Living without a credit card
Question: I think it will be difficult to find a low risk, 4%+ bank account. Not that difficult. Here’s one:
http://www.capitalone.com/directbanking/hymm/index.php?linkid=WWW_Z_Z…
That’s a “high yield money market” account. There is no minimum balance and no monthly fees, and you get a checkbook and an ATM card. However, since it’s a money market, there’s a limit on transactions per month. But it’s just about perfect for a rainy day account: if you need money for a big unexpected expense (like a repair on your home or whatever), you can write a check and get effectively instant access to the money.
> A better way (once all the credit card debt is paid off) may be to > have that 4-month money in a three or perhaps six month CD which are > currently paying above 4%. If a true emergency does arise, the CDs > can be tapped to pay off such emergency charges.
That can work great too. It really depends on whether the CD is paying a higher rate and if so whether it’s worth it to risk the penalty for early withdrawal if/when you need the money. A lot of CDs don’t have that big a penalty, so it probably is pretty often worth it.
> Our preferred method for an emergency fund was to make extra > payments against the mortgage where the (extra) equity could be > made available in case of emergencies.
Did you get that type of loan in the US? You mentioned the IRS, making me think you are in the US, but I thought that type of loan was only available in other countries. If it is available in the US, that would be great to know about since I want to get that type of loan.
Answer: It was simply a home equity loan (US) where the loan interest is typically deductible vs. conventional loans which are typically not interest deductible.
I’m confident most every mortgage lender has a home equity loan option, assuming one has enough equity..
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Filed under: Home Equity Loan
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