How Many Credit Cards Should I Own?

Hopefully, you’re working hard to keep a high credit score by using your cards and paying on time. You may be wondering, though, if more is better. Is several credit cards and more available credit a good idea? Or, are too many cards a liability to your score? 

Read on for the answers to all your questions. 

How your credit score works 

Let’s explore the major components of your credit that credit scoring agencies, like FICO and VantageScore, use to calculate your score: 

  1. Your payment history. The timeliness of your payments comprises 65% of your FICO score. VantageScore calls payment history “extremely influential” in your score.
  2. Your credit utilization. Credit scoring companies look at how much of your available credit – in total and per line – you are using.
  3. The age of your credit history. Lenders want to see a long and active history of credit cards and on-time payments.
  4. Your credit diversity.  A variety of credit indicates that you are an attractive borrower.

Why have several open cards?

Over time, having multiple cards can boost your score in two important areas:

  • Your payment history. When you pay several credit card bills on time instead of just one, this component of your score will go up.
  • Credit utilization rate. FICO likes to see a low credit utilization rate. Having multiple cards lowers this number by increasing your available credit and allowing you to spread your credit use across several cards.

The right number of credit cards

There is no magic number of cards you should shoot for to achieve a high credit score. Instead, let’s take a look at the credit cards of consumers with excellent scores.

Statistics find that the average individual with a FICO score exceeding 785 has 7 open credit cards. The average credit account is 11 years old and the most recently opened account is 28 months old.

While it may be OK to have a few cards, having lots of NEW cards probably won’t help you achieve excellent credit.

When not to open new cards

If you’re planning on taking out a large loan within the next year, applying for new cards can hurt your score. Here’s why:

  • Hard checks. When you apply for a new credit card, your credit history gets pulled. Lots of “hard checks” can negatively affect your score.
  • Your credit age will decrease. The age of your credit is determined by taking an average of the age of all your cards. By opening lots of new cards, you’re bringing that overall average down, and therefore hurting your score.
  • Your credit variety will decrease. Opening more unsecured cards with revolving credit will lower your credit variety because you’ll now have more unsecured lines than other types of loans.
  • Too much open credit. Lots of open credit will negatively affect your VantageScore. This score is used for auto loans and other large loans; though most mortgage lenders only consider your FICO score.

Keeping your credit score strong can positively affect your finances for years to come.

Your Turn: How many credit cards do you own? Do you think this number is too few or too many? Share your thoughts with us in the comments!

 

SOURCES:

https://www.bankrate.com/credit-cards/how-many-credit-cards-is-too-many/

https://www.google.com/amp/s/lifehacker.com/how-many-credit-cards-should-i-have-1658094283/amp

https://www.creditcards.com/credit-card-news/too-many-cards-1586.php

https://www.nerdwallet.com/blog/finance/too-many-credit-cards-hurt-fico-score/

https://www.google.com/amp/s/www.creditkarma.com/credit-cards/i/how-many-credit-cards-does-the-average-american-have/amp/

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BeMoneySmart: Help Your Kids Resist Impulse Spending

When it comes to being Money Smart, impulse spending is our common enemy.

Every parent knows it doesn’t take long for children to learn that the best part of having money is spending it.

When it comes to being Money Smart, impulse spending is kryptonite: the enemy we all have in common.

If you don’t believe it, consider how much money you make in one year and how challenging it is to achieve your financial goals or make ends meet.

Now consider the fact that 90% of us make occasional impulsive purchases while 40% of all consumer spending is impulse buying. In grocery stores alone, 20% of all items are bought the same way: on impulse. And the younger the shopper, the higher the number.

It’s no wonder that when it comes time to wait in line, grocery stores squeeze us into narrow checkout aisles that are jam-packed with magazine headlines, cheap toys and every type of candy imaginable…right at our children’s eye levels.

Teaching our kids how to avoid the pitfalls of impulsive spending will help them make smart decisions their entire lives. There’s really no age that’s too young to learn about the dangers of impulse spending. With businesses and marketing professionals constantly dreaming up new and inventive ways to make any child with a dollar salivate, the right time to start is now. Here’s how.

TALK ABOUT MONEY

Sounds like a no-brainer, right? But regularly talking about money is a great way to not only help your kids learn what money is and how it works, but how to develop a healthy relationship with it.

If you find these conversations difficult to start because your child is very young, try a more hands-on approach.

The next time you’re at the grocery store with your child, ask them if they know why items cost different amounts of money. Help them understand why you, as a parent, need to think about the price of each of the items you’re buying. Show them your shopping list so they can see how much time and effort went into it. You can even make a game out of shopping by involving your child in your grocery decisions.

SET AN EXAMPLE

Most of our lives are filled with moments that demand patience and restraint in the face of making impulse purchases.

But here’s the good news: that’s great parenting. Once you invite your children into your grocery shopping, you’ll find endless educational opportunities.

Show your kids how you avoid impulse spending temptations at the checkout. Use coupons in front of them. Commit to not buying things you don’t need or can’t afford, especially in your child’s presence. If you’re trying to decide on a purchase, include your child. Encourage them to help you weigh the pros and cons.

Here’s an old classic almost every child will find relatable:

“I wish I could buy that but I don’t have enough money.”

ALLOWANCE AS A TEACHING TOOL

Kids crave responsibility. An allowance can be a useful way to empower your child with the opportunity to make their own financial decisions and accept the consequences that come with them.

What’s the right amount of money for your child’s allowance? That’s up to you. Allowances can come with their own challenges so it’s important to establish an allowance system that works for your entire family.

Here’s a simple rule of thumb for teaching a child the value of avoiding impulse spending: aim for providing your child with enough money to get some of what they want, but not enough to escape making tough decisions.

In other words, set the stage for impulse purchase decisions that mirror lessons and emotions grown-ups deal with daily.

INCENTIVIZE AND REWARD

And no, this is not the same thing as a bribe. Incentives and rewards establish frameworks, beforehand, that empower kids to make smart decisions. Bribes merely pay kids off in a given moment, with little to nothing valuable learned. Here’s an example:

“In our house, cleaning the attic earns $5.” vs. “If you’ll clean the attic like I asked you to, I’ll give you $5.”

See the difference? Here’s a fun, educational activity that puts an incentive and reward framework into action:

When at a shopping location together, give your child a designated amount of money to buy something, like a piece of candy or small toy. Tell your child that they are going to be in charge of buying what they want with the money you’ve given them. And here’s the fun part…

Inform your child that whatever they don’t spend, they get to keep for the next time you come back or for any other reason. It’s a great way for your child to learn the ups and downs of spending impulsively vs. having money in their pockets. You may even learn a few things about your child along the way.

PRACTICE, PRACTICE, PRACTICE

Like anything worth doing, helping your kids learn to avoid impulse purchases requires practice. Lots and lots of practice. After all, this isn’t just about making isolated financial decisions. It’s about empowering your child with a lifetime of smart, financial behavior.

Fortunately, you’re not alone. UCCU’s award winning BeMoneySmart program offers a lot of enjoyable ways to incentivize and reward your child’s smart spending and savings habits.

For example, when you open a SmartSaver Rewards account for your child, UCCU will give your child their very own SmartSaver Rewards deposit card. Every time your child makes a deposit (regardless of the amount), UCCU will punch the card, moving your child closer and closer to cash rewards.

The more deposits your child makes, the better the reward, giving your child more reasons than ever to avoid the temptations of needless spending.

For older kids who need a little extra motivation (like your teenager), consider opening a BeMoneySmart checking account that comes with its own VISA debit card. And before you drop this article in terror, consider this: a debit card enables you, as a parent, to monitor every transaction your child makes. You certainly can’t do that with cash. Monitoring and discussing your teenager’s spending can be an essential step in helping them learn to curb impulse spending on their own.

THIS IS JUST THE BEGINNING

The more you work with your kids now, the better equipped and more empowered they’ll be to resist pointless spending for years and years to come. And whenever you need a little (or a lot) of help, we’re ready.

UCCU’s BeMoneySmart youth banking program is a fun and free resource that can help every child in your family learn to make smart decisions and master their spending and savings.

And for your kids who are skeptical about education being fun, you can simply watch The Smart Family, a short web series that follows one family’s hilarious adventures to becoming Money Smart. Every video is short, funny, and educational.

But don’t worry. We won’t tell your kids if you don’t.

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Getting the Most out of Youth Accounts

Managing money is a foundational life skill. That’s why it’s best to give your kids a head start on money management and saving.

UCCU is proud to offer specialized saving accounts for kids. Our Be Money Smart program is geared for children, youth, and teens aged 0-18.

Youth savings accounts offer no annual fees, competitive interest rates and quarterly dividends.

What better way to start saving for your future than with FREE money? Open a BeMoneySmart Savings Account before your child’s first birthday, and UCCU will make the first deposit of $10!

When your child opens a savings account, UCCU will give them a SmartSaver Rewards deposit card. Every time they make a deposit, we’ll punch the card and they’ll move closer to cash rewards. The more punches saved… the better the reward.  It’s the perfect way to help your kids learn saving habits and how to set and achieve saving goals.

Teenagers need a sense of independence. To help them gain that, teen account holders are eligible for a debit card with maximum daily limits that are set by parents/guardians.

Ready to open an account for your child(ren)? Does your child already have one? Here are three ways to ensure that he or she gets the most out of their new or existing account:

1.) Set a goal

Let your child use this opportunity to save for something big. Together with your child, create a long-term goal, like saving up for a first car. Also create a short-term goal, like a new hoverboard. Set a date for when you hope to hit your goals.
Next, set up a savings calendar for illustrating how much money needs to be saved each month to reach the intended target on time. Discuss ways to add to the savings.
2.) Bank together
If this is your child’s first time owning an account, she’ll need you to show her the ropes. Take your child along when you stop by UCCU to deposit her savings and show her how it works. If your child asks you to withdraw money from her account, let her see how this translates into a dip for their savings.
When helping your teen child, you’ll need to walk him or her through that first deposit and withdrawal. After that, leave it to them. Make sure they understand that every swipe of their debit card means a dent in their account.
It’s also a good idea to warn kids of all ages about security. They should know to never share their account information with anyone and to keep their debit card in a safe place.
3.) Monitor your child’s activity
Always keep an eye on your child’s account. If your child is depositing less than planned, or your teen is maximizing his daily ATM allowance, speak to him about money management and impulse purchases.
Every financial lesson you teach your child today equips them with skills for a lifetime.
Your Turn: How do you maximize the benefits of having a youth account for your child? Share your best tips with us in the comments!
SOURCES:
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Energy Saving Tips – What to Look For When Buying New Appliances

There’s no getting away from the fact that our dependence on energy increases daily. With energy-dependent technology driving our lives, ecologists continue to search for ways to save our environment. Focusing on energy-efficient appliances is one way to do that.

Your monthly electric bill may not itemize the specific usage of each appliance in your home. If you are interested in a breakdown, though, you can ask your local electric company for a listing. But about 30% of the charges on your statement stem from your electrical appliances. That’s why the government, as well as the majority of appliance manufacturers, encourage consumers to replace standard devices with new energy-saving ones.

So, if your dishes aren’t coming out clean after a run in the dishwasher, or if the ring around your shirt collar has not disappeared after a hot laundry wash, you may be in the market for a new appliance.

There could be some good years left in that 10-year-old refrigerator or oven. But, generally speaking, prices for electrical appliances have come down across the board over the years. And once you consider the cost of a new part for your old apparatus, plus the charge for the visit, it just might be worthwhile to chuck the old and buy new.

It’s also worth keeping in mind that the new energy-efficient appliances save you money on a monthly basis because they use far less electricity. They also help the environment by cutting down on greenhouse gases emitted into the air.

What is Energy-Efficient?

So what does it really mean if an appliance is energy-efficient? In simple terms, it means the process used to make the appliance function – spin, clean, cool, heat, etc. is using less energy. This can be achieved in a number of ways, and manufacturers are always adapting new techniques, such as using renewable sources of energy like water or sunlight.  

Now that you have decided that a modern and energy-efficient refrigerator is what you need, how can you be sure you’re choosing the best product at the most reasonable price?

Here are some tips to guide you in your search:

  1. Determine the total cost. Since the purpose of your new purchase is to save on monthly energy costs, the first thing to consider is the operating costs.  That, along with the actual purchase price, should give you the real cost of the appliance.
  1. Look for the energy rating. There are several reliable rating services that provide information about appliance energy consumption. The federal government uses the yellow and black Energy Star Standard sticker to inform consumers about operating costs and annual energy consumption. This helps buyers compare one clothes dryer to another. Energy Star tests each item independently.
  1. Select the right size appliance. Running a large machine – even the most energy-efficient one – uses more electricity than a compact one, so don’t buy something bigger than what you need.
  1. Look for economy choices. Many dishwashers and washing machines offer a variety of different cycles. If you find one with an economy cycle, that will save you money when you need to wash only a small load of clothes or dishes.
  1. Stay Simple. When it comes to choosing a refrigerator, go easy on the add-ons. According to one independent rating service, a water dispenser or ice maker uses a lot of extra electricity. Also, top-to-bottom fridge/freezer models are more energy-efficient than side by sides. The auto-defrost feature uses heat to speed up defrosting and makes running the refrigerator less efficient.

This holds true for self-cleaning ovens as well, so consider the value in this upgrade.

  1. Contact your utility supplier for the latest ways to save on utility charges. With today’s smart devices, appliances can be programed to use less energy at certain times of the day.
  1. Check out your home. If you have the time and the extra cash, it may be worthwhile to call in a home assessor to help identify ways you can save on your overall energy and water costs.  He or she may be able to tell you how to use your appliances at the most energy-efficient times of day.
  1. Comparison shop. Never buy the first model you see. Household appliances are not cheap, and to find the most energy efficient one at the best price, shop around. Well-known name brands are always more expensive than lesser-known companies. However, they don’t always offer a better product. If you check carefully, you may find that heating element in the name-brand laundry dryer is exactly the same as the one in a model selling for hundreds of dollars less. Compare the details. You might be surprised.

SOURCES:

http://matteroftrust.org/13895/energy-efficient-appliances-and-their-benefits

https://energy.gov/energysaver/shopping-appliances

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How Can I Shop Safely On Black Friday?

Most people love the prospect of saving big on Black Friday sales, but are worried about the risks.  Between the danger that crowds pose and the possibility of your credit card being compromised, there’s a lot that can go wrong.  Black Friday does pose some serious risks to shoppers, but with the proper safety measures, you can protect yourself without missing out on the biggest shopping day of the year.

Here’s how:

1.) Plan ahead

Planning ahead means you’ll spend less, be out of line faster and decrease your risks. Sites like BlackFriday.com can help you plan your day and find the best deals.

2.) Credit card only

Credit cards are the best way to shop when there are high risks to your safety. You can always dispute a charge; you can never reclaim stolen cash. Also, keep your card as close to you as possible. If using a debit card, cover the payment terminal with your other hand when inputting your PIN.

3.) Shop with a friend

The mall may be crowded, but a determined criminal can find a way to corner you and empty your wallet or take your bags. Stick with your friends and never enter deserted areas alone.

4.) Keep your cool

Nothing you can purchase on Black Friday is worth your health or safety. Avoid all scuffles with fellow shoppers.

5.) Move your car

If you spend the day at the mall and routinely drop off your bags in your car, it’s best to move your car to a different spot. Thieves watch shoppers leaving the mall with lots of bags and follow them to their cars. If they see you dropping off your goodies and then heading back to the mall, they’ll consider making off with your things. If you drive off, though, they’ll think you’re leaving and won’t follow you.

6.) Online safety

Black Friday and Cyber Monday are notorious for online scams of every kind. Here’s what to remember when shopping online:

A.   Beware of phishing scams

Be alert for suspicious looking emails and links. Delete anything that doesn’t look right.

B.   Make sure your connection is secure

Verify security by looking for the padlock icon on the address bar and by using sites with an “S” tacked on to the “http.”

C.   Pay securely

Only use trusted payment systems like PayPal or GoogleWallet. Shop from sites you trust and make sure they’re legitimate by checking the URL and looking out for sites that end in .org or .net. Never agree to wire money for a purchase.

D.   Strengthen your system

Before shopping online, check that your device’s security systems are updated with the most recent protection and security patches. If you’re using Wi-Fi, make sure the network is secure and requires a password to join.

Your Turn: Do you have any other tips for safe shopping on Black Friday Cyber Monday? Share them with us in the comments!

SOURCES:

https://www.google.com/amp/s/venturebeat.com/2014/11/28/5-things-you-can-do-to-stay-safe-shopping-online-on-black-friday/amp/

https://www.moneycrashers.com/black-friday-tips-for-safe-shopping/

https://www.google.com/amp/www.telegraph.co.uk/black-friday/0/11-tips-for-staying-safe-shopping-online-on-black-friday-and-cyb/amp/

https://www.google.com/amp/mashable.com/2016/11/21/online-shopping-safety-black-friday-cyber-monday.amp

https://www.consumersafety.org/news/safety/stay-safe-shopping-on-black-friday-and-cyber-monday/

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How Low Can You Go? Give Your Child The Grocery Challenge

Do you ever feel like all your money goes toward groceries? Out of all the non-fixed expenses a household can have, food costs take the biggest bite out of the average monthly budget. Understandably, trying to trim the family’s grocery bill is an ongoing battle for most of us. Give your kids a leg up on this lifelong skill by challenging them with this fun and educational activity.

Materials needed:
  • Coupon circulars and/or newspapers
  • Writing materials
  • Calculator
  • Piggy bank
Instructions:
  1. Give your child a reasonable budget to be used for a week’s worth of groceries for your family.
  2. Instruct your child to create a shopping list. Let them know they will be tasked with going “shopping” for every item on the list while spending as little as possible. All extra money should go into the piggy bank.
  3. Tell them to be sure to include all meals, drinks, snacks, ingredients, pantry staples, pet food etc. on their grocery list.
  4. Making no mention of the coupons, have your child complete the task with all the materials provided. After creating the list, let them “shop” for everything by adding the costs of each item and giving you a “receipt” for the total sum. If your young shopper is unsure of an object’s price, they can ask you for help.
  5. Stress that the challenge in this activity is to see how far the budget for a week’s groceries can go.
  6. Introduce the coupons, but explain why buying something you have no need for just because there’s a coupon isn’t smart. Let your child decide which coupons are worth using.
  7. Watch your child use their budgeting skills and smarts to “shop” for the family and try to save as much as possible.

When the task is complete, review the results with your child. How much money went into the piggy bank? Were items written on the grocery list because of available coupons, or were the coupons only flipped through after the list was already made? Did your child first create a menu for the week before writing the list? Did they omit anything important? What did they learn from this activity?

Variations:
  • You can do this in real life, having your child create a shopping list and then taking them to the store. Have them actually select the groceries and make the purchase of all the week’s groceries, trying to spend as little as possible.
  • For younger children, you can create a “store,” using fake money, a toy cash register and a play shopping cart. Place a few items on a table, making sure there are clear prices on each item. Have your child “go shopping” with the money that’s available, making sure they are aware that they must have enough money to pay for every object they put in their cart.
Your Turn:How do you teach your kids about saving money on groceries? Share your best tips with us in the comments!
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Advice From The Bottom: What Losing A Million Dollars Taught Entrepreneurs About Finance

A million bucks sounds, to most people, like absolute security, because being a millionaire seems like it would put you in a strong financial position for life. If your car were to break down or you lose your job, a million dollars could solve those problems pretty easily.

Unfortunately, there are no guarantees in personal finance. Even a million dollars can go away quickly through a string of bad luck or poor decisions. Learn the lesson from these ex-millionaires to keep a tight grip on what you have.

1.) A million dollars can’t sustain a millionaire’s lifestyle

When most people think of a million dollars, they usually don’t think of the money in their accounts. They think about big houses, flashy watches and fast cars. Those things are part of the lifestyle, and they’re part of what makes the dream of a million dollars so desirable. The problem is, a million dollars disappears pretty quickly when it’s being used on those things while trying to grow a business.

Take the example of Joshua Lee, an internet entrepreneur from Texas, who had accumulated that coveted seventh figure at the young age of 28. Like most 28-year-olds with extra cash, he bought cars and watches, treated his friends to expensive nights out and did all the other things millionaires are “supposed” to do. His first million didn’t last him long at all.

Lee was able to recover, thanks to hard work and good fortune, but he offers a valuable piece of advice on the topic. Once you’ve decided on a goal, whether it’s having a million dollars in your account or getting debt-free, think about the parts of that goal that make it desirable. Once you’re 80% of the way there, take some time to re-evaluate. Figure out if the properties of that goal are sustainable. A million dollars looks and feels a great deal different coming from $800,000 than it does from $20.

2.) Keep an eye on the people keeping an eye on your money

Most people who get a million dollars do so by doing something other than working with finances. Even those who do, like successful investment managers, probably have someone else looking out for their money. Top earners in most industries have IRAs and other long-term investment accounts that are watched over by a third party. When there’s that much money, a professional can be indispensable in tax planning and long-term return maximization.

A millionaire can be too trusting, though. Millionaire retiree Jay Cee, a California resident, found out the hard way that not everyone who claims to be looking out for your best interests really is. He transferred his 401(k) from a previous employer and worked with a financial professional to do so. She encouraged him to put his money in a specific set of investment vehicles as part of an IRA rollover. The deal looked incredible, since there was no line on the contract for a commission. When he asked about her compensation, she told him that the company took good care of them.

That part was certainly true. The investment company charged nearly 3.5% in management fees, while earning a return of less than 4%. Jay’s retirement nest egg was growing at less than half a percent. He would have been better off putting his money into a basic savings account. Over the course of the year that his IRA was held by the company, they made $12,000 from his account, after just one 30-minute meeting. Talk about expensive advice!

Remember the golden rule of economics: If you’re not paying for a service, you’re not the customer; you’re the product. Make sure you know how everyone who gives you financial advice is compensated, and insist on seeing a detailed breakdown of fees before you sign any investment agreement.

Of course, the proper lesson isn’t one of exclusive self-reliance. Most people aren’t financial professionals. They don’t have the education or experience necessary to make expert, long-term financial plans. Yet people who make a great deal of money tend to see themselves as invincible. That’s how someone like former Major League Baseball pitcher Curt Schilling went broke shortly after leaving baseball. Schilling invested his money without a proper understanding of risk, then lost everything when the one company he’d backed went bankrupt. Getting advice is indispensible; just make sure it’s advice you’re paying for up front.

3.) Keep an eye on risk

There’s a certain glamour in having nothing to lose. When you’re starting a small business, you can throw caution to the wind – to a certain extent. After all, if your new business goes belly-up, you haven’t lost more than you’ve put into it. It’s fine to swing for the fences when you’ve got a fledgling start-up. That changes a little bit once you’ve experienced some success. You need to take steps to protect what you’ve got.

Part of protecting what you have is realizing that it can be lost. If you’re a successful entrepreneur, you have to realize that success took hard work to build, and without that hard work, it’ll go away. Risks to your business are always present, and you have to work hard to minimize those risks.

That’s one of the lessons to be learned from the bankruptcy of rapper Curtis Jackson, III, known by his stage name, “50 Cent.” Jackson was one of the most successful figures in the music industry, yet his stage name became equivalent to his net worth in 2015 as he filed for bankruptcy. One of the reasons behind the loss was his repeated entanglement in lawsuits. Jackson never stopped acting as though he had nothing to lose, picking fights with other performers and business owners who would then take him to court. Even if he won most of the legal battles, he’d still suffer the slow loss of money in legal fees and settlements.

Once you’ve “made it,” you need to change your strategy. You can’t afford to take those same wild risks. You need to find safe investments and know when to back away from a challenge. Slow growth is better than losing it all.

Sources:

https://www.entrepreneur.com/article/249881

http://www.financialsamurai.com/how-to-lose-a-million-dollars-and-live-to-see-another-day/

http://www.financialsamurai.com/recommended-net-worth-allocation-mix-by-age-and-work-experience/

https://www.entrepreneur.com/article/248863

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How To Get By In An Emergency: Personal Loan Or Credit Card?

Unexpected expenses are, by nature, unplanned … and costly.

While it’s best to have a rainy-day fund, for many this is just a dream.

If you’re unsure how you’d survive a financial emergency, you’re not alone. A survey found that 47% of Americans would borrow for a $400 emergency.

As a credit union member, you have borrowing options. Two popular choices for emergency funding are personal loansand credit cards.

Here are several pros and cons to each.

1.) Limits.

Credit cards have credit limits in the thousands, enough to cover a small emergency. The value of credit cards is their convenience; there’s no need for a new loan each time you incur an expense.

However, many people don’t have sufficient credit to cover major financial emergencies and instead choose to utilize a personal loan.

Your personal-loan approval amount depends on several factors: income, credit score and other assets. For borrowers with good credit history and a strong ability to repay, these loans could be $50,000, enough for serious unexpected expenses.

2.) Repayment options.

Credit card repayment is handled monthly. There’s a minimum payment and no fixed term to repayment; if you continue charging and only pay the minimum, paying off your loan can take forever.

In contrast, a personal loan, includes a fixed monthly fee that lets you repay the loan in a set amount of time. It’s amortized so you’re making equal payments of both interest and principal over the loan’s life. There’s also no penalty for early repayment.

 

3.) Interest rates

Credit card interest rates can be high; the global average is 15%. Some credit cards fluctuate their interest rates based on the prime interest rate, and they can alter your rate if your credit score changes dramatically, making it difficult to plan your financial future.

A personal loan has a fixed interest rate that never increases if you don’t miss a payment. You can make a future budget that involves paying a fixed amount over approximately five years.

Interest rates on personal loans are usually lower than on credit cards. For people with average credit, interest rates can be 5% lower; for those with better credit, it can be even lower.

 

As a member of UCCU, you have access to competitive rates for personal loans. If you’re in a hard place, UCCU can help. Call, click or stop by today!

Your Turn: What’s your emergency financial plan? How would you cover an unexpected $400 expense? If you’ve had a financial emergency, what advice can you give others?

Sources:

https://www.nerdwallet.com/blog/loans/cheap-personal-loans/

http://www.valuepenguin.com/average-credit-card-interest-rates

https://www.nerdwallet.com/blog/credit-cards/credit-card-issuer-raising-interest-rate-5-times/

http://www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/

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Emergency Funds – Not Just For Adults!

Divvying up your kid’s allowance into different jars, each with a specific label and purpose, has become pretty standard. Your kids probably have one jar for savings, one for spending and maybe another for giving.

What most parents and kids omit, though, is one more jar for emergencies. Yes, emergencies, even for kids. Granted, they won’t be shelling out thousands of dollars for a roof repair or a medical crisis like their parents might, but emergencies come in all shapes and sizes, and to all-sized people.

No one needs convincing that having funds for an unexpected expense is crucial to financial security. In fact, building an emergency fund is the first of Dave Ramsey’s famous seven baby steps for getting out of debt. It’s definitely something you want to build into your kids’ psyche. So why not start now?

Some examples of small and not-so-small emergencies for children are:

  • The pair of new sneakers left in the locker room after PE, now gone forever
  • The shattered car window from an overeager, but poorly aimed, baseball
  • The huge data plan overage charge
  • The misplaced spending money for an afternoon at the mall

So yes, kids have emergencies. Helping them set up a fund to pay for some of these mini-crises instead of bailing them out each time will teach them to be prepared.

Here’s how to do it:

  1. Help your kid add an extra jar to their existing set and mark it for emergencies.
  2. Allocate a portion of your kid’s weekly allowance or chore payment to the emergency fund.
  3. With your child, create a goal for the new jar. For a younger child, $25 should be enough, with the number steadily growing to about $100 for preteens.
  4. Once the jar has hit its target, revert back to the original division of money among the other jars.

The next time your child has a financial emergency, have them pay for all or part of it. It’s okay to share the costs for larger emergencies, or even for smaller ones. Your child will still learn responsibility by coughing up some of the funds on their own.

These should be situations due to negligence, irresponsible behavior or simple forgetfulness on the part of your child.

When the fund is depleted for an emergency, be sure to encourage them to replenish it by going back to step two.

Remember; it’s baby steps like these that will prevent your child from having to crawl their way out of debt later on in life.

Your Turn: How do you teach your kids about the importance of planning for emergencies? Share your best tips with us in the comments!

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Credit Cards or Debit Cards – What’s the Smartest Swipe?

Most people own at least one debit card and at least one credit card. They know they have them, but they may not know about all the differences that exist between using a credit card and a debit card.

Believe it or not, there are many. The most basic difference is the fact that each time you use a credit card, you’re borrowing money. A debit card, on the other hand, simply transfers your own money from your checking account to the vendor you’re paying.

When you use your credit card, your credit union is lending you money, which you’ll need to pay back along with interest. A debit card takes funds directly from your account similar to the way that checks do – only quicker. Some processing terminals will require a PIN and some will require signature.

Both credit and debit cards are convenient, quick and easy. They’re also safer than cash, because cash cannot be replaced if lost or stolen.

Which one should you use? The answer depends largely upon your lifestyle.

1.) Budgeting

Credit cards allow you to buy now and pay later. Unfortunately, this can turn into a nightmare because of the obvious financial pitfalls in being able to purchase things you don’t have the money for now. If you think you’ll be tempted to overspend, regular credit card use may not be ideal for you.

However, it’s nearly impossible to incur thousands of dollars of debt through debit card usage. Most credit unions will cover purchases that put your account into the red, but only up to a few hundred dollars. If this happens, you’re accountable for your purchases and charged an overdraft fee.

2.) Safety

The convenience of debit cards can make fraud more likely. Unless reported promptly, debit card theft or fraud can quickly drain your account. Credit card companies are held to strict liability laws: Consumer liability for credit card fraud is limited to $50. If you report suspicious charges in a written request within 60 days, the company is obligated to investigate and restore the funds to your account if the charges are determined to be fraudulent.

For debit card fraud, your liability is $50 if you notify the credit union within two days of seeing the fraudulent charges. After two days, your liability increases to $500. If you report the activity 60 days or more after it happened, you may be liable for all of it. Although many credit unions have implemented voluntary plans to limit customer liability to $50, there is no federal law requiring them to do so.

In addition to stricter liability laws, credit cards offer consumer protection on purchases. You can always cancel a charge if you are the victim of an online scam or bought something that was never delivered or wasn’t what you expected. This makes credit cards the ideal choice for large or fragile purchases that will be delivered to your home for additional insurance on the purchase.

3.) Rewards

One major draw for credit cards is the points awarded for purchases. That’s a strong advantage over debit cards. The ability to earn airline miles and the lure of a possibly free flight are attractive to many consumers. Of course, you may be paying for those miles with a high interest rate or an annual fee.

Don’t get hooked on the points. Research each card carefully to make sure you’re really getting your money’s worth.

4.) Credit History

Another important benefit to using a credit card is establishing or restoring a positive credit history. Debit card usage may encourage responsible spending, but a major factor in measuring your credit score is your credit card usage. Occasionally using a credit card and paying your bill on time can really improve your credit rating. This, in turn, improves the likelihood of earning favorable terms for home loans, auto loans, personal loans and more.

5.) Annual Fees and Interest

A strong disadvantage of credit cards is the money you spend to keep them. Some cards charge an annual fee, and the interest on your credit card bill can easily be a third of your payment or more. If you’ve overspent one month and are unable to cover the entire amount due, you may need to pay only the minimum payment. More of your payment will soon be going toward interest than toward lowering your bill. This makes the next payment higher, and again you’ll be paying a significant portion toward interest. This is often how credit card debt spirals. Interest becomes a huge hurdle, making it nearly impossible for the consumer to make headway.

If you don’t think you will be able to pay your bills in a timely manner, keep credit card usage to a minimum.

As a UCCU member, you already have access to fantastic rates and optimal security. To find out which debit or credit card is best for you, call, click or stop by today!

Your Turn: In what situations do you prefer to use a debit card or a credit card? Why do you choose one over the other? Share your thoughts with us!

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