How to improve credit card security
Dear Liz: Can you please explain why a personal identification number is not required when one uses a credit card? I know people who’ve had their card stolen and used quickly and for large amounts. That would immediately protect the credit card company from paying millions to cover losses.
Answer:
“Chip and PIN” cards — which combine a microchip with a personal identification number — are the norm in most of the rest of the world. In the U.S., however, credit card issuers are reluctant to require their customers to use PINs.
The issuers are worried people would find the PINs to be a hassle and would opt to use a competitor’s card that didn’t require remembering and entering a number. The massive amount of fraud that results is considered a cost of doing business.
Consumers aren’t on the hook to pay for these bogus transactions as long as the fraud is reported within 60 days of the charges appearing on a statement. But compromised cards are still a hassle.
One of the best ways to protect your credit cards from fraud is to use mobile payment systems such as Apple Pay or Google Pay. These systems don’t expose your credit card number to the merchants and allow you to pay for purchases quickly and securely.
Credit utilization and your scores
Dear Liz: When my credit utilization decreased to 24%, my credit score rose from 675 to 690. My utilization has since decreased to 17% but my score remains 690. Approximately what does my credit utilization have to be to see a credit score over 700?
Answer: Keep in mind that you have many credit scores, not just one, and the formulas used to create these scores can vary considerably.
But in general, the less you use your available credit, the better. People with the highest credit scores tend to use less than 10% of their credit limits.
How to give your house to a friend
Dear Liz: I want to make sure a close friend of mine gets my house after I pass away. Which is better taxwise for this friend, adding her to my deed or leaving the house to her in my will? My fear of leaving it to her in my will is that a family member may try to contest the will. While I will leave my family member money in my will, I want to make sure that the house goes to my friend.
Answer:
If you add your friend to the deed, you’re making a gift of the home to her during your lifetime. That means if she ever sells the house, she could owe taxes on the appreciation that happened since you purchased the home.
If you bequeath the home to her, on the other hand, the gains that occur during your lifetime won’t be taxed. You can leave her the home via a will, a living trust or, in many states, a transfer-on-death deed.
If you’re concerned about someone fighting your decision, please get appropriate legal advice. Estate planning can get complicated, and most people would benefit from an attorney’s help, but that’s especially true if you have contentious relatives.
Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.