Community Focus FCU Blog
A good credit score can earn you lots of advantages in life: lower interest rates on lines of credit and loans, like auto and home loans; better insurance rates; lower security deposits on rentals, cell phone services, and new utilities; and even a stronger job application with employers who run a credit check.
But what does “good credit score” even mean?
The most-used credit scoring models—FICO and VantageScore—use a range of 300 to 850. And here’s how that range breaks down:
- Very poor: 300–579
- Fair: 580–669
- Good: 670–739
- Very good: 740–799
- Exceptional: 800–850
What’s in a good credit score?
Your credit score is made up of the follow five components:
- Payment history: 35% of your score
- Current debt: 30% of your score
- Length of credit: 15% of your score
- New credit: 10% of your score
- Types of credit: 10% of your score
Things that don’t affect your score include checking account overdrafts and good payment history on recurring bills like utilities, cell phone bills, gym memberships, or rent—unless the company reports to one of the three reporting bureaus (Equifax, Experian, TransUnion). However, these companies will report unpaid accounts to collections companies, who do report to the credit bureaus—so don’t skip paying these bills!
What to do:
- Pay bills on time (payment history)
Pay all of your bills on time. The bills that most directly affect your credit score are payments to lines of credit and loans: car loans, student loans, personal loans, credit cards, retailer credit cards, etc. However, as mentioned above, you also need to pay all of your other bills on time, because falling behind on them could result in your information being reported to a debt collection company, and they will report back to the credit bureaus.
If you think you’re going to fall behind on a bill, contact the company and see if you can get a grace period or extension, or set up a payment plan to get current on the bill without them reporting you to a collection company.
- Keep your credit card balances low (debt capacity/credit utilization)
The rule of thumb with credit utilization is to stay below 30% on each individual credit card and on your combined credit limit. So, if you have a card with a $1,000 limit, you shouldn’t have more than a $300 balance on that card at the end of each billing cycle. If you had three cards—one with a $500 limit, another with $750, and the last with $1,000—you wouldn’t want to carry a balance of more than $675 dollars in total.
If you find that you’re routinely using more than 30% of your credit capacity every month but still paying off the balances, you can ask the credit card companies to increase your limits so you maintain that 30% or less credit utilization each month. Just be sure not to fall into the trap of spending more money just because you have a higher credit limit! (A credit increase may temporarily lower your credit score a little, but it will quickly recover.)
Loan balances and lines of credit also impact your level of debt and your credit score. Having too high of a debt-to-income ratio can lower your score. So while you’re working to not overutilize your credit capacity, also aim to carry as little debt as possible.
- Don’t close old credit cards (length of credit history)
This may sound counterintuitive at first, but it’s actually in your credit score’s best interest to keep old credit cards open—even if you no longer use the card (maybe you don’t use its perks or you found a card with a lower interest rate). Here’s why.
When you close a credit card, you lose that credit history, and since 15% of your credit score depends on your average credit history length, this can ding your score. It also reduces your available credit, which in turn lowers that 30% credit utilization threshold you’re trying not to exceed.
The exceptions to this advice are if it’s a recent credit card you opened (in which case it won’t hurt your history as much to close it) or if there are high yearly fees on the credit card and you can’t negotiate with the company to have them waived.
- Limit applications for new credit (new and types of credit)
While using a varied mix of credit—credit cards, loans, etc.—is generally part of a higher credit score, you want to limit the number of applications for new credit, especially in a short span of time. When you apply for a new credit card or loan, the lender will make a “hard inquiry” on your credit report, which will temporarily lower your score. And remember, opening a new line of credit will lower your average credit history length.
So, while in theory the ideal mix might be one car loan, one mortgage, and a few types of credit cards, it isn’t worth taking on more debt than you can repay or having too many new lines of credit to earn a perfect 10 on this component of your score.
- Watch your credit report
Errors on the part of the bureaus or lenders that report to them do happen. As does identity theft and credit fraud. Don’t let others’ mistakes drag your credit score down when you’ve worked so hard to earn a high mark. Check your credit score regularly—in fact, each credit bureau allows you to get one free credit report each year without lowering your score. So you could request your free report from one of them every four months. That will give you a regular chance to check for and correct any mistakes.
Everyone has walked into their home at some point and just felt like moving. It can happen a lot more if your home is older with outdated finishes. A whole home remodel would do the trick, but that may not be in your budget. Don’t worry, here are a few projects that can bring a lot of new life to a home without breaking your budget.
Replace the doorknobs
If you have old, brass-colored doorknobs, you can swap out to brushed nickel for less than $200 for the whole house. All you need is a screwdriver and a Saturday afternoon to replace them. Don’t forget the hinges too.
Install new bathroom faucets
They get corroded and outdated. You’ll need to watch a few YouTube videos before you take on the project, though. It’s not too complicated, but you can't wing it and you'll need some special tools, like a blow torch. For a two and a half bath home, you’re looking at $100–$150 and a Saturday. Higher if you also replace the towel bars and toilet paper holder too.
Put in LED replacement lights
Whether you have recessed can lights, ceiling-mounted lights, or hanging lights; LED upgrades are available. So get rid of those old dome lights that look like grandma’s punch bowl stuck to the ceiling and replace them with something more modern and efficient! Some of the recessed can lighting replacements screw into the old light socket and require no tools. Look to spend anywhere from $50 to $100 per room and a few hours. If you need to touch any wires, make sure you turn off the power at the breaker.
Drab, old, dull paint can bring down a room. One or two gallons will cover a typical room, or you can do an accent wall and get away with a quart. Expect to pay about $50 per room including supplies. Remember the more you tape, the less touch-up is needed.
Organize your closet
Kill two birds with one stone here. Get rid of a bunch of old clothes you never wear anymore and get a closet that’s better organized and more efficient! There are tons of options for “drop-in” closet organizer kits that screw or click together.
Clean up your yard
Trim back neglected plants. Tighten up the edges of your garden. Dig out those old, overgrown pavers. There are a lot of things you can do around your yard for free that will help freshen things up. Check on Facebook or Craigslist for people giving away unused material (leftover materials pop up a lot).
Replace cabinet pulls and handles
Sometimes it’s the little things that can really tie a room together. Often times in a kitchen, it’s the cabinet fixtures. It’s something anyone can do with a screwdriver. If you have all the knobs and handles you need, it can be done in an hour after work. Ikea and Amazon have a lot of budget-friendly options that’d cover most kitchens for $50–$100. Try putting a different design on the island or a standalone cupboard to add a little flair.
Put down a rug
It’s that simple. Doesn’t matter if you have hardwood, tile, or carpet. A rug can change up the feel of a space. Expect to spend anywhere from nothing to a few hundred, the choice is yours.
Replace your outlet and switch plates
This can be a huge improvement in older homes. Plastic degrades over time and gets that yellow tinge. Old plates were often made from a brittle plastic that can crack. While you’re at it, replace the outlets and switches too. Rocker style switches and plugs with built-in USBs are a great update. Changing the plates should cost about $50. Replacing the outlets and switches is going to bump the cost to around $200–$300.
Remove ceiling popcorn
It’s no longer 1973. With a spray bottle and a scraper you can shave years off your home. Some plastic sheeting and a few rolls of tape will help too. Unless you also want to replace your carpet. Altogether you’re looking at $50 and a weekend as an investment.
Sometimes a few details make the whole picture better. Everything on this list can easily be done by you and with tools you most likely already have or are at least inexpensive to buy. Either watch a few videos, talk to someone at your local hardware store, or, better still, ask a neighbor for tips and some help.
When you apply for a loan, lenders must assess your credit risk—i.e., the risk to them that you will default on the loan—based on the following five factors, often referred to as “The Five Cs of Credit.”
This first C contains the most information on you as a borrower. Your credit history consists of information provided by previous lenders that have extended credit (loans or credit cards) to you. This history is listed on your official credit report, pulled from one or more of the three credit reporting bureaus, and includes the names of previous and current lenders, types of credit you have, payment history, and credit history length. Your credit score—based on a scale of 300–850, with better scores at the higher end—will also be checked as an indicator of risk.
Lenders need to know if you can comfortably afford the payments on the loan you applied for. They determine this by looking at your net income amount, type, and stability (payment regularity/history), sometimes through submitted paystubs or direct deposit history. Another tool lenders use to assess your credit capacity is your debt-to-income ratio (DTI), calculated as the ratio of your current credit capacity plus the new loan debt to your net income.
Collateral (for secured loans)
If you’re applying for a home or auto loan, you’re applying for a secured loan—one that’s protected by an asset and used as collateral in case you default on the loan. The item acting as collateral is usually the item you are taking the loan out to purchase. The lender will hold on to the title of the car or the deed to the house until the loan is paid in full, including interest. The lender will also evaluate the value of the collateral. Any existing debt already secured by the collateral will be subtracted from that value. The remaining equity will be a factor in the ultimate lending decision.
It’s expected that your income will be the primary way you will make loan payments; however, your capital—including savings, investments, and other assets—could be used to help repay the loan if your income decreases or you incur unexpected expenses.
This last C refers to how you intend to use the loan as well as to factors such as the economy. This especially applies to business loans. A lender will want to see due diligence on your part to ensure the money will be used wisely to increase business income and that the market is favorable for your business to take on this additional debt.
In terms of real estate, “sweat equity” is understood as value-enhancing improvements made by homeowners. These improvements might be made to increase the immediate value of the home for re-sale, or to increase the usability, enjoyability, and value of the home to the owners as they live there.
Investing sweat equity into a home is a great option for anyone who can’t afford a more updated, expensive home but has the time and know-how, or willingness to learn, to make value-added improvements.
Does this mean you need to take out a large loan to upgrade your kitchen to match the sprawling houses of the rich and famous? Not at all! Simple, lower-cost but high-effort improvements offer the highest return on investment. In fact, investing in the wrong types of renovations might even devalue your home to prospective buyers. So, before you grab a hammer or paint brush and max out your credit card at the home improvement store, here’s how and where you’re most likely to add value to your home.
Projects that add the most value:
- Updating kitchen and bathrooms (painting cupboards, resurfacing counter tops, installing stainless steel appliances)
- Replacing or power washing exterior siding
- Updating interior paint
- Rejuvenating landscaping
- Updating/Installing trim and crown molding
- Refinishing/Replacing flooring (to higher-quality materials)
- Installing/Updating light fixtures and ceiling fans
- Less-profitable and possibly value-damaging projects have one of three flaws: they’re expensive, they focus on a space not used every day, or they reflect too much of the owners’ personal taste (think unusual or extravagant fixtures, finishes, paint colors, hobby spaces, etc.).
Projects not guaranteed to add value:
- Converting part or all of the garage into a family room or hobby space
- Turning a spare bedroom into a home office
- Screening in an outdoor room
- Conducting a deluxe upgrade in anything but an upscale home
In addition to adding value to a home, sweat equity can empower homeowners and make them more knowledgeable about their house and how best to maintain its value in the long-term.
Not everyone has great credit, which can make getting a credit card very difficult – unless they are open to other options.
If someone has been turned down for a traditional credit card, they might want to consider being added as an authorized user on someone else’s card, applying for a secured credit card, or finding a card issuer that will allow a cosigner and then finding someone willing to take that risk.
- As an authorized user, a person is added to someone else’s credit account. The authorized user then gets their own credit card and is approved to make charges to that account. They can even help build their credit score if all payments are made on time. The main account holder, however, needs to keep in mind that they’re still responsible for making payments on the account and that failure to do so can result in their credit score taking a hit.
- A secured credit card is easier to get than a traditional card and can be great for people with limited or poor credit, but it does require that the person makes a refundable security deposit – often the amount of credit allowed on the card. Someone with a secured card can charge up to the credit limit allowed and they will need to make regular payments on that debt. By making payments and paying off the card, a person can build their credit score. If they fail to pay their debt, their score will take a hit and their deposit will be used to cover it. Once that person qualifies for a traditional credit card, the deposit on the secured card will be returned.
- Another option to qualify for a credit card would be to get a cosigner, but this should be done only if the card holder plans to always pay their debt. That’s because a cosigner becomes responsible for the debt if the main account holder doesn’t pay, and that can fray family ties or ruin friendships. The cosigner option can be helpful if the person applying for the card has a low income, has little or no payment history, or has a low credit score. Keep in mind, however, that not all financial institutions offer this option.
Consumers who choose one of these credit card options should talk with a financial institution about their opportunities and requirements. When used responsibly, each can be a way to build a credit history and to boost a credit score. But it’s vital to remember the importance of always making the required payments. Failure to do that can destroy your credit history and make getting other loans - much less another credit card - extremely hard to do.
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You have payment choices when making purchases online, but what card – credit or debit – do experts recommend?
Go with credit. That’s because credit cards usually come with a variety of consumer benefits that range from protections against fraudulent charges and broken or undelivered goods to things like extended warranties and rental car insurance.
- With credit cards, you escape some of the financial headaches caused by fraudulent purchases. When disputing credit purchases, the card company will work to resolve the dispute and you won’t be out any money during that process. With debit cards, however, the money comes directly from your checking or savings account and you’ll usually be out that amount until the dispute is resolved.
- In addition to after-the-fact protections, credit card companies also have built-in safeguards that can recognize unusual activity on your card and block suspected fraudulent purchases.
Beyond credit card fraud protections and other benefits, there are things you can and should do to protect yourself against card misuse.
- If you have two or more credit cards, use only one for online purchases. That way, if you need to cancel the card due to fraudulent use you’ll still have another card to use.
- You might consider getting a credit card with a low spending limit to use for online shopping, which can protect you from someone else running up big purchases.
- Experts also say you should check your account online regularly to look for suspicious transactions and to report them right away. You also should set up text or email alerts to inform you of things such as purchases that exceed certain amounts.
- Shop only on trusted, secure sites. Look for ‘https’ at the start of the web address and the small lock symbol in the address bar.
- Either save the email copy or a printed version of your receipts and compare them to the charges that show up on your statement. Let your card provider know if there are any irregularities.
To take full advantage of the protections and features that come with your credit card, be sure to read the fine print on your card’s agreement, and be sure to shop safely and report any problems immediately.
If you are looking for a wise investment for your family’s future, saving for college is a smart place to start.
Although there are various options, a 529 college savings plan gets high marks for its tax benefits and flexibility. And since it’s an investment, the sooner you start saving, the more you’ll have when you need it.
There are two types of 529 plans: savings and prepaid tuition. Savings plans are available in most states, while the prepaid plans are less common.
The biggest benefits of these state- or school-operated ‘qualified tuition programs’ are:
- The earnings are tax free if used for qualified higher education expenses.
- The funds are controlled by the person who opened the account until they are withdrawn.
- Significant contributions can be made by you, family members or friends.
- And these plans can be set up for your children, grandchildren … even for yourself.
So what’s the difference between a savings and prepaid tuition plan?
Think of the savings plan as an investment, with your earnings based on the performance of the stock market. The 529 savings options are a lot like mutual funds, with the offerings usually being a mix of stocks and bonds, and they are likely to be offered with choices at various levels of risk – from aggressive to conservative.
These plans – which generally earn more money than traditional savings accounts like money markets or CD’s - are offered by most states. The money and its earnings can be used for both undergraduate and graduate costs - including tuition, room and board, even computers and peripheral equipment – at any accredited college or university.
A benefit of this type of plan is that you can invest one state’s plan and send your child to a school in a different state. And, if you like, you can move your money once a year into a plan that might be more attractive in another state.
You can invest in any state’s 529 savings plan and your earnings are not subject to federal income taxes when used for qualified education costs. While the actual contributions are not deductible on your federal taxes, some states do allow this type of deduction.
These plans allow you to pay money now to lock in future college costs, but they are less widely available than the 529 savings plans.
Depending on the type of prepaid plan, the money you pay usually allows you to cover in-state tuition costs, although some plans might cover other expenses as well. And most prepaid plans have age or grade limits for the beneficiary.
Since these plans are usually targeted at the schools offering them, make sure you check to see what your money-transfer options would be if your child or beneficiary chooses a different school to attend.
An advantage of this type of plan is that your payments lock in future college costs and the plan must make good on its promise.
Things to keep in mind:
- While 529 college plans are attractive because their earnings are tax-free when the money is used for qualified education expenses, another big benefit is that large amounts of money can be deposited for the beneficiary – in excess of $300,000 for some plans.
- Contributions under $14,000 annually fall under the federal gift tax exclusion and a lump-sum deposit of up to $70,000 can be spread out over five years and still qualify. To make saving easier, automatic transfers can also be set up from your checking or savings accounts.
- The plans are also professionally managed, but you’ll want to check on any fees associated with the plan you choose.
There also are other considerations to be aware of:
- If the money in the plan isn’t used for qualified education expenses, you face a 10% withdrawal penalty on the earnings (not the principal), and the withdrawn earnings will also be taxed at your regular income tax rate.
- However, if your child decides not to attend school, the person who controls the account could name another beneficiary for the money and it could be used for that new person’s qualified educational costs.
- The money in a 529 account will have some effect on financial aid applications. Be sure to check with an advisor on how this is affected by federal or school rules.
And as part of any financial planning, make sure to do your research on the options you have, and check with a trusted financial advisor on the various plans’ options and risk levels.
How do you start teaching young children about money? You talk to them in simple terms and work with examples that can make sense to them.
At early ages you’re not prepping them for an economics degree, but you can at least start talking to your kids about the importance of value and saving. The bigger stuff can be introduced as they grow up.
- Talk to them generally about how you work so you can make money to buy things you and your family need or want – such as groceries, school clothes, or vacations. Then give them a regular allowance or pay them for doing certain small chores around the house so they can see what money looks like and how they can earn a little.
- Tell them about saving money you earn and then using it to make purchases or pay bills. Show them how they can save too. Have them put their money in separate jars or piggy banks – one for things like inexpensive toys or books; one for more expensive things such as a cool pair of shoes; and maybe one that could be used on gifts for others. A clear jar will let them see the money they add, or a full piggy bank will weigh more over time.
- As they save their money, talk to them about their coins or paper money and count it with them on occasion so they know their savings grows. “Look, you have 4 dollars! Last time we only had 3! One more and we can get that toy you want.” Let them know that even you have to wait to buy things.
- When you take your kids to the store, talk with them about how much some of the items they like cost. That can help them understand that they have more or less than that at home. “All you have to do is save 2 more dollars and you could buy that!”
- Take them to the store when they have saved enough money to buy something they want, then let them pick the item out and hand their money to the cashier so they'll be excited as they learn the value of “this money for that thing.”
You could even start teaching them a little about loans - how you sometimes need to borrow money if you promise to pay it back. “I know you have 6 dollars at home, so I’ll loan you the money now, and you can repay me with 6 of your dollars when we get home.” And when you get home, let them give you that money from their bank.
Teaching your kids about money when they’re young can help them on the road to responsibility as they grow up. Those little tips can make a big difference.
With the Community Focus FCU’ s mobile banking app, you can deposit a check without ever making a trip to the bank. It’s really easy and it saves you time and money. Below are some tips to keep in mind when you use mobile check deposit feature.
Endorse your check properly
When you deposit a check via mobile deposit you must first endorse your check. Simply, sign your name on the back of each check you are depositing and write “For Mobile Deposit Only” along with the current date.
Take a quality photo of your check
Checks come in a variety of designs: some feature light colors and other may have bright prints. The best way to take a photo of your check is to place your check on a plain, dark background and center it in the middle of the photo.
Understand your mobile deposit funds availability
Funds are generally available within the two business days.
Be mindful of mobile deposit limits
Mobile deposit limitations can vary between financial institutions. At Community Focus FCU, each mobile check deposit is limited to $5,000 per check and the total daily limit is $10,000 per business day per eligible account.
Retain your check
Mobile deposit is a convenient, fast, and secure way to deposit money. Sometimes, however, an error may occur causing the check to be rejected, such as entering the incorrect amount of the check. At Community Focus FCU we ask that you retain the check in a secure location for 60 days, after which time, the original check should be shredded.
Mobile Check Deposit is a popular feature on most mobile banking apps that allows you to take a picture of your check and upload it with just a couple of clicks to your bank or credit union account at any time of day or night. Mobile check deposits are simple and convenient. They save time and make your life easier. Millions of American consumers use mobile check deposits on everyday basis.
Community Focus FCU mobile check deposit feature ensures that any information transmitted to us electronically is using the highest encryption tools available. All check images are stored on a secure server not on your mobile device and they are deleted as soon as the app is closed.
However, just like every technology, mobile deposit can become a prime opportunity for scammers to commit all sorts of fraudulent activities. Fake check scams typically involve a scammer contacting their victim through email or social media and claiming to be a potential employer, lender or interested buyer on a marketplace site. The fraudster may then provide a victim an opportunity to earn money quickly by offering to deposit a check to their account. The scammer may then request the victim’s bank account information and may even ask for online or mobile login credentials to deposit the check. Often the fraudster may offer to pay more and request the victim to withdraw the extra funds and send it back through a third -party money service or a cashier’s check later. What may sound like a great deal is ultimately as scam because the check deposited by the fraudster turns out to be fraudulent.
How to Protect Yourself
- Never share your financial information including your bank or credit union accounts with any one
- Don’t accept any payments if they sound too good to be true and especially when they involve requests for funds to be sent back
- Stay extra vigilant if you are communication with someone you’ve never met in person or a company with no online presence especially when you are being asked for your private information
- Monitor your account activity. Check your transaction history often and sign up for e-alert notifications about any activity on your account.
If you think you may have become a victim of a mobile deposit scam, contact your local police department immediately and notify your financial institution as soon as possible. They can place additional safeguards on your account.
If you have questions about protecting your identity and your accounts online, visit communityfocusfcu.org/fraudprevention
Scammers love personal information, especially yours and anyone else’s they can steal, using it to target your finances or as part of some other fraud scheme.
To them, your telephone can be a gold mine, so the next time your phone rings and your caller ID shows what appears to be a local number or even someone you recognize, you should be wary because it could be part of a ‘neighbor spoofing’ scam.
With ‘neighbor spoofing,’ the callers are hoping you’ll pick up because the call looks local – even if it’s just your same area code - then they start their pitch, hoping you’ll answer their questions. It’s likely they’ll tell you that they need to update or confirm some information, or they’ll make some threat, hoping you’ll panic.
What should you do?
The Federal Communications Commission and the Better Business Bureau offer these tips:
- If you don’t recognize the telephone number, don’t answer the call. If it’s important, they’ll leave a message and you can decide whether to call back or not.
- If you answer a call that appears to be from your bank, doctor, insurance company or a utility provider or government agency, you should still be wary because scammers can spoof that caller ID. It’s likely they’ll tell you there has been some sort of problem and that they need more information and that you need to act quickly.
- Things a scammer might ask for include account numbers, passwords, PINs or insurance numbers. They might even make some sort of threat, hoping you’ll react before thinking.
- If you are at all suspicious or feel pressured, hang up before answering any questions. Some experts even advise not even answering with a ‘yes’ or ‘no.’
- If you think the call could be legitimate after hanging up, take the time to look up an official phone number. Check for valid numbers on the back of your debit or credit cards, a financial account statement, a utility bill, or on an official website. Use those numbers and explain why you are calling.
- To help battle this type of call, you can file a complaint with the FCC at consumercomplaints.fcc.gov, or with the Better Business Bureau at bbb.org.
The next time you get a call that you don’t recognize or are unsure of, take the time to think before you talk.
‘Do not hang up. I have important information.’
Are you sick of robocalls? Whether you have a landline or a mobile phone, it seems like telemarketers are trying to swamp you with unwanted telephone calls.
If you are looking for a way to stop these calls, you should register your phone number with the National Do Not Call Registry. You’ll find it on the web at donotcall.gov and then you’ll need to follow the instructions. The good news is that companies that follow the rules will stop bugging you. The bad news is that some won’t quit and others won’t have to.
People who can still call your number include political groups, charities and debt collectors. Other callers who don’t quit can face big fines but they usually don’t care and they can be hard to track down. They can even ‘spoof’ telephone numbers to make them look like they are from legitimate businesses or are coming from local phone numbers as a way to trick you into answering your phone.
You should ignore those calls or hang up as soon as you don’t recognize the caller. That’s because they might be trying to scam you by asking for personal information or by pretending to be a tech-support service, the IRS or even your bank or utility company telling your there is a big problem or demanding money.
Experts say it’s important to not say anything but ‘hello’ if you answer. That’s because even the word ‘yes’ can be recorded and used to pretend you are agreeing to something.
Don’t share personal information, account numbers, passwords, your Social Security number or anything else with unknown callers. If you think someone claiming to be from your financial institution, a utility company or a government agency might be legitimate, hang up and look up a real number by checking a statement or utility bill or finding it on the group’s actual web site. Tell them why you are calling and ask if there are any problems.
So if unwanted calls are driving you crazy, remember that you can register your telephone number at donotcall.gov or that you just shouldn’t answer any number you don’t recognize. While taking these steps might not end every call, you can at least reduce them and limit callers’ chances to trick you into doing something you shouldn’t.
Your motto should be ‘Don’t answer unknown calls.’
How to Fix Credit Report Errors
Errors on your credit report can affect your credit worthiness in the eyes of lenders, creditors, insurers, and employers. This can make it harder to get a car loan, take out a new credit card, get better lending terms and interest rates, or even rent an apartment. What complicates matters even more is that you have three credit reports that could contain errors—one from each of the three credit reporting bureaus (Equifax, TransUnion, Experian).
To keep track of what exactly is on your credit reports, it’s a wise idea to get your once-a-year free report from each bureau and review all information for any inaccuracies. Thanks to the federal Fair Credit Reporting Act (FCRA), if you do find errors, you have a way to dispute them.
Errors to look for
While there are some errors that won’t affect your score—like a misspelled former employer or an outdated phone number—there are others you should look out for when reviewing your reports:
- Inconsistent and inaccurate spelling of your first name and middle initial. If you’re inconsistent with your name on credit cards, loan applications, etc. your report could accidentally contain information on another person with a similar name. Double check all reports have your full current address and Social Security number as well.
- Missing credit accounts. Length of credit history (how long you’ve held a loan or credit card with a company that reports to the credit bureaus) is an important part of a healthy credit report and score. If you’re missing good payment history on a credit card, loan, or line of credit, it’s hurting your creditworthiness. Ask your creditors/lenders to begin reporting your credit information to credit bureaus, or find lenders who do.
- Missed or late payments you actually made on time. Loan or credit card payments may have been inadvertently applied to the wrong account or you may have evidence of on-time payments that are missing on your report.
- Accounts reported more than once. This can hurt your credit score by making it appear you have more lines of credit open and higher debt than you really do.
- Former spouse’s debt. If you’re recently (or not-so-recently) divorced, you’ll want to be sure your ex’s debts are not reflected on your report.
- Signs of identity theft. These can include:
- Wrong account numbers
- Accounts that aren’t yours (loans taken out, credit cards opened, etc.)
- Inaccurate credit limits or loan balances
- An ex-spouse incorrectly listed/added on a loan or credit card
- Bad debts that should have been removed. Bad debts (collections accounts) and bankruptcies have a limit on how long they can appear on your report: seven and ten years, respectively.
How to fix errors
Once you’ve spotted an error, collect whatever materials you can to support your case for a correction—this could be credit card statements, auto debits/payments from your checking account, loan documents, divorce decree, or government-issued ID. Make physical copies or digital ones, depending on how you plan to contact the credit bureau with the wrong information plus the lender or creditor reporting the information. Never send originals—keep those for yourself.
Next, contact the organization that provided the information to the bureau, called the “furnisher.” Many companies specify a physical or email address for disputes. Use this address to send your dispute letter and copies of supporting documents. There’s a chance the furnisher will amend the mistake and report the fix to the bureau(s) without you having to contact each bureau. If not, or if you want to cover all your bases…
Contact the credit bureau that is showing the incorrect information. You can file a dispute online for all three credit bureaus on their respective websites. If you mail a letter, send it by certified mail with a return receipt so you have proof of if and when the bureau receives your correspondence.
In your digital or print communication, include copies of the documents that support your claim, as well as an official dispute letter. You can also include a copy of your report with the items in question circled. There are dispute letter templates you can use on the Federal Trade Commission’s consumer information webpage.
If you believe the mistakes on your report are due to identity theft, contact your local police. When you complete a police report and Federal Trade Commission identity theft complaint, include that in your communications with the furnisher and credit bureau.
What happens next
Credit bureaus investigate disputed items within 30 days unless they consider your dispute frivolous—i.e., you’ve submitted incorrect or incomplete information, or you’ve tried to contest the same item multiple times without new information. In this case, the bureau doesn’t need to investigate it further as long as it communicates this to you within five days, along with the reasoning for deeming the dispute frivolous.
When furnishers receive notice of a dispute from a credit bureau, it must investigate, review the relevant information, and report the results back to the credit reporting company within a similar time frame. If the information provider finds the disputed information is inaccurate, it must notify all three nationwide credit reporting companies so they can correct the information in your file.
You are entitled to the results of the investigation and a free copy of your report if the dispute results in a change. This will not count as your annual free report. You can ask the credit bureau to send a notice of the correction(s) to anyone who received your report in the past six months, or to anyone who received a copy for employment purposes in the past two years.
Your dispute may not be resolved in your favor. If this happens, ask the credit bureau to include your statement of the dispute in your file and future reports.
It can be tough enough to build a good report, you don’t need mistakes lowering your score!
Like any other habit, saving money takes time and repetition to really stick. If you want to give your kids a head-start on healthy money management skills, help them understand how and why saving is crucial. Afterall, it’s an important building block of a secure financial foundation.
You can implement age-appropriate rules and lessons to improve their savings smarts today. Start with these ten.
Wants vs. needs
Distinguishing between wants and needs is a life-long practice, which makes it the perfect place to start with kids. Explain that needs are things like as food, shelter, transportation, and clothing. Wants are everything else that can make life fun and enjoyable. When you’re at the store together, ask your child which items are wants and which are needs. You can also use examples from your own budget to show how needs take spending priority over wants.
Pick a place to save
For younger kids, having a physical piggy bank or other container they can easily empty to see and count their money is perfect. There are many options online and at local shops for “piggy banks” kids can design or decorate themselves! How about a dinosaur or unicorn bank? For older kids, you can set up youth saving and checking accounts together at your credit union. Most youth financial programs will also provide helpful, age-appropriate financial education.
Let them earn and handle their own money
Allowances for kids can be a hot topic—and there are many different ways to earn and pay out allowances—but it’s still true that allowing kiddos to earn and save their own money is the best way to let them learn. However you decide to structure chores and allowance, you’re teaching the value of work, the value of time spent working in exchange for money, and the value of responsibility in how they handle their hard-earned money.
Set saving goals
Saving without a purpose doesn’t offer much in the way of motivation. If you help them craft a personal saving goal, they will be more invested (pun intended) in the work and discipline required to reach that goal. Break a large goal down into more manageable actions and targets—how many dollars a week must they earn and save to reach their goal by a deadline?
If they want to save for multiple goals, here are some creative ideas to help them visualize their goals and stay on track:
- Create saving containers for each goal. Have them label and decorate them.
- Put a picture of the item they’re saving for next to the container or piggy bank.
- Draw a thermometer or other visual indicator they can fill in to visualize how they’re getting closer to their goal.
- For younger children, you could offer small rewards for reaching percentages saved, like 50%, 75%, etc.
Distribute allowances or pay for work in small denomination bills that can be easily split and encourages saving.
Part of achieving saving goals, and eventually being able to pay bills on time, is knowing where your money is going. Have your child write down their purchases for a week or maybe a month. Encourage them to think about how they’re spending money and how much faster they could reach their saving goal if they changed their spending habits.
To jump start your kid’s saving habits, you could offer a saving incentive that mimics an employer who makes a matching contribute to retirement savings. Or tell them you’ll contribute a certain amount of money toward their goal once they reach a certain benchmark, or if they decide to save all of their allowance for two weeks in a row. This can really help if your child has set an ambitious saving goal.
Let them learn from mistakes
Learning from mistakes as a kid, when the financial stakes are considerably lower, can teach impactful lessons without the risk of long-lasting financial damage. It may be difficult for you as a parent to watch your child make an unwise money move, but not letting them make those mistakes now could pave the way for bigger mistakes later in life when you’re not there to bail them out.
Be their creditor/lender
Not living beyond your means is an important rule to live by. However, loans and credit cards allow people to make large purchases they can’t afford at the moment. This isn’t always a terrible thing, but it can be a slippery slope into consumer debt. To teach kids how loans, credit, and interest work, you can offer to lend your child the money for a purchase they’re too impatient to save for. Lend the money, but explain you’ll require payment from the allowance you provide, with interest. The lesson you want to teach is that saving may mean delaying gratification, but it won’t end up costing more you if you wait.
Talk about money
You heard right. If you want your children to develop financial wisdom and a healthy relationship with money, you must allow and encourage an open and ongoing conversation about money. Answer their questions truthfully, even if that means admitting you don’t know the answer or admitting your own financial mistakes. Those will be teachable moments! Talking openly about money and spending decisions will allow you to emphasize values like hard work and responsible spending.
Set a good example
If you haven’t already begun your own family saving journey with an emergency fund, a college saving account, or your own retirement plans, start now and show your children how you’re budgeting and saving for these worthy goals. Show them how the family budget works. Tell them when you’re moving money to into a savings account instead of spending that money on a want.
You are the best teacher for your kids to learn from about saving and spending habits—especially because you’ve probably made mistakes and learned lessons you can pass down to them!
Are credit unions or banks a better option for you when it comes to your finances? At Community Focus Federal Credit Union, we’ve found 8 ways that will show you that credit unions are a great choice for you!Read More »
Can You Return a New Car?
There are reasons you may want to return a recently purchased, brand-new vehicle; however, return and refund policies and laws are notoriously strict when it comes to dealership obligations. Whether you’re already suffering from a case of buyer’s remorse or haven’t yet signed the purchase contract, this guide will help you understand your options and perhaps avoid the situation altogether.
Reasons for returning a new car
You have buyer’s remorse - Buyer’s remorse—that gnawing feeling in your gut that you made the wrong decision in making a big purchase—can strike an hour after driving home in your new car or weeks later when you’re making the first car loan payment. If the reason for returning a vehicle is rooted in simple regret, dealerships are under no obligation to accept the return, also called “unwinding the deal,” unless they specifically state in the contract or dealer policy that there is a purchase grace period.
Absent a stated grace period, you can still approach the dealer and ask if they will take the car back. Usually, they will only do so as a trade toward a new vehicle or they will make an offer to purchase the car from you. Either way, you will probably lose money on the exchange, but it will divest you of the unwanted vehicle and enable you to pay off most of the car loan.
You bought a lemon - To be legally dubbed a “lemon” under a state’s lemon law (yes, that’s really a thing!), a vehicle must exhibit a substantial defect covered by warranty that cannot be fixed after repeated repair attempts within a certain period of time. As you can see, to qualify as a lemon, a vehicle’s faults must fall within strict parameters. If you believe this is the case with your new car, make sure all repair attempts and failures are well documented and familiarize yourself with your state’s lemon law before seeking compensation from the manufacturer.
You got a bad deal - If, after taking your new car home, you’ve discovered the dealership salesperson you worked with made promises regarding the car’s price, features, or warranty that are untrue, you may have a legal case to return the car. If you suspect fraud, collect all purchase documentation and speak with an attorney.
Dealer policy - If you’re fortunate enough to buy from a dealership with a grace period attached to new car purchases, you may be able to return the car, no strings attached, as long as it’s within the grace period time frame—this can be anywhere from 24 hours to 30 days after purchase. The dealership may take the car back for full purchase price or prorate the price as if you had rented the car. This can be a big motivator to buy from a dealership that offers this kind of policy.
Legal loopholes - There are very few legal loopholes to “unwind the deal” after a vehicle purchase. If only a minor (anyone under 18 years old) signed the purchase contract, or, in some states, if one spouse purchased a vehicle without written consent from the other spouse, for example. Some purchase contracts will have a “back out” clause that allows the buyer to exit the contract before taking delivery of the car—however, they will most likely lose the down payment.
Sell it - You always have the option of selling your new car on the private market. You will probably lose some money, but it’s often the most successful tactic to get out of new car ownership. This option allows you to pay off an auto loan, if you used one, and start over from scratch on your car search.
Ways to avoid common causes of buyer’s remorse
These quick tips can save you the agony of buyer’s remorse and help ensure you drive the right car home at the end of the day.
- Don't assume a car has a certain feature that you want. Look at the vehicle specs, ask about all the buttons, and (safely) push all the buttons so you know what you’re buying.
- Don’t skip the test drive—in fact, ask the salesperson for an extended test drive and take some of your regular routes. Bring along the people who will regularly ride in the car and have them try out all the seats.
- Check your insurance rates on the car you're looking to buy. You don’t want to find out after you purchase a car that insurance on it is more than you can afford on top of car loan payments.
- Ask the salesperson to accompany you home on a test drive to see if the vehicle fits in your garage.
Strategies for Paying Off Your Debt
When you have a number of different debts, attempting to pay them off can seem overwhelming. It’s easy to lose track of whether you are making any progress on paying it down: as one account decreases, another balloons out of control. In such a situation, it’s common to feel like you’re tossing money down a bottomless well. However, if you stay organized, energized and focused, you can work your way to freedom from debt. Here are some well-known strategies you can employ to keep yourself on track.
Your Debt Budget
The first step to ridding yourself of debt is to make sure you aren’t living beyond your means and adding to the problem. Before you can pay off any balances, you need to make sure your monthly budget covers your bills, basic living expenses and minimum debt payments. The amount of your income left over every month is your “debt budget.”
Next, cut any unnecessary luxuries out of your lifestyle. Don’t worry, you don’t have to give up luxuries forever, just until your debt is paid off. The goal is to maximize your debt budget by minimizing the number of bills you have to pay.
The Snowball Strategy
The snowball strategy focuses on psychology and motivation to help you pay off your debts. You pay your monthly minimums, then, beginning with your smallest debt, you focus your debt budget on one account at a time. Since you’re starting with the smallest debt, it won’t be long until you have your first taste of victory by eliminating an account balance. This clear success will give you enough confidence to stay motivated about tackling the next debt. In turn, you’ll have even more confidence and focus to wipe away the next account — kind of like a snowball that starts small and slowly grows into a snow-boulder.
The Avalanche Strategy
While the snowball strategy can be successful in keeping you motivated, it might not make the most financial sense. In many cases, accounts with high interest rates will grow and compound while you’re focused on paying the smaller debts. If this is true for you, the snowball method could cost you thousands of dollars more and require much more time than if you had focused on a mathematically-optimal payment strategy.
In the avalanche strategy, you arrange your debts from the highest interest rate to the lowest, regardless of balance and concentrate all your extra funds towards paying down the highest interest debt first. By doing so, you’ll be free of debt much faster than if you had started with the smallest account first, similar to the way that snow accumulates much faster in an avalanche than when rolling a snowball. One caveat: if your debt with the highest rate also has the largest balance, it could be a long time until your first clear “success.”
Which Strategy is Best for You?
If you’re worried that your lifestyle could creep up on you if you don’t experience some early emotional rewards, the snowball method is probably the way to go. However, if your largest debts are on high-rate credit cards, you should probably prepare your inner debt-paying-monk for a disciplined avalanche approach.
For some people, the two methods will be essentially the same: the highest rate debt will also be the smallest. In this case, you’re lucky enough to get the best of both worlds. Your debt will be gone in no time!
Where to Keep Your Savings
Hopefully you already agree that you should regularly be saving money. But where should you put it? You probably want to keep it safe, you probably want access to it for an emergency or when you’re ready to buy what you’re saving up for, and you probably would love for it to earn you more money without having to do anything.
Well, the first thing to know is that keeping your savings in a shoebox under the bed or mixed in with your checking account aren’t the best options.
Reasons not to keep your savings in a shoebox:
• It could be stolen
• It’s hard to keep track of how much you have at a glance
• It’s not earning you any additional money in interest
Reasons not to keep your savings in your checking account:
• It gets mixed in with your money for your everyday budget,
• Which means it’s easy to accidentally spend your savings
• Because you look at your checking account total and think you have more to spend than you really do.
• And, again, you aren’t earning additional interest on it (most checking accounts earn little to no interest for their owners)
Next, before considering where you should put your savings, you’ll need to know how to balance your need for quick access to your cash (also called “liquidity) with your need for it to earn you enough money to keep up with the rate of inflation. The problem of putting your money away where it doesn’t earn you any interest is often called “cash drag.” It’s a problem because the $1,000 you work hard to save today won’t be worth the same, i.e. will have less buying power, in five, eight, fifteen years. So, if your savings isn’t earning you money, it’s actually losing you money. And that’s a drag.
Now that that’s covered, below are six savings options (sometimes called “savings vehicles”) to maximize your interest earnings and help you reach your savings goals.
Many credit unions have special interest checking accounts. Requirements to open one will vary, as will the annual percentage yields (APYs, i.e., the amount of interest earned, taking into account its compounding schedule).
One of the common restrictions on an interest checking account is the balance cap. This is the maximum amount of money you can hold in the account before you begin earning a lower APY. So, say the balance cap is $10,000 and the advertised APY is five percent. As long as you maintain a balance under that cap, you can earn that high interest rate. If your balance exceeds the cap, you’ll start earning a drastically lower APY. For this reason, the secret to make the most of this type of account is to stay as close to the balance cap without going over to maximize the interest you earn on your money.
Other common requirements for interest checking accounts include opting to receive electronic instead of paper statements, having a set number of direct deposits going into the account each month, and making a minimum number of debit (withdrawal) transactions a month.
This type of account could work well for someone who wants to house all or part of their emergency savings up to the balance cap and then simply set up recurring deposits and debits for smaller monthly bills—like a cellphone, gym, or TV subscription bill. Just be sure to keep track of your accumulating interest so you can transfer it to another account, keeping you safely under the balance cap.
High-interest checking accounts are a good solution to the cash drag vs. liquidity dilemma mentioned earlier. With this type of account, you have quick access to your savings while also earning enough to prevent cash drag. It’s also a safe move because your deposits are federally insured up to $250,000.
Basic savings accounts
If you can’t meet the requirements of an interest checking account but still want quick, easy access to your cash, then a basic savings account is a good place to start. It’s easy to make withdrawals and transfers between accounts, you can view your balances through your online account or credit union’s mobile app, and you can make withdrawals from an ATM. At most credit unions, the requirements to open a savings account are minimal, as in all you need is a starting deposit of $5!
The drawback is that most basic savings accounts only earn you one percent or less on your balance—not even enough to keep up with inflation.
High-yield savings accounts
This is your option that’s somewhere between an interest checking and basic savings account. The earned APY can be as high as five percent with ease of access to money and mobile banking features; however, the requirements may be easier to meet than an interest checking account.
Goal-oriented savings accounts
This is really just a type of basic savings accounts, usually with the same APY and balance requirements, but one that can help you reach your savings goals faster by giving you a psychological boost.
A goal-oriented savings account allows you to earmark funds for a specific purpose—buying a car, going on vacation, having a down payment on a house, etc. You’ll be able to name the fund and separate it from other savings accounts—sometimes all this means is creating a subaccount under the same account number as your basic savings. Your credit union may have ways to set up alerts to let you know when you’ve reached certain benchmarks, like reaching the half-way point, and tie action items to those events, like shopping for flights or filling out loan paperwork.
Share certificate or certificate account
A share certificate or certificate account is a credit union version of a bank’s certificate of deposit (CD). The name is slightly different, but the principals are the same. With a share certificate, you deposit a set amount and promise not to make any withdrawals for a set amount of time. The longer you promise not to spend it, the higher the interest rate you earn on it. There are a variety of time frames to choose from—anything from a month up to 10 years. However, with this higher interest rate, you lose out on liquidity: if you need to make a withdrawal before the account matures, you’ll pay a hefty fee.
If you already have an easily accessible stash of cash in a regular savings account, a share certificate can be a good option to put additional further savings into.
In the end, for most people, having a smart savings strategy comes down to having a mix of savings vehicles, with the aim to balance liquidity against cash drag, short- against long-term savings. The goal should be to make sure your money is still working for you and earning maximum growth while you wait to use it.
Set Up An Emergency Fund
You’re probably familiar with the idea of an emergency fund. Everyone should have a little bit of money set aside “just in case.” Here’s how you can get started, even if saving seems difficult.
What an Emergency Fund Is Not
Having an emergency fund doesn’t mean you mentally allocate some of your retirement investments as “for emergencies.” An emergency fund needs to be liquid, meaning you can access it quickly when you need it. Additionally, it shouldn’t have any exposure to negative value fluctuations. Suppose your “emergency fund” is invested and something goes seriously wrong in your life just as the markets tank. You’ll be doubly dazed as you realize serious capital losses.
Why You Need an Emergency Fund
It can be difficult for anyone who hasn’t “been there” to understand how quickly something unfortunate can seem to turn life upside down. Are you such a person? Does an emergency fund seem unnecessary? Right now, imagine that you arrive home tonight and notice a pipe has burst! Water is flooding your home and you need to get a plumber to repair it. If you don’t have cash on hand, what would you do?
How Much Do You Need?
The term “emergency fund” means different things for everybody. In general, the ideal emergency fund doesn’t need to be much more than three to six months’ worth of living expenses. However, most people have a difficult enough time putting enough away for retirement. If that sounds like you, then three to six months of living expenses may seem like a laughable tall order. Instead of stressing yourself out and trying to build that amount up all at once, do it in tiers.
Tier 1: Dealing with Small Emergencies
• A “tier 1” emergency fund is between $500 and $1,500. A fund of this size is a great buffer against small, yet common, emergencies. For example, if your vehicle breaks down or your pet needs to see a veterinarian, you’ll be able to handle it. If you’re a student or you’ve recently graduated, this is what you should aim for. Set aside $10 to $30 every week and you can build this up in a year.
Tier 2: Support for Moderate Emergencies
• Once you’re in the workforce and have a reasonable income going, it’s a good idea to start working on “tier 2.” Set aside money until your fund is around $2,000 to $6,000. This ought to be enough to help diffuse moderate health care costs or a few months’ rent if you find yourself in a tight spot.
Tier 3: A Few Months of Breathing Easy
• Finally, once your career is moving along at a steady clip and you’re collecting a comfortable income, it’s time to work on building up your emergency fund into an amount that would allow you to continue a lean version of your lifestyle for three to six months. This will help cover you in case something major happens, like the unexpected loss of a job, or major damage to your home that insurance doesn’t cover.
Putting away money for an emergency fund might not seem exciting, but you’ll be awfully glad you did in the long run. Even though the money isn’t generating interest, it will be generating a different kind of value for you: peace of mind.
Tips For Safe Online Shopping
With the number of online transactions growing each year, thieves and fraudsters are eager to take advantage of our desire for quick, cheap buys online. Follow these ten tips before you hit the “purchase” button and you can avoid falling victim to their scams.
Use familiar web sites
It can be tempting to use a search engine to find great buys online; however, search results could show you sites that operate by overcharging, selling rip offs, and/or failing to deliver products. Watch out for websites with misspellings of popular retailers or URLs with a different top-level domain (a website with “.net” instead of “.com”). To be safe, stick to well-known websites and be suspicious of those with spelling or grammatical errors and that only ship from overseas.
Use only secure websites
Speaking of URLs, you should only share details like your credit card or account information on websites with SSL (secure sockets layer) inscription installed. It’s easy to see if a website has this added layer of protection—the URL will start with HTTPS:// (notice the “s” in there, for “secure”) and a locked padlock icon will appear in the window of your internet browser, in the URL address bar, or in the browser tab.
Don’t share more info than needed
There is no reason a legitimate seller needs your social security number, birthday, mother’s maiden name, etc. to verify your payment method. But someone who wants to steal your identity would want those details.
Even if you make sure to only use verified, secure websites for your online shopping, your information could still be compromised (i.e. stolen, logged, tracked) if you share it on an unknown Wi-Fi network/hotspot. If you do decide to use an unknown or free Wi-Fi network, then it’s safer to shop using a gift card, which won’t contain any private financial information.
Protect your laptop or desktop against malware with an updated anti-virus program and you’ll also be protecting your financial information when you make purchases online.
Only use secure payment methods
Your Spidey senses should tingle if a website asks for you to pay with money orders, wire transfers, or checks. That’s because these payment methods do not offer any buyer protection. Stick to credit cards or known online payment methods, like PayPal, to ensure you’re protected against shady transactions.
Check your credit card statements regularly
It’s always a good idea to check your credit card statement after making an online purchase. Most transactions will show up on your online statement within 24 hours of making the purchase. You want to make sure it’s for the amount you expect and that multiple charges weren’t made.
Use strong passwords
Strong passwords (at least seven characters long with upper- and lowercase letters, numbers, and symbols) that aren’t used across multiple sites and are frequently changed will guard you against scammers guessing the password or having it leaked after a data breach. To keep track of your multiple, changing, robust passwords, look into using an online password manager.
Beware of fake apps
They do exist, and the trickiest ones will look very legitimate—with fancy logos and everything. Like malware, the aim of these apps is to steal your personal and financial information and compromise your identity. To save yourself from falling victim to a bogus retail app, be sure the app is shown on the company’s official website, check for ratings from other users to make sure it’s been around for a while, and avoid being the first to download a new shopping app.
Too good to be true
If it feels like a once-in-a-lifetime, too-good-to-be-true price for a usually expensive item—like an iPad or high-end athletic wear—it is, especially if the price is offered under time pressure (buy in next 30 seconds!) after following a link in an email, clicking on a pop-up add, or visiting an unfamiliar website.
Six Ways Online Bill Pay Can Help You
Online Bill Pay is a service that allows you to send electronic payments to billers. It’s true that some billers have their own websites where you can make payments online. But it can be cumbersome and time consuming to log in to multiple sites and schedule payments. With Online Bill Pay you log in to one, secure site, using only one set of login credentials to schedule payments to multiple biller! But there is more! Check out these six reasons for getting started with Online Bill Pay:
With Online Bill Pay you can receive and pay your bills online, all in one place. You can even set up recurring payments so you don’t have to remember to pay them.
The Online Bill Pay tool is free so you can save on postage, envelopes, late fees and checks!
Eliminate paper payments
Fewer and fewer people use checkbooks to pay bills. With Online Bill Pay, you make all payments online so no checks are needed. It’s better for the environment too!
Choose payment options
Talk about choices! With Online Bill Pay you can preschedule payments, set up recurring payments or even make same-day payments for a small fee.
Overwhelmed by paper bills on the counter, in the drawer, in that special bin? With Online Bill Pay your payment history is stored in your online account so there is no need to sort through paper receipts or visit multiple website to access a past transaction.
Enjoy peace of mind
Paying bills electronically means no risk of mailed checks getting lost or stolen. Plus, you can stop worrying about missing a bill payment when you set up reminders and automated recurring payments.
Get started with online bill pay today! All you have to do is enroll in online banking, then click on the Bill Pay tab and enroll – it’s that easy!
Protect the Information on Your Smartphone
Our smartphones are capable of many things: email, shopping, banking, apps and storing information. These features are great for getting things done on the go, but can expose you to identity theft, unless you take some precautions.
Here are some things you can do to help prevent having your identity stolen:
- Always keep track of your phone, and don’t leave it out or carry it openly in crowded places.
- Use your phone’s lock screen feature. It’s like a padlock for the information inside.
- Don’t set up your phone to automatically log in to sensitive accounts, and be sure to log out immediately when you’re done using things like mobile banking or shopping online.
- Don’t store sensitive information on your phone. That means you shouldn’t have an easily accessible file listing your passwords. This includes information like; checking and savings account numbers and passwords, credit or debit card numbers, your Social Security number; or any data about you or people you know that could be misused if your phone is lost or stolen.
- Avoid banking or making purchases over free public Wi-Fi networks. It’s safer to use your 4G or 3G networks or, wait until you get home and use your own Internet connection.
- Download apps from trusted sources such as the Apple Store or Google Play, and be sure to install updates when available because some fixes are made to improve security.
- Use software such as ‘Find My iPhone’ for iPhones, and Android Device Manager or Lookout for Android phones in the event that it is lost or stolen.
Be sure to call your phone provider and let them know if your phone is lost or stolen. Don’t forget to mention if you did happen to store credit card, or other sensitive information. Contact your bank or credit union if that is the case.
Make the right call... guard the information on your smartphone to help protect yourself from identity theft.
Electronic Payments are Fast and Secure
Are you looking for a fast, safe and convenient way to do everything from paying bills to making purchases? Whether you use your debit or credit card for transactions, or set up online bill pay, you can easily track your spending and payment dates.
Electronic bill pay lets you schedule regular or single payments for things such as utility bills or loan payments, knowing that those payments will be made on time and that the transactions will be secure.T here’s no need to address envelopes, buy stamps or run the risk of bills getting lost in the mail. You can even make payments via online banking or mobile banking.
Person-to-person payments are also quick and easy - all you need is a phone number or email address to pay or be paid for things like a dinner bill, concert tickets, the babysitter, or even rent. Your debit or credit cards can be accepted around town or around the world for purchases either in person or online. Your cards have protections that cash or checks don’t have and you can easily track your spending and statements online.
With electronic payments you can set up alerts to let you know if payments have been made, if they exceed a certain amount, or how and where they were made. So for security and certainty, electronic payments are the way to go.
Ask us about your payment options today!
Turn off Your Debit Card Remotely
If you've ever misplaced or lost a debit credit card, you know the panicky feeling, is someone going to use it to drain my account or run up a bunch of unauthorized charges? Now, what can I do? More and more, the answer is simple. Turn your card off until you either find it or cancel it. When you lock your card, new charges and cash withdrawals will be denied until you turn it back on. But any automatic payments you set up for things like bills will continue to be allowed. How fast does it work? Instantly. Once all is well, turn your card back on.
Different financial institutions offer this feature and they may call it differently. If you are not sure whether your financial institution makes remote debit card management available, simply give them a call and ask. Community Focus FCU offers MobiMoney app that members can use to manage their debit card usage remotely right from their mobile device. Simply search for MobiMoney on your GooglePlay or AppStore and connect your Community Focus FCU debit card with the app! The app guides your through the process and it's really easy!
Whether you're locking or unlocking the card, the on-off feature can be used for more than just a missing card. If you have a card that you rarely use or if you want to block another authorized user from using it, just lock the card until you need it or want it to be cleared for use. The main benefit is that you are in control of blocking or allowing any new spending. Experts do recommend that you notify your card issuer of a missing card if you can't find it right away. You might need to be issued a new card if it truly is gone.
The lock unlock feature can be used in conjunction with other powerful banking tools such as transaction, and balance monitoring or text and email alerts that can warn you of possible suspicious purchases or balances falling below a certain threshold. Some cards even come with features that set spending limits, allow spending only within certain geographic areas, and limit when you can make withdrawals. So while it's always wise to keep track of your payment cards, it's good to know you have the power to turn spending off when there are concerns about the cards whereabouts, and then to turn cards back on when you find it. The on-off feature is just another tool to help keep your accounts safe from theft and fraud.
Smartphone Security Tips
We use our smartphones a lot – some of us use them for just about everything - but we don’t always take the right steps to keep our phones secure.
While phones are less likely to be targeted by viruses than home computers, it’s important to know there are simple things you can do to safeguard your smartphone – and your data.
Lock your screen
A passcode is your first defense against unauthorized access to your data. It’s a good idea to use it.
Back up your data
If something happens to your phone you could lose all of your data, including your photos.
Download only trusted apps
You’re safer downloading apps from one of the official stores, such as the Apple App Store or Google Play. And make sure when you download a banking or shopping app it’s an official app from a financial institution or retailer.
Update operating systems and apps
When you see that your operating system or an app needs updated, take the time to do it, or better yet, turn on auto updates if available. Updates can include important security fixes that help protect you.
Don’t store sensitive information
Don’t keep account numbers, passwords or other personal information on your phone.
Beware of public Wi-Fi
Experts recommend that you don’t do things like banking or making payments while using public Wi-Fi networks. Use your carrier's cell network instead.
Shop only at sites that you trust and know are secure. And make sure to log out as soon as you are done.
Consider using an app to locate or remotely wipe your phone’s data. These options are standard on many smartphones and can help you find a misplaced phone or remotely erase the data on a stolen phone. Also, be sure to remove all your information on a phone before you give it away or trade it in. When it comes to your phone, be sure to stay secure.
Balancing your Checking Account
Do you get a little nervous when you pull out your debit card or checkbook to make a payment, because you're not sure how much money you have left in your checking account? You can ease that stress by taking advantage of online and mobile banking, and also taking a bit of time to balance your withdrawals and deposits either by hand or with software. Now it's important to know how much money is in your account, so you don't get hit with costly overdraft charges or fees, when you spend more than you actually have. With online and mobile banking, you can quickly check your balance, see where you spent money, look at your monthly statements, and even set alerts to let you know when your balance falls below a certain amount. These tools can help you from spending more than you actually have.
Another option that many financial experts recommend is keeping an ongoing ledger of your account balance, spending and deposits, either with a paper check register or via a software spreadsheet. This method of balancing your checking is a great way of reconciling your bank statement with what you keep track of manually. It also allows you to get more into purchase details so you can use it to help cut spending if necessary. Starting with your current balance, you'll want to track the following things in rows and columns, a check number, if you still use checks to make payments, the date of all purchases or payments, including ATM withdrawals and any account fees, a description of who the payment was made to and what it was for, the amount of any deposits. And then you'll want to deduct the payments from your balance, or add the deposits so you'll always know where your account stands. By keeping your own records, you can match them to your monthly statements to check for discrepancies, or use them to help find where you can reduce your expenses. If you notice any issues between your records and those of your financial institution, contact them right away. Regularly balancing your account can help you know when it's safe to spend money, when not to, and to keep track of both your income and your purchases.
What to Know about Overdraft Protection
If you're considering overdraft protection for your checking account at your financial institution, you'll want to spend time learning about your options, and the possible fees you could face if you overdraw your account. Overdrafts happen when you spend more money than you have in your account. Overdraft protection can be used to cover that shortfall, by moving money from another one of your accounts, or by covering it as a loan or credit charge, that would be repaid with interest. For personal accounts, overdraft protection is an opt-in feature, meaning that unless you choose it, you probably don't have it. If you're unsure, call your financial institution and ask.
When you make an insufficient funds debit card, or ATM transaction, without overdraft protection, the transaction will be turned down, and you won't be charged any fee. However, if that happens with a scheduled bill payment, or a rejected check, you could face both an insufficient funds fee, and possibly a late payment charge from whoever was supposed to be paid. With overdraft protection, money will either be pulled from a linked account to cover the shortfall, or it will be attached to a linked credit account. Either way, you'll still likely be charged a transfer fee, and possibly interest costs if credit is used, but at least your payment will be covered.
While overdraft services are an option to protect you in the case of an overdrawn account, you can and should closely monitor your account with online and mobile banking. By setting up text or email alerts, and closely monitoring your account balance, you'll know when you're close to overdrawing, and you'll be able to either transfer money on your own to prevent a shortfall, or you'll know not to spend that money until you have sufficient funds in your account. Take the time to assess your needs, and then schedule an appointment with a Member Service Representative at our credit union to review your options, and make decisions about the best way to protect yourself from overspending on your account.
Setting up a Household Budget
Have you set up a household budget yet? It’s a great tool for tracking your monthly expenses and income – and planning for the future.
Besides helping you get organized, it also allows you to focus on two important things: How much money you have in the bank, and how much your bills cost you each month.
A realistic budget can help keep your revenue and expenses in line, and can even be a roadmap for setting realistic saving goals – whether it’s for a new car, a fun vacation or the day you retire.
It can even help you plan for the unexpected - a trip to the hospital, a costly car repair, or a broken water heater.
The basics are straightforward: How much money do you have, and how much do you spend? With a good budget, at the end of each month you can compare the list of your expenses with your income.
Whether you purchase a computer program to enter and track your income and expense categories, do your budget online, or with pencil and paper at home, make sure to record the numbers and total them up every month.
While you can – and should – make adjustments each month as necessary, make sure you also take a look at your spending and income at the end of each year so you can set goals for the coming year.
Household budget: Tracking your expenses – expected and unexpected
A big first step in creating a household budget is figuring out your monthly expenses.
Thinking of all the things you spend money on will take some work, so don't get frustrated if it doesn't all happen in a single sitting.
Start by making a list of the money you spend - and what you spend it on - keeping in mind that the number is likely to vary from month to month.
If possible, review all your bills from the past year. The more numbers you can include, the more likely you are to have a realistic picture of your actual expenses … and the more likely you are to not overlook occasional costs.
If you only have 3 months worth of bills, add those totals and divide by 3. If you can find your expenses for a full year, get those totals and divide by 12. That will give you average monthly totals to use for your budget.
If you don’t keep your monthly bills handy, sign on to your online bank account and check your monthly statements. You’ll be able track what you’ve paid for with your debit card, as well as any paper checks you’ve written.
Here are some important expenses to track:
These are costs that stay the same - things such as rent or mortgage payments, car payments, student loans and your cable bill. Don’t forget regular but occasional things like car or life insurance bills.
These are bills you have to pay monthly but have totals that can vary – things like gas, electric, water and phone bills, as well credit card payments.
This category includes things like fuel for your car, groceries, as well as entertainment costs – such as going out to eat, drink, watch a movie - or vacations and other travel expenses.
Irregular expenses and cash
These are miscellaneous things such as clothes; gifts for birthdays and holidays; medical co-pays or prescriptions; printer ink; donations to charities; sporting events; and cash you might spend on snacks or other small purchases.
Set up the expenses category of your household budget so you can track your regular expenses individually. This helps you monitor any possible changes, and can even help remind you to make sure you’ve paid a bill.
Expect the unexpected
You should also set aside money each month for unexpected expenses such as emergency medical bills or car repairs.
There is no specific number for this, but it’s always better to be safe than sorry. Recommendations include always having at least an extra $1,000 to $2,000 in the bank, setting aside 10% of your income each month, or giving yourself a cushion of at least 6 times your average monthly expenses. In other words, be prepared.
While banks can loan you money to cover big expenses, remember that you’ll still have to pay that loan back, along with interest.
Household budget: Tracking your income
Spending only what you can afford is one of the prime considerations when developing a household budget. When you know how much money you have, you’ll know how much you can afford to spend, and what you can save.
How much do you currently have in the bank?
Money you have in your checking and savings accounts becomes your starting point. But don’t touch your savings – this is your head start for the future.
If you use online banking, checking your account balances is simple. Sign on and check the numbers.
How much do you get paid?
This includes paychecks and other regular income you might get. Leave overtime pay out of your base income calculations, since that money might not be a guarantee from month to month.
Your list of expenses will be the total of what you can predict having to spend each month. Your income numbers are how much money you have to cover those expenses – and hopefully you will have enough left over to set aside for saving.
Can you reduce expenses in order to save?
After seeing what you spend each month, take a look at those costs to see if you can economize. Are you spending too much on entertainment? If you raise the temperature in your house by a degree or two in the summer, or lower it in the winter, you can reduce utility bills. If you can afford it, paying off loans early will save money on interest payments. Do you need to drive as much as you do? Reducing time in the car will cut your gasoline and maintenance costs.
Give yourself a challenge: Try to reduce your expenses and keep them down. The money you save will turn to income.
Your goal should always be to spend less than you earn. Use that extra money each month to put in some sort of savings account offered by your bank or other trusted financial institution.
Household budget: Follow your budget and review it
After you create a household budget and get in the habit of recording your monthly expenses and income, there is another important step: Reviewing your budget and making adjustments.
At the end of each month, check the total amount of your income and expenses. Are they in line with what you expected? Do they fall within your budget?
If you’re spending too much, look for ways to cut back.
If you are actually spending less than expected, take some time to decide whether to give yourself a small treat with some of the extra money – or add it to your savings for a bigger treat in the future. But keep in mind that it’s always better to have money in the bank.
While you can – and should – make budget adjustments each month as necessary, make sure you also take a look at your spending and income at the end of each year so you can set new goals for the coming year.
A utility bill could go up or down. You could pay off your car and have more money to put into savings.
Use these tips to plan ahead and prepare for the future.
Most of us carry at least two pieces of plastic to pay for things, a debit card and a credit card. But what's the difference between the two? To begin with, think of it this way. With a credit card, you're borrowing someone else's money to make a purchase, but you'll have to pay it back. With a debit card, you're pulling money directly from your own bank account. It's the difference between taking out a short-term loan or spending only what you have. So which one is better? Well, let's just say it depends.
Using a debit card is like writing a check. You're spending money from your account for goods or services. If you don't have enough money in your account, the debit will be turned down. If you do, the money is deducted from your account almost in real time. Debit cards can also be used at ATMs or to get cash back at places like grocery stores. These cards can be great to help keep you from spending more money than you actually have, and they can be great for in-store purchases. Credit cards, on the other hand, can be perfect for large purchases because you're borrowing someone else's money for a short period of time.
Credit cards also come with some liability protections and benefits that most debit cards don't have. These benefits might range from cash back to points for airline miles or lodging. Benefits can also include extended warranties or rental car insurance. Because of these protections, using a credit card for rentals or online purchases can be safer than using a debit card.
While both card types offer ways to dispute a purchase, your credit card issuer is trying to get its money back from a merchant. With a debit card dispute, the money that came from your account is gone and unavailable for use until the dispute is resolved. That doesn't mean credit cards don't come with drawbacks. If you have trouble controlling your spending or paying your account bill on time, it could be costly. That's because interest is charged on bills that aren't paid in full by the end of each billing period. You could also face a late fee. The longer you take to pay off the bill, the more you'll pay in interest charges. It's also quite possible that credit cards that offer rewards will charge you an annual fee, whereas debit cards often come free with an account at your financial institution.
So which one should you use? While credit cards generally come with more protections, you'll want to make sure you pay them off as fast as possible to avoid paying interest charges. Responsible use of a credit card can also help build your credit score. Debit cards, on the other hand, can be great for in-store purchases and are great for people who want to limit spending to only what is in their account. Either way, experts recommend that you always monitor your accounts online and to report any discrepancies immediately. You should report a lost or stolen card immediately as well. No matter what card you use, be sure to take the time to read about your protections and rights as a card holder.
Debit Card Alerts Help Your Funds Safe
Are you using the power of your debit card to help protect yourself against fraud?
By setting up text alerts or notifications you’ll know when your card is being used, how much is being spent, and even when it’s time to pay your bill.
In a world where crooks look for ways to access our accounts, alerts give us an early warning that something might be wrong or needs immediate attention.
These text or email alerts can be controlled and customized via online banking and the MobiMoney app. You can choose to get them via texts, emails or push notifications.
These powerful safety features can:
- Alert you to card use - things like transaction amount, online or phone purchases, foreign purchases, fuel purchases, and ATM withdrawals.
- Show you account balances, provide reminders about when a payment is due or when it is received, and display available credit.
Consider setting up alerts in our Online Banking to protect you from fraud and keep you informed about your accounts.
Now is the time to turn on the power of account alerts.
Online Bill Pay - The Safe, Easy Way to Pay
OK, we all know that paying bills isn’t fun, but it should at least be simple and secure, right?
We can make that happen - with online bill pay.
Online bill pay through our online banking services allows you to set up recurring or single payments from your computer. This safe and easy way to pay your bills puts you in charge, whether you’re at home or on the road. You’ll be able to set up billers, schedule when payments will be made, and how much you want to pay. You’ll even be able to set up reminders so you know when a bill is due and when it has been paid. And to help make record keeping easy, you can always check your payment history online.
Online bill pay lets you set up automatic payments for bills that stay the same each month – such as rent, mortgages and loan payments – so you won’t have to worry about them. And you can also schedule full or partial payment for bills that vary, such as credit cards or utilities.
Paying your bills online helps protect you from fraud and identity theft because access to your accounts is protected by multiple layers of security. Paying this way protects you from mail fraud and theft that can happen via regular mail.
And your options with online bill pay help guard against late payments that can cost you money and hurt your credit rating.
Learn more about bill pay here. It’s the safe, easy way to pay.
Make Your Online Password Strong
Are your passwords strong enough to protect your accounts from unauthorized access?
Most of us have a variety of online accounts – everything from financial tools to social media. All of these accounts have varying degrees of sensitive information. Having a strong password is one of the most important things you can do to protect your online accounts.
Here are some password protection tips:
- Don’t use the same password for everything - You should have a different password for every account, especially ones that involve finances and payments.
- Don’t use short or predictable passwords - Sure, short or common words are easy to remember, but they’re also easier to hack. Also easy to hack, are passwords using words that can be found in the dictionary. If it’s easy for you, it’s easy for criminals.
- Make them long and strong - Experts recommend that you use at least eight characters – more if possible - and that you mix upper and lowercase letters, numbers and symbols.
- Get creative – If you are having a tough time creating a strong password, use the first letter of each word in a phrase that you can easily remember, and make sure it doesn’t spell out a real word.
- Hide your passwords and don’t share them - Don’t write passwords down and leave them somewhere they can be easily found. Hide them so only you know where to look. Keep passwords to yourself, and don’t give them out to anyone.
- Be aware - If you hear on the news that a site where you have an account with has been hacked, change your password for that site, and any other site that you used that same password for.
- Have a plan - Making sure your passwords are unique helps protect your accounts, but it can also be confusing. Be sure to create passwords that can’t be easily hacked, but don’t make them impossible for you to remember. It’s also recommended that you set up password recovery options for your accounts, so that if you do forget a password you’ll be able to reset it.
It’s time to fortify your online defenses with strong passwords.
Make Your Automobile Road Trip Ready!
Nothing will put the brakes on your road trip faster than a major car repair. Even a minor repair, or forgetting to pack something crucial, could slow down the fun. Use this check list and you’ll be in the clear for a worry-free vacation!
- Schedule a checkup for your vehicle and perform basic maintenance, even if it isn’t due for it quite yet. If any major repairs need to be done, have them completed a month before your planned vacation to allow time for any problems related to the repair to surface and to take care of them.
Make sure to examine, top off, or replace the following: windshield wipers, air filter, coolant mixture of antifreeze and water, oil, windshield wiper fluid, brake pads.
- Check your battery to make sure it’s holding a full charge and has clean terminals. You can clean the terminals yourself, all your need is a wire brush, a mix of baking soda and water, and some good old elbow grease.
- Tires are next on the checklist. Ensure they have sufficient tread left and examine them for any tears, punctures, or bulges in the side wall. Don’t forget to double check the spare is fully inflated and that the jack, wrench, and other tire-changing tools are in the trunk. If your car doesn’t have a spare tire, you should have a tire inflator kit.
Before you leave town, properly inflate your tires for the total vehicle load—passengers and cargo included! Many vehicles have two recommended inflation ratings or levels: one for light loads and one for heavy loads and/or high speeds. You can find this information in the owner’s manual or on a sticker in the door jamb. Always remember, set the pressures when the tires are cold.
- Give your car a thorough cleaning. On any road trip, you’ll quickly acquire a collection of splattered bugs on the windshield and snack crumbs on the seats. You can at least start your trip grime free!
- Bring supplies to help in case of an accident, medical issue, or break-down on the side of the road. Pack a first-aid kit, flashlight(s), visibility vest, blanket, any additional medications, and some basic tools. Have plenty of water in re-fillable bottles on-hand as well as snacks.
- When deciding what to pack, check your vehicle’s load capacity so you don’t pack too much. The load rating includes passengers and cargo. If you’ve calculated the fuel cost into your vacation budget (and you should!), know that carrying a heavier load means reduced gas mileage than what you’re used to.
Only pack light, bulky items in roof-top cargo containers. If you’re not using the roof rack, remove it for better fuel economy. If you're carrying heavy objects, place them forward in the trunk space and distribute the weight evenly on both sides. Make sure things like purses, pillows, books, and blankets can easily be reached without unbuckling.
- Pick up a road atlas and download travel apps. In addition to a reliable map app, consider downloading an app to show you lowest gas prices or one to show you charging stations if you drive an electric or hybrid vehicle.
- Call your car insurance provider and make sure you’re covered for road-side assistance and any out-of-state services you might need. Many new cars have road-side assistance as part of the warranty.
- Tuck crucial paperwork in the glovebox, like the owner's manual, registration, and proof of insurance. Double check your registration, insurance, plate tags, and driver’s license won't expire while on your trip.
- Before you leave, fill your gas tank in-town as it’s usually cheaper than on the road.
E-statements - Simpler, Secure, More Convenient
In a fast-paced world of ever-changing banking technology one thing has remained – our commitment to ease and security. How you receive important financial documents is integral to banking safety.
Paper statements are an easy target for identity theft. They can be stolen from your mailbox or picked right out of your trash.
E-statements are simple and secure alternative. E-statements provide protection and less paper which reduces clutter on kitchen tables and filing cabinets.
E-statements are easy to store, more efficient and help keep you consistently informed.
Once enrolled, we will send you an email each time your statement is ready. Simply, log in to your Online Banking and view your current E-Statement or your past E-Statements. So, when tax season approaches your information is easily accessible from one place. E-Statements – simpler, more secure, more convenient.
Financial Life Hacks for Students
Managing your money can be a lot. There’s no perfect way to budget and the goal should be to find a system that works best for you. For some people, it’s an app. Others keep a spreadsheet. Some folks use envelopes with cash meant for different things. There are some life hacks that can help keep you in top financial fitness and make life easier overall.
You’re probably going to take on debt at some point in life. It’s how you build credit and how you can afford cars and homes. Learning about the dangers of debt before you have any debt is a good start.
Not only will you know what you’re getting into when it comes to debt, but you’ll also be able to make smarter choices when it comes to what debt you’re willing to take on. Trying to learn how to handle debt when you’re eyeballs deep in debt is like learning to swim while you’re mid-air when jumping in.
• Life hack: Pay off high-interest debt first. If you have credit card debt and a low-interest personal loan, paying off the credit card first limits how much more you’d pay over time in interest.
Related to understanding debt is understanding credit cards. They are given a bad rap by a lot of financial gurus out there. Like many things that people try to make sound scary, they’re really only bad if they’re misused. If you budget and track everything you spend on your credit card and don’t exceed what your budget can afford, you’ll be fine.
• Life hack: Pay off your credit cards every month. There is no penalty for paying off a credit card every month. You still get all your rewards points if that’s part of your card program. There’s actually no downside; you avoid paying interest and you get the things you paid for.
• Life hack: Never max out your credit. Try to minimize your credit use to 30% of your credit limit. If you have an emergency, you’ll have the bandwidth to cover the costs.
Besides a car loan, student loans are probably the first loans you’ll take out. There are two kinds of student loans: subsidized and unsubsidized.
On subsidized loans, the Department of Education pays your interest while you’re in school and during the post-graduation grace period.
With unsubsidized loans, you don’t have to pay while in school, but the interest is accruing the whole time.
• Life hack: Start making payments on unsubsidized loans as soon as you take them out. The interest payments won’t be ridiculous if you start paying them early.
• Life hack: If you’re struggling with student loans, you can contact your lender; most will work with you to find a plan that works.
Staying on top of your credit score in the early years will help you stay ahead in the later years. Right now you don’t need much credit. Staying focused on building good credit now will help you get the credit you need when you do take out big loans.
There are plenty of programs that allow you to know your credit score at any given time. Most likely your credit union will keep you up to date in relation to your checking or savings account.
• Life hack: Don’t co-sign a loan. This is different than not having a co-signer. You’re young; you’re going to need a parent to cosign most loans you take out. That’s your credit to build and your co-signer is there to assure you pay.
Being the co-signer is what you’ll want to avoid. Even though you’re just building your credit, after a few years, you could potentially co-sign for someone else. Don’t do it. Friend or family, if they’re coming to you, they don’t have a lot of options and that is a risky person to sign with. And their mistakes are now tied to you and your carefully protected credit score.
Teen Checking Account Tips
You may have opened a savings account for your children as a way to sock away money for college or to teach them about investing. As they grow, however, they’re going to need to learn some other money basics, and that includes managing a checking account. Starting a checking account early for teens is a key way to avoid pitfalls later as it can help learn concepts related to money and give them valuable practice in a safe environment.
Choose the right time
Look for a level of responsibility in your child rather than age. Some young people are ready for a checking account and a debit card at the age 13 and some need a little big more time. For accounts opened for teens under the age of 18 you’ll be a co-owner of the account as a parent. This gives you the ability to view the account and set up limits and restrictions.
Set it up together
- Walk your child through the process of depositing money earned from jobs, birthdays or allowances to the account. Place some in savings for later and some in checking for spending.
- Remember that while your child has watched you swipe a debit card for years, he or she may not fully understand how the transaction works. Explain that a debit card connected to an account is the same as cash. Then, when your child uses a debit card, track the transaction and watch the process. Show how after the card is swiped, funds are deducted from the account. Hang on to the receipt until the transaction goes through.
- If you have mobile deposit turned on, show them the steps involved to take advantage of this feature.
- Teach your child the importance of never sharing account information with friends and to always use privacy measures when shopping.
Once your son or daughter grasps the basics of the transaction process, make sure you set daily habits of checking their accounts. Using your smartphone app (or online banking), take 60 seconds every day to check the account balance. Many institutions, including our credit union, have a daily debit card limit for protection. In addition to checking activity online, request text alerts if the account is low or below a certain threshhold.
Make it a learning process
Some parents set up a system in which teens receive a stipend or allowance every 2 weeks, similar to a paycheck. From that amount, they need to cover gas, dining out, miscellaneous purchases and entertainment. If they overspend in certain categories and don’t have gas money then maybe the “work overtime” or do extra chores to earn more. Or possibly they have to wait for the next “”check”.
With technology we have a lot of tools for limits and controls — you can let your teens manage their accounts with the assurance that there are checks and balances creating a safe environment.
Check out the FastTrack Teens Account at our credit union for more details.
Building Financial Literacy
Reading is an important bonding time with your child. If you pick the right books, it can also mean building their financial literacy! Check out this list of books that may be fun to read and learn about money at just about any level.
1. Browse through the list of books and choose one you'd like to read with your child, for ages 4 to 10. The books should be readily available at your library or bookstore.
2. Download the reading guide, which helps you explain the key ideas covered in the book and gives you questions to ask during reading time and activities for afterwards.
3. Have fun reading together. Hold the book so everyone can see it and ask questions as you go.
A Bargain for Frances by Russell Hoban
Age: 6 and up
A Chair for My Mother by Verna Williams
Age: 6 and up
Alexander, Who Used to Be Rich Last Sunday by Judith Viorst
Age: 4 and up
But I've Used All of My Pocket Change by Lauren Child
Curious George Saves His Pennies by Margaret and H.A. Rey
How Much Is That Doggie in the Window? by Bob Merrill
Age: 3 and up
For more books suggestions, visit this link.
Assets First-Time Homebuyers Should Have
Believe it or not, you’ll need more than just a pile of cash to make your first (or second, or third) home purchase. There are other non-monetary assets that you’ll need in order to qualify for a home loan with the lowest interest rate. Add these five assets to your list of things to have before you begin your house hunt!
Proof of a steady, reliable income shows a lender you are capable of affording the monthly mortgage payments and are a low risk for defaulting on the loan. Usually, lenders want to see a work history of at least two years at your current employer or in your current field. If you’re self-employed, the required work history length may be longer.
As proof, lenders may ask for a signed letter from your employer stating your position and salary or two years’ worth of paystubs. Or you may be asked to provide your last two years of income tax returns.
Low Debt-to-Income Ratio
This ratio is a non-cash asset, but it’s important in the eyes of lenders. Although a lending agent won’t ask for your entire personal budget, they will look at the ratio of your monthly debt obligations (student loans, car loan, credit card balances, personal loans, etc.) to your gross monthly income. This is your debt-to-income ratio. You want to keep this ratio as low as possible, with your estimated new mortgage payment included in the calculations. These days, lenders offer the best mortgage rates to borrowers whose total monthly debts (including the estimated mortgage payments) are no more than 43% of their total gross income.
Carrying a high debt-to-income ratio will make it harder to qualify for a mortgage. Before beginning your house hunt, work to pay off current debts and lower that ratio.
Good Credit Score
This is another non-cash asset that is an important part of every home-buyers’ mortgage application. Your FICO credit score is the primary way lenders gauge how well you’ve managed credit, loans, and debt in the past and if you pay your bills on time (a big factor when they’re considering you for a mortgage!). Scores fall on a scale of 300 to 850. While a credit score of 670–739 is considered “good,” applicants with a score of 740 or higher are the ones most likely to receive better-than-average rates from lenders.
You are allowed one free credit report each year from each of the three credit reporting agencies: Experian, TransUnion, and Equifax. While you’re saving up for a hefty down payment, you can also check on your credit score and work to improve it: pay off debt (e.g. student loans, credit cards, medical debts, etc.), pay all bills on time, and don’t open or close any lines of credit (e.g. store credit card, personal loan, etc.).
Cash for a Down Payment
The money you plan to spend as your down payment on a house should be in the form of cold, hard cash in an account you can easily access (not in a CD or share savings account where you may pay a fee for the withdrawal). It can be tempting to put all or part of the down payment on a credit card, but this will affect your debt-to-income ratio, which ultimately lowers your creditworthiness.
In order to receive the best loan rate and avoid paying private mortgage insurance (PMI) on a conventional loan, you need to save up for a down payment of at least 20%. With other strong financial elements—like low debt-to-income ratio and excellent credit score—you may be able to put less money down and secure a decent mortgage rate, but you’ll still be taking out a larger loan and ultimately paying more interest on that larger principal over the life of the loan.
Cash for Closing Costs
Be sure to earmark some of the cash you’ve saved up as cash for paying closing costs, an often-overlooked home-buying expense. Closing costs include loan origination fee, title search and recording fee, appraisal fee, inspection fee, property taxes, and others. While these costs can vary, they generally fall between two percent and five percent of a home’s purchase price.
While you can sometimes roll these costs into the mortgage, it’s best to be able to pay them up front with cash, thereby avoiding a higher monthly mortgage payment and possibly a higher loan rate. You may also pay these fees with monetary gifts from relatives or by negotiating with the seller to have them pay these costs—especially if they’re eager to sell.
Buying a Home: Seven Easy Steps
Home ownership remains one of the best investments you'll ever make. Just think, what other investment can you make that will not only give you a solid return on your money but will also be something you use each day?
If you are looking at buying a home, here are the seven basic steps to follow:
Pinpoint your target
Decide where you want to live. Consider things such as commuting time, quality of schools, and proximity of stores and services. If you limit your hunt to one or two areas, you'll be able to keep closer track of available properties. Talk to people who live in that area or pick up a local newspaper to find out more about what's going on there.
Get pre-qualified for a mortgage
This way you will know your price range and how much of a down payment you're going to need. You will also be able to move fast if you find the right property. Finally, you’ll learn in advance if there will be any hitches in securing a mortgage.
Be prepared to run into a lot of real estate agents. It's important to know that agents represent the seller and not you, the buyer, unless you've hired someone specifically for that purpose. So buyer beware! Open houses are usually held on Sundays, but don't hesitate to ask for a private viewing. Read the classified ads and drive through the neighborhoods that interest you and look for "For Sale" signs.
Ask lots of questions
Agents should be able to answer most of your questions but always ask for the seller's disclosure, which is a document on which sellers must list whatever defects they are aware of in the home. It may also show the age of the roof, furnace, and other critical parts of the house. Ask the agent for "comps," statistics which compare what other houses in the neighborhood have sold for. Check your library for books on home buying and home repair. The more you know, the better the decision you can make!
Now get that mortgage
Even if you've been pre-approved, you can still shop for a better deal on your mortgage. You might play it safe by staying with the company that pre-qualified you, but if your credit is sparkling, it'll be easy to shop around.
Get an inspection
Municipalities often issue "certificates of occupancy," but these are based only on limited criteria. A professional inspector is like a detective and may unveil problems you can't spot. If you are unhappy with the home after the inspection, you may be able to get out of the deal without suffering any financial loss.
Close on your mortgage
The closing is where you sign all the papers, take legal possession of the property, and become indebted for your mortgage. Again, don't be afraid to ask questions. You're signing a legal contract, and you definitely want to know what you're getting into before signing all those forms. You may have an attorney with you at closing, although most people don't want to go the extra expense. If you want to be a little more careful, you can try to have a lawyer look over the papers in advance.
You seek the expertise of CPAs at tax and audit time, of course. But CPAs also promote personal and professional financial security year round. Visit the CPA Referral Service on the MACPA website to search for a CPA in your geographical area or specific area of expertise.
This article was submitted by the Michigan Association of CPAs.
To File Jointly or Not to File Jointly
If you’re married, you have a choice when it comes to the filing status on your federal income tax return: you can file jointly with your spouse or separately. For the majority of married couples, there are more advantages to filing jointly.
Filing jointing usually means a couple can deduct two exemption amounts from their income. It also more easily qualifies them for multiple tax credits, like the:
- Earned Income Tax Credit
- American Opportunity and Lifetime Learning Education Tax Credits
- Exclusion or credit for adoption expenses
- Child and Dependent Care Tax Credit
- Student loan interest deduction
- Tuition and fees deduction
- Elderly and disabled credit
If a couple files jointly, their income is combined, giving them a higher income threshold for some taxes and deductions. For many people, this allows them to earn a larger amount of income and possibly still qualify for certain tax breaks. Those who file together do need to list their deductions the same way, so if one spouse itemizes their deductions, the other spouse must itemize as well, even if their itemized worth is less than the standard deduction.
In certain situations, filing separately may help you save more on your tax return, and on your spouse’s. For example, the IRS only allows you to deduct medical costs that exceed a certain percentage of your adjusted gross income (AGI). So, if either of you have a large amount of out-of-pocket medical expenses to claim, it can be more difficult to claim the majority of the expenses if you and your spouse have a high combined AGI. You would be able to claim a higher percentage of out-of-pocket medical expenses if you filed separately.
Filing separately may help reduce the income used to determine student loan payments. If your federal student loan payments are based on your tax return income, then filing separately can result in a lower payment plan.
However, if you file separately, you are disqualified from several of the deductions and credits listed above. Not only that, but filing separately lowers the standard deduction that’s offered to joint filers—in the past, up to 50 percent lower—and the capital loss deduction limit. If you contributed to an IRA, are married, and file separately, you may be limited to a smaller IRA contribution deduction.
The best way to decide which filing status is more advantageous to your specific situation is to work with a tax professional. They will most likely calculate both outcomes to see which net refund is higher, or which balance due is lower. Or, you can use tax software that can give you similar guidance or allow you to calculate both scenarios.
Fees and Bills You Might Be Able to Negotiate
Most Americans don’t assume they can negotiate the prices of goods and services. It’s one of our cultural norms—you don’t expect to be able to walk into a grocery store and haggle with the cashier about the price of a gallon of milk. So, it might surprise you to discover there are bills you can negotiate, if you know how.
Over a dozen bills that could be up for negotiation are listed below, but before you read on, you should know the negotiating strategy that applies to them all:
- Shop around for other offers from competitors and be able to quote a better deal from them. You’ll have better luck negotiating a lower price in a competitive market where companies are eager to keep customers. Also be willing to leave your current service provider if they won’t lower your bill.
- Be in a stronger bargaining position by being a good customer and paying all of your bills on time. A strong payment history will go a long way in your favor when you suggest a lower rate on services.
- If applicable, be able to offer cash up front. Many companies would rather have a lump sum of cash now than have to pay a credit card or other billing service a fee to charge you multiple payments.
- Don’t accept the first “no” you hear from the first customer service rep. Tell them if they can’t do any better than their current price, you need to speak to someone about cancelling your service. You’ll either get a price break right then or be passed up the chain to someone who can give you the discount you want.
With those steps in mind, here are bills you can try to negotiate.
Medical bills can easily wipe out your emergency savings or force you to put some of the expense on credit cards. But before you do that, you have three options for lowering the bill.
First, you can offer cash up front. Hospitals are often cash strapped, so a lump sum of money up front is appealing. Offer to pay your bill in cash but at a discount. People have had success with this strategy, lowering their bills by 10 to 40 percent!
Second, you can hire a medical billing advocate to negotiate for you. This will cost a fee, but it could still be less than paying the entire owed amount to the hospital, clinic, or doctor’s office. Ask for a free consultation from the expert first to see if it’s worth your while.
Third, you can—and always should—conduct an audit of your itemized bill. It’s possible there are errors. An analysis by personal finance company NerdWallet found almost 50 percent of Medicare medical claims contained billing errors, resulting in more than 25 percent overpayment by patients! Look for duplicate charges, charges for services that weren’t rendered, and incorrect quantities of medicines.
Bonus tip: Ask for an interest-free payment plan. Tell the billing representative what amount you can pay each month and they may be able to meet that request. And that’s much better than paying the high interest rate of carrying the balance on a credit card!
Credit card interest rates and fees
Speaking of credit cards, did you know you might be able to negotiate a lower annual percentage rate (APR) on your credit card? While it’s ideal to pay off your full balance each month and avoid paying interest at all, by lowering the APR, you could save yourself hundreds of dollars a year if you do carry a balance from month to month.
Call the customer service number on the back of the card and ask a representative to lower your APR. The longer your history of responsible credit use and on-time payments, the better your chances of getting what you ask for. And don’t be afraid to use it as proof you deserve better terms on your card!
If they won’t budge on the APR, consider leaving that credit card company and consolidating to a new credit card with a 0 percent introductory rate period to save on interest costs. But watch out for balance transfer fees. Although this, too, might be negotiable with the new card.
Other credit card fees you can negotiate are the annual membership fee and late fee. Again, if you have good payment history, tell them you feel they can do better for such a good customer.
Cable and internet service
This may be the easiest service to negotiate because there is so much competition between cable, internet, and satellite television providers (unless you live in a remote area, in which case, sorry, you’re probably stuck).
For best results, call and try negotiating near the end of your service contract, since the company would rather keep you than see your money go elsewhere. Ask about any current promotions you qualify for. Have a competitor’s offer ready and ask if they can match it. If you’ve noticed a decline in service, mention it and ask about a bill credit for the time the cable or internet wasn’t working.
Alternatively, you could eliminate channels or lower your internet speed to save money. Or switch entirely to streaming services like Hulu, Amazon Prime, or Netflix. Although this will mean you’ll want a higher tier of internet service.
Like cable TV service negotiations, rent negotiations are best started at the end of your current lease before a new lease is signed. If you’ve found similar accommodations in the area for less, use that when negotiating with your landlord. Consider signing a longer lease for a discount.
The rise of more and more discount carriers using the same networks as the larger carriers means those big players are more willing to offer or match competitive pricing. Discount carriers are also often contract-less, giving you more flexibility of when to end or change your service.
Another option is to review your plan and see if you’re using all of the talk, text, and data you’re paying for—or if you could cut back for a cheaper plan.
Try your negotiating skills on these bills, too:
- Landline phone (if you even have one!)
- Car insurance
- Alarm/Security system
- Storage unit
- Satellite radio
- Bottled water delivery
- Gym memberships
- Identity theft services
- Gas, electric, propane gas
What To Do When Weather Damages Your Home?
The weather can be unpredictable and we are becoming more and more aware of it's impact due to the climate changes. And when it comes to your home, it can be downright devastating. From flooded basements to trees crushing your roof, weather can directly impact one of your greatest investments. Here’s what you should know when mother nature strikes at home.
A lawyer was recently overheard saying, “The legal system is now based on reading emails.” Why? Because email is a strong record of events. The moment there is damage to your property, start taking photos and emailing them to whoever you think needs to see. If you rent, email photos to your landlord, they’re going to need them. Email photos to other accounts to act as receipts if someone denies receiving your emails.
In fact, the documentation should start before you ever need to make a claim. Take photos any time you update your home. Keep an inventory of the things you have in your home; it can be difficult to prove something is missing if there’s no record of it.
- Keep it organized
- Keep it up to date
- Keep it in multiple places
If you do those three things, you’ll have a leg up on any conversations you’re having with your insurance provider or landlord.
Once you’ve assessed and documented the damage, start to mitigate its effect on the rest of your home. A tree branch through the roof? Get a tarp over it. Seal up any windows that were damaged. Turn off power and water if necessary. Start pumping the water out of your basement.
Keep documenting everything while you work to stop, or at least slow, the damage being done. It might not be common—but it has happened—but insurance companies have denied claims saying the damage was caused by the homeowner. Be cautious about making the problem worse.
Depending on what happened, start calling, emailing, texting, or posting on social media to get in contact with the right folks.
If there are power lines down or other utilities exacerbating the damage, contact the proper utilities and let them know. A tree branch through your front window is bad. The powerlines the branch brought down in your yard are worse. Chances are you won’t be able to address the branch without getting the power lines taken care of first.
Tarps, plywood, or anything else you spend money on to mitigate the damage to your home is probably reimbursable by your insurance. Or if you rent, your landlord should reimburse you. Don’t only save the physical receipts but also take photos. Follow the same steps you did with the initial damage: send the documents to those who might need them. Send them to a second account to keep them stored safely.
When you get to the repair stage, you’ll want to be on top of every receipt that you get from contractors. Get all quotes in writing. If you can, document when they start work and leave. Keep track of as much as possible. Hopefully, no one makes you dig that deep to fulfill your claim, but it’s better to have it and not need it than need it and not have it.
Don’t forget to breathe
Things happen. No matter how prepared you are, there is always something that can catch you off guard. And it’s your home, one of the costliest investments you’ll ever make. Having something go wrong can be devastating. Panicking and over-reacting are only going to make the situation worse. It never hurts to write out a plan of what to do when things go wrong ahead of time. Then when something does happen, you have a list to follow to help you direct your actions instead of having to improvise along the way.
If you’re looking for a home or home insurance, talking to your credit union is a good start. Even if your credit union doesn’t provide insurance, they probably have a few recommendations you could investigate.
6 Things to Know About Personal Loans
In recent years, personal loans have become one of the fastest growing loan products—according to TransUnion, more than 20 million people have personal loans. They’re appealing for many reasons: they can offer low interest rates for people with good to great credit, they can be for smaller loan amounts, and they can be used to pay for a range of life’s expenses, including consolidating debt, covering an unexpected expense, or making home improvements.
To determine if a personal loan is the right option for you—or if you should consider other options—consider these six facts about personal loans.
It’s an installment loan
A personal loan is also an installment loan where a fixed amount of money is paid back, with a fixed interest rate, in monthly installments over the life of the loan. This period can be anywhere from 12 to 84 months. As with other loans, selecting a longer repayment period lowers the monthly loan payment, but it also means paying more interest overall.
Personal loans are typically unsecured and aren’t backed by collateral that the lender can use to repay the loan if the borrower defaults on payments. If a lender offers secured personal loans, they will usually use the borrower’s savings account, CD, or share certificate as collateral.
Amounts have a wide range
Loan amounts range from $1,000 to as high as $50,000. Interest rates vary from five to 36 percent. Both the loan amount and its interest rate will depend on the lender and the borrower’s determined creditworthiness.
Most lenders charge a one-time fee, called an “origination fee,” to cover their cost of processing the loan. This fee ranges from one to six percent of the loan amount. Usually this fee is included in the advertised APR of the loan. This means if someone needs a $10,000 personal loan from a lender that charges a five percent origination fee, the total loan will actually be $10,500, and this will be the number the interest rate is calculated on, not the lower $10,000 amount.
Some lenders also charge a prepayment penalty if the loan is paid off early. It’s sometimes included in the interest fee (often under the term “pre-computed interest”). If possible, it’s best to avoid taking out a loan with this kind of charge as part of the loan terms.
Hard inquiry on your credit score
The application process for a personal loan is similar to other loans. The lender will make a hard inquiry on your credit report. They will consider your income, total debt, and credit score to determine your creditworthiness, which in turn will affect the amount they are willing to lend and at what rate.
The hard inquiry on your credit report will affect your credit score, lowering it by a few points. Usually a hard inquiry will stay on your credit report for two years. The good news is that consistent, on-time loan payments will earn those points back, plus a few more. While shopping for the best rates and terms on a personal loan, be sure that the lenders are only doing soft pulls as part of the pre-approval process so that your score isn’t lowered further.
Interest rates range from 5 to 36%
Like other credit products, the interest rate will depend on your credit score and the lender you choose.
Other lending options
The two other lending options often considered alongside a personal loan are credit cards or a HELOC (home equity line of credit). Which of the three options is the best will largely depend on the borrower’s credit score and if they own a home.
Credit cards offer both disadvantages and advantages over a personal loan. In general, credit cards have higher interest rates, those interest rates can increase (on future purchase made on the card or if a payment is made 60 days past due), and it can take up to 30 years to pay off the balance if only minimum payments are made each month.
However, on the flip side, if you use a credit card to pay for the expense instead of a personal loan, you could benefit from the card’s rewards, like cashback. With good credit, you could qualify for a balance transfer credit card with a 0 percent introductory APR, allowing you to make the purchase and subsequent monthly payments without interest for a whole year. The last advantage is that a credit card gives you a revolving line of credit—as you pay off the balance, more credit is freed up for you to use again, whereas a personal loan is only for a set amount.
For homeowners, they have the option of a HELOC. These are usually for larger loan amounts and they use the equity built up in the home as the collateral in the loan. Like a credit card, a HELCO is a form of revolving credit, allowing you to borrow more as you pay off the credit amount. A HEL, or home equity loan, works on similar principles, but it’s an installment loan. In both cases, if payments aren’t made on the loans, the lender has the right to foreclose on the home as payment.
Some Deals Are Too Good to Be True
Everyone wants to get a deal when they are buying a car. Why would you pay more than you absolutely have to? One of the biggest ways to save on a vehicle is to be related to someone who works for a manufacturer. Some family discounts can be as good as a 99% off the manufacturer suggested retail price (MSRP). Most tend to be 5%–10%, which is still a significant savings on a brand new vehicle that costs tens of thousands of dollars.
Those kinds of deals bring a lot of customers, desperate for a discount, to a salesperson. In fact, one salesman was recently arrested by federal agents for illegally offering $8.7 million in discounts to people who were not family. It should be obvious that such deep discounts are very regulated and mostly reserved for direct relatives and a very few select friends, if any. The dealer involved was selling the discounts on social media, often stealing coworkers discount codes. If it seems too good to be true, it is.
So what are your best bets on getting a discount?
- Buy used. A one- or two-year-old car has almost all the same tech and features you’ll find on a brand-new car. A new model-year doesn’t mean new features because most vehicles are refreshed every two to five years with overhauls and fully new models every five to ten years.
- Another option is to shop for vehicles that have a low turnover rate. Dealers only have so much space for inventory. They want to use that space for vehicles that are going out the door fast. They have to pay to keep a vehicle on the lot, so they are going to be willing to cut you a deal to clear out low-volume cars.
- If you really want a new car, and never want a vehicle more than a few years old, leasing is an option. You’ll constantly be making monthly payments and never have any equity in the vehicle, but you’ll also have a lower payment than buying a new car every two or three years.
- If you do know someone who works in the automotive industry, ask them if they do have access to discounts. Dealerships do get some, but people employed by automakers and parts suppliers usually get better discounts. It never hurts to ask someone if they can help. A lot of people have access to discounts and don’t even know it. One thing you may run into is a dealership not knowing about the discounts. Metro Detroit is full of automakers’ headquarters and suppliers to the auto industry. Dealerships in those areas are very familiar with people coming in with discount codes. Outside of that area, you might need to explain what’s going on if you have a code.
What you shouldn’t do is buy a code or discount. Paying someone to give you a deal is never the deal you think you’re getting. Another red flag is a car salesperson telling you they can get you a deal but you can’t tell anyone. Industry discounts are an above-the-board thing. In the case of the salesperson who was recently arrested, they were offering deals to bolster their own sales numbers. The more cars someone sells, the bigger bonuses they get from the dealership they work for. There are also manufacturer bonuses for high-volume dealers and dealerships.
Buying a new vehicle can be stressful enough as it is. If you know there are discounts or money-saving options available before you go in, bring those with you to the dealership. If their salesperson offers you some deal that is just too good to seem true, ask if you can talk to a manager to confirm. Or ask if the deal is valid at other dealerships. The fallout from that one salesperson’s fraud is ongoing. The people who bought from them are most likely in the clear, but it’s always better to be ethical and safe than shady and unknowingly stealing.
What to Do When Your Car Gets Repossessed?
It might not be everyone’s worst nightmare, but it’s probably high on the list; you walk outside, keys in hand, but your car is gone. If you missed a payment on your loan, your vehicle could have been repossessed. What should you do?
First thing’s first: minimize collateral damage. Call anyone who might need to know you’re not getting to where you were planning to go. Tell work you had a family emergency and need to take a personal day. Contact a friend to help, especially if you were planning on meeting that person.
Find out why
There are a few reasons a vehicle could have been repossessed. And not all of them are as obvious as they might seem. If you’re confident that you are up to date on your payments, contact your local police. If your car was repossessed, they’ll be able to tell you; accidents do happen. Once you’ve confirmed with the police, or you know it was a repossession, call your lender. They’ll confirm one of three likely reasons:
- Your payment was delinquent, i.e. unpaid (the most likely cause).
- You didn’t have adequate insurance.
- It was a mistake—rare, but it happens.
What to do next
Once you’ve determined that your car was repossessed and it wasn’t a mistake, you should evaluate your finances. It could be you have the money, but the autopay stopped for some reason. You should be able to quickly fix this kind of issue.
If you can’t afford the vehicle—and that includes fuel, maintenance, and insurance—then your lender did you a favor. It’s a hard lesson to learn but can be a valuable one in the long run. Don’t overextend yourself.
Once you’ve analyzed your finances, you have a few options:
- Pay off the loan. If you can afford the car and can secure the funds, you usually have the option to pay off the balance of the loan and get your car back.
- Negotiate a payment plan. Your lender probably will make more from loan payments than selling the car at auction, so you might be able to renegotiate your payment plan.
- Let it go. If you know you can’t afford the vehicle, this is your best option. But understand, you may still owe your lender money. More on this later.
- File for bankruptcy. This is a worst-case scenario. If your car isn’t the only debt you’re drowning in, bankruptcy may be an option. It will pause the repossession so you can at least still get to work while you reorganize the rest of your debts.
After the repossession
After your vehicle is repossessed, if you’ve decided to let it go and not declare bankruptcy, there are a few things you need to know.
Anything in the car is still yours. The lender only owns the car; all other property is still yours and they must return it.
You may still owe the lender. If you decide to let the car go, the lender will most likely sell it at auction. If the car sells for less than the amount you owed prior to repossession, you’re still on the hook for the difference. If you owed $12,000 and the car sells for $8,000 at auction, you will owe the lender $4,000. It might not seem fair, but it was in your loan agreement.
The repossession officers are allowed on your property and even in your garage. However, they aren’t allowed to cause any damage. If there is any damage, they are liable for the repairs. This is why they aren’t allowed to break into a locked garage.
What not to do
It is true that they can’t break into a locked garage. But you shouldn’t try to hide your vehicle. The lender can take you to court, and you’ll likely owe more money for court costs and lawyer fees. On top of that, the lender can charge you for the cost of repossession—the longer it takes, the higher the fees.
This is not the end
Yes, your credit is going to take a big hit. You’re going to need to make some sacrifices when it comes to finding a replacement car. Expect a high down payment. You’ll probably have high-interest payments. Until you can improve your credit score with on-time payments.
Be smart, work with your lenders, and reign in your finances and you will recover from this. It will take time and effort, but a vehicle repossession is only a temporary setback.
Want to Shop a Used Car Auction?
There are three kinds of car auctions: One is where cars go for hundreds of thousands to millions of dollars for extremely rare vehicles. Another is where slightly less valuable classic cars sell for tens of thousands of dollars. And the last—the focus of this article—is used car auctions. If you want to get the best deal on a used car, keep reading.
There’s more than one kind
Before you get too deep, there are two types of used car auctions—public and dealer. Often there are days open to the public and days reserved for used car dealers to fill their lots. Unless you’re a registered dealer, you’ll have to go on a public day. Dealers usually can go whenever.
Where do the cars come from?
Most of the vehicles in these auctions come from dealerships that bought them as trade-ins. Saving themselves the hassle of an odd collection of cars, they sell them at these auctions for whatever they can get. Buying a car at the auction is going to be cheaper than going to a dealer simply because there are fewer people needing to make a profit.
Others come from insurance salvage. Damage done to the vehicle could deem it totaled by the insurance company. However, that doesn’t mean there are problems with the safety of the vehicle. A vandalized car can easily have damage in excess of the market value of the car.
Before you bid
- Set a budget
- Check the list of cars to be auctioned
- Look at values
- Read the auctions warranty, if there is one
- If you can, check the VIN
Know if it works
Every auction is going to have a system that quickly identifies the roadworthiness of the car. Usually a green, yellow, and red stoplight concept. Green would mean it’s good to go out the door with no known issues. Yellow would signify the car needs work, but remember, this could be vandalism like spray paint or deep scratches. Red would mean the vehicle is barely running at best and is either good for parts or a huge project. The system at your auction may be different, so make sure you read up on their system before you start bidding.
Check them out
Before the bidding starts, most auctions allow you to inspect the cars going across the block that day. Take the list you made earlier and give them a look. Seeing the vehicles in person is going to give you a lot more information than a simple description and maybe a few photos.
Flexibility is key to buying at an auction. The goal is to get a deal. Bidding up a car because you really want that one is going to hurt you and only you. If the vehicle you’re bidding on starts creeping up in price, drop out. There are more cars that will be rolling across the block.
Are You Ready to Buy a House?
Homeownership is a goal for many Americans, and it can be good for your financial health as an investment…but only if you go in well prepared and know under what circumstances it isn’t a good move for you and your wallet.
How much can you afford?
Answering this question as accurately as possible is crucial to moving forward in your house search. The factors that go into the answer will help you decide what “affordable” means for you and keep you from buying too much house.
The first factor to know about is your debt-to-income ratio (DTI). To calculate this, add all of your monthly debt payments (credit card, car loan, personal loans, student loans, etc.) and divide it by your monthly gross income. Including anticipated housing-related expenses—mortgage, mortgage insurance, homeowners’ association fees, property tax, homeowners insurance, etc.— your debt payments shouldn’t be above 43% of your monthly gross income.
So, to figure out how big of a monthly mortgage payment you can afford using this DTI, multiply your monthly gross income by 0.43. This gives you the total you should be spending on debt payments. Now, subtract existing debt payments (those credit card, student loan, etc. payments listed above). That final number is what, theoretically, you can afford to spend each month on a mortgage.
Of course, the lower your DTI, the better!
The 43% debt-to-income (DTI) ratio standard is generally used by the Federal Housing Administration (FHA) to determine if the borrower can make their payments each month. But you should also consider the front-end debt-to-income ratio, which calculates the monthly debt you would incur from housing expenses alone, such as mortgage payments and mortgage insurance. For this, lenders like the ratio to be 28% or less.
The affordability of a house for you should also include the money needed to cover closing costs, which can range from two to four percent of the purchase price, a down payment of 10 to 20% of the purchase price, and the credit score you need to secure the best interest rate.
Do you have the down payment?
The ideal for most people is to be able to put down 20% of the home price. This allows you to avoid paying private mortgage insurance (PMI). PMI is added to your mortgage payments and can add anywhere from $30 to more than $70 to your monthly payments for every $100,000 borrowed. And PMI is not the same as your homeowners’ insurance policy, which you’ll also need to purchase separately.
If you can’t put the full 20% down, you can still buy a home with as little as 3.5% down, for an FHA loan, for example. However, in general, it will limit your choice of lenders and increase your monthly mortgage payments in the long run.
Where do you want to put down roots?
If you’re considering tying your finances to a 15- or 30-year mortgage, you’d better be confident where you’re putting your roots down! Will your job or education likely change in the near future and require you to relocate? Are you near a support network, like family? Would you rather remain flexible about your living situation?
How much time do you have to spend on being a homeowner?
Are you ready for the time commitment of homeownership? We promise most maintenance issues, DIY projects, and rehabs aren’t as easy or as quick as the TV shows would have you believe!
If you can’t pay for someone else to clean your gutters, repair your driveway, install a new bathroom, landscape your backyard, etc., you’ll need to spend time learning how to do it yourself. And then do it.
Not everyone wants to commit the amount of time a home can take. Be sure you consider this lifestyle change before you buy a home.
Avoid Costly Mistakes When Buying a Car
Are you buying your vehicles backward? Most people seem to. What do we mean? This: most people, when shopping for a new vehicle, go to the dealer, pick out their car, and then figure out financing. How is that backward? You might think they don’t know their budget until they start talking numbers, but the result is almost always spending more than they intended to. How can you avoid this costly mistake? Keep reading for a few tips and a few things you should keep your eye out for when starting your journey to buy a new vehicle.
First things first
Preapproved or prequalified? What’s the difference?
- Full credit check
- Makes you a cash buyer
- Rate locked-in, as long as the car is in the criteria of the loan
- Less back-end work with your lender
- Credit score is most likely all they looked at
- Interest rate may change for any number of reasons
- Not guaranteed, lender could deny you in the end
- More back-end work with your lender
It’s your choice in the long run. You have more freedom to do what you want with pre-qualification, but preapproval will speed up the process if you know what to do.
Knowing how much you can spend before you get to the dealership is more than putting some information into an auto loan calculator and getting a vague idea.
Going to your credit union before you even start seriously shopping is the best way to know your budget ahead of time and set it in stone.
The high ground
Holding the high ground in any fight is to your advantage. Negotiating the price of a car is no different. And one way to get the high ground is to have cash. That is what you have when you walk in with a preapproved or prequalified loan: cash. The dealership will get paid the second you sign the papers. And like anything, cash gets things done faster.
Having your financing squared away before you go to the dealer helps you avoid any financial markups before you close the deal. You’ve already signed the papers and have a clear understanding of what your interest rate is going to be. Waiting to figure out financing with the dealer, you could end up with higher rates, random fees, and generally just spending more than you should.
The stereotype of dealers finding random ways to up the price has truth. Mostly gone are the days of un-necessary underbody coatings or strange fees like making sure the bolts are tight and the paint is fresh.
When you have your financing in place before you even start shopping, it’s harder to sneak those fees. If the price you shook on starts going up, walk away from the table and go to another dealer. The ball is in your court. You’re helping them by buying a car; they aren’t helping you by financing it.
Getting your pre-loan work out of the way is going to vary depending on your credit union or the lender of your choice. However, many lenders have simplified the process over the past few years. So simplified in many cases that you can apply online or through an app.
The best way to get the details is to contact your lender and ask a few questions. Due to Covid, there is a chance their process has changed, depending on how you’d like to apply. Other than that, enjoy your new vehicle.
Buying a Home In the Spring
Home shopping season is upon us! Spring is the most popular time of the year for buying and selling homes. With so many buyers in the market, you’ll want to make sure you stay competitive. Follow the tips below to help you land the home of your dreams.
Research & Preparation
If you are planning to move to a new area, it is a good idea to explore and talk to locals. Drive around in the neighborhoods you like most and use online tools to research the town and local real estate agents. Visit the neighborhood during different days and times to get a better understanding of traffic and lighting.
Finding a local real estate agent that is well versed with the neighborhoods you are looking in is extremely valuable. They will be able to tell you what the market is like, how fast the homes are selling, and information about the neighborhood. You can ask for a referral from a real estate network you’ve used in the past or ask friends from the area if they have an agent they could recommend.
Your Mortgage & Pre-Approval
Get in touch with a mortgage lender to figure out how much home you can afford. Our partner, Mortgage Center, offers a free pre-approval that will show sellers you’re serious.
Your pre-approval letter will show you the maximum loan amount you are approved for, but you’ll want to create a budget to figure out how much home you can afford. Don’t forget about expenses like utility bills that could increase depending on your home. Make sure you’re comfortable with a new monthly budget.
Pay Off Debt or Save for Retirement
Paying off debt. Saving for retirement (or financial independence, if you prefer). They’re both important to your financial health, but is one more important than the other? Can you manage to do both at the same time and call it a wise decision?
Ultimately, the answer depends on your current situation, including the types of debt you have and at what interest rates, and what retirement matching plan is offered by your employer. As your situation changes throughout life, your strategy to both pay off debt and save may change, and that’s okay.
Formulate a plan with manageable steps and automate your savings as much as you can. Here are eight steps you can follow to pay off debt and save for financial independence.
Figure out what you have and what you owe.
Essentially, this is a snapshot of your net worth. By laying out what your income is and what your debt obligations are, you can more clearly see your current balance between savings (for retirement and an emergency fund) and debt. Knowing where you’re starting from will not only show you which direction to take but will also show you when progress is made.
Find and list the interest rates on all of your debt.
Create a simple spreadsheet where you list out your total remaining debt balances, their interest rates, and the monthly minimum payments. Organize the debts from highest interest rate to lowest. Include credit cards, hospital debt, student loans, personal loans, payday loans, car loans, mortgage, etc. You will use this to prioritize debt payments against the potential growth of retirement contributions.
Create a budget.
The goal of your budget should be to pay all of your fixed expenses (rent, loan/debt minimums, insurance, etc.) and needs (food, utility bills, gas in car, clothing on your back, etc.) and then divert as much money as possible toward paying off debt, building an emergency savings fund, and saving for retirement. If you can set aside at least 20% of your net income for these goals (excluding what you put into your 401(k) pre-tax), then you’ll make progress at a steady pace.
See if you can refinance your loans.
If interest rates on car loans and mortgages are currently lower than when you took out the loans, it may be a smart move to refinance and take advantage of the lower rates. When refinancing your mortgage, consider looking at a shorter-term mortgage. See if your budget will comfortably allow the bump in monthly payments to shorten the loan and ultimately pay less in interest. If you have questions about refinancing, speak with a financial advisor at your credit union.
Reevaluate your credit card usage.
Start using your credit card like a debit card: only spend the money you have in the bank. Cancel automatic charges and turn them into auto-debits from your checking account (if the expense still fits in your new budget). Call your credit card companies and ask for a lower interest rate or to wave the yearly fee. If you can’t lower the interest rate, see if you can transfer the balance to a card with a 0% interest offer. The goal is to not continue racking up credit card debt while you’re working to pay off the balance.
Create an emergency savings fund.
At minimum, you need one month’s worth net income saved for emergencies before aggressively paying down debt. While building your emergency fund, continue to pay the minimums on your loans and debt, but put all extra money into savings. Once you’ve saved your goal amount, apply those extra dollars toward paying down debt. An emergency fund prevents you from falling back on credit cards (and amassing more debt) when an unexpected expense comes up—like a car repair, vet bill, or home repair.
If you can afford it, take advantage of your employer’s 401(k) or 403(b) match. If you can’t, then cut expenses or earn more money so you can.
Not taking advantage of an employer retirement 401(k) or 403(b) match is like throwing away free money. While paying off the minimum monthly payments on your debt, do whatever it takes to take full advantage of the offered retirement match. If they’ll match up to 6%, scrounge every penny to meet that full 6%. It’s an immediate return on your investment.
Now figure out how much you can pay toward your debt.
You have a budget that prioritizes saving and debt repayment. You’re cutting expenses and perhaps creating new income. You have an emergency fund of at least one month’s net income. You’re making the minimum monthly loan payments. You’re meeting any retirement match offered by your employer.
Now’s the point where you aggressively pay down your debt. Where before every extra dollar not paying for food or the mortgage went toward your emergency fund and then your company’s retirement match program, now any and all extra money goes toward paying off debt, starting with the loan with the highest interest rate.
Depending on your time horizon for retirement and the interest rate on your debts, you may be advised to shift the balance of those extra dollars in favor of saving for retirement. Or, if you have any debts with interest rates over 6%, some financial advisors suggest paying off those debts first before going back to minimum payments on lower-interest-rate loans and more aggressive retirement savings.
When is it better to use a Debit Card?
“Debit or credit?”
It’s a question you probably hear every time you buy something in person. If you have the option of using either a debit or a credit card, is there a reason you choose one card over the other? Is there ever a wrong choice between the two?
There could be, depending on your situation.
How your cards work
It’s first important to understand how the two types of cards work.
Debit cards draw money straight from your checking account. You won’t get a bill later or pay interest on what you spend, but you could pay an overdraft fee if you spend more than what you have in your account. A debit card also allows you to get cash from an ATM, drawn from whichever account you choose (checking or saving).
Credit cards allow you to borrow money that must be repaid, with interest if you don’t pay your entire credit card bill when it comes due. You will have a credit limit on each credit card—the maximum amount of money you can charge to a card, but it will likely be much more than you have in your checking account.
Credit cards have many perks, like fraud prevention, helping you build credit, earning perks (like cash back or airline miles), extended warranties on electronics, and additional insurance on air travel or car rentals.
If someone steals your debit card information and withdraws money from your account, there’s a good chance that money is gone forever, although your credit union may offer additional protection up to a certain dollar amount. However, with a credit card, you are protected against fraudulent charges by federal law, and you can dispute any charges by dishonest sellers.
Even with all of the advantages of using a credit card, there are times when it might be smarter for you to use your debit card.
If using a credit card incurs a fee
It’s not uncommon for a surcharge to be added to your bill if you use a credit card. Examples include using a credit card to get money out at an ATM, to pay taxes, or to pay a tuition bill.
If you’re buying from a small business
Businesses must pay a credit card processing company money to offer credit cards as an accepted form of payment. To help offset this cost, the store may set a credit card minimum, ensuring you spend enough to make the credit card charge worth it. Using your debit card when shopping from small, local businesses helps the business keep more of the profit, helps keep you from overspending to meet that purchase minimum, and helps prevent the business from increasing its overall prices to compensate for the credit card processing fee.
If you’re in credit card debt
If you’re currently facing deep consumer debt on your credit cards, or have only recently paid off your credit card debt, or struggle to resist spending beyond your means, you should be reaching for your debit card more than a credit card.
When you run out of money in your checking account, your credit union won’t let you spend any more! It’s a natural prevention to overspending!
An easy way to decide which card to use in the moment is to match the card type to your goal.
If you’re avoiding debt, use your debit card.
If you’re trying to build credit and can pay off your bill each month, use a credit card.
Exposing Hidden Fees - They Are Everywhere!
Undisclosed and deceptive fees are becoming commonplace and end up costing American consumers billions of dollars each year. According to a report by the Consumer Federation of America, hidden and additional fees can increase bills by up to 25%.
Companies may choose to hide the true cost of a product or service through fees—often added at the very end of the purchase process—so they can appear to be the lowest-price provider in a competitive marketplace. When, say, an airline service disguises part of a ticket’s cost as fees, the true and total cost may not be picked up by online shopping engines, showing you a much lower price. Industries notorious for hiding fees include shipping, airlines, non–credit union banking services, cable providers, car rental agencies and dealers, hotels and resorts, phone providers, medical services, and retirement funds.
Types of hidden fees and fee pricing
This fee tactic slowly accumulates costs as you progress through check out. A company might lure you to a product with a super-low price, but once you hit the “purchase” button, additional options (some of which are unavoidable, like a charge for the color of the item), upsells, tax, and shipping and handling costs will slowly push that price up.
This often happens with bargain-basement travel deals with airlines, hotels, and car rental companies. The seller has boxes automatically ticked for product, service, or shipping upgrades by default. If you don’t go through and uncheck each box, you’ll pay a much higher-than-advertised price.
This is an additional fee that is usually higher than what you could pay for the item or action on your own. For example, the fuel surcharge from a car rental company.
These are simply for the act of fulfilling an order, like for an online concert ticket purchase.
These are the fees that you weren’t told about or able to discover on your own. These can be legal or illegal. They are considered illegal if they or the quoted price was deceptive, fraudulent, or the result of false advertising.
You might know this scheme as the claim “You only pay shipping!” A company will sell you an item “for free” and you only have to pay shipping and handling fees—but of course those fees are inflated. This is how the company covers manufacturing costs and generates a profit.
Here’s where you’re most likely to find hidden fees:
- Hotels. Today, hotels often charge “resort fees” to cover items that you might expect to be a part of your basic hotel price and experience. Resort fees can run $10 to $100 per night. They usually cover your room’s “free” wifi, “complimentary” bottled water or coffee, access to the gym and swimming pool, towels, housekeeping service, the “included” breakfast, the safe in your room, and potentially other items and services. Ask about resort fees before you book your next hotel room and ask if any of them can be removed (like the one for a safe in your room if you don’t need it).
- Car rentals. Be sure you look for these fees and charges before deciding which company truly offers the best deal: additional insurance, age surcharge, additional driver fees, overcharged toll feels, fuel charges, drop-off fees, mileage fees.
- Car dealerships. These might be some of the most well-known fees, which are added to the sale price before you sign documents and drive off the lot: advertising, documentation, dealer prep, inventory, and delivery fees, as well as extended warranties. Many of these can be negotiated.
- Phone service. Beware of “cramming”—adding fees to your phone bill for services you didn’t sign up for. They’re often small-amount fees, but they add up over time. They can include voicemail, mail server, membership, minimum monthly usage, premium text message, or simply “other” fees. These aren’t always illegal, but you have the right to contact your phone company and ask to cancel or negotiate a better deal.
- Modem fee. Many internet providers charge broadband customers a monthly fee to rent a modem. You can avoid this by purchasing your own. It will most likely pay for itself in less than a year!
Ask These Questions When Buying a New Car
"What's my out-the-door price?" or “What other fees will I be charged?”
Usually, up to the point of signing the vehicle purchase contract, you’ve only been discussing and negotiating the price of the car. However, there are always additional fees to pay—some legitimate and unavoidable, others questionable or negotiable. Fees to expect include sales tax, registry and new license costs, tire recycling fees, and a documentation fee.
“How much is your documentation fee?”
“Are there any dealer-installed options on the vehicle?”
“What tax credits are available for this vehicle?”
“How many miles are on the vehicle?”
“Can you deliver the car?”
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