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Building Credit, Credit Cards, Reviews

OpenSky Secured Visa Review: No Checking Account Required

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

The OpenSky Secured Visa secured credit card can be helpful for those who have bad or no credit history. This card is designed for consumers who want to rebuild or create a credit history. OpenSky does not require a checking account or credit check when you apply, which makes the application process simple. Take note that this card does come with an annual fee, unlike other secured cards. With responsible use, you could see an increase in your credit score and move to an unsecured card.

OpenSky® Secured Visa® Credit Card from Capital Bank N.A.

APPLY NOW Secured

on Capital Bank N.A.’s secure website

OpenSky® Secured Visa® Credit Card from Capital Bank N.A.

Annual fee
$35 For First Year
$35 Ongoing
Minimum Deposit
$200
APR
18.39% APR
Credit required
zero-credit
New to Credit, Bad

How the card works

Since this is a secured card you will have to make a security deposit. This money will become your line of credit and must remain in your account while your card is open. There are four options to make your security deposit and fund your account. The first is using a debit card. Simply provide your debit card information on your application, and OpenSky will process your transaction right away. You can also complete a wire transfer to Capital Bank. If you don’t have a checking account, you can use Western Union or mail a check or money order. An email with instructions on how to fund your security deposit will be sent after your application has been approved. Note that, depending on the method of payment that you choose, it may take up to five business days for your security deposit to clear.

If you’re looking to improve your credit score, the best way to take advantage of this card is to start off with a low credit limit and find a recurring expense you can put on the card. For example, you can put your utility bills on the card. Make sure that you pay this on time and in full every month. To ensure it’s paid on time, you can enroll in their auto pay program, which will guarantee you never miss a payment. Once you enroll in auto pay, the credit card company will make a scheduled monthly payment automatically on the day you choose. This way, you will have a purchase every month that OpenSky can report to all three major bureaus.

How to qualify

To quality for this credit card you do not need to have credit history, but you do need a job. By having a job you will show a stable source of income, which shows credit lenders you are responsible and can pay your bills. In addition you will need a security deposit. That means if you want a $1,000 credit limit, you’ll need to have $1,000 deposited at account opening. The online application is four simple steps that can be completed in 10 minutes. They request basic personal and financial information, have you choose the starting credit limit you prefer, and fund your security deposit. Your requested credit limit is subject to approval based on your creditworthiness.

What we like about the card

No credit check

OpenSky does not check your credit history during the application process. This is great if you lack a credit history or have poor credit, therefore improving your approval odds.

Simple application process

The application process takes place solely online, making it easy to apply at your convenience. It only takes 10 minutes according to OpenSky to complete the application. There are four easy steps: provide your personal and financial information, customize and fund your card, review your information, and accept the terms and conditions.

No checking account needed

OpenSky does not require you to have a checking account to apply for this card. This is great for those who want to establish credit but don’t have a bank account. The majority of credit cards require bank accounts, so this is a good option if you don’t have a bank account.

What we don’t like about the card

Annual fee

OpenSky charges cardholders a $35 annual fee. Be sure to review your credit options, because you can find other secured cards that do not charge an annual fee. However, note that those cards may require a checking account, so make sure to review your options.

Foreign transaction fee

Make sure this card remains at home when you travel abroad since there is a high 3% foreign transaction fee. This will increase your bill if you make purchases abroad, so it’s best left at home.

No option for an unsecured card

If you’re ready to move onto an unsecured card, there is no option with OpenSky. That means you’ll have to look to another company, which could be a hassle because of the process of applying for the card, getting a credit check, and closing your current card.

Who the card is best for

If you’ve struggled with being approved for credit cards in the past due to bad or nonexistent credit history, the OpenSky Secured Visa may be right for you. With no credit check during the application process, you have good approval odds. This card is also for those who do not have a checking account but want to build credit, as you won’t find many credit cards that are offered to people without checking accounts. However, the annual fee and lack of transition to an unsecured card can make you think twice about this card. You can find MagnifyMoney’s ranking of the best secured credit cards here.

Alternatives

Secured MasterCard from Capital One Bank

Annual fee

$0 For First Year

$0 Ongoing

Minimum Deposit

$49

APR

24.99% APR

Fixed

This credit card doesn’t require that you have your security deposit equal your credit limit. You can make a deposit as low as $49, unlike the OpenSky card, which is $200. However, this card will check your credit history and will determine your deposit requirement based on your creditworthiness. There is no annual fee associated with this card, unlike OpenSky.

Discover it® Secured Card - No Annual Fee

Annual fee

$0 For First Year

$0 Ongoing

Minimum Deposit

$200

APR

23.99% APR

Variable

This card has no annual fee, unlike OpenSky. It also features 2% cash back on up to $1,000 per quarter on gas and restaurant purchases and 1% on other spending. In addition, after eight months you may be eligible for an unsecured credit card, which you can’t do with OpenSky. These are great benefits that make the Discover it® Secured card a good alternative.

DCU Visa Platinum Secured from Digital FCU

Annual fee

$0 For First Year

$0 Ongoing

Minimum Deposit

$300

APR

12.50% APR

There is also no annual fee for this card, as well as no cash advance or balance transfer fees. The APR is lower than OpenSky, which is beneficial if you think you might carry a balance month to month. According to a DCU representative, the maximum credit limit is $2,000. However, it is determined by your overall creditworthiness. Also, you’ll need to be a member of Digital Federal Credit Union, which may be difficult to get into. You can learn about eligibility requirements here.

FAQ

No, OpenSky does not check your credit history. So any bad history you may have will not affect your approval odds.

A security deposit is the amount of money you deposit into your account and acts as collateral. It also becomes your line of credit. That means if you make a $1,000 security deposit, you’ll have a $1,000 credit line.

There are four options to make your security deposit.

  1. Debit card- Simply provide your debit card information on your application, and OpenSky will process your transaction right away.
  2. Wire transfer to Capital Bank

If you don’t have a checking account:

  1. Western Union
  2. Mail a check or money order

An email with instructions on how to fund your security deposit will be sent after your application has been approved. Note that, depending on the method of payment that you choose, it may take up to five business days for your security deposit to clear.

Additional reporting by Alexandria White

Sarah Li Cain
Sarah Li Cain |

Sarah Li Cain is a writer at MagnifyMoney. You can email Sarah Li here

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Retirement, Small Business

A Comprehensive Guide to the Solo 401(k) for Business Owners

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

If you run your own business, one of the difficulties in saving for retirement is that you don’t necessarily have easy access to a 401(k).

Enter the solo 401(k). This is a retirement savings option for self-employed business owners who have no employees and their spouses. Read on to find out how it works, who is eligible, and how you can open an account.

The Solo 401(k): Explained

What Is a Solo 401(k)?

Also known as a one-participant or individual 401(k), a solo 401(k) works just like a company-sponsored 401(k) would, except it’s for self-employed individuals who don’t have any other employees other than their spouses and themselves.

Just like a traditional 401(k), you can control how your money is invested. There are different plans, with most comprising stocks, bonds, and money market funds. These are considered “free” prototype plans offered by brokerages, and you’re typically limited to investments offered by that brokerage.

However, there are options for those looking to participate in alternative investments, such as precious metals or even real estate. There are companies that help you open what’s called a self-directed 401(k) and that sponsor “checkbook control” solo 401(k) plans, meaning that individuals can control the type of investments they want to make, whether it’s stocks, bonds, foreign currency, real estate, or commodities. You do so by writing a check for investment purchases, from a bank account dedicated specifically for that purpose.

Who Is Eligible for a Solo 401(k)

Only self-employed individuals and their spouses are eligible for a solo 401(k). This plan is ideal for consultants, independent contractors, or sole proprietors. If you hire part-time workers or contractors, then you’re still safe. However, if they work for you for more than 1,000 hours a year, you cannot participate in a solo 401(k).

Furthermore, you need to have the presence of self-employment activity to be eligible, which includes ownership and operation of an LLC, C, or S corporation, a sole proprietorship, or a limited partnership where the business intends to make a profit. There are no criteria as to how much profit a business needs to generate, as long as you run a legitimate business with the intention to generate a profit.

If you are currently employed elsewhere, you can still open a solo 401(k) account if you’re serious about maximizing your pre-tax savings. If you work for an employer that offers a 401(k) plan, you can still participate in their plan alongside a solo 401(k) plan, as long as you don’t exceed the contribution limits.

Where to Open a Solo 401(k)

You can open a solo 401(k) with most major brokerages. For those looking for a custom plan, there are companies that specialize in providing those plans. Some insurance companies also offer solo 401(k) plans but only if your goal is to invest solely in annuities.

Below are some of the most popular companies offering solo 401(k) plans:

Vanguard – The individual 401(k) offers all Vanguard mutual funds. However, you cannot purchase exchange-traded funds (ETFs) or mutual funds from other companies and cannot take out a loan. There is no setup fee, but there is a $20 fee per account per year to maintain your solo 401(k).

SunAmerica – The SunAmerica Individual(k) offers mainly annuities as part of their plan. You can take out a loan (for a fee). It costs $35 to set up your account, and there is an annual maintenance fee of $75.

E-Trade – The E-Trade Individual 401(k) Plan allows Roth contributions and has a brokerage option with $9.99 trades for any ETF. They accept IRA rollovers and allow for loans. They also will pay you if you transfer your current solo 401(k) to them: $200 for $25,000-$99,000, $300 for $100,000-$249,000, and $600 for a $250,000+ plan.

How to Establish a Solo 401(k)

When opening a solo 401(k) plan, you want to choose the option best for your needs. Once you’ve selected your brokerage, you’ll need to have the necessary documents:

  • 401(k) plan adoption agreement
  • Designation of successor plan administrator, which requires a notary or a witness
  • Brokerage account application
  • Designation of beneficiary form
  • Power of attorney (optional)

If you plan on opening one for your spouse, you’ll need to do twice the paperwork (one form for each person).

Remember, you need to open a solo 401(k) account by December 31 of the tax year. You don’t need to actually fund it until the April 15 filing deadline. If you miss opening an account, you’ll have to wait until the next tax year to do so.

How Much You Can Contribute to a Solo 401(k)

Participants in a solo 401(k) plan can make contributions both as an employee and an employer.

For elective (employee) contributions, you can contribute up to 100% of your earned income, up to the annual contribution limit, which is $18,000 in 2017. Those age 50 or older can contribute an additional $6,000, depending on the type of plan, according to the IRS.

When making a contribution as an employer, you can contribute up to 25% of your earned income as an employee. Your total contributions cannot exceed $54,000 in 2017 ($53,000 for 2016), not counting extra contributions for those 50 or older.

For example, Mary earned $40,000 from her freelance business in 2016. She put $18,000 in this plan as an employee. As an employer, she contributed 25% of earnings, which is $10,000. In total, she contributed $28,000, which is the maximum she can contribute.

Remember, contribution limits are for each person, not each plan. If you are working full time for another employer and participate in that company’s 401(k) plan, combined contributions to your traditional 401(k) and solo 401(k) cannot exceed the annual limit.

To figure out the maximum contributions you can make, check the IRS website on how to calculate a more accurate amount.

Read more: 9 Essential Tax Tips for Entrepreneurs >

Learn More About Solo 401(k)s

The Pros of a Solo 401(k)

The solo 401(k) has higher contribution limits compared to other retirement savings plans. You can contribute up to $18,000 plus 25% of earned income, compared to a maximum of $54,000 or only 20% your earnings (whichever is less) with a SEP IRA. Your employer contributions are also tax deductible.

You also have the option to borrow up to 50% of your account’s value or $50,000, whichever amount is less.

The Cons of a Solo 401(k)

A solo 401(k) can get complicated to set up and maintain, particularly if you intend on opening a customized plan. Depending on the company you go with, fees can cost you at least a few hundred dollars to set up an account, not including fees to maintain the plan annually.

Even if you open a prototype plan, it can cost you. Yes, it’s free to set up, but they put many requirements on you as the owner. These requirements include filing tax return documents once a year if your plan has more than $250,000 in assets and keeping up to date with all records and transactions.

Alternatives to a Solo 401(k) Plan

There are two alternatives to a solo 401(k) plan — a SIMPLE IRA and a SEP IRA. The main difference between each is the maximum amount you can contribute to each year.

SIMPLE IRA – A Simple IRA plan is for those who as an employee (including those who are self-employed) have earned a minimum of $5,000 any two years before the current calendar year and expect to receive at least $5,000 for the current calendar year. You can contribute up to $12,500, plus an employer match of 3% of employee compensation. Those 50 or older can also contribute up to an extra $3,000. You can find more information about the simple IRA on the IRS website.

SEP IRA – A Simplified Employee Pension (SEP) plan only allows employers to contribute to the plan, unlike a solo 401(k). Employers can contribute a maximum of $53,000 or 20% of their net self-employment earnings, whichever amount is less.

Even with all its benefits, there may be a few reasons why someone is better off not opening a solo 401(k). “If you’re concerned about doing additional paperwork, a SEP IRA might also be a better choice,” advises Robert Farrington, founder of the College Investor. “If you’re working a side hustle and have a regular 401(k) at your day job, the alternatives might be easier.”

Who Solo 401(k) Plans Are Best For

While any of the above options are helpful for self-employed individuals, the solo 401(k) is best for those who are looking to invest heavily in their savings. “The solo 401(k) is best suited for a self-employed individual who wants to maximize their retirement savings,” says Farrington.

“Furthermore, if you’re a husband/wife/spouse team, your spouse can also contribute to the solo 401(k) with the same percentage of ownership, so you can get even more in tax savings and retirement contributions.”

Sarah Li Cain
Sarah Li Cain |

Sarah Li Cain is a writer at MagnifyMoney. You can email Sarah Li here

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Credit Cards, Featured, News, Strategies to Save

5 Ways to Protect Your Money on Summer Vacation

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Summer vacations should be a time to relax and recharge your batteries. It’s also a time to socialize more, travel more, and fly to exotic destinations.

For those who are traveling long distances (especially to another country) during the summer, there are a few precautions you need to take to ensure that you protect your money. If you set these in place, you can relax a bit more and, hopefully, have more fun on your trip.

Tell Bank and Credit Card Companies About Your Travel Plans

If you don’t tell your bank or credit card company that you’re planning on traveling, they may think all those purchases you’ve made are faulty. Unfortunately, that means that you may lose access to your credit or debit card.

It only takes a few minutes to call these places and let them know about your plans. Doing so is even more important for those planning on traveling overseas. When you call, let them know the places you plan on visiting and how long your trip will last.

Only Bring the Necessities in Your Wallet

If you have a lot of cards and IDs in your wallet, only take what you will use on your trip. For example, bring a credit card, a backup credit card, and an ATM or debit card if you plan on withdrawing cash. If you need to, bring your driver’s license.

To prevent identity theft, leave your Social Security card at home in case your wallet gets stolen. If you think you might need it for any reason, photocopy it and black-out the last four digits. In fact, it’s a good idea to make photocopies of credit and bank cards you’ll be taking with you on your trip, as well as your IDs (including the passport data page) to keep on hand. You can also give copies of those, as well as your travel itinerary, to a trusted friend or family member at home in case of an emergency.

The less you have in your wallet, the less of a hassle it will be if you do need to replace your cards if they get stolen. It’s even better if you put your credit cards and IDs in separate locations so you don’t lose all access to cash during your trip.

Use Your Credit Card as Much as Possible

Most credit cards will protect you from liability for fraudulent purchases, which is helpful in case your card is lost or stolen. Also, if you make most of your major purchases on your credit card (such as hotel and flights), you may be eligible for travel insurance. Of course, that depends on the terms on your credit card.

Using credit cards instead of cash means that you can recoup your losses much faster. If someone stole cash from your wallet, the chances of getting that money back are pretty slim. However, if you have a credit card stolen, all future purchases made will not be your responsibility.

If you want to save money on pesky exchange fees, make sure to use a credit card that has no foreign transaction fees. That means you’re only paying the exchange rate on the day you make a purchase. You can even consider using a cash back or travel rewards card to earn points while you travel. Some cards, like the Chase Sapphire Preferred, allow you to earn 2x points on travel and dining purchases.

Watch Out for Fake ATMs

There may be times when you need to get cash during your vacation. With thousands of ATM machines around the world, there’s no shortage of access. However, you’ll want to make sure that the machine you’re getting your cash from is a legitimate one.

Unfortunately, thieves like to put fake ATM machines in high traffic tourist areas. What happens is they end up stealing your card information and all your money along with it. In 2010, a man in Beijing was arrested for installing a fake ATM machine near a corner store. Unsuspecting passers-by would use the machine, get an “out of order” message, and later discover their accounts had been drained.

If you’re unsure about the ATM machine, don’t use it. The Beijing fraudster went to some trouble to make his ATM look legit, even adding signage like “24 hours self-service,” according to media reports. But there were some pretty clear giveaways to show the Beijing machine was a fake — the money slot was sealed shut, the security camera was a piece of plastic, and the receipt slot was sealed.

To play it safe, it might be better to avoid stand-alone ATMs and stick to ATMs that are located in airports, transportation hubs, hotels, or banks.

You can even do a bit of research beforehand and look up ATM machine locations on your bank or credit card website. For example, Visa and MasterCard show locations of their ATM machines around the world. You can easily do a search and know which one you can head to.

Also, consider keeping only a small amount of cash in the account linked to your debit card. Even if your account is compromised, a thief won’t get away with much.

Keep Up with Your Purchases from Your Trip

There’s nothing wrong with relaxing, but you still need to be alert on your trip. Whenever you purchase something, check the receipt to make sure all charges are accounted for or you got the right change if you paid in cash. If you have online bank access, check to see if all charges are actually yours.

Also, you’ll want to be as organized as possible. Aside from only bringing the necessities in your wallet, make sure you can access your things easily in your purse or bag. If you have to search in your bag a lot, you may end up misplacing important documents or lose valuable items.

It’s also a good idea to review your credit card and bank statements when you get back from your trip if you weren’t able to check it during your trip. If there is fraudulent activity, report it right away.

Final Thoughts

Protecting your money on your summer vacation doesn’t have to be stressful or take a lot of time. As long as you take some precautions and are careful in your surroundings, you’ll be able to enjoy your vacation much more.

Sarah Li Cain
Sarah Li Cain |

Sarah Li Cain is a writer at MagnifyMoney. You can email Sarah Li here

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Life Events, Pay Down My Debt

What Happens to Loans When We Die?

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

You may not have to pay loans after you pass away, but that doesn’t mean they disappear into thin air. There isn’t a one-size-fits-all answer as to what happens to your loans when you die, but there are many factors that can affect them. Where you live, the types of loans you have, as well as who applied for them can determine what happens.

While it’s not fun to think about your eventual demise, it’s necessary to know if your debt could be passed onto another person.

Gathering Up Loans

When you pass on, your executor will notify creditors, hopefully as soon as possible. Whatever known creditors you have, the executor will notify them and forward a copy of your death certificate and request that they update their files. He or she will also notify the three major credit reporting agencies to notify them that you are no longer alive, which will help prevent identity theft. As well, the executor will then get a copy of your credit report to figure out what debts are outstanding.

When that is completed, the executor will go through probate, which means that your estate goes through a process of paying off bills and dividing what’s left to the state or whoever you named in your will.

When Someone May Be Responsible for Paying Back Your Loans

Simply put, your loans are the responsibility of your estate, which means everything that you owned up until your death. Whoever is responsible for dealing with your estate (usually your executor) will use those assets to pay off your debts. This could involve selling off property to get money to pay it off or writing checks to do so. The rest of it then will distributed according to the wishes in your will. If there isn’t enough money to pay off the debtors, then they’re usually out of luck.

However, this isn’t always the case. If you co-signed a loan or have joint accounts (like credit cards), then the account holders may be fully responsible to pay off the whole debt, no matter who incurred it.

If you live in a community property state, then your spouse could be responsible for paying off your loans. If you have property in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin, your spouse may have to pay back half of any community property from a marriage. This doesn’t include any loans you have that came before the marriage. However, Alaska only holds a spouse responsible if they enter into a community property agreement. All states have different rules, so it’s best to check what will apply to your situation.

There is also the “filial responsibility” law that could hold your adult children responsible for paying back loans that are related to medical or long-term care. The same works in reverse. Currently, there are around 30 states that enforce this law, including Maryland, Pennsylvania, and Virginia. Some enforce this law pretty strictly, so it’s best to check with your state to see what could happen.

For more details on the different types of loans, read on to find out about what could happen to each when you pass on.

Credit Card Debt

If the credit card debt was yours and yours alone, then your estate is responsible for paying off the debt. Depending on which state you live in, creditors may only have a limited time to file a claim after you have died. If your estate goes through probate, then the executor will look at your assets and debts and determine which bills should be paid first, according to the law.

If there isn’t money left when it comes time to pay off your credit cards, those companies unfortunately have to call it a loss. Credit card companies cannot legally force family, friends, or heirs to pay back your debt unless you live in a community property state. In that case, your surviving spouse may be liable.

However, if the credit card is joint, the other account holder is responsible for it. That means if a family member or business partner signed the card application as a joint account owner, then he or she will need to help pay back the loan along with your estate. However, if your partner is just an authorized user (meaning he or she didn’t sign the application), then they’re not held responsible.

Mortgages and Home Equity Loans

There are several options for dealing with an outstanding mortgage after you have passed away. Due to the complexity of these options, it may be worth speaking with a local estate attorney.

If you are the sole owner and your mortgage has a due-on-sale clause, your lender may try to collect the entire balance of the loan or foreclose on the property. However, the CFPB has expanded protection for heirs who have inherited a home. The transfer of property after your death won’t trigger the Bureau’s ability-to-repay rule, making it easier for your heirs to pay off your loan or refinance.

In contrast, a home equity loan against your home is different. A lender may have the right to force someone who inherits the home to pay back the loan right away. Some lenders may work with your heirs to take over the payments or work out a plan, but you shouldn’t assume that will be the case. In a worst-case scenario, your heirs may have to sell your property to pay back your home equity loan.

Car Loans

Car loans are similar to the other types of debt we have discussed. The steps for handling this type of debt will depend on whose name is on the loan and where you live. If your heirs or co-signer are willing to take over your payments, the lender won’t need to take any action. However, the lender can repossess the car if the loan isn’t paid back.

Student Loans

If you have federal student loans, these will be discharged when you die. It will not be passed onto anyone else. If you were a student recipient of Parent PLUS loans, you’re also eligible for a death discharge. These loans will not be the responsibility of your estate. Your executor simply has to present an original death certificate or certified copy of your death certificate to your loan servicer.

However, if you and your spouse co-signed Parent PLUS loans on behalf of a student, your spouse will still be responsible for the balance.

Some private lenders may also offer a death discharge if you don’t have a co-signer. However, these policies vary by institution. You should review the terms of your loan for the specifics. Wells Fargo is an example of a company that may allow student loan forgiveness in the case of death.

However, if your private loan has a co-signer, your co-signer may be legally responsible to pay back your debts. Some companies may ask for the balance immediately. Also, if you live in a community property state, your spouse may be held responsible for your student loans if the debt was acquired during the marriage.

Medical Bills

If you have outstanding medical bills, nursing home bills, or any expense related to your long-term care, your spouse or family members may be responsible for paying it back per your state’s filial responsibility laws.

Your children could be held responsible for your medical bills if the following scenarios are true:

  • You receive care in a state with a filial responsibility law.
  • You don’t qualify for Medicaid while receiving care.
  • You can’t afford your bills, but your children can.
  • Your caregiver sues your children to collect on your unpaid bills.

Final Thoughts

The last thing your family members want to think about after you have died is outstanding loans. This is why it is essential to get organized in advance. It may be worth speaking with a financial planner regarding the specifics of your individual situation. They can help you review which options could best protect your heirs from your unpaid debt. Once you have passed away, your heirs should seek assistance from a qualified estate attorney.

Sarah Li Cain
Sarah Li Cain |

Sarah Li Cain is a writer at MagnifyMoney. You can email Sarah Li here

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