Peer review

Q I hear people talking about balance transferring their credit cards for no fee or zero percent fixed for a certain period of time. What are the advantages and disadvantages of doing this?

Ann, Plymouth

To answer this question correctly, I have to ask you another: Is the interest rate on your card the real problem?

Changing from a 19 percent APR to zero percent is advantageous. In fact, if you think about it from a wealth-building perspective, you really can't beat it. You're earning a guaranteed 19 percent on your money.

However, there are drawbacks. On some cards, one late payment will catapult your rate right back where it was. And you aren't actually paying off your loans.

That means you probably are incorrectly identifying your interest rates as the problem, where your spending is the problem.

Go ahead and transfer the balance to the zero percent card, but make sure you close your old card and pay off the new one. For too many people, this strategy creates an opportunity to spend again. If you regularly carry a balance, you should concentrate on your spending, not your credit card rates.

Q My company said that I can receive $75,000 in group-term life insurance but that if I take the full amount it will be over some sort of IRS limit. What is that, and what does it have to do with me?

The IRS excludes group term life insurance coverage of up to $50,000 from taxation. However, there are tax consequences for coverage that exceed this limit. Amounts of coverage in excess of $50,000 must be included in income, using the IRS Premium Table, and are subject to Social Security and Medicare taxes.

For example, if you receive $75,000 group term coverage, then $25,000 ($75,000 to $50,000) will be included in income based on the cost per $1,000 of coverage. If you are 26 years old, this cost is 72 cents for every $1,000 of coverage per year. Therefore, $18.00 (72 cents multiplied by 25) would be fully taxable and included in your gross income.