Students’ Guide to Personal Finances and Credit Unions
Students’ Guide to Personal Finances and Credit Unions
What are credit unions?
What can BSCU offer students?
Debit or Credit? When to Use Each
Things to Consider When Making a Purchase
Three important decisions need to be made regarding your debit and credit card. The first is quite apparent, and it has to do with which type of card you should be carrying in your wallet or purse. A good rule of thumb would be to always carry both on you. That way, you can withdraw cash if needed (without a fee) and use your credit card to build credit or earn rewards.
The second big decision is to figure out which type of card to use on any given purchase. It’s recommended to use your credit card wherever you can. That way, you earn rewards and have more protection against fraud. Use your debit card in instances where you need to get cash or if the purchase is a low dollar amount.
The last decision is whether you should select debit or credit on the pin pad when using your debit card. When you use your BrightStar Debit Card and select credit, you will be prompted to sign for the purchase. This allows you to earn rewards if you’ve enrolled the card in our Scorecard Rewards.
When to use your Debit Card
- Withdraw cash or make small purchases.
- Avoiding debt. Some people can’t control how much they spend, so using a debit card can help them stay within budget. You can also set limits on the BrightStar Card Control App.
- Some stores require that you use debit cards. For example, Costco will not let you make a purchase unless it’s with your Visa Debit.
- Sometimes you can incur a fee for using a credit card. Why pay extra to use credit when you can use debit?
- When buying from a small business. Businesses don’t set credit card minimums without reason. Often, they must pay extra to process the transaction.
When to use your Credit Card
- Building credit! This is a huge one for most people and is something you should strive to do.
- Making big purchases. If you need to finance something and don’t have all of the money upfront. You want to avoid doing this because of the interest you’ll pay on the purchase.
- Most credit cards come with several consumer protections that people don’t realize they have. For example, BrightStar’s Credit Cards come with NortonLifeLock Identity Theft Protection, Travel Benefits, Accident Insurance, Auto rental, and luggage insurance.
Questions to ask before purchasing a home
What do I need to know?
Buying a home is something that you really need to prepare for. Whether it’s saving for a down payment or figuring out which neighborhood is the best fit for your needs. Right now, the housing market is starving for inventory. Law of demand comes into play making prices for current inventory inflated or slightly higher than they normally would be. If you are looking to purchase a place of your own this next year, here are some critical questions to consider.
1. Is my credit score good?
If you need a mortgage to finance a home, you should know that the higher your score is, the more likely you’ll be approved. Not only will you be approved, but you’ll receive a lower interest rate. Since home prices are higher than usual, you might need a lower interest rate on your mortgage to compensate.
2. Do I have a stable enough job?
It’s important to make sure you have a stable job before jumping into a large purchase like this. Thankfully, the economy is doing well and there are plenty of jobs out there. If you suspect an organizational change or some other unknown factor, it may be a good idea to wait and see what happens before purchasing a home. It’s also a good idea to make a budget and figure out what payments you’ll be able to afford with your current salary.
3. Can I afford the down payment?
You’ll want to put 20% down when purchasing a home to avoid paying private mortgage insurance (PMI). PMI can be costly and can stretch your budget every month. If you’re short on cash for a 20% down payment, finding an extra job or some other income source might be a great idea. You can also rethink the home you’re looking for and maybe find something a bit cheaper that can be renovated.
4. Can I afford the home of my dreams?
Don’t buy a home that you aren’t completely happy with. It’s a big investment so you need to be sure it’s a place that you can see yourself living in for a while. It’s not just a short-term investment. Not only does the house need to be something you like, but also the neighborhood, surround schools, and everything else should be up-to-par with what you want.
STOP overspending on fuel
Save at the Pump!
- Make sure your tires are always filled with the right amount of air
- Use the manufacturer’s suggested engine oil and get it changed as directed
- Use your air conditioner only when needed
- Remove any bike racks or luggage racks that could weigh your vehicle down
- Turn your car off rather than idle if you’re in a situation that allows it
- Drive the speed limit
- Use cruise control
- Use public transportation or some other means to get around
- Accelerate slowly at a stoplight when it turns green
- Use your GPS to find the fastest route
- Combine errands into one trip
- Arrange carpools to share the cost
- Buy gas with the lowest octane rating
- Check websites and apps that list gas stations with the lowest price
- If you have a Costco membership, use their pumps when available
- Don’t drive far out of your way to save a few pennies at another gas station
- Walk into restaurants instead of using the drive-through
- Avoid circling a parking lot to find a space that is a little bit closer
- Avoid gas stations near the highway as those prices tend to be higher than gas stations further away
- Don’t “top off” at the gas pump
For more tips you can visit https://www.balancepro.org/resources/articles/frugal-fill-ups-30-ways-to-save-at-the-pump-2
Navigating on a Reduced Income
How to Navigate on a Reduced Income
1. Analyze the Numbers
You need to revisit your budget and make any necessary changes. Figure out what income you currently have so that you can adequately budget what you’re able to spend.
2. Talk to your service providers and financial institutions
If you are unable to make your rent/mortgage, utility, credit card/loan, or other payments, you should reach out to your providers and financial institutions to see if they offer any accommodations. Many credit card providers were allowing their members to skip payments without any consequences. It’s worth asking even if it’s a long shot.
3. Cut out all non-essential items from your budget.
This means anything that is not essential to your life or work. For example, you may have to skip happy hour with your friends on Fridays because you don’t have the available funds with a reduced income. Of course, this won’t be fun, but it’s something that you will need to do. All these non-essentials will return once your income increases.
4. Apply for any and all assistance
Go to your county’s website for health and human services to find out what kind of public assistance they offer. This could include food assistance, childcare assistance, health insurance, work search programs, and transportation certificates. Using these services can help tremendously. Make sure you apply for assistance immediately because it can take some time to process.
5. Look for odd jobs
Exploit your talents and skills by finding different jobs that you can perform to make money. This could be as simple as working for Grubhub, UberEats, GoPuff, and other delivery services. You can also sell your own products such as masks, art, handyman work, cooking, cleaning, or dog walking.
6. Learn how to DIY
We sometimes spend money on things that we can do ourselves just for the sake of saving a few minutes. Instead of paying to get your car washed, you can easily grab a bucket and soap to scrub with. If your furry friend needs a haircut but some clippers and do it yourself. It might not be as professional is you’re used to, but eventually, your skills will improve. Doing tasks yourself will save you more money than you may initially think.
7. Stay home and enjoy free things to stay entertained and healthy
Staying home will not only help you stay within social distancing guidelines, but you will also save money by not going out. Enjoy a good book, movie, or an at home workout. This is also an excellent opportunity to discover new hobbies or talents that you may not have considered before.
Navigating on a reduced income can be stressful, but with the proper planning is doable. For more financial tips, visit Balance Financial.
Understanding Credit in a Changing World
Your Credit Matters!
What is a credit score?
Your credit score can range from 300-850. Ratings 720 and above will usually give the borrower the best rates available unless it is a thin file (minimal trade lines and history) also known as a false Beacon. The following are the roles of credit scores:
- One element of the credit decision-making process.
- Often the key to better rates. Higher scores equal a better rate.
- Not a money-management tool. This is purely an indicator of how risky you are to a lender.
- Discovering fraud or credit reporting errors is essential. You want to check your credit score periodically to ensure your personal information hasn’t been compromised.
How Scores are determined
Many different factors determine your credit score. No one knows precisely how much each category is worth, but they are all significant in determining your final number. Below are the different categories with an estimated percentage of how important each is.
- Types of Credit (10%)
- New Credit (10%)
- Length of Credit History (15%)
- Amounts Owed (30%)
- Payment History (35%)
There are many mistakes that you can make when it comes to your credit. Each error will adversely affect your credit score. Typically, if you max out your card, it will decrease your score by 10-45 points. Late payments will reduce your score by 60-110 points. A foreclosure will affect your score by 45-125 points, and bankruptcy will decrease it by 130-240 points. Make sure you are responsible with credit to avoid penalties.
How to improve your credit score
It can take time to repair your credit score, but it’s essential to do. The following are ways that you can improve your score:
- Pay on time, every time. Even if it’s just the minimum, pay it.
- Pay collection accounts.
- Keep your old accounts. Don’t cancel old credit cards that aren’t costing you money. The length of your credit is important when determining your score.
- Avoid maxing out accounts.
- Limit balance transfers.
- Avoid excess credit applications. Generally, you only need 3-5 credit cards.
Beware of credit repair companies. They cannot legally do anything that you cannot do yourself for free. Take steps yourself to dispute incorrect or outdated information. Members of BrightStar Credit Union can speak with a financial advisor for FREE to sort out their credit issues and develop a plan to improve their score. Our Balance Financial Advisors will also help build a household budget, understand your credit report, buy a home, protect your identity, rebuild your credit rating, and more.
COVID-19 and your credit score
While employment status isn’t included in your credit report, job loss can still affect your credit. The reason job loss can affect your credit is that you might not stay current on your payments resulting in penalties. Unemployment itself does not prevent you from applying for new credit. The likelihood of a loan denial is much higher with a loss of steady income. Hopefully, during these hard times, you have taken the right steps to ensure your credit score remains healthy.
Make the Most of a Reduced Paycheck
Don't worry you will get through this!
Don't stress out!
Determine whether your situation is temporary or permanent
If you fully expect to be back to your full salary soon, you may only have to adjust to lessened cash flow for a limited time. But before you tap into your reserves (and retirement savings, home equity, cash value life insurance, etc.) it would be wise to behave as if the salary reduction is long-term. Cut down on spending now. Securing your old income may take longer than you think.
If you do not expect to make as much money as you once did, you may be experiencing anxiety, which is normal. You may be panicking about the practical matters to contend with as well, such as how you will pay your bills. Adopting a systematic approach and devising a plan will help you manage the anxiety.
Recognize that your salary is not you
This is a deceptively obvious statement. Of course your salary is not you. But many people’s self esteem directly corresponds with how much money they make—the higher the income, the more important they feel. If your mood declines when your income drops, make every effort to dispel the attitude that financial wealth equals worth. It does not, nor does having an abundance of money guarantee happiness. Think back to when you were making more money then you do now. Were you genuinely happier, or did you just have the ability to buy more?
Seize the day
Hardship can hone skills and challenge entrenched ideas. Perhaps you worked in the high-tech field because the money was good, but that is not where your passion (or even perhaps talent) truly is. Consider this your opportunity to discover what you really want out of life. After all, if you are going to dedicate forty or more hours a week to your job, it should be something you love. Or at least like.
If you are currently unemployed or are working fewer hours, use this “extra” time wisely. Your options are as varied and abundant as your desires. Consider taking a class—one that will boost future earning potential or for pure pleasure. Write that book, paint the kitchen, start an exercise routine. Or just relax.
Analyze your expenses
When cash is copious, it is easy to spend arbitrarily. However, when the salary that sustained such a lifestyle is gone or drastically reduced, its time to take a good look at what you need to spend your money on, not what you can. Prioritize expenses now, and identify which bills take precedence. Mortgage versus car payment? Credit cards versus utilities? Analyze the ramifications of missing or not paying each. If you need help deciding, contact a financial counselor for help.
Develop a spending plan.
It will help you to discern between those expenses you can and cannot live without. If you find there is simply not enough money to support your necessities, much less your desires, at the very least you now know how much you will require from your next job. If expensive dinners are now a thing of the past, relish in the delights of a cheap pizza, or making cold cuts stretch with lots of lettuce. Enjoy and appreciate the things you may have begun to take for granted.
Remember: credit is not supplementary income
When money is tight, credit cards can take on an unusually seductive glow. However, a $40,000 line of credit is not a bonus in disguise, no matter how you much you wish it was. If you use credit to maintain the lifestyle you’ve grown accustomed to, it won’t be long before you “hit the wall”. Without an income to support repaying the balance in full every month, you’ll be paying in installments. Interest rates on unsecured credit is not cheap, and if you fall behind by 60 days, the rates will likely skyrocket. Late and over limit fees will add to an increasingly daunting balance. And soon you’ll be wishing you could return all the merchandise you bought and the meals you ate just so you don’t have to open another statement and look at those big, scary numbers. Credit cards are not designed to be emergency savings accounts.
Develop a plan
To thwart procrastination, write down what you want to achieve during this time. Be specific: include names of people you need to speak to and proposed accomplishment dates for each task. Update and refer to it regularly. Apathy’s enemy is a detailed and well-thought-out plan.
Go forward
Get professional assistance, talk to friends, and find others who are in like circumstances. It is too easy to think you are alone in this—support is key. Vent to those who can empathize; ask for help from those who can assist. Shock, shame, and anger are normal and feeling these emotions is expected. But by adopting a positive attitude and taking pragmatic steps, you can adapt to a reduced income, and achieve a financially stable future.
Blog Credit: https://www.balancepro.org/resources/articles/how-to-make-the-most-of-a-reduced-paycheck/
Tips to Save You Thousands on a New Car
Surviving the car dealership
Be Educated!
Research the Market Value
Just like any other purchase, you want to know what the vehicle is worth. There are many resources and websites available for consumers to check how much a car is realistically worth. Checking on this before going to the dealership will give you peace of mind knowing you’re getting a fair deal. You can assess the value of the car by going to sites like Kelley Blue Book or Edmunds. Both sites will help you find the average price per model in your area.
Don’t become too invested in the deal
You need to be ready to walk away from the deal if it’s not adding up. Make sure you keep a clear head and know when to say, “no thanks” and move on. Don’t get attached to a particular car, because in reality, there are thousands to choose from. Saying no and moving on may be a result of the dealer you are speaking to as well. Many are overly pushy and confusing, resulting in a bad customer experience. They may promise one thing, then turn around and take it back. Pay close attention to what they say and take notes if you have to. Auto Advisors are a great tool to use because they help people buy cars all the time. They know what to look out for and how to get the best deal.
Walk into the dealership knowing your out-of-door price
The out-of-door price is the price that you want to walk out with, which includes all fees, taxes, and other costs that you pay. Make sure this reflects the market value that you researched. Go into the dealership with a firm price and then talk the salesperson down. The salesperson wants to make a sale, so if you’re firm and don’t get too set on buying the car that same day, the salesperson will many times settle for your price.
Don’t get sucked into the extras
Here are some common add-ons that the dealership will try to get you to purchase to make it seem like you’re getting an added benefit.
- Nitrogen in your tires – This is only useful for racing; otherwise, you likely will not notice a difference in your car’s performance or wear.
- Theft Protection – These packages vary, but most new cars come with a built-in alarm system that will do the trick. There is no need for an advanced system.
- Rear-seat Entertainment Systems – These are a complete waste of money. Ten years ago, it was a different story, but currently you can purchase a tablet for a fraction of what a rear-seat system would cost.
In conclusion, you need to be prepared and informed when purchasing a vehicle. Going to a dealership underprepared will most likely result in a poor deal that you walk away from unsatisfied. If haggling isn’t your thing, consider using an Auto Advisor. It’s their job to make sure you get the best price. They work with dealerships thousands of times a year, so dealers want to give them the best price possible in order to keep getting their business. You can learn more about our free auto advisors by clicking here.
Ways to Save on Your Next Vacation
As the spring and summer months quickly approach, we are all looking forward to some much needed vacation time. There are typically two types of people when it comes to planning for a vacation. Read the following sceneries and honestly reflect on which one relates most to your approach.
Scenario 1:
You and your friends/family decide to take a sporadic vacation to Mexico during March. The timing works perfectly for everyone, so you buy your tickets at a high season price. As the date quickly approaches, you all have completely forgotten about planning or buying a hotel, so you scramble to find a bouge place to stay. You end up spending way more than you should have due to your lack of planning.
As your relaxing on the beach with friends and family, zero thought goes into what you purchase or where you swipe your card. By the end of the stay, you have racked up a $8,000 bill for your luxury 4-night stay. Was it worth it?
Scenario 2:
You and your friends/family decide to take a vacation together at some point during the year. Everyone sits down and searches for the cheapest times for tickets, hotels, etc. Once the perfect date is settled and hotels and flights are purchased at an offseason price, you decide to make a daily budget to follow.
On vacation, you closely monitor your spending and aren’t just whipping out your rewards credit card to exercise your wrist. On your budget, you’ve accounted for extra spending each day so even if some days are more expensive than others, you have the necessary funds for it. Once it’s time to leave, you have a $4000 bill on your rewards credit card, but have enough money in the bank to pay that off immediately due to your proper planning.
Some tips to prepare for your next vacation:
- Budget. BUDGET! The last thing you want to do after coming back from a relaxing stay at the Bellagio is worry about paying off a credit card that you don’t have the money for.
- Use a rewards credit card for purchases. There’s nothing wrong with putting everything on a credit card. As a matter of fact, it’s what you should be doing to avoid having your account compromised. Earn extra money, miles, or gifts by putting everything on your rewards credit card and then pay the balance off to avoid high interest charges.
- Book in advance and during offseason if possible. Scenario 1 and 2 stayed at the exact same place but paid completely different prices. Booking well in advance will relieve stress as well as get you the best price. It’s recommended to start planning your vacation a year in advance to give you plenty of time to budget and find tickets.
According to CheapAir.com 2018 Annual Airfare Study, they determined that you should book this far in advanced for the following seasons.
- Winter: 62 days in advance
- Spring: 90 days in advance
- Summer: 47 days in advance
- Fall: 69 days in advance
- Figure out local transportation. You can easily save money by checking if there are local trains, busses, Uber, Lyft, etc. Taking a taxi everywhere will cost you an arm and leg.