10 Rules For Managing Credit Cards

Call Sterling Van Dyke Credit Union at 586.264.1212 for an appointment to discuss ways we can help you plan your financial future.

Depending on your spending habits and money management skills, credit cards can be a useful financial tool or a ticket to financial ruin. If you want to be the master of your debt load, Everybody's Money magazine recommends following these key rules:

Take Inventory. How many credit cards do you have? What's the balance and minimum monthly payment on each? What's the total balance? Excluding your mortgage, or monthly housing payment, your debt payments should not exceed 10% to 15% of your monthly take-home pay. If you find that your total balance is more than you thought or can afford, it's time to initiate immediate reductions.

Check out the cost of your credit cards. What's the interest rate on each card? What's the annual fee? Does your card offer a grace period? The grace period is the length of time you have from the statement date until the due date to pay your bill in full before you're charged interest on new purchases. Typically you will have 20 to 30 days. If the card doesn't have a grace period and you carry over a balance or take a cash advance, you're usually charged interest right away.

Get one low-fee or lower-interest card and use it wisely. Too many cards can equal too many shopping sprees and result in excess in debt. Generally, if you never carry a balance, you should look for one card with a low annual fee. If you do carry a balance, search for a card with a lower annual percentage rate (APR). A good source for low-interest rate cards is your credit union. Credit unions historically have lower rates and fees than other financial institutions. When searching for a new card, see if you can transfer balances to your new lower-interest card. This will help you keep closer track of your total credit card debt.

Make the largest monthly payment you can afford. While it's ideal to pay your balance in full each month, it's not always possible. But paying the monthly minimum may do little more than cover accrued interest. If you're paying down a high-interest or high-balance credit card, make the highest payment you can afford, and stick to it. Instead of reducing your monthly payments as your balance declines, keep your payments level and save.

Don't exceed your credit limit. Card issuers may levy a stiff fee if you charge more than your limit. Your credit limit not only includes the dollar amount you charge, but also factors in accruing interest. Use your checkbook register credit tally to keep yourself safely under your credit limit.

Keep track of your purchases. Don't just charge it and forget it. Be aware of what you're spending. One easy way to track your credit card debt is to write down all credit purchases in a checkbook register; simply keep your purchases listed as you would your individual checks. Keep a running total as the month progresses and stop when you've reached your personal limit.

Monitor your credit limit increases. If you're a good customer, credit card companies may reward you by increasing your credit limit. While this may make you feel special, be careful. Increased limits can turn around and bite you when you try to apply for other loans. You may be denied credit if you have too much available credit through your credit cards. Increased limits may also tempt you to spend more; that's the real reason they are provided.

Watch out for teaser rates. Your mailbox may be brimming with unsolicited credit card offers that promise attractive low interest rates. But if you take the time to read the fine print, you'll see that after six months or so the issuer may double the low introductory rate. If you're like some not-so-watchful consumers, you might run up many charges (or transfer balances from other cards) on this new card. When the rates go up, you could find yourself owing a lot of money at a high interest rate.

Be wary of "reward" cards. The irresistible lure of a free round-trip ticket to paradise, or cash back for every dollar you spend may end up costing you more than you think. Before you sign up for a "reward" card, decide what you're hoping to "buy" with the accumulated points and then figure out how much it might cost to pay for it yourself. Now, figure out how much you'll have to charge to earn that "free" item, factor in the interest charges and any annual fee you may be paying for the card. You may find that it's cheaper to stick with the lower-interest rate card and purchase the "rewards" all by yourself.

If you get in over your head, don't bury it in the sand. There are some hardships you just can't avoid that can do some major damage to your debt load. If you quit making your payments your credit report will suffer. Generally, negative information stays on your credit report for seven years—and bankruptcy stays for 10 years—and can affect not only your ability to get credit, but may also limit your ability to get a job or rent an apartment. If you are having trouble making payments contact your creditors before they contact you; alternative payment arrangements may be negotiated.

From gaarc.org

How Credit Unions Protect Your Money

Call Sterling Van Dyke Credit Union at 586.264.1212 for an appointment to discuss ways we can help you plan your financial future.

How Credit Unions Protect Your Money

Credit unions know that you need more than a variety of products and services. You need to know that your money is safe—and at a credit union it is.

Money is Insured

The National Credit Union Administration (NCUA) is the independent federal agency that regulates charters and supervises federal credit unions. NCUA, with the backing of the full faith and credit of the U.S. government, also operates and manages the National Credit Union Share Insurance Fund, insuring the deposits of nearly 90 million account holders in all federal credit unions and the majority of state-chartered credit unions. As an alternative, many credit unions choose to insure your funds through private insurance companies.

The NCUSIF provides all members of federally insured credit unions with $250,000 in coverage for their individual accounts. These accounts include regular shares, share drafts (similar to checking), money market accounts, and share certificates. Individuals with account balances totaling $250,000 or less at the same insured credit union have full NCUSIF coverage.

Members have full NCUSIF coverage at each federally insured credit union where they are qualified members. While NCUSIF coverage protects members at all federally insured credit unions from losses on a broad spectrum of savings account and share draft products, it does not cover losses on money invested in mutual funds, stocks, bonds, life insurance policies, and annuities.

Responsibly Managed

Credit unions generally offer higher interest rates for savings accounts and lower rates for loans, when compared to most banks. And credit unions typically do not engage in predatory lending practices, such as offering subprime loans or payday lending programs with exorbitant rates and fees.

Credit unions also follow conservative investment practices and live within their financial means. That means you can trust your credit union to put the needs of you and its other members first.

Financial Guidance

Across the country, credit union staff members participate in programs that help consumers learn the basic financial skills that will serve as a strong foundation for their financial futures.

Also, many credit unions and their state associations work with other non-profit entities to help educate consumers about the risks associated with predatory lending.

Whether it’s working with schools to open in-school branches, hosting a financial planning seminar, or offering ID-theft prevention tips at a branch, credit union staff members share their knowledge with the community. Because the more knowledge credit union members have, the wiser the decisions they can make with their money.

Article from lovemycreditunion.org

Dreaming About a Tax Refund?

Call Sterling Van Dyke Credit Union at 586.264.1212 for an appointment to discuss ways we can help you plan your financial future.
Instead of rushing out and spending your refund, though, consider treating yourself to a bit of financial happiness and reduced stress. How can you do that? Follow a few money-saving tips.

Are you expecting a tax refund this year? If so—and if you’re like millions of other Americans—you’ve probably already begun to plan how it will be spent.

Pay off credit card balances. Use your refund to pay off any outstanding credit card balances. You've worked so hard for your money, so don't just give it away to the credit card companies. Each year consumers lose millions of dollars paying interest on credit card balances.

Save for college. Do you have a college education bill looming in the future? With the rapidly rising costs for a college education, a mutual fund may be just the place for your refund (especially if your kids are more than four years from graduation). If your kids are in high school already, a certificate of deposit (CD) or money market account with check writing privileges may be a better alternative.Either way, $1,000 earning interest over a couple of years is smarter financial choice than a big screen TV today and a student loan tomorrow.

Add money to (or create) your emergency fund. Individuals are advised to have an emergency fund amounting to six months' worth of living expenses. Using your tax refund here is a good place to start.

Save for holiday shopping. Do you remember how expensive holiday shopping was this past holiday season? Even if you've already paid this year's balances off, there is nothing wrong with planning for next year. By purchasing gifts throughout the year, you can shop at your own pace and find items on sale. This tip also reduces stress, allowing you to avoid crowded malls during the already busy holiday season.

Consider increasing your exemptions. If you're receiving a substantial return each year you may want to think about increasing your exemptions on the W-4 form you file at work. The extra money you see in your paycheck could be automatically transferred into a savings account. When the government holds your money until the end of the year, you earn no interest.

Spend some and save some. For some people, the temptation of all that money is just too much and the need to buy something persists. This is understandable, but there can be a happy medium. Spend part of your return and save the rest. You will feel good enjoying your new purchase and seeing your monthly savings account statements growing throughout the year.

Article from lovemycreditunion.org

Money Smart Kids Saving Smart

SVDCU wants to share tips for teaching children good habits about money management. The information was originally published in Smart Parenting - Money Smart Kids.

Saving Smart

Saving money takes discipline. To make it a habit for life, teach your kids about saving as soon as they have a regular income—i.e. an allowance. Help them understand that all the money they receive is not for spending immediately on candy, toys or games. Kids should learn that they have responsibilities—to them­selves, their loved ones, their future and their com­munity. Teach them that they should save money for several reasons, including emergencies, common expenses (such as birthday gifts or lunch money), future purchases, investing and charity.

The 3 Little Piggy Banks

Some experts recommend kids keep their money in at least three piggy banks—one for spending, one for saving and one for charitable giving. Your kids can use envelopes, plastic baggies or any other containers—as long as there are three separate ones clearly marked and explained. Decide what percentage of your kids' allowance and gift money should go into each bank. A common formula is at least 10 percent for savings, 10 percent for charity and the rest for spending. Whatever formula you use, stick to it. Your kids need consistency to learn the routine.

Save Yourself

Model the behavior you want your kids to exhibit. The older they get, the more they'll notice your methods of saving and spending. Let your kids see that you put off immediate gratification to save for bigger goals, pay credit cards on time or set aside money regularly for retirement or investing.

The Magic of Saving

The payoff of saving is watching your money grow. Remind your kids to keep an eye on their savings. When they get enough coins, let your kids trade them in for bills. When they get five $1 bills, give them a $5 bill, and so on. By making regular deposits, they will see that savings add up.

Make It Official

When your kids have enough money saved, take them to open a savings account at your credit union. Tell them their savings will grow faster and be safer in an interest-bearing account. You could explain that the federal government insures people's money in most banks, credit unions and savings and loans associations for up to $250,000 per account.

Saving Options

Visit your credit union with your kids to find out about the kinds of accounts they can open. Ask about:

Passbook or Statement Account

This basic savings account pays your kids interest. They'll receive their own register or book to record their deposits and track their balance. They can withdraw some or all of their money at any time. A minimum deposit may be required.

Money Market Account

Your kids will earn more interest with this account but have more restrictions. They may need a larger opening deposit and have to keep a higher balance. They can withdraw their money any time, however, and may receive a checkbook with the account.

Certificates of Deposit (CDs)

CDs or timed accounts are beneficial if your kids have a lot of money (e.g. $500 or $1,000) they won't need for a while. They'll earn a relatively high interest rate and won’t be able to withdraw the money without paying a penalty.

SVSCU wants to share tips for teaching children good habits about money management. The information was originally published in Smart Parenting - Money Smart Kids.

You can teach your children how to save money by partnering with SVDCU. Open an account today with a minimum deposit of $10.00. They then become a member of the "Very Important Kid" Club.

The Risks Retirees Need to be Aware of

Are we prepared for retirement?   Recent figures from the Employee Benefit Research Institute reveal that 47% of Americans, ages 56-62, would run out of funds necessary to pay for basic retirement expenditures if they retire at age 65.  Six in ten Americans express significant concern about their retirement savings and investments.  So why are people so unprepared?  That is a good question and what do they need to be aware of for the future?

The way retirements are funded is rapidly evolving.

1)      The future of Social Security is in question.  Every day more and more of the 78 million baby boomers approach retirement age.  The Census Bureau estimates that the ratio of people in their retirement years, 65 and older, versus those in their working years, 20 to 64, will rise from 20.6% to over 35% in 2030.  That will put a tremendous strain on the Social Security system.

2)      Pension plans are disappearing.  The traditional employer-sponsored pensions seem to be gone.  The number of defined pension plans being offered to employees has been shrinking steadily since 1980. Defined contribution plans, such as 401(k) s and 403(b) s are the new vehicles for retirement.  The problem with these plans is that these plans leave investors highly vulnerable to market volatility.  The burden of financing retirement is shifting squarely on the shoulders of individuals.  Adding to this burden are financial risks that make retirement today more challenging than ever.

3)      We are living longer.  Life expectancy has increased by more than 10 years and most experts see the trend continuing.  This means retirements could last more than 30 years or more.  Somehow we have to fund these extended years.  We will need an income source that can help maintain the quality of life we enjoy. 

4)      Rising costs are affecting our pocketbook.  Expenses in retirement will tend to keep rising.  We will have to find income to account for these increases. Specifically, there are three key cost related issues that can erode the purchasing power of retirees over time.  The first is inflation.  Most people underestimate the impact inflation can have on their standard of living in retirement.   Inflation can be a significant risk especially for retirees.  Basic necessities such as food, housing, transportation and utilities have risen at between 1% and 13% annually.  The second issue is taxes.  Federal taxes do fluctuate up and down.  According to the Tax Foundation, federal income taxes would need to double in order to close the deficit.  The last issue is healthcare.  Healthcare costs have risen 149% between 2000 and 2009-over four times greater than workers’ incomes.  Healthcare costs will likely continue to rise.

     5)       Market uncertainty is posing a risk to financial security in retirement. Volatility poses one of the biggest threats to retirement savings because a downturn just before or after retirement can be devastating to an unprotected portfolio.  It could take years to recover from losses; precious time that someone entering retirement might not have.  One thing we need to do is to understand the financial challenges we have to face in retirement and address them.

Call Sterling Van Dyke Credit Union at 586.264.1212 for an appointment to discuss ways we can help you plan and enjoy your retirement.

Money Smart Kids Ages 15-18

SVDCU wants to share tips for teaching children good habits about money management. The information was originally published in Smart Parenting - Money Smart Kids.

Ages 15-18

Your teenagers will likely earn money from a part-time job. This is the time to open a checking account. Be sure they know how to keep records and balance their checkbook. Give your teens more responsi­bility for handling money and making decisions. Older teens can shop for school supplies and clothes—with an expanded allowance from you. Control over spending with a dollar limit.  This will force them to make better decisions. For instance they'll soon realize that buying designer brands means fewer items for their money.

Reality Check

All young adults need to learn the cost of everyday life. Work up a realistic list of the expenses your teens would have if they lived alone. Include the cost of groceries, clothing, rent, utilities; car payments, insurance and gas (or public transportation), taxes, healthcare, entertainment, and miscellaneous (car repairs, household supplies, credit card bills, etc.). Then compare this list to your kids' projected income. They'll see how they'll have to budget and possibly cut back on expenses in order to afford everything.

The Cost of Credit

You may consider letting your teens use your credit card, but there are drawbacks.  You have no control over spending and are responsible for paying the bill. You can teach the cost of credit in another way by charging interest on a small loan you give your teens for a relatively costly item, such as a digital camera. Be firm with your kids paying you back with regular payments on time.  This will help them develop good habits. 

You can teach your children how to save money by partnering with SVDCU. Open an account today with a minimum deposit of $10.00. They then become a member of the "Very Important Kid" Club.

Money Smart Kids Ages 11-14

SVDCU wants to share tips for teaching children good habits about money management. The information was originally published in Smart Parenting - Money Smart Kids.
This is an especially important time for learning about money. Your kids will have more cash now, along with the maturity to begin making decisions about how it's handled. Give them control of the money and the room to make mistakes and learn lessons.

More Money, More Responsibility

Increase the amount of your kids' allowance and add the responsibility of paying for school lunches or other needs. Make the allowance large enough to cover their entertainment expenses. Let them decide how these fun-time dollars will be spent movies, video rentals, snacks, bowling with friends. Provide additional decision- making opportunities by setting a spending limit on purchases and letting your kids shop for birthday gifts for others.

Life Lessons

Use more complicated financial situations as opportunities to teach your preteens and teens about money. Let them see how your major financial purchases involve trade-offs. If your family is buying a new computer or car, for example, ask your kids to help you research which one to buy. If you are refi­nancing your house, show them how small differences in interest rates equal big savings.

Earning and Saving

Continue to stress the value of saving. If your kids want something that costs more than you're willing to spend, suggest ways to earn the differ­ence: odd jobs around the house, baby-sitting or washing the neighbors' cars. Give your kids free reign over their spending money, even if they seem careless. They may blow all their earnings on frivolous buys, but when they realize they're broke, they will learn to be more frugal.

Truth in Advertising

Advertisers spend millions of dollars trying to hook young adults on spending—or influence their parents' spending. To prevent your kids from being lured by glitzy ads and fads, talk with them about the ways advertisers make people want to buy. Discuss the fact that ads are often short on facts but use lots of false promises.   In the case of celebrity endorsements, explain that celebrities are paid to sell products they may not even use or like. By learning how ads use the power of persuasion, your kids are less likely to be influenced.

You can teach your children how to save money by partnering with SVDCU. Open an account today with a minimum deposit of $10.00. They then become a member of the "Very Important Kid" Club.