Dear Liz: Can you explain why a personal identification number is not required when using a credit card? I know people whose cards have been stolen and used quickly and for large sums. 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 US, however, credit card issuers are reluctant to require their customers to use PINs.
The publishers fear that people would find the PINs a hassle and opt to use a competitor’s card that doesn’t have to remember and enter a number. The enormous amount of fraud that results is considered a cost to doing business.
Consumers are unwilling 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 do not reveal your credit card number to the merchants and allow you to pay for your purchases quickly and securely.
Credit usage and your scores
Dear Liz: When my credit utilization dropped to 24%, my credit score increased from 675 to 690. My utilization has since dropped to 17%, but my score remains at 690. What should my credit utilization be roughly to see a credit score above 700?
Answer: Keep in mind 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 usually use less than 10% of their credit limits.
How do you give your house away
Dear Liz: I want to make sure that a good friend of mine gets my house after I pass away. What is more tax-efficient 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 will try to challenge the will. Although I will be leaving my relative’s money in my will, I want to make sure the house goes to my friend.
Answer: Adding your friend to the deed creates a gift from the house her in your lifetime. That means if she ever sells the house, she may owe taxes on the appreciation that happened since you bought the house. If, on the other hand, you leave the property to her, the profits that arise during your lifetime will not be taxed. You can leave her the house through a will, a living will, or, in many states, a death certificate. (You can read more about this option in the next section.)
If you are concerned about someone fighting your decision, seek appropriate legal advice. Estate planning can get complicated and most people would benefit from the help of a lawyer, but this is especially true if you have contentious relatives.
Transfer upon death certificate
Dear Liz: After going through the probate process several times in California and Nevada, I can say it stinks. It is expensive and takes place at a time when the family is most stressed and saddened after the loss of a loved one. While estate planning and revocable trusts seem to be all the rage, I’d suggest another avenue: death certificates for real estate. They are available online through the county. It avoids a complicated estate, is much simpler than a living will, and still gives the family the benefit of an increased tax base on the property.
Answer: Probate isn’t always a nightmare. Some states have introduced reforms that make the process less costly and lengthy. Even in states with notoriously slow and expensive probate laws, such as California, there are typically rules in place that allow small estates to bypass most of the red tape.
However, due to rising real estate values, simply owning a home may be enough to activate probate, even if the deceased has few or no other assets. For example, many states now offer death certificates for real estate, and they can be a good solution for people who don’t own much other than a home.
Liz Weston, Certified Financial Planner, is a personal finance columnist NerdWallet. Questions can be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact Us” form at asklzweston.com.