Debit or Credit?

“Debit or credit?” is kind of a trick question. It seems like it should only have two answers (I mean there’s two options in the question, right?). But really, you have three options when it comes to paying with a card at the register. If I just confused you, don’t worry, I can explain.

To start with, remember the basic differences between your debit card and credit card. Debit cards are linked directly to your checking account. They take the place of cash or a check and the money comes directly out of your checking account. Credit cards are a line-of-credit from your credit card company. They are basically lending you money to make purchases up to a certain credit limit, then you pay them back later with interest.

But “debit or credit?” isn’t just a question about which physical card you want to pay with, it’s asking you how you want your transaction to be processed. That’s where the three choices come in. They are:

DEBIT AS DEBIT

In this option you:

  • Swipe you debit card and enter your PIN number.
  • The transaction posts immediately from your checking account (meaning the money is withdrawn from your account in real time).

CREDIT AS CREDIT

In this option you:

  • Swipe your credit card and sign for the transaction.
  • Your credit card company pays for the transaction, you have not yet paid for this item.
  • Your credit card company charges you interest on the balance of your card. You must pay back your balance in monthly installments.

DEBIT AS CREDIT

In this option you:

  • Swipe you debit card and sign for the transaction.
  • The transaction typically takes 1 – 2 days to post in you checking account. The length of time it takes to post is dependent on the merchant, not on your bank or credit union.

This third option is the one people most commonly forget about. Just because you used your debit card does NOT mean that your transaction was processed as debit. The key thing to remember is, unless you entered a PIN, the transaction was done as credit.

So let’s say you went through the Dunkin’ Donuts drive-thru to get your morning coffee. They grabbed your debit card, swiped it, and passed it was to you. That was a credit transaction because you didn’t enter a PIN. You might not see that $2 being withdrawn from your account for a day or two, so don’t forget about that transaction when you check your available balance. What your mobile banking shows for your balance might not include transactions run as credit!

Next trick question – “Is one way of using a card better than the others?” The simple answer is – not really. There are benefits and drawbacks to all three options, so the best answer is to do whatever is most convenient for you. As a credit union member and employee however, I will point out that your credit union benefits more from debit as credit transactions than the other two options, so if you want to help out your financial institution I encourage you to swipe and sign with your debit card!

I hope this post helps you feel more confident about your answer the next time you’re at the register. 🙂

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Declutter Your Financial Life

Do you ever find it strange that, in an increasingly electronic world, it’s still so easy for clutter to pile up? With so many receipts, statements, and bills stacking up, it can be hard to keep your financial life in order. Here are a few easy tips to help you keep your money world organized.

  1. Stop the Snail Mail – I think the real cause of global warming and deforestation might be credit card offers. I feel good about myself for 0.2 seconds when I see an envelope in the mail that says, “You’ve been pre-approved!” And then I see the other 5 credit card or insurance offers that also came in the mail today and remember that I’m not special. You can actually stop these offers from cluttering your physical inbox by going to OptOutPrescreen.com. The electronic form will stop you from getting offers for 5 years, which is good for you and the environment.
  2. Get a Shredder – Spend $25 on a shredder at Target, it’s a smart investment. Any receipts, statements, pay stubs, or other documents that have your personal info on them should be shredded to help prevent identity theft. Plus shredding things is weirdly therapeutic.
  3. Have a Money E-mail Account – I read this tip in Cosmo, proving that the magazine has more content than celeb gossip and embarrassing moment stories! It can be easy to miss bills or other important alerts in your crowded inbox. Try setting up an account like KelseyBills@gmail.com specifically for financial stuff so those e-mails don’t get lost in the shuffle. You’ll never miss an E-bill again.
  4. “Yes, please e-mail the receipt!” – A lot of retail stores now ask you if you want your receipt printed, e-mailed to you, or both. Take advantage of the bills e-mail you set up in #3 and have the receipt e-mailed. It saves paper, decreases your risk of losing the receipt, and keeps any personal information safe.

You don’t have to be a neat freak to keep your financial clutter to a minimum. What are your tips for keeping your money organized?

Choosing a Credit Card Is Easier Than Flappy Bird

If you’re over 18, chances are you get a new credit card offer in the mail almost every day. Visa. MasterCard. Discover. American Express. The choices are endless. Each one promises to have the lowest interest rates, no fees, and an amazing rewards point program.  Sifting through all the offers to find the credit card that’s right for you is like trying to win at Flappy Bird – virtually impossible!

Two is my legit high score. Two.

Two is my legit high score. TWO.

But unlike with Flappy Bird (which you should just give up on playing before you punch your finger into your phone so hard it breaks), there is hope for the first-time credit card applicant. What’s the easiest way to be sure you’re getting a credit card that won’t fee you to death or get you in trouble? Ask your credit union for help! Most financial institutions offer credit cards of their own or have a credit card company they recommend to members. Applying for a card through your financial institution will ensure that you are using a trusted, secure, reliable credit card company.

Once you choose a credit card provider, there’s still the tricky question of which card to choose. There’s “Cash Rewards” Cards, “Travel Rewards” Cards, “Student” Cards, and so many more. They all have different terms, different interest rates, and different gimmicks to get you to choose them. Since your financial institution knows you and your money habits/needs, they can recommend which specific card will work best for you. Unlike a big credit card company, your credit union doesn’t just want to sell you something; they’ll work with you to find a credit card that doesn’t hurt but helps your credit.

Still reluctant to open up the Pandora’s Box of being a credit card holder? Or maybe you’ve already developed some bad spending habits and are working to restore your credit? Whatever your situation, a Secured Credit Card is a great alternative to a more traditional credit card. With a Secured Card you make an initial deposit into a secured savings account of $300 – $5,000. This deposit is pledged as security for your credit card account and will earn interest while you are using your card. You can only spend on your Secured Card as much as you deposited, so you don’t have to worry about racking up a high balance. Additionally, if you get behind or become unable to make payments, your credit card company will use your secured deposit to take care of your outstanding balance.

You can use your Secured Card just like any other credit card – merchants and retailers won’t ever know the difference! And your secured savings deposit guarantees your approval, so you don’t need to worry about being denied because of past mess-ups with your credit.

Still worried that a credit card will do you more harm than good? Here are a few tips for using your credit card wisely:

  • Pay off your balance in full every month. Don’t just make the minimum payment.
  • Limit yourself to just paying for certain things with your credit card. For example, use your card only to pay for gas at the pump. This will keep your balance down and will stop you from impulse shopping with your card.
  • Never pay for something that’s $20 or less with your credit card. This may seem counter-intuitive, but putting a lot of small $5 or $10 purchases on your credit card can really rack up your balance. You can pay for your $3 coffee with cash or your debit card.
  • Put a sticky note on your credit card with your savings goal on it. Say you’re saving up for Spring Break or a pair of concert tickets – put a note right on the card that says “CANCUN!” If you see the note when you pull out your credit card, it will make you think twice about the purchase? Do you really need the item or would you rather save that money for your trip?

Don’t be scared! Getting a credit card doesn’t have to be a scary, grueling experience. Ask the pros at your credit union for help! Now get out there and spend wisely (and just stay away from Flappy Bird. It’s a life-ruiner. It ruins people’s lives.)

Short & Sweet Credit Card Advice

Want to know the single best piece of financial advice I’ve ever been given?

If you wouldn’t go to a bank or credit union and ask for a loan to buy it, DON’T put it on your credit card.

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I got this tip way back at the beginning of my financial career (like 2 years ago) at a Financial Literacy Conference.  It came from Dr. Barbara O’Neill a member of the New Jersey Coalition for Financial Education. She’s a very smart lady.

The trouble with credit cards is, they don’t feel like real money. It’s not cash you have to hand to the cashier.  It’s not a debit card that affects your checking account balance right away.  It’s so easy to impulse buy or overshop with a credit card because payment is delayed.  And all of the sudden 1 or 2 small purchases turn into 20 and it all adds up to a big balance.  Worst of all, since you haven’t depleted your checking account or the cash in your wallet, you probably feel like you still have money to spend even though you’ve already burned through your monthly budget.

Another problem with credit cards? Interest rates are crazy high (average in the U.S. is 14.95% APR according to CreditCard.com). Why would you want to pay 14% interest on a purchase you could have paid for at 0% interest with cash or a debit card? You wouldn’t! You’re paying more for items in the long run just to delay payment for a few weeks or months. I’m sure you’ve been told before to pay-off your credit card balance in full every month, but how many of us actually do that? According to NerdWallet.com the average U.S. household in 2013 has $7,050 in credit card debt, which makes me think not too many of us are good at ante-ing up each month to pay off our credit card balance.

If you follow Barbara’s rule, however, you are less likely to drive up the balance of your credit cards unintentionally.  Before you swipe your credit card, think “Would I ask my bank for a loan to make this purchase?”  If the answer is “NO WAY” then pay with cash or debit instead.  For example, you wouldn’t walk into a branch and ask for a loan to pay for a pizza, would you? If you were brave enough to do it I can almost guarantee that you will not be approved (unless that particular loan officer has a great sense of humor).

If you reserve your credit card for big purchases that you could ask for a loan for, like car repairs or furniture, you will be a much more cautious spender. It’s likely you’ll have done some research into what you want to buy, where to get the best price, and whether or not you really need it. If it’s truly something you might not have immediate funds ready to purchase, your credit card can help you get it.  If you can pay for it out of your regular budget, do that instead.  No more racking up your balance on nail polish or new going-out clothes from Forever 21 (not that I’ve ever done that . . . ).

With the holidays, Black Friday, and Cyber Monday quickly approaching it’s more important than ever to remember this rule. All the knick-knacks, decorations, gifts, and food that come with the holiday can really put a dent in your wallet.  But putting all of those expenses on your credit card might not be the best solution.  Set a limit to your holiday spending that fits your current budget, even if these means cutting back a little. Start putting a little money away each week (start today!) so you have money saved specifically for holiday shopping.  And last but not least, see if your financial institution offers a Holiday Loan; the rates would likely be a lot less than your credit card and making the payments will improve your credit.

Leaving your credit card at home this holiday season might make your 2014 a little more merry and a lot brighter!

Hackers and Fraudsters and Scammers . . . Oh My!

When I think of financial scams, the first thing that comes to mind is that episode of “the Office” where Michael tries to sign everyone up for a pyramid scheme.

michael scott

Oscar: This sounds like a get rich quick scheme.
Michael: Yes! Thank you! You will get rich quick. We all will!
Toby: Didn’t you lose a lot of money on that other investment, the one from the email?
Michael: You know what, Toby? When the son of the deposed king of Nigeria emails you directly, asking for help, you help! His father ran the freaking country, okay?
– The Office, Season 2, Episode 19, “Michael’s Birthday”

While Michael probably should have spotted his “business opportunity” as a scam, financial fraudsters today aren’t always so easy to recognize. They use well-known websites, send checks that look authentic, and are really, really good at tricking you into giving them your money. You might be doing something a routine as answering a phone call from what you think is your credit union or selling an old laptop online and the next thing you know your bank account has been hacked.  Scammers rely on the fact that you feel safe giving out your info or doing your business online.  If you are totally oblivious to potential scams, you’re the perfect target! Although I don’t expect you all to turn into crime-fighting, fraud-preventing superheroes (get out your capes and tights!), knowing the warning signs of a potential scam can save you some major bucks and a lot of hassle.
Here’s a quick overview of a few of the more common check scams out there:
Phishing – Someone calls or e-mails you posing as a familiar bank, retailer, or government agency. They say that something is wrong with your account and ask you to give them personal or financial information in order to fix the problem. A legitimate business would never contact you unexpectedly to request this kind of information; these types of calls are likely scammers trying to get access to info like your bank account number, Social Security number, passwords, etc. If you get a call or e-mail like this that you suspect is a scam, end the interaction right away, don’t give them any info, and contact the business you thought you were dealing with directly.
**Example: “Rachel from the credit card company” calls my parent’s house all the time saying that she can help them lower their interest rate if they just confirm some of their information. The fact that she doesn’t specify which credit card company should tip you off right away that it’s a scam. If your credit card company did want to lower your interest rate (which is rare), they would identify themselves.
Overpayments – Let’s say you sell an item online and the buyer sends you a check or money order for more than the amount you agreed on. They claim that the overpayment is a mistake and that you can just send them the extra money back. Or they say the check came from someone else who owed them money. They want you to take what you need and forward the remaining amount to them along with the item they purchased. Whatever explanation they give, it’s a scam! Legitimate buyers would agree to send you a check for the correct amount. Accepting an overpayment can leave you without your item and without the cash!
Rental Schemes – This is a trick that I had never heard of until I checked out www.fakechecks.org. It’s super sneaky! In this scheme you put an ad for a rental apartment or house online. A potential tenant, typically from outside the area, contacts you about renting the place. They send you a check or money order for more than the agreed upon rent and ask you to use the extra money to pay for the cost of shipping their stuff, getting their rental car, or some other expense. They could just send the money directly to this third party, but they ask you do to it for them instead. DON’T DO IT! The check is probably fraudulent and I’m willing to bet that they are on the receiving end of that “shipping” company you sent money to. You probably won’t see them in your apartment any time soon.
Work-From-Home Offers – We’ve all seen the ads: “Work from home! Make $8,000 a day for 4 hours of work! Live the life you’ve always wanted!” Admit it – there’s a small part of you that’s tempted to click on those links and see if they’re legit. Because who wouldn’t want to make a lot of money and not be stuck at the office for 40 hours a week? You know what they say though, if it seems too good to be true, it probably is! Scammers will contact you via e-mail, social media, or phone offering to hire you without an in-person interview or background check. They may ask you to deposit checks made out to the business into your personal account and tell you to keep a portion of it as your pay. Or they might send you funds to “test” a money transfer service for them. Whatever the set-up is, remember that legitimate businesses would pay you the old-fashioned way, with a paycheck and tax deductions.
Sudden Riches – Surprisingly, there are not a lot of people out there just dying to give you buckets of cash for no good reason. In a perfect world we would all be millionaires without having to lift a finger; but in the real world, it is highly unlikely that a sudden windfall of riches will come your way. One common check scam is to notify people that they have won a sweepstakes. They send you an “advance” on your winnings to help you pay for legal expenses or taxes. Or they say that in order to claim your winnings you first need to send them a check for a small amount so that they have your account information. A legitimate sweepstakes would never ask you to send them money before they sent you your winnings. Taxes and any other expenses would be deducted from money you won in a legitimate contest before they sent it to you. Additionally, notice of these winnings always comes by certified mail, not by regular mail, phone, or e-mail.
**Warning Sign: If you didn’t buy a lottery ticket or enter yourself in a sweepstakes, you probably didn’t win one! If anyone contacts you about winning a contest you didn’t enter (especially one in a foreign country you’ve never been to), it’s probably a scam!
Love Losses – This scam is the last and, in my opinion, saddest one on my list. This is the financial version of Catfish (a great documentary about a guy who thought he was dating a hot, young girl online and it was really a middle-aged woman – you should watch it!). Here’s how it happens: you start chatting with someone online, maybe through a well-known social media or dating site. The person claims to live far away from you, out of state or even in another country, so it would be difficult for you to meet in person. Once you’ve spent a lot of time getting to know each other and have built a relationship, they ask you to send them money. It might be for a medical emergency, to help someone in their family, or to travel to visit you. Whatever the reason, they need you to send them money ASAP. You should never send money to someone you haven’t meet in person. No matter how much you may trust or feel connected to this person, you run the huge risk that they aren’t who they claim to be.
So now that you’ve read through all of them (hopefully 😉 ) what are you supposed to do to avoid all of these potentially dangerous situations? Hide in your room? Go off the grid? The answer is simple – just be on the look-out. You don’t have to become overly suspicious of everyone you do business with, but be aware that fraudsters are out there and that they are always looking for new victims. Here are a few key things to keep in mind:
1. If you deposit a bad check or money order into your personal account, YOU are responsible for the funds. If a bad check overdraws your account, you have to come up with the money to cover the negative balance. Once you sign a check and deposit it, the issuing party is no longer responsible for the funds, even if the check is bad. If you’re unsure about a check, don’t deposit it!
2. Just because a check cleared your account, does not mean that it was good! It can take a long time for checks to be declared fraudulent (sometimes up to a few months). Federal law requires your financial institution to make funds available to you quickly, usually within 10 days, meaning that you could withdraw the money from a check deposit before finding out if it is bad. So again, if you’re not sure about a check, don’t risk depositing it.
3. Never accept an overpayment. A legitimate buyer or employer will always agree to send you a check for the correct amount. There is never any genuine reason that someone would need you to accept a check for a higher amount and return excess funds to them.
4. Never give your personal information to a person or business over the phone or online that you did not contact directly.
5. Never send money to someone you have not met in person. Similarly, never agree to cash a check or money order for someone you do not know.

If you want more information about check scams and how to avoid them, visit www.fakechecks.org. They have lots of great videos that help you understand exactly how these types of schemes work as well as a link to site where you can report suspected fraudulent activity. If you ever have questions about a potentially fraudulent check or a financial situation that seem suspicious, contact your credit union or bank right away; they help you decide how best to proceed.

Hopefully, you if you are aware of potential scams and are cautious about who you give personal information to you won’t end up like Michael Scott.

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