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Monthly Archives: September 2017
Ways to use debt consolidation to reduce your debt
If you added up all your debt, how high is that number? And do you think it’s more or less than say, your best friend’s? Or maybe your boss’s? According to the 2016 American Household Credit Card Debt Study, the average household has racked up a whopping $135,924 in debt. Yeah, a big chunk of that is your outstanding mortgage, but it also includes an average credit card debt of $16,425. Did you know that the interest alone on a revolving credit balance of that caliber could cost you almost $1,300 per year– how crazy is that?
The cost of debt
We all know that debt doesn’t only come in the form of credit cards. It includes student loans, mortgages, car payments, medical payments, personal loans, and any other type of money borrowing or payment plan arrangements. All debt, however, is not created equal. While subsidized student loans might be 6.8%, unsubsidized loans could be as low as 3.76%. Compare that to credit card debt at 15% – 18% or more. An auto loan might be 5%, and a mortgage could cost around 4%.
If there is a type of “good” debt, it would be low interest and definitely used to finance something that will provide value in the future, e.g., your education or a home. “Bad” debt, on the other hand, is high interest, used to purchase an item that has no long-term value or is beyond your income level, e.g., revolving credit card debt, ridiculously expensive designer clothes or a car with a monthly payment that eats up the majority of your paycheck.
What is debt consolidation?
Debt management is a serious issue and a growing concern for many Americans. We all want to honor our financial commitments, but how can we handle outstanding debt and manage it more responsibly? Debt consolidation is the act of combining multiple outstanding debt contracts. It allows you to repay multiple creditors at one time and to consolidate multiple monthly payments into one new monthly payment paid to one new loan issuer. Ideally, it should reduce your interest burden and the overall long-term cost of your debt.
Ways to consolidate your debt
If managing your outstanding debt has become too much of a challenge, as it has for many people, there are several solutions that may help you consolidate your payments, save some interest, and salvage your credit at the same time.
Debt consolidation can be a bit risky from both sides of the coin, however. Borrowing funds to satisfy your current creditors addresses one issue, but how easy is it to fall back into your old habits? It’s a serious matter for both you and any financial institution to consider. You may be confident that you’re on the path to debt-free living, but your potential loan issuer may or may not be willing to take on that risk. It’s a common reason for any potential solution to be declined, so be prepared. There are both pros and cons to each approach, so it’s critical to understand what’s at risk when it comes to choosing an option.
1. A zero interest credit card
Credit cards and revolving debt and can be double trouble if you’re trying to consolidate debt, but if you can find one with zero-percent interest, you may be able to take advantage of that introductory rate for six months to a year. Zero-rate cards target high credit score consumers, so they’re a little harder to come by. If you qualify, be sure to check the fine print for transfer fees, penalties for late payments and any other hidden charges. Consider transferring only the amount you can pay off before the rate expiration because when it does, it will likely jump to a much higher rate. If you transfer more than you can pay off, be diligent about searching for another card to transfer the balance before the rate expires. Remember, too, that opening too many new credit card accounts within a given period of time may negatively impact your credit score.
2. A home equity loan or line of credit
Do you own a home? One of the most popular ways to consolidate debt is through a home equity loan or line of credit. By borrowing against your home, you’re able to withdraw cash that can be used to pay bills that are incurring higher interest charges. You may also get a tax break, too. Be careful, though. Default on the loan and you could lose your house. And be sure to talk with your tax advisor before pulling the trigger. Equity loan interest tax deductions could be limited in some instances.
3. A debt consolidation loan
Using a debt consolidation loan to pay off your debt increases your bill paying efficiency, saves your hard-earned money from excessive interest charges, and simplifies your overall life all in one fell swoop. With 15 different creditors, each with a different interest rate and payments due on different dates, who can keep track? With a debt consolidation loan, simply pay them all off and repay one new loan. It’s one single payment on one day of the month. Easy? Yes. Does it always add up to savings? No. Make sure you do the math. You also don’t have anything to secure the loan, like a house, so it’s likely that the lender might bump up the rate just a bit, understandably so. Be sure to do your homework and shop around.
4. A loan from a friend or family member
One final way to consolidate your debt is to borrow the funds from friends or family and design a repayment plan that agreeable to both of you. There are many variables involved in this type of arrangement, including being comfortable enough in your relationship to be able to ask for and repay a significant amount of money. You must also be willing to share the full details of your current financial standing, your plan for budgeting future spending and expenses and how you envision a structured repayment plan will work. Although borrowing money from family and friends may be easier and often less expensive from that of a bank or other financial institution, it also comes with significant risks. Money often changes relationships, especially when one party feels that the other oversteps their bounds or doesn’t honor the agreement. Choose wisely and weigh all of your options. Otherwise, strained relationships may lead to very awkward holiday conversation.
The main objective of debt consolidation is to get to a point where you’re comfortable with a monthly payment that effectively reduces your debt in a reasonable amount of time. Yes, debt consolidation can help you pay off debt faster and help you avoid credit damage, but it also requires discipline and sacrifice. If you’re ready to address your concerns with debt management, talk with your financial professional to design a plan and implement a solution that works for you and your wallet.
Top 5 misconceptions about credit unions
There are lots of myths out there about credit unions. Some that, if they were true, wouldn’t make you look twice. Wouldn’t you agree? The truth is that credit unions offer the same—and often better—service, options, and conveniences than your traditional bank. So we dug deep to find the answers to all the half-truths and ugly rumors being spread in the financial schoolyard. If you need to make a choice for your financial future, you won’t want to miss this:
1. To join a credit union, you have to be employed by a particular company
You may remember that, at one time, credit unions were only offered to those working for the federal government or a particular employer. That was way back when and now credit union membership is available to a lot more people. Credit Unions now serve tons of customers including those in a specific county, community, company, profession, religious institution, school, university, labor union, and many more. With the number of credit unions available today, there’s no reason you should have any difficulty finding one—or more– that you’re eligible to join. Really, it’s not that hard.
2. Wait, there’s a fee to join?
To join a credit union, they generally require new members to purchase a “share” that’s usually priced between $5 and $25. Don’t worry, it won’t set you back too far. It actually serves as a deposit and grants you all the rights to the credit union. Good news–interest is paid like that on a savings account and unlike a fee, when your account is closed, the initial deposit, or cost of the share, is refunded back to you. How can you lose?
3. There are too few ATMs and branches available
This is probably the most ridiculous of all the complaints we’ve heard. Honestly, it’s more about education than numbers. Most credit unions participate in a co-op shared banking network, which allows their members to use the services of 3,500 sister credit unions. If you’re away from home and need to make a deposit, withdrawal, purchase a money order, or transfer money, you’re able to visit one of 5,000 branches worldwide. You’ll also have access to nearly 85,000 surcharge-free ATMs. That’s right–you won’t have to worry about losing a cent to unnecessary fees. We think 3,500 credit unions, 5,000 branches and 85,000 ATMs is pretty sufficient, but to each his own.
4. Credit unions are technologically behind the times
When it comes to credit union spending and investing their profits back into benefits for their members, technology is a priority. The fact is, many credit unions are on par, and some have even technologically surpassed many banks with the services they offer. With mobile deposits, imaging ATMs, and person-to-person payments, they’re continually evaluating their services and looking for improvements that will help their members not only make better banking decisions, but also make them with easier and more efficient transactions. Banks, on the other hand, are much better at strategically bragging on themselves, which may be one of the reasons for the common misconception. Credit unions understand the critical need of upgrading their technology and importance of being able to compete with those on the same level.
5. My money isn’t “safe” in a credit union
How many people do you think would deposit money in a credit union if their money wasn’t safe? Banks are insured by the Federal Deposit Insurance Corporation (FDIC), which means if the bank defaults, your account is covered up to $250,000. Similarly, credit unions are insured by the National Credit Union Administration (NCUA) for the same amount – $250,000. The NCUA is a self-funded, but federally guaranteed deposit insurance, so you can rest easy. Your money is as safe as it would be in a bank.
The six most common financial mistakes college students make
If you’re a college student, managing money on your own is just one of many brand new adventures. The combination of newly found freedom and a lack of money management experience can result in some costly, real-world fumbles. At a time when you’re just beginning to build your financial reputation, steer clear of these six common money mistakes:
1. Borrowing too much
If you’re borrowing money to pay for college, make sure those funds are dedicated solely to school expenses. Remember that once you graduate, you’ll have to repay that debt. Don’t compound it by financing your annual Spring Break trip just because it’s listed on the school calendar. Make smart decisions about what qualifies as an educational expense and only borrow the amount you really need.
2. Not living on a budget
Creating and living on a budget is a must for a college student living the college life. There’s likely a limited source of income that includes an allowance (if you’re lucky), wages, and savings that need to be closely monitored and spent with care. Go old school and use a notebook, a spreadsheet or an online budgeting tool to help manage your budget and keep track of your monthly spending. Otherwise, you’ll be living a life of ramen noodles.
3. Relying on credit cards
It’s easy to fall into a trap with credit cards. If you use your credit card to pay for an item, the odds are you’ll spend money that you don’t have and rationalize it by saying that you’ll pay it off by making monthly payments. Use a credit card if you need the item, it fits into your budget, and you can pay it off at the end of the billing cycle. End of story.
4. Stopping the scholarship search
It’s true that many scholarships are awarded to incoming college freshman, but there are a significant number of scholarships available to current college students. Most people hit the snooze button sophomore year and miss out on available cash. Continue to search for and apply for scholarships and grants throughout your college career so that you can fund your education and keep your debt at a minimum.
5. Skipping class
Whether it’s partying too hard, oversleeping, unpreparedness, or just plain laziness, there’s no real justification for skipping class. When you’re not in attendance you’re not learning the material, which obviously increases your chance of failing the class. Before you graduate, you’ll need to repeat the class and PAY FOR IT AGAIN. You don’t need a Ph.D. to know that’s a total waste of time and money.
6. Missing deadlines
Maybe it’s buying game day tickets in advance to take advantage of the discount, being conscious of the last day to drop a class so you’re still eligible for 100% refund, or returning rented textbooks on time in order to avoid the late fee. Whatever the case, there’s money at stake when you miss deadlines. Most of the time it’s because you’re disorganized. Get a calendar, mark the dates as soon as you know them and review your calendar daily. Huh, look at that, money in your pocket. Shocker.
The bottom line
We know, you’ve heard it a hundred times…”College life is an exciting experience, but it also brings a new set of responsibilities.” If you take away anything from this, we hope you’re just more aware of these financial pitfalls and do something to avoid them. We promise we won’t let on that we gave you any advice and when you’re finally feelin’ good about your debt management, you don’t even need to thank us!
Equifax Breach: What You Need to Do Right Now
You’ve probably seen the news regarding the recent data breach involving Equifax. Even though this is not a Georgia’s Own event, we want to make members aware of the facts as well as recommend some resources to help you respond to the data breach.
Chances are good that the Equifax data breach affects you. What do you do next? The short answers: Consider a credit freeze. Scrutinize your credit statements. And check your credit reports from all three credit bureaus.
Equifax says hackers used a website application vulnerability to access the personal information of about 143 million U.S. consumers, or more than half of the country’s adult population. Credit bureaus such as Equifax are an especially sensitive target because they handle detailed financial records, and it’s nearly impossible for consumers to avoid credit reporting. Every time you apply for credit, the personal data — including your name, birthdate and Social Security number — you share can be stored by a reporting bureau.
Most credit card issuers and lenders report consumer activity to all three major U.S. credit bureaus, and your data is likely duplicated at Experian and TransUnion. There’s no reassurance in the fact that only one bureau was hacked.
“On a scale of 1 to 10, this is a 10, and that’s because of the quality of the data … your Social Security number is the skeleton key for your identity,” said Adam Levin, founder of CyberScout, a company offering identity theft and data breach defense services.
Freeze your credit for the best protection
Credit freezes prevent stolen information from being used to open new accounts in your name by restricting access to your records. Without access to your credit history, most creditors won’t open a new account.
“We have to assume that our personal information is exposed and act accordingly,” Levin said. He said a credit freeze has become “a critical thing to do.”
Credit expert Barry Paperno, who blogs at Speaking of Credit, agreed: “That’s the most extreme method, but it’s also the most effective.”
But this most effective method will cost you in money and inconvenience.
A freeze might cost you a small fee, which varies from state to state, but it’s better than a credit monitoring service. A freeze can prevent fraud, while monitoring alerts you fraud might have happened. It’s the difference between using a deadbolt to keep thieves out rather than a security camera to catch them after the fact.
You’ll also have to pay to lift the freeze each time you apply for credit or need to allow a potential landlord or employer to check your credit. You’ll receive a PIN to “thaw” your credit. Keep it in a safe place.
Here’s how to request a freeze:
- Equifax: Call 1-800-349-9960 or go online
- Experian: 1‑888‑397‑3742 or go online
- TransUnion: 1-888-909-8872 or go online
Even with your credit frozen, you’ll still have access to your credit records and scores. If you don’t already have a way to regularly monitor your score and report information, consider signing up before you place a freeze. Some credit card issuers and many personal finance websites offer them for free. Watching for a big, unexplained change can alert you to potential fraud.
Place fraud alerts if a freeze is too much
If you don’t want to lock out all creditors — perhaps you’re in the middle of mortgage shopping or refinancing — you can place a 90-day fraud alert on your credit. This tells potential creditors to verify your identity before issuing credit in your name.
Contact one of the three bureaus, and it will notify the others.
Monitor your own credit
You’re entitled to at least one free credit report from each credit bureau every 12 months via AnnualCreditReport.com. If you haven’t accessed your credit reports within the past 12 months, do it now. If you’ve reviewed them recently, placing a fraud alert on your credit files allows renewed access.
Use your reports from the bureaus, and any free score and report services you have, to watch for:
- New accounts that you didn’t open
- Credit inquiries that don’t match when you applied for credit
- Balances that don’t match your statements
Deal with your credit cards
Freezing keeps new accounts from being opened, but doesn’t stop fraudulent charges on an existing account. Take these steps to protect yourself:
- Check your email and regular mail. Some consumers whose account numbers were compromised are being notified by credit card issuers that they’ll be sent a new card and the old one will be deactivated.
- Even if you’re not notified by your issuer and you think your data wasn’t in this breach, don’t relax. Stay vigilant by checking your credit card statements for changes you don’t recognize. If something looks fishy, dig further. Often there’s a phone number listed with the merchant name for the transaction.
- Consider signing up for text or email alerts about credit transactions. Many issuers let you set them for charges above a certain amount.
If you see a charge you think isn’t yours, call your issuer right away to dispute it. Your card issuer can’t charge interest or fees on the transaction while it’s being investigated.
What was exposed? Is my data out there?
The data accessed includes:
- Information such as names and addresses, birthdates, Social Security numbers and some driver’s license numbers
- Credit card numbers for approximately 209,000 consumers
- Some documents from about 182,000 consumers’ credit report disputes, including personal identifying information
Consumers can check whether their information is affected at www.equifaxsecurity2017.com. However, the “Check potential impact” process asks you to input the final 6 digits of your Social Security number, which gives security experts pause.
Equifax also opened a call center that you can reach at 866-447-7559. It will notify the subset of consumers whose credit card numbers or dispute documents were affected by mail.
Should I sign up for the free Equifax monitoring?
Equifax is offering all U.S. consumers free credit and identity theft monitoring for one year. But the risk doesn’t disappear after a year. Someone who has your Social Security number has it — and might try to use it — forever.
The service is through TrustedID, an Equifax company. The terms of service include waiving your right to participate in a class-action lawsuit or class arbitration and agreeing to use individual arbitration. The National Consumer Law Center has called upon Equifax to strike that clause. Failing that, the NCLC advises consumers they can opt out of the forced individual arbitration by notifying Equifax in writing within 30 days.
Same Day ACH Debits Coming September 15th, 2017!
You have probably gotten used to a little lag-time between giving your account number to a merchant or biller for a one-time payment and when the item actually clears your account. On September 15th this will be changing for many of those transactions made by phone, on-line, and for electronic checks and those checks converted to ACH. The Federal Reserve will begin processing same-day ACH (Automated Clearing House) debits.
What does this mean? In the past, ACH debit transactions were processed only once daily. After September 15th, ACH debits will post multiple times per day just as credits currently do. This means that payments you make may post to your account the same day. Most importantly, many items that you currently see pending for a duration of time when logged into online or mobile banking may no longer do so. Same Day ACH Debits may also enable you to make faster on-line bill payments as well as faster crediting when you are moving money among transaction accounts that you own at different financial institutions. Your scheduled recurring items are not affected, only one-time payments.
Tips to be Prepared
- Don’t assume funds will clear the day after you make a purchase or payment. Make sure you have the money available in your account at the time you give your account number or write a check to any merchant or biller.
- Even if you write checks when making purchases in person, retailers can choose to convert your checks to ACH and now process them within hours on the same day.
- When reviewing your account balance on-line or on the mobile app, please be sure to look at the “Available Balance” amount, and not the “Current Balance” or “Ledger Balance”. Other pending transactions like debit card transactions that you have made earlier may “hold” the money from the time of authorization until the merchant processes the items. The “Available Balance” helps keep you from spending the authorized funds.
- The credit union has no control over when transactions clear your account. It depends on when the company you scheduled the transaction with processes those transactions. We also cannot guarantee your direct deposit will go into your account before any transactions are processed that day. If you have questions about your balance, please use our online or mobile banking services or contact our Member Services Department.