5 Ways You Should Never Use Your Credit Card

We all know that credit cards can be a valuable tool. They can help you build credit when you’re just starting out, and can really benefit you in the case of a spending emergency. However – if you’re not careful, they can do more harm than good. When it comes to spending, here are five ways you should really never use your credit card.

To help you feel better: Yes, a new purchase can cheer you up, but if you’re looking to feel better – a mountain of debt probably will only make things worse in the long run. If you feel the need to splurge, use whatever cash you have in your wallet or make sure you’re spending from your checking account using a debit card instead.

Hospital bills: Credit cards are best to use on a purchase that you can pay off quickly. Medical bills typically aren’t small, so be sure to think about how long it could take you to pay off that amount of debt. This type of debt can quickly build up, being that you are probably paying a pretty high interest rate each month.

A cash advance: If you’re in a pinch, you might think taking a cash advance from your credit card is a good idea. However, you should first consider other options before going down this road. A cash advance may seem like a good option, but it may carry a higher interest rate than your normal credit card. You may want to do some digging into the fine print in your account disclosures before considering this.

Paying for college: This is probably one of the worst things you could ever put on a credit card. You may not be thrilled about student loans, but those usually come with much lower interest rates than a credit card ever could. If you’re having trouble paying for school and you don’t have a full time job yet, you may be sitting on this debt for years – if it’s on a credit card. It would not be a wise decision to begin your financial future with thousands in credit card debt.

To help start a small business: It’s great to follow your dreams, and if starting a small business is one of them – wonderful. However, charging your business equipment to a credit card is not the best idea. Try looking into a small business loan instead, rather than purchasing items on a higher interest credit card. No one wants to think about it, but what happens if your small business doesn’t make it and you’re still paying off thousands on equipment you can no longer use?

If you are looking for higher credit lines, lower APRs, no annual fees, no balance transfer fees, a 10-day grace period, rewards (cash back or on travel & retailer gift cards), an EMV security chip, and more, check out First Financial’s Visa Credit Card options. Click here to learn more and apply online today.

 *APR varies up to 18% when you open your account based on your credit worthiness. These APRs are for purchases, balance transfers, and cash advances and will vary with the market based on the Prime Rate. Subject to credit approval. Rates quoted assume excellent borrower credit history. Your actual APR may vary based on your state of residence, approved loan amount, applicable discounts and your credit history. No Annual Fees. 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 Credit Card and is available to anyone who lives, works, worships, volunteers, or attends school in Monmouth or Ocean Counties. No late fee will be charged if payment is received within 10 days from the payment due date.

Article Source: John Pettit for CUInsight.com

 

4 Hacks to Raise Your Credit Score

Your credit score. Chances are you either love it or hate it. It’s either the greatest thing in the world or a total hindrance. Or, maybe you don’t really know enough about your credit score for it to make an impact on your life.

As a whole, Americans’ credit scores are beginning to increase but our knowledge of credit and how it works is declining. A recent survey from credit scoring company Vantage Score and the Consumer Federation of America, found that 32% of the people surveyed didn’t know they had more than one credit score.

Let’s forget about how many credit scores we have for a second and answer a very basic question: What is your credit score? 

Your credit score is a three digit number ranging from 300 (the lowest possible score) to 850 (the highest score). Lenders use your credit score to make decisions about whether or not to offer you credit – such as a credit card, car loan or mortgage. Your credit score is also used to determine the terms of the offer – such as what your interest rate will be.

Your credit score is calculated by looking at these categories:

  • Payment history
  • Your debt-to-income ratio
  • Total debt
  • Length of credit history
  • Types of open credit
  • Public records (such as bankruptcy)
  • Number of inquiries on your credit report
  • New credit

So, what is considered a good credit score? 

The average credit score in the United States ranges between 670 and 710. According to Experian, a “good” credit score is anything that falls between 661 and 780, which is about 38% of the population. Usually, if an applicant falls in that “good” credit range, they’re likely to be approved for credit at competitive rates.

Now that we know what a credit score is and what classifies as a good one, the next question to look at is: Why does your credit score matter? 

Think of your credit score like a report card you used to get while you were in school. Your report card measured your progress during the school year, and your credit activity puts you into a scoring range. But, unlike grades – credit scores aren’t stored as part of your credit history. Instead, your score is generated each time you apply for credit. Fact: It actually negatively impacts your credit score if you have multiple inquiries in a short period of time.

What are your major financial goals? Buying a home? Buying a car? Chances are, your credit is likely going to be a factor in framing that financing picture. Your score will actually tell a lender whether or not you qualify for a loan and how good the terms of the loan will be. For instance, the lower your credit score is, the higher your interest rate on a loan will be.

If you’ve looked at your credit report and you’re surprised to see it’s lower than you thought, there are simple ways to fix that:

  • Pay your bills on time. That goes for ALL your bills – not just credit cards and loans. Fact: Payment history is the most heavily weighted factor of your credit score. It makes up 35% of your total score.
  • Keep your credit card balances low. Credit history accounts for 15% of your credit score, so keep those old accounts open even if you don’t use them.
  • Space out your credit applications. Each time you apply for a line of credit, the inquiry is noted on your credit report. One or two inquiries aren’t a huge deal, but when you have a bunch within a two year period, it can cause your score to fall.
  • Mix up your credit. Your credit mix, or the types of credit accounts you have, makes up 10% of your credit score. Basically, lenders want to see that you can use different types of credit responsibly.

Credit doesn’t have to be scary or overwhelming. There are many responsible ways to start out slowly and build worthwhile credit for the future. First Financial can help! Are you looking to build or establish credit? We have a number of ways to start you on the right path. Stop by one of our branches today or give us a call. You can also check out our credit management guidebook on our website, for some additional tips.

Do You Know Your Credit Card’s APR?

This year wasn’t kind to credit cardholders’ wallets. In 2019, cardholders paid an average of 17% APR – the highest level ever recorded by the Federal Reserve since 1994. To put it into perspective: In 2009, the average APR registered just under 13% and in 2016 it hovered around 12.5%.

Even the maximum APR has climbed significantly. Financial institutions typically offer a wide range of APRs. As a result of the increase, maximum APRs are around 25% with the median standing at 21%. Wow, that is high!

So, what does this mean for you?

It means you’re likely paying more in interest than you’ve ever paid. However, there are several ways around paying high interest rates that will help you in the long run.

Avoid balance carry over. Ultimately, the best and most responsible way to use a credit card is to pay off the balance monthly. By paying your balance in full each month, you avoid paying interest while reaping the benefits a credit card has to offer. Plus, it helps improve your credit score.

Avoid spending more than you have. We’ve all done it. We have a credit card for emergencies only, but something comes up we really want, and it finds its way onto the credit card. Next thing you know, there are multiple unnecessary purchases on there that you’re trying to pay off. The best habit to get into is not spending more than you can pay off monthly. The more you put on a card, the more interest you’re going to be charged.

Do your research. If you’re thinking about signing up for a credit card, do your research. First of all, know your credit score. That’s going to be a huge factor in determining your APR. Also, consider why you want a credit card. Are you looking for cash back options? Do you want to earn rewards points or airline miles? Don’t apply aimlessly. Look at the specific types of cards that are designed for the purpose you want and see which card best suits your needs.

Obtaining and maintaining credit by using credit cards doesn’t have to be a scary experience. First Financial’s Visa Credit Cards offer benefits that include higher credit lines, lower APRs, no annual fees, no balance transfer fees, a 10-day grace period, rewards (cash back or on travel & retailer gift cards), an EMV security chip, and more!* And they can be used anywhere Visa is accepted. Click here to learn about our credit card options and apply online today.

 *APR varies up to 18% when you open your account based on your credit worthiness. These APRs are for purchases, balance transfers, and cash advances and will vary with the market based on the Prime Rate. Subject to credit approval. Rates quoted assume excellent borrower credit history. Your actual APR may vary based on your state of residence, approved loan amount, applicable discounts and your credit history. No Annual Fees. 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 Credit Card and is available to anyone who lives, works, worships, volunteers, or attends school in Monmouth or Ocean Counties. No late fee will be charged if payment is received within 10 days from the payment due date.

3 Bad Choices that Could Damage Your Credit Score

Your credit score is a big deal. That number decides what kind of loan you’ll be able to get and what interest rate you’ll have to pay. If your credit score is low, you’ll need to find ways to raise and improve it. If your score is good, here are three things you may want to avoid in order to maintain your high credit rating.

Cosigning a loan: You’re a nice person and you do nice things for people you care about. In reality, you should really never cosign someone else’s loan. If the borrower starts missing payments, your credit score will take a big hit. The last thing you want to do is be on the hook for someone else’s car payments, personal loans, or credit cards.

Closing a credit card account: Maybe you have a credit card that was just used to build credit or have in case of emergencies. You may have paid if off and decided to stop using it, but be sure you don’t close that account. That card’s credit history is good for your credit score. Also, closing the account will lower your amount of available credit which could negatively affect your debt utilization ratio. Closing a credit card account is one action that can damage your credit score in two different ways.

Not looking for errors: Always keep a close eye on your credit score. If you haven’t looked at yours recently, check out annualcreditreport.com. If you don’t keep an eye on your credit report, you could have your identity stolen and not even know it. Even if isn’t the case, there could still be inaccuracies. The day you find an error on your credit report that is negatively impacting your score, is the day you’ll be extremely happy you checked.

If you’d like more insight into your credit score and managing your credit – view our credit and debt management guide here.

Article Source: John Pettit for CUInsight.com

The Pros and Cons of Having Multiple Credit Cards

Credit cards. You were probably pretty excited when you got your first one, and if you weren’t cautious with it, that excitement probably faded pretty quickly. But there’s no denying that a credit card can be a valuable tool. So how many should you have? Here are some pros and cons to having more than one credit card.

PRO – It can be great for your credit score: When credit bureaus determine your credit score they look at your debt utilization ratio (percentage of your available credit that’s in use). If you’ve got one credit card with a $5,000 limit, and you’ve spent $4,000 on it, then your debt utilization ratio is 80%. If you get a second credit card with a $5,000 limit and keep a zero balance, your debt utilization ratio is now 40%. Your credit score will thank you.

CON – It can be damaging to your credit score: While a larger debt utilization ratio might be good for your credit score, the act of opening the account can be damaging. Anytime you open a new line of credit, your credit score can take a small hit. Just make sure not to open two new accounts in a short period of time.

PRO – Don’t keep all your eggs in one basket: Occasionally you might have trouble with a card, and it’s always great to have a back-up. Let’s say you’re traveling and your card is lost or stolen. Having a second card stowed away somewhere will really come in handy.

CON – Large amounts of debt: If you’re not very good at keeping your spending in check, having multiple credit cards can potentially be a huge disaster. If you’re lacking self-control when it comes to credit cards, the less you have – the better.

If you’d like more insight into your credit score and managing your credit – view our credit and debt management guide here.

Article Source: John Pettit for CUInsight.com

 

Credit Card Regret: It’s More Common Than You Think

“Regrets, I’ve had a few. But then again, too few to mention.” – Frank Sinatra

If you’re the kind of person who prefers to play it safe, there’s a good chance that, like Ol’ Blue Eyes, your list of regrets is mercifully short. But if you’re the adventurous type who’s more likely to yell “YOLO!” than take the time to consider the pros and cons, you may have made more unfortunate decisions than you care to admit. And if we’re being honest, some of them are probably related to finances.

Going into credit card debt is one of the most common financial regrets. According to a recent NerdWallet survey, “About 6 in 7 Americans (86%) who have credit card debt say they regret it.” With numbers that high, it’s safe to assume most of us would make different credit decisions if given a chance.

Common Reasons for Credit Card Regret

If you’ve ever opened a new credit card account and felt that distinctive twinge that tells you it was a bad decision, there’s a pretty good chance you filled out that credit application for the wrong reason. Bad reasons come in a variety of forms. Here are a few of the most common:

You wanted that sign-up swag. T-shirts. Koozies. Collapsible drink coolers. It doesn’t matter what it is, we all love free stuff. Credit card companies know this. Sure, free t-shirts are cool, but are they really worth opening a credit card that will charge you 26% interest on your purchases?

You can’t resist that one time discount.

“Would you like to save 25% on today’s purchase by applying for a store credit card?” If you’ve ever shopped at a retail store, there’s a good chance you’ve heard this sales pitch at the checkout register. If you took advantage of the offer and suddenly wished you hadn’t, you’re not alone. According to a recent survey, almost 75% of Americans have at least one store credit card. Not surprisingly, nearly half of them regret it.

You’re in a financial pinch.
When your checking account is running low, it can be incredibly tempting to sign up for a credit card just to get some temporary relief. However, credit cards don’t remedy poor financial habits, they tend to make them worse. If you’ve ever signed up for a new credit card “just to cover things until payday,” this regret may feel all too familiar.

OK, you signed up for a credit card and regretted it. Now what?
Before we go any further, it’s important to remember one thing: Just because you have a credit card doesn’t mean you have to use it. Even if your regrettable card carries a 26% interest rate, 26% of $0.00 is still $0.00. However, if you’re worried you won’t be able to resist using your card, you might be tempted to close your account immediately. This could certainly help you avoid charges you can’t afford to repay, but there may be a better approach.

Available credit and length of credit history are two of the main components of your credit score. Having an open, active account you don’t use could actually help you. If you were given a $1,000 credit line with your new card and you don’t make any purchases, you have $1,000 of available credit. If you close the account, you have no available credit. In this case, maintaining the credit line may be beneficial for your credit rating.

As for the length of credit history, that part’s fairly self-explanatory. The longer you maintain a satisfactory account, the more favorably it reflects in your credit score. With this in mind, you might be better off just removing the card from your wallet instead of closing the account altogether.

Good credit is one of the building blocks of your overall financial health. If you live, work, worship, attend school, or volunteer in Monmouth or Ocean Counties in New Jersey and you’re trying to find financing options that are right for you, contact First Financial to make an appointment with a representative. We can help you review your financial situation and recommend the best products and programs for your needs. We are happy to help with managing your credit — and finances in general, with no regrets!