3 Debt Payoff Tactics That Should Never Be Used

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Paying off your debt is an admirable goal and a great move for your financial health. But some ways of doing it might hurt more than they would help. Withdrawing from your 401(k), draining your emergency fund, or ignoring your monthly bills in the name of paying off your credit card debt may seem like good ideas in the moment, but they can have adverse consequences in the long run.  Don’t be tempted by any of them!

Dipping Into Your 401(k) – Not a Good Idea

There are plenty of reasons not to use your 401(k) to pay off debt, but let’s start with the potential financial ramifications. If you take money out early, before age 59½ — not only will that money be taxed at your current income tax rate, but you’ll also pay a 10% penalty.

By using your retirement funds to pay off your credit card debt, you’re potentially setting a dangerous precedent. You’re making tapping into your retirement fund an option for sticky financial situations, which could help you justify withdrawals in the future, even if they aren’t absolutely necessary. Unless you’ve exhausted all other legal options, try to leave your retirement savings alone for your future.

Draining Your Emergency Fund – Also Not a Good Idea

Because of high interest rates on credit cards and lower interest on savings accounts, it isn’t wise to keep a large cash reserve while carrying credit card debt from month to month. However, it’s also not a good idea to drain your cash reserves completely to wipe out your debt. Emergencies happen, and you need to have some savings in place to deal with them because a credit card isn’t an emergency fund.

The amount of emergency savings you should keep depends on your personal situation. As a starting point, everyone should have $1,000. Some people — like small business owners, custodial parents or sole breadwinners — may need more, while a single young professional without a mortgage will probably be fine with a small fund. Any savings greater than what you need for emergencies can be put toward debt, but don’t drain your entire rainy-day fund.

Neglecting Your Current Bills – Really Not a Good Idea

When you’re anxious to get rid of your debt for good, it may be tempting to cut corners elsewhere to pay it off as soon as possible. But ignoring your monthly payment obligations to pay down debt isn’t a sound approach. You’ll likely get hit with fees, and your late payments may be reported to the credit bureaus and remain on your credit reports for seven years.

Instead, pay your bills and minimum debt payments first. Then, provided you have a small emergency fund already, put the excess toward extra debt payments.

The Bottom Line

Pay down your credit card debt aggressively, but don’t hurt yourself financially by withdrawing from your 401(k), draining your emergency fund, or ignoring your monthly bills. Instead, aim to bring down your debt by making more or spending less, and allocating the extra funds to your credit card bills.

Don’t forget about First Financial’s free, online debt management tool, Debt in Focus. In just minutes, you will receive a thorough analysis of your financial situation, including powerful tips by leading financial experts to help you control your debt, build a budget, and start living the life you want to live.

Article Source: Erin El Issa for Nerdwallet, https://www.nerdwallet.com/blog/tips/debt-payoff-tactics-recommend/

7 Benefits of a Credit Union Credit Card

FFNJ%208160%20m%20platinum%20card%20designs3-resized-600Here are seven reasons why consumers should consider using a credit union credit card:

1. You’re a member-owner. When you join a credit union you are a member-owner, not a customer, and this means you have the privilege of voting for the board of directors – volunteers who help lead the credit union.

Is Your Rewards Credit Card Really Rewarding You?

cards_mastheadConventional financial wisdom for the last 10 years has been that you need a rewards credit card. Obviously, carrying a high revolving balance is bad, but if you pay your debt in full every month, it’s a no-brainer. You put all your expenses on your credit card, pay it off before you’re charged interest, and rack up those airline or other rewards. You cash those in for free flights, first class upgrades, restaurant gift cards, merchandise, and other perks.

There’s another bit of conventional financial wisdom, though: there’s no such thing as a free lunch. Free rewards sound great, but are you really getting everything you’re promised?

It might be time to take another look at your rewards card. Is it still the best bet for your money? If you’re thinking about cutting the card, check out these factors:

  • Is there an annual fee? If you’re paying money every year to use the card but you’re not getting more than that amount in rewards, your credit card is a losing proposition. Check your billing statement for this information – and don’t forget to check the fine print.
  • Is the interest rate extremely high? If you pay the balance in full every month, you might not ever think to check your interest rate. Suppose though, that something unfortunate happened – you or your spouse lost your job, you lost track of the date, or otherwise forgot to pay the bill. You could rack up significant finance charges on even one month’s expenses.
  • Is there a real grace period on interest? You might assume that if you pay your credit card bill before the end of the billing cycle that you wouldn’t get hit with any interest charges. This might have been the case when you first signed up, but the deal may have changed over time. Credit card disclosures are often difficult to read, so check them carefully.

If any of the above are making your rewards card less of a reward and more of a chore or added expense, it might be time to look closer to home for your credit card needs. Here at First Financial we offer a Visa Platinum Credit Card* with no annual fee, no balance transfer fees, a 10 day grace period, and a CURewards program where you can redeem points for gift cards, merchandise items, travel, and so much more! PLUS, we’re currently offering an introductory rate of 2.9% APR for the first 6 months on all purchases and balance transfers.**

Instead of counting on programs for rewards you may never see, put the money you save with our low-cost Visa Platinum Credit Card into a Holiday Club or Summer Savings account. Now that’s a real reward! Don’t forget to read all the important documents carefully, then pick up the phone. Our friendly staff will gladly help you make the switch. Speak to a First Financial representative today by calling 866.750.0100 or stop into any branch location.

*APR varies from 10.90% to 17.90% when you open your account based on your credit worthiness. This APR is for purchases, balance transfers, and cash advances and will vary with the market based on the Prime Rate. Subject to credit approval. No Annual Fee. Other fees that apply: Cash advance fee of 1% of advance ($5 minimum and $25 maximum), Late Payment Fee of up to $25, Foreign Transaction Fee of 1% plus foreign exchange rate of transaction amount, $5 Card Replacement Fee, and Returned Payment Fee of up to $25. A First Financial membership is required to obtain a VISA Platinum Card and is available to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties.

**The 2.9% promotional rate will apply to purchases and balance transfers only for six statement cycles from the new account holder’s initial balance and/or initial transfer to the First Financial VISA Platinum card. The balance transfer promotional rate does NOT apply to purchases or cash advances.

SOURCES:

5 Bad Credit Card Habits to Break Now

8044873-largeWe’ve all heard the advice: Use credit cards wisely. Still, knowing what’s smart and doing what’s smart can be two different things. And with an increasing number of U.S. young adults putting purchases on plastic – 57 percent of 18 to 34-year-olds say they use credit cards today, versus 48 percent in 2013, according to Mercator Advisory Group’s recent Customer Monitor Survey – that advice is worth repeating.

Are you guilty of any of the following five bad credit card habits? If you’re guilty of having any of these habits, it’s time to change your ways. Otherwise, stay far, far away from these behaviors:

1. Mindless charging. Some people use credit cards with the mindset that “it doesn’t count” if it’s paid for with plastic instead of cash. You need to think before you spend. You don’t want to have more than $100,000 in credit card debt and not qualify for a mortgage for your new home. Even if you’re able to clean up your credit enough to close on a home, you could face the possibility of foreclosure when trying to balance your credit card debt and your living expenses.

2. Paying only the minimum amount due. It’s understandable that if money’s tight, you may not feel like parting with hard-earned cents to pay down your credit card debt.

But you’re just hurting yourself in the long run. If you pay the minimum on credit cards, you’re extending the time period on everything that you buy. This is the main reason that people can build extraordinarily large credit card balances that they can’t hope to pay off. If you’re going to use your cards and carry revolving debt, you at least need to know that it’s going to be paid off within a time frame that works for you.

3. Adding to your revolving debt by making nonessential purchases. All revolving credit card debt should be avoided, of course. But if you’re carrying revolving debt on a credit card, and then your car breaks down, and you don’t have the money to pay a mechanic, you can make a good argument for whipping out your credit card.

You need that car to get to work, or to shuttle your kids around, and if you live in the suburbs or countryside, you probably don’t have a bus service to utilize. So, yes, getting the car fixed is essential. But buying a pair of shoes when you already have a closet full of them or going out to eat with a credit card that has revolving debt is a) problematic and b) not essential, says Albert Williams, a personal finance professor at Nova Southeastern University in Fort Lauderdale, Florida.

“This pay-later [plan] is really creating a loan that is interest-bearing,” Williams says. “This is a bad practice but people do it often.”

In other words, if you’re still paying off that mechanic six months from now, you probably won’t hate yourself. You needed that car fixed. If six months later, you’re still carrying debt on cheeseburgers, fries and shakes, every time you look at your credit card statement, you probably are going to experience indigestion.

4. Using your credit card for a cash advance. If you’re short on cash and you really want some actual bills in your wallet, it may be tempting to take out a little cash. But you might as well just rip it up. In fact, if you take out a cash advance from a credit card, not only will you pay interest, you may get a transaction fee, which could be as much as 5 percent of the cash advance.

You can pay back your credit card immediately, of course, if you get a cash advance that you immediately come to regret. But no matter what, you’ll end up paying the interest accrued on that cash – as well as the transaction fee.

5. Having too many credit cards. There are good reasons to have some credit cards, but it’s difficult to justify having lots of them.

Researchers say that the average number for most people with credit cards is four. However, once you get a credit card, you really have to live with it, since canceling the card can hurt your FICO score. That’s because a great deal of it is based on the equation of credit used over credit available. Try to have cards that equal the amount of credit that you can use and more importantly, can manage.

Leslie Tayne, a New York City-based attorney, debt specialist and author of the new book, “Life & Debt: A fresh approach to achieving financial wellness,” agrees that having too many credit cards is a bad habit consumers develop, thanks to all the store cards out there.

“I often see people with over 20 credit cards, all of which have balances,” she says. “This makes it hard to keep track of that many cards, for issuing payments on time.”

And balances, she adds, can quickly add up. That’s not to say that if you can replace your bad habits with good habits, you can’t benefit from these cards. “Store card discount incentives can be great if someone has a plan to pay off the balance,” Tayne says. And having a plan to pay off the plastic is generally the key to creating and maintaining good habits with credit cards. If all else fails, remember the universal rule of credit card usage: If you don’t pay it now, you’ll really pay for it later.

Don’t forget about our free, online debt management tool, Debt in Focus. In just minutes, you will receive a thorough analysis of your financial situation, including powerful tips by leading financial experts to help you control your debt, build a budget, and start living the life you want to live!

Article source written by Geoff Williams of US News.

Credit Cards Can Be Stolen Right Under Your Nose

635576298599917158-468266197-4-There are several things people freak out about when their wallets or purses have been stolen: knowing a thief has your ID (and your home address), losing irreplaceable gift cards or cash, and having to cancel your credit cards. That’s usually the first thing people do — call their banks — but it’s easy to act quickly when you realize you’ve been robbed. Sometimes, it’s not that simple.

Thieves steal credit and debit cards all the time without taking the physical card. The most common kind of card theft results from data breaches. Last year, millions of U.S. consumers had their cards replaced after their information was compromised in one of the massive cyberattacks on retailers, even if their cards didn’t show unauthorized activity. People have gotten used to the idea that data breaches are inevitable, but there are lots of daily activities that put your cards at risk for theft, without you noticing.

1. Drive-thrus

A Pennsylvania woman was recently arrested for allegedly swiping customer cards on a personal card reader while she worked the drive-thru at a Dunkin’ Donuts, WFMZ reports, reportedly using the information to create duplicate cards and charge more than $800 to the accounts.

That’s not the first time a story like this has popped up, and it’s likely to happen again, because the situation presents an easy theft opportunity to drive-thru workers: Customers hand over their cards and usually can’t see what the cashier is doing with it on the other side of the window. It’s not like you should avoid the drive-thru for fear of card theft, but it’s one of many reasons to regularly check your card activity for signs of unauthorized use.

2. Restaurants

How often do you see your server process your dinner payment? Usually, he or she takes your card away from your table and completes the transaction out of your sight. Many restaurant workers have taken advantage of this situation to copy customers’ cards and fraudulently use the information. Once again, regularly check your card activity for signs of unauthorized use.

3. On the Phone

People are pretty trusting when making orders over the phone, assuming that whoever takes the order is entering the credit or debit card number, expiration date and security code into a payment system, not just copying it down for their own use. On the flip side, it might not be the person on the other end of the call you should worry about — plenty of people read their card information aloud within earshot of strangers, making it easy for someone nearby to write down the numbers.

4. RFID Scanners

Most radio-frequency identification (RFID)-enabled credit and debit cards have a symbol (four curved lines representing a signal emission) indicating the card has the technology for contactless payment. If you have one of these cards, you have the ability to use tap-and-pay terminals found at some retailers, because your card sends payment information via radio frequencies, received by the terminal.

That same technology also allows thieves to use RFID scanners to copy your card data if they get close enough to it and your card isn’t protected. If you’re not sure your card has RFID technology, call your issuer, and if it does, use signal-blocking materials and products to protect it.

5. Card skimmers

Thieves have been installing copying devices at gas pumps and ATMs for years: They tamper with card readers to install skimmers that copy your card data when you swipe it, so a thief takes your credit or debit card information while you complete an otherwise routine transaction. Experts advise you look closely at card readers for signs of tampering, use ATMs serviced by your bank and check your card activity regularly for signs of fraud.

That’s really the best way to combat credit card theft: Watch closely for it. With online banking and mobile applications, it’s easy to check your accounts every day, making it more likely you’ll spot something out of the ordinary than if you only looked at card activity once a week or so. You can also check your credit score for sudden changes, which can be a sign of fraud or identity theft.

Don’t wait until it’s too late! Check out First Financial’s ID Theft Protection products – with our Fully Managed Identity Recovery services, you don’t need to worry. A professional Recovery Advocate will do the work on your behalf, based on a plan that you approve. Should you experience an Identity Theft incident, your Recovery Advocate will stick with you all along the way – and will be there for you until your good name is restored and you can try it FREE for 90 days!*

Our ID Theft Protection options may include some of the following services, based on the package you choose to enroll in: Lost Document Replacement, Credit Bureau Monitoring, Score Tracker, and Three-Generation Family Benefit. To learn more about our ID Theft Protection products, click here and enroll today!**

*Available for new enrollments only. After the free trial of 90 days, the member must contact the Credit Union to opt-out of ID Theft Protection or the monthly fee of $4.95 will automatically be deducted out of the base savings account or $8.95 will be deducted out of the First Protection Checking account (depending upon the coverage option selected), on a monthly basis or until the member opts out of the program. **Identity Theft insurance underwritten by subsidiaries or affiliates of Chartis Inc. The description herein is a summary and intended for informational purposes only and does not include all terms, conditions and exclusions of the policies described. Please refer to the actual policies for terms, conditions, and exclusions of coverage. Coverage may not be available in all jurisdictions.

Article source courtesy of Christine DiGangi, Credit.com.

5 Times Your Credit Score Matters Most

Credit - Arrows Hit in Red Target.Your credit score has a huge impact on the net loss or gain of some of life’s biggest financial moments: a good score gives you more options, better terms and bigger savings. Your credit score will follow you throughout your life and affect a variety of situations, but these five times are when your credit score really matters the most.

1. Financing a Car

There are three factors that determine how much financing a car will cost: how much money you put down, the length of the term of the loan and your credit score. On a $10,000, 60-month auto loan, a borrower with a low credit score could pay nearly $4,000 more in interest charges than a borrower with a prime credit score. If you have a less-than-stellar credit score, shop around for the best car loan rate available — the savings will be well worth the effort.

2. Buying a House

It’s common knowledge that your credit score matters when applying for a mortgage, but just how much your score costs you in the long run is often ignored. The difference between an excellent score and good score can cost you tens of thousands of dollars over the lifetime of a loan, and having a poor score can cost you your dream of homeownership altogether.

According to Informa Research Services*, the average national interest rate on a 30-year fixed rate mortgage for a consumer with a 760 or higher FICO score is 3.547% APR. If you take out a $200,000 mortgage loan at 3.547% APR, your monthly payment would be around $903. If you have a FICO score of 660, your rate could go up to 4.16% APR, which would raise your monthly payment by $70. The number seems negligible until you annualize those costs. The $70 increase adds up to more than $25,000 in additional interest on your home for the life of the mortgage.

3. Starting a Business

If you are a small business owner or have dreams of entrepreneurship, your personal credit is a major influence on the kind of capital you can access. Even if a business is set up as a corporation to limit personal liability, credit scores are often tied to the owner’s ability to personally guarantee the business’ debts; an analysis by the Federal Reserve estimated that 40.9 percent of all small business loans and 55.5 percent of small business borrowing is personally guaranteed.

4. Renting an Apartment

Though there are no official credit score requirements to rent an apartment, the higher your score, the better your housing options. A competitive credit score can give you the edge you need to rise above other applicants or take advantage of offers, like low down payment promotions for qualifying applicants.

Rental markets can be competitive, especially in large cities where many owners of multi-unit apartment buildings have a minimum score requirement to rent within the community. If you have a low score and have a hard time getting your rental application approved, you may have better success with a private landlord — your options will be limited but the requirements tend to be less strict.

5. Qualifying for Insurance

Insurance companies have standard practices for setting their rates, weighing various risk factors to calculate the exact rate to charge a customer, including their credit score. But the scores insurance companies use are different than the ones used by banks and financial services companies — these scores are called Insurance Credit Bureau Scores, or Insurance Risk Credit Scores.

Insurance scores consider credit information and previous insurance claim information, which allows insurers to determine how much of a risk someone is to insure. Actuarial studies suggests that someone who pays all of their bills on time, has a good credit history and hasn’t filed any insurance claims is less of a risk and a more profitable customer, according to the Insurance Information Institute. Therefore, a favorable credit score will not only get you a better rate on your insurance premiums, it could be the determining factor on whether you even get approved for coverage.

If you are looking to finance a vehicle, buy or refinance a home, or start your own business – be sure to contact First Financial for low rate loans and personalized service!**

*Calculations are accurate as of Dec. 8, 2014.

**A First Financial membership is required to obtain a First Financial loan and is available to anyone who lives, works, worships or attends school in Monmouth or Ocean Counties. Subject to credit approval.

Article Source: Morgan Quinn for gobankingrates.com, http://www.gobankingrates.com/personal-finance/5-times-credit-score-matter/