have saved enough to provide for them if you die. Do not buy cash value life insurance, get a term policy and invest the difference.

Learn more or get a term life insurance quote now

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1. Can You (Really) Save on Car Insurance?
2. Health Insurance: Understanding Your Deductible, Co-pay, Out-of-Pocket Maximum and More
3. How (and Why) to Get Health Insurance When Unemployed

So is the Captial One Venture Card something to get excited about? If you play the credit card points/miles/cash back game and travel is your choosen reward, perhaps. (And a friendly reminder, if you don’t pay off your credit card balance(s) in full every single month, don’t bother with a rewards card…you probably won’t come out ahead).

In general, Capital One cards are becoming popular with travelers for two reasons:

• Simple Rewards: Many users say Capital One’s miles rewards programs have been living up to the card company’s “no hassles” tagline.
• No Foreign Currency Fees: Capital One cards are among the only cards that do not charge foreign currency transaction fees and they have pledged to continue this practice even as other issuers raise fees. Becuase that could save you between two and four percent on any overseas purchases, some would say Capital One cards are among the best credit cards for international travel.

What’s New About the Venture Card?

At first glance, the Capital One Venture Card offers similar benefits to the card company’s No Hassles Miles Rewards cards except that the Venture Card has a higher rewards level: You’ll earn two miles for every dollar spent, without limits. According to Capital One:

There are no limits on when, where or how you earn double miles, no retailer specifications or spending categories, no separate rewards enrollment or re-enrollment requirements, and no limit on the number of miles cardholders can accumulate. What’s more, cardholders enjoy easy redemption by booking on any airline at any time, with no blackout dates, no advance booking required, and no expiration. Rewards can be redeemed for any travel related expense, such as airline, hotel, cruise line and rental car transactions.

The other big difference with the Venture Credit Card is the way you redeem rewards—you can use your miles to pay for any travel-related purchase you make with your card. You simply purchase your travel and flag the charge for reimbursement from your accumulated miles. And the redemption rate is average—100 points equals one dollar’s reward. So $15,000 in spending earns you 30,000 miles which can buy a $300 airline ticket…any airline ticket. That’s better than a lot of points rewards card that only give you one point for every dollar spent and then require you to cash in up to twice as many points to get a cash-value reward like a gift card.

Is It Worth It?

The Capital One Venture Credit Card is free for the first year but has a $59 annual fee thereafter (with its rewards structure, you’d need to spend $3,000 a year on the card to break even with the annual fee). As of its introduction, the card has a variable 13.9 percent APR. There is also a no-fee version of the card—the Capital One VentureOne Credit Card—which offers similar benefits but pays only 1.25 miles rewards per dollar spent.

If you’re after a card that gives you a better-than-average and unrestricted travel rewards, you might give Venture a closer look. If you’re interested in getting a no-annual fee card with more versatile rewards, check out Discover More Card, Blue Cash from American Express or Chase Freedom Card instead. And again, if you carry a balance on your card, just forget the rewards game altogether. Find the lowest APR card you can and pay it off as fast as you can.

Related posts:

1. The Best Credit Cards for International Travel
2. Discover Escape Card Offers Rewards Few Cards Can Match
3. The Better Deal: Cash Back or Miles Credit Cards?

No matter. You can learn how to start saving for retirement in the five minutes it will take you to read this article, and you can probably start doing it in less than an hour. So if you know that you should start saving for retirement but have no idea where to start, roll up your sleeves, brush off your fear and let’s get started.

Retirement Savings 101

Okay, so why do you even need to save for retirement, anyway? Because lucky for you, thanks to our modern quality of life and medicine, chances are good you will live to a ripe old age. And when you’re approaching 80, you may want to do something other than work. And although Americans receive Social Security benefits after a certain age, our younger generations cannot count on these government benefits alone. They won’t be enough to live on if they’re still around at all. We need to take charge of our own financial future and we do that by saving for retirement. The government will even give us some tax benefits if we do.

Finally, the earlier you start saving for retirement, the better: The more time you let your investments grow, the less money you have to stash away in the first place. (For more about retirement saving basics, read 23 Things Every Beginner Should Know About Retirement Savings).

How to Start

Anybody can start to save for retirement. We’ll cover the two most common ways.

The 401(k) Plan

If you work full-time, ask your human resources manager if your company offers a 401(k) plan or 403(b) plan (if you work at a non-profit). These plans allow you to save for retirement with automatic deductions from your paycheck up to $16,500 a year (in 2010). The best part is you do not have to pay taxes on the money you save. Even better, some employers will match some of your savings (usually a percentage of your salary). When you enroll in your company’s 401(k) plan, you will need to choose among a limited number of investments your plan offers (typically, you are limited to a few choices). Ask to speak with your plan manager for recommendations, or simply choose a target date mutual fund for the year you will retire. These funds are collections of investments that the plan continually adjusts to maintain appropriate risk and return for your anticipated retirement year.

The Individual Retirement Account (IRA)

If your employer doesn’t offer a 401(k) or 403(b) plan or you want another option, start an IRA. You can open an IRA for free and often with no minimum deposit at most any online broker and can invest however you want (in any stock, bond, mutual fund, ETF, etc.) Investors under the age of 50 can contribute up to $5,000 a year (for 2010) to either a traditional IRA or a Roth IRA. These two types of IRAs often confuse new investors, but choosing can be easier than you think:

• Traditional IRA: Money you put in is tax-free (you can deduct the contributions on this year’s tax return). Choose a traditional IRA if you don’t have a 401(k) or other retirement plan at work.
• Roth IRA: You cannot take a tax deduction for the money you put into a Roth IRA, but you won’t have to pay taxes on the money you withdraw in retirement. Choose a Roth IRA if you do have a 401(k) or other plan at work and you do not earn more than the Roth IRA income limits.

Upon opening an IRA, simply set up automatic investments: transfer money from your checking account to your investment account every month or pay period and forget about it, just like employers do with 401(k) plans. Finally, whichever type of IRA you open, you will need to choose how to invest the money. Choosing from the entire universe of investments is more intimidating than selecting from among a few mutual funds in a 401(k) plan, so proceed carefully. You can research investments yourself using a free tool like Morningstar or enlist the help of a financial advisor (paying an advisor big bucks in your twenties rarely makes sense, but you might pay a fee-only planner for an hour session once a year to help you pick out your starting investments). Whatever you do, resist the urge to do a lot of trading: Even if you get lucky, the commissions and fees will eat up your returns, especially when you’re just starting out.

That’s really all there is to starting to save for retirement. Whether you sit down with your HR person at work or open an IRA account at an online discount broker now, you can probably be saving in less than an hour. The only question is: What are you waiting for?

Related posts:

1. Open Your First IRA
2. 23 Things Beginners Absolutely Must Know About Saving for Retirement
3. What to Do If Your Employer Cuts Its 401(k) Match Benefit

The following chart displays the best online savings account rates for some of the most popular banks among our readers. These top online savings accounts have been chosen not only for their consistently competitive interest rates, but also their customer satisfaction, ease of use, and overall reputation.

Happy saving!

Best Online Savings Account Rates

*The minimum to open an EverBank account is $1,500, but balances under $5,000 are assessed an $8.95 monthly fee.

Have you found other online savings accounts that offer competitive rates with low or no minimum opening deposit? Please let us know in a comment, or share your experience saving with any of the above online savings accounts!

† We have a financial relationship with this company. To learn more, read our disclosures.

Related posts:

1. FNBO Direct Voted Best Online Savings Account
2. Transferring Money: Online Savings Accounts Provide Unique Options
3. Online Savings Accounts 101

Needless to say, in the years since then, learning to balance my checkbook and save financial reserves has saved me untold amounts of money. If you want to do the same, it’s important to understand why overdraft protection exists and how it works.

And that’s never been more important than today, because the way banks handle overdraft protection features (and the accompanying fees) is changing.

Overdraft Protection 101

In the days before debit cards, if you wanted money from your checking account you either went down to the bank and got cash or you wrote a check. Obviously, if you didn’t have money in your account, the bank teller wouldn’t give you money. Similarly, if you wrote a check and didn’t have money in your account, the check would bounce. Not only would your bank charge you a fee, but the merchant to whom you wrote the check would also charge you a fee.

Enter overdraft protection: Banks realized that bouncing a check wasn’t just costly for customers, it was also embarrassing and inconvenient. So banks began offering overdraft protection, often automatically. With overdraft protection, if you write a check that you don’t have the money for, your bank will still clear it (up to a certain amount) and make your checking account balance negative. Then they will charge you an overdraft fee typically between $30 and $40. The bank still gets their fee, but the customer is spared the embarrassment of bouncing a check. Not many people complained.

But when debit cards came along, overdraft fees became a problem. All of a sudden we’re using our debit cards several times a day and for practically everything from monthly bills to $2.13 cups of coffee. That makes it infinitely harder to keep track of our checking account balance (assuming we balance it at all). So if you’re running low of funds on the day before payday and use your checking account to pay a bill and for two debit card transactions, you could face not just one but three overdraft fees.

How is that possible? Many banks clear larger dollar-amount transactions first. So if you had $99 in your account and paid a $100 bill and then bought a $15 lunch and a $2 cup of coffee, the bank would deduct the $100 bill from your account first, leaving you with a balance of -$1, charge you a $35 fee, then process your $15 lunch, charge another $35 fee, and finally deduct your $2 cup of coffee and charge you one more $35 fee. Ultimately overdrawing your account by $18 could cost you $105.

How Overdraft Protection is Changing

Bank of America made a splash this week when it announced that beginning this summer, the bank will no longer charge customers $35 overdraft fees on debit card transactions. Going forward, if you don’t have enough money in your checking account and you try to make a debit card purchase, Bank of America will decline the transaction. That’s probably how it should be: no money, no latte.

And change isn’t just happening at Bank of America. New federal regulations taking effect July 1 will require that banks only charge debit-card overdraft fees to consumers who opt-in for the feature. So if you’re a Bank of America customer, you won’t be able to overdraw your account via debit card unless you’re at an ATM, in which case the machine will ask you if you want to overdraw and pay a fee. But if you bank elsewhere, you get to choose whether you want to be able to spend more than you have in your account by debit card and pay overdraft fees or if you just want your transaction to be declined.

But overdrafts aren’t disappearing altogether. Banks can still charge overdraft fees on checks and recurring electronic debits without customers’ consent. (Translation: You still need to track your spending and balance your checking account!) On the flip side, however, you can still use overdraft protection in a pinch if you’ll face stiffer penalties for not paying a certain bill on time. (Ideally, of course, you should budget and save enough money so that you’re not scraping the bottom of your checking account).

Avoiding Overdraft Fees

If you’re a good customer and you ask nicely, banks may forgive your first one or two overdrafts and refund the fee. Larger banks even have specific formulas for deciding when to excuse certain fees. But don’t count on getting a freebie. In most cases, overdrawing an account is your fault and the fee is the penalty. The goal is not to do it in the first place and, if you do it once, try not to make a habit of it.
Automatic electronic funds transfers from your checking account can be another source of overdrafts. If you’re currently paying monthly bills via automatic debit, consider setting up a bill-pay account to automatically move the money from your checking account to the biller instead of the other way around (most banks won’t make a bill-pay transfer if you don’t have the cash but will allow an auto debit to go through). Check with your financial institution just to be sure.

Lastly, if you frequently overspend, do not opt-in for overdraft protection on your debit card this summer. Get a better handle on your budget and save up an extra few hundred dollars to cushion those weeks in which your checking account is running low.

Learning to avoid overdraft fees can save you hundreds of dollars a year and can even make your finances healthier in other ways too. The new regulations this summer will help, but only your commitment to budgeting and moving away from living paycheck-to-paycheck can guarantee an escape from the overdraft trap.

Related posts:

1. Cruel Overdraft Traps
2. Avoid Bank Fees
3. Debit Card Dangers

Buying your first home is one of the most important and exciting financial milestones of your life. But before you hit the streets with a realtor, you need to have a good sense of a realistic budget. Just how much house can you afford? You can determine how much house you can afford by following three simple rules or percentages of your monthly income.

The Rules of Home Affordability

Mortgage lenders use something called qualification ratios to determine how much they will lend to a borrower. Although each lender uses slightly different ratios, most are within the same range. Some lenders will lend a bit more, some a bit less. We have taken average qualification ratios to come up with our three rules of home affordability.

Your Maximum Mortgage Payment (Rule of 28): The golden rule in determining how much home you can afford is that your monthly mortgage payment should not exceed 28 percent of your gross monthly income (your income before taxes are taken out). For example, if you and your spouse have a combined annual income of $80,000, your mortgage payment should not exceed $1,866.

Your Maximum Total Housing Payment (Rule of 32): The next rule stipulates that your total housing payments (including the mortgage, homeowner’s insurance and private mortgage insurance (PMI), association fees and property taxes) should not exceed 32 percent of your gross monthly income. That means for the same couple, their total monthly housing payment cannot be more than $2,133 per month.

Your Maximum Monthly Debt Payments (Rule of 40): Finally, your total debt payments including your housing payment but also auto loan or student loan payments and minimum credit card payments should not exceed 40 percent of your gross monthly income. In the above example, if the couple with $80k income wanted the highest mortgage payment they could get, they could have up to $533 in other debt (car payments or credit cards).

This rule means that if you have a big car payment or a lot of credit card debt, you won’t be able to afford as much of a mortgage payments. In many cases, banks won’t approve a mortgage until you reduce or eliminate some or all other debt.

How to Calculate An Affordable Mortgage

Now that you have an idea of how much of a monthly mortgage payment you can afford, you’ll probably want to know how much house you can actually buy. Although you cannot determine an exact budget until you know what interest rate you will pay, you can estimate your budget. Assuming an average six percent interest rate on a 30-year fixed-rate mortgage, your mortgage payments will be about $65 for every $10,000 borrowed.

• $1,866 / $65 = 28.71
• 28.71 x $10,000 = $287,708 (Your maximum mortgage amount)

Include Your Down Payment: Hopefully you have a down payment of at least 10 percent up to 20 percent of your future home’s purchase price. Add that amount to your maximum mortgage amount, and you have a good idea of the most you can spend on a home. Note: If you put less than 20 percent down, your mortgage lender will required you to pay private mortgage insurance (PMI), which will increase your non-mortgage housing expense and decrease how much house you can afford.

Ready To Go House-Hunting? Save time, money, and aggravation by lining up your financing first with a mortgage pre-approval. Read my post on how to get no-obligation mortgage quotes online.

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1. What Percentage of Income Can You Afford for Mortgage Payments?
2. Are You Ready to Buy a Home? An Easy Way to Check
3. How to Find the Best Mortgage

If you’re getting ready to buy your first home or are a new homeowner, here’s what you need to know—in plain English—about the home mortgage interest deduction.

Who Can Take the Home Mortgage Interest Deduction?

In order to deduct your mortgage interest, you must:

• File Form 1040 and itemize deductions on Schedule A.
• Be legally responsible for the loan. You cannot deduct payments you make for someone else if you are not legally liable to make them. (For example, if you are splitting the mortgage with a live-in partner and the mortgage is only in his/her name, you can’t take the deduction). Also, you cannot deduct interest you’re paying a family member for a home unless you have established a legal debtor-creditor relationship.
• Have a mortgage secured by a qualified home. A qualified home must be your first or second home. The IRS states that “A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.”

To simplify even further, if you took out a mortgage from a bank in your name to buy your first home, you qualify for the deduction. In other circumstances, check with a tax pro.

• Thinking of Buying? Get Mortgage Pre-Approval Online →

What You Need

Claiming the home mortgage interest deduction is fairly simple. You’ll need:

• Form 1098, Mortgage Interest Statement from your mortgage lenders. They should mail this to you just like your employer mails you a W-2. The mortgage interest statement shows how much you interest you paid during the tax year.

• HUD-1 Settlement Statement (if you bought or sold a home within the tax year). This form usually comes from your escrow company and is used to itemize all the charges paid by both borrower and seller during a real estate transaction.

Limitations

There are some limitations on the home mortgage interest deduction. You cannot deduct interest on more than $1,000,000 used to purchase your first and/or second home(s). (Or $500,000 if married filing separately). In addition, you cannot deduct interest on more than $100,000 of home equity debt. If you deduct interest paid on home equity debt, it will affect the calculation for paying the Alternative Minimum Tax (AMT), so it is a good idea to understand the tax consequences before borrowing against your home.

If you have a joint mortgage, you can only deduct the interest you actually paid, regardless of who receives the 1098 Mortgage Interest Statement.

• TurboTax: Start Your Return Online for Free →

Mortgage points on a home purchase are fully deductible in the tax year in which they are paid (points are interest payments you make up-front, in a lump sum, to reduce your lifetime loan cost). If you pay points on a mortgage refinance, however, you must amortize the deduction over the life of the loan.

Should You Get Help?

Most of the time, taking the home mortgage interest deduction is straightforward. You add up the interest you paid listed on your mortgage interest statement forms and take the deduction. Things get tricky when you buy or sell property or start to carry multiple mortgages.

If you feel like some self-study, all of the rules are available in IRS Publication 936. But in most cases, tax preparation software like TurboTax will calculate your actual deduction for you. Finally, if your situation is more complicated, you might consider talking to a tax professional.

Related posts:

1. 2008 Tax Deductions You Don’t Want to Miss
2. Itemized Deductions: A Beginner’s Guide
3. Don’t Miss These Important Tax Deductions

Stumped? You might stand to learn how to organize your finances better. I know I could. Still, I don’t want to waste countless hours scrutinizing every receipt. I want to “set it and forget it”. I want a system that eliminates work and creates powerful peace-of-mind. So I created a plan to organize my finances in the simplest way I could devise; hopefully it helps you organize your finances, too. It comes down to three simple steps: Consolidate, Automate and Document.

Consolidate

Like the unused stuff in our closets, we tend to accumulate financial accounts over time. Sometimes there are good reasons: We can get a credit card with better terms or we move and open a new bank account. Before we know it, we have five credit cards and three checking accounts.

There’s nothing wrong with multiple accounts, in fact there are times multiple bank accounts are helpful. But extra accounts you don’t use create financial clutter. To help you de-clutter,I suggest you have no more than:

• Two Bank Accounts – Keep one local checking account and an online high-rate savings account. (If you run a business or you’re married and want both joint and separate accounts, you may need one or two more accounts).
• Two Credit Cards – I would only carry and use one credit card (if you want to use a credit card at all), but I advocate keeping two credit cards open both as protection in case your primary card cancels your account and for the health of your credit score. (If you’re self-employed or run a business, designate one card for tax-deductible expenses and try to put every business expense on that card).

A final note: Credit unions often make it easy to combine checking, savings and low-rate credit cards and loans under one roof. You may sacrifice some benefits like the highest savings rates and nationwide ATMs, but you’ll make up for it with simplicity, low loan rates and service.

Automate

With today’s technology, there are no excuses for not automating your finances. Every month, your checking account should automatically pay reoccurring bills (making forgotten payments and late fees a think of the past) and automatically contribute to your retirement savings and emergency fund. When you automate, remember two points:

• Create a Buffer – The biggest excuse for not automating is “flying too close to the ground”—that is, not having enough money in your checking account to cover monthly bills. That’s dangerous, because banks charge overdraft fees that can be more than late fees. Here’s the solution: Save $500 to $1,000 in your checking account or a savings account your bank will draw from in the event of an overdraft. It’s overdraft protection, peace-of-mind and a mini emergency fund all in one.
• Use Bill Pay When Possible – There are two ways to set up automatic payments: Instruct your bank to pay your bills at certain times using bill pay or authorize your billers to tap your bank account for funds. The end result is the same, but it’s the difference between you deciding to hand out money and you letting other people come in and take money from you in the night. Honestly, I use a combination of both, but I opt for bill-pay when I can because I can easily control all of my payments 24/7 in one place.

Document

If you have eliminated your unused financial accounts and automated your bills and savings, I guarantee you won’t worry as much about your money. But there’s one last step to organizing your finances—document—and there are two reasons to do it:

• Keeping Track – Studies show that high net-worth individuals are more likely to track the money they spend. Besides, it just makes good financial sense: Know what’s coming in, know what’s going out. Ideally, to the penny.
• Taxes – We all have to keep records of our income for tax reasons and, if you itemize deductions or are self-employed, you’re going to need documentation for your deductions.

Again, thanks to technology, documenting your finances has never been easier. It doesn’t matter how you track your spending: You can use a program like Quicken, a free service like Mint or a simple free budget spreadsheet.

Finally, you can opt for paperless statements from your bank and credit cards and save your monthly statements to a designated folder. In addition, most credit cards offer a year-end summary of your charges. You may still need to save that odd paper receipt for tax purposes, but a simple well-laced folder should work for that!

What about you? What steps have you taken to simplify or organize your finances? Please share your strategies in a comment!

Related posts:

1. How to Stop Worrying About Money
2. Organize Receipts with Shoeboxed: A Closer Look at Shoeboxed.com
3. How I Organize My Financial Records (And Why You Should)

Want to avoid a similar fate? It’s all about knowing how to shop for a mortgage.

Banks and Credit Union Loan Officers

The simplest way to apply for a mortgage is to walk into your local bank or credit union and sit down with a loan officer. He or she will take your application and, hopefully, present a number of different loan options for your situation. Depending on the bank, you may get a really good deal, especially if you’re already a loyal customer.

Small local banks and credit unions often offer the best mortgage rates. Trouble is, many of them only lend to people with truly immaculate credit. This alone can rule-out many first-time buyers who simply don’t have long enough credit histories yet.

But let’s assume your bank offers you a loan. Unless the rate the bank offers is lower than national averages, how do you know it’s the best deal? Unfortunately, you don’t. So you head down the street to get a quote at another bank or you go to a mortgage broker.

Mortgage Brokers

Mortgage brokers match borrowers with lenders. They work as “free agents” for multiple different lenders and earn a fee or commission when they sell a mortgage to a bank. Just like talent agents shop aspiring actors to movie studies, mortgage brokers approach different lenders with borrowers’ applications.

Good mortgage brokers should be able to find borrowers the most competitive rates and also find loans for borrowers with less-than-perfect credit. But there’s a downside: The more expensive the mortgage, the more the broker gets paid. So brokers may have an incentive not to show you the absolute best loans (not to say they all do this).

So shop around and negotiate for your loan just like a home or a car: Don’t blurt out the highest rate you will accept and never be afraid to push for a better deal.

Finding a Mortgage Broker

Many mortgage brokers are independent and work out of small offices or their homes; the best way to find a good one is often to ask friends or family for a referral or pick up a local directory.

Another option is to work online: Sites like LendingTree are essentially virtual mortgage brokers; you enter your application and they shop it around, often instantly, to multiple lenders.

• Start Now: Get Up to Four Mortgage Quotes from LendingTree

Final Tips

Shop, shop, shop. Before signing on the dotted line, investigate at least two of the three options above: a local bank or credit union, a mortgage broker or an online broker. As you shop, try to compare apples-to-apples. Ideally you should be able to compare loans that are for the same term and the same amount with the same down payment. Then, get a detailed breakdown of rates, points, fees and total closing costs.

Finally, even if you have never checked your own credit before, now is the time to get a free copy of your credit report and score. Print out your report and take it to your first meeting with a bank officer or broker; they should be able to give you a rough idea of what kinds of loans you’ll be approved of before they do a hard inquiry on your credit report (some banks charge a fee for a credit pull to discourage “tire kickers”).

Related posts:

1. FHA Mortgage Loans: A Good Idea for First-Time Buyers?
2. Your First Mortgage: How to Apply and Get Approved
3. Mortgage Rates Briefly Explained

And it’s not all good.

Without prying into painful details, here’s a 60-second run-down of what you need to know about the CARD Act.

Watch your interest rates carefully. The new laws make it harder for cards to raise interest rates (for example, they can no longer jack your APR 10% just because you paid a day late). To make up for this lost revenue, banks raised interest rates on virtually everybody before the laws took effect. And that’s not all: Banks may now issue credit cards with super-high “regular” APRs but lower “discount” or “promotional” rates. The banks can then take away “discount” rates for any reason without violating the new laws. Little has changed. The good news is you can always negotiate a lower credit card APR.

Fees, fees, fees. The new laws will cost credit card banks billions in lost interest. Don’t think they won’t make up for it…with fees. There will be annual fees, paper statement fees and even inactivity fees if you have a card but don’t use it. One area analysts expect banks to target? Foreign currency transaction fees. Most cards charge three percent on any transaction in a foreign currency, and it may go up. (Hint: Captial One cards don’t charge that fee, and have pledged not to start; it’s the reason I voted a Capital One miles card the best credit card for international travel.)

Check your grace period. A grace period is the time during which no interest accumulates on charges. Grace periods are what make credit cards free (or, in the case of rewards cards, even profitable) to users who charge regular expenses and pay their balances in full every month. Some cards may begin reducing or eliminating grace periods to extract interest from what the industry calls “deadbeats”—people who pay off their credit card balances every month and thus, traditionally, never made card companies a dime.

Under 21? Getting a credit card may be more difficult. The CARD Act tries to protect you from card companies that want to get you in debt young and keep you there. But you can still get a credit card before turning 21, you’ll simply need an adult’s blessing or be able to document that you have the means to afford the credit.

The Bottom Line

The CARD Act protects card users from some of the slimiest credit card practices, but the fact is this: A credit card is an expensive and risky financial instrument. It’s fine to use credit cards for their convenience, security and rewards, but as soon as you borrow money on a card that you’re going to pay off over time, you’re at the card company’s mercy and you can expect them to make you pay very, very dearly.

So watch your mail carefully. Read everything your credit card company sends you—that next piece of mail may be their polite notice that they would like to begin charging you more money in a way they never have before.

Related posts:

1. The Future of Credit Cards
2. Beware Credit Card Rate Jackings (Increases)
3. Credit Card Changes: Five Ways to Protect Yourself