Checking/Savings and Credit Unit

Do you ideally want to have a HIGH credit score or LOW?

HIGH

Set Savings Goals!

How much should you save each month? That depends on what you're saving for.

Penalty Fees and Rates

You want to know what charges you will have to pay if you are with a payment.

APR

You want to know what interest charges you will have to pay if you don't pay the full balance on time.

Why is it important to consider the Annual Fee when comparing credit card offer?

You will have to pay an annual fee every year, which could be greater than any total rewards you would earn in that time frame, depending on how you use your card. There are many credit cards with NO annual fee, which is likely a smarter choice for a young person.

What do you think it means that your money is FDC/NCUA insured: up to $250,000?

Your own bank deposits up to $250,000 are guaranteed to be available, regardless of what happens to the bank or the economy. The bank can't just "lose" your money--even if the bank goes out of business, FDIC/NCUA insurance will refund your balance (up to $250,000).

Why is it important to review your credit reports annually?

- To see if there is someone else using your account (identity theft) - To see if there are any errors

For each action, write YES or NO for whether it will likely decrease your credit score:

1. You request a copy of your credit report (NO) 2. You open 5 new credit cards in one month (YES) 3. You are 3 months late paying your student loan bill (YES) 4. You lose your job, & it takes 4 months to find a new one (NO)

Which fee category has shown the largest year-over-year growth?

Annual fee

Debit and credit cards work exactly the same.

False

What banking activity do most consumers use online banking for?

International money transfer

Buying shares of stock in your favorite clothing company.

Investing

Contributing 3% of your paycheck to a 401(k) plan offered through your job.

Investing

Giving your cousin $5000 to help start his business, in exchange for 5% of monthly profits.

Investing

What is the most common credit card fee in 2018?

Late fee

What is the scale for minimum to maximum possible credit score?

Min. is 300, Max. is 850

What is the number one category of spending across all three populations?

Online purchases

What are the 2 most important factors taken into account when calculating a credit score?

Payment history and amount of debt

Save First, Not Last!

What's the FIRST thing you do when you get paid? Putting money into your bank first is important.

Why are credit card companies more willing to offer a young persona secured credit card than an unsecured card?

With a secured card, you give a deposit (ex: $500) that becomes your spending limit, so the credit card company already has your full credit limit of cash. If you don't pay your bills, the company uses the money you put down as a security deposit, and they don't lose anything. It's less risky for them.

A key difference between a debit and credit card is...

You can pay interest when using a credit card, not with a debit card AND You can build a credit score when using a credit card responsibility, not with a debit card.

Why is it a good idea to check your bank statements on a regular basis?

You might be able to keep an eye on if there were any errors and keep track of your spending.

What happens when you use your debit card?

You pull money directly from your checking account.

Extending the term of you loan...

decreases the monthly payment and increases the total cost of car loan

Increasing the amount of a down payment...

decreases the monthly payment and the total cost of car loan

What website should you visit to request your free credit reports?

www.annualcreditreport.com

What are some examples of fees that can be seen on a bank statement?

- Overdraft fees - ATM withdrawals fees (from a different ATM than the bank or credit union that you have an account with)

How can you obtain a free copy of your credit report?

Go to www.annualcreditreport.com

Which term refers to the amount of time you have between when the billing cycle ends and when you must pay your credit card bill?

Grace period

What category of credit card spending has the greatest difference between Completers and Non-completers? What is that difference?

On regular basis for everyday purchases (52% completes - 32% non-completers = 20% difference)

Where is the Apple Pay Cash recipient's money stored?

On their phone in their digital wallet; they can keep it there, pay merchants or peers, or transfer it to their bank accounts.

Since the start of the COVID pandemic, the savings rate has jumped from 7.9% in February 2020 to 13.1% in March 2020. Why do you think this is?

People may be saving more because of the economic uncertainty. Additionally, people's income and expenses may have changed due to loan payment deferrals (student loans, car payments, etc.), unemployment payment increases to $600/mo., government stipend check, and more.

What is one disadvantage people face without a checking account?

People without a checking account have to pay fees at check cashers, bills have to be paid in person, etc.

When you do spend, be a smart shopper

Remember to shoot smart! Check out prices, the internet is a pretty amazing tool to shop.

Depositing your annual income tax return into an account until you have enough to buy a car.

Savings

Putting $20 per paycheck into an account to help pay for books during college.

Savings

How do you think this data would looks if it only looked at how GenZ uses mobile and online banking? Why?

Since the generation is young, the data would likely be heavily skewed towards mobile banking, both because GenZ uses mobile technology frequently and because they are unlikely to engage in a lot of the banking activities done via online banking at their age.

Secured Credit Cards

The borrower puts down a security deposit that doubles as the credit card's limit. They make purchases as they would with a regular credit card, and they're responsible for paying at least the purchases minimum balance on time every month. As long as they do so, their account will stay open, they build credit, and their security deposit remains untouched. If they fall behind or don't make payments, the lender uses the security deposit to cover overdue payments and may close the card. Secured cards are less risky for the lender, because the borrower's own security deposit is on the line.

Between what two consecutive age groups do you see the largest difference in credit scores?

The difference between 55_ yrs. old (696) and 45-54 yrs. old (646) is 50 points

What is the connection between a credit report and a credit score?

The information from your credit report is what determines your credit score.

What happens if you only make the minimum payment on your credit card statement?

The remaining balance stays and the bank start to earn interest on it until you pay it off.

Four banks, not one!

Want a smart way to control your money? Use four little banks. Label each bank with the way you'll use the money: SAVE, SPEND, INVEST, and GIVE.

What prevents someone who randomly picks up your phone from sending money to themselves using a messenger-based payment?

You must authenticate with your fingerprint, Face ID, or a PIN number

Secure a lower APR...

decreases the monthly payment and the total cost of car loan

Paying more than the minimum monthly bill...

increases the monthly payment and decreases the total cost of car loan

What else can a digital wallet be used for?

- Boarding passes - Tickets - Credit, debit, and gift cards - Transit cards (in some locations)

Advantages of a Lease:

- Can sell the car back to the dealer - Can get a new car every 2-3 years - Lease payments are typically lower than loan payments - Car will be under warranty

Ways that a debit card and credit card are different

- Debit access your money from your checking account; credit is like a little loan you must pay back later - Debit charges no interest rate; credit card does - Debit card comes with your checking account; must apply if you want a credit card

Ways to get money INTO your checking account

- Deposit a check using mobile deposit in your smartphone - Deposit a check in person at a bank branch - Deposit cash at a bank branch - Transfer funds electronically from other accounts to this one - Set up direct deposit of your paychecks

Which seems like the better option?

- Direct lending makes it easier for you to compare loans from various banks. - Dealership financing may be more convenient and dealers sometimes offer special financing incentives to move cars off the lot.

In your own words, how does one get set up to use online bill pay?

- First gather all your bills and the numbers/addresses to where you need to make the payments. - Then, enter each biller's information into your bank's online bill pay platform and choose when to send the payment. - When doing this, you can select to make a recurring or one-time payment. - At the end, make sure to set a reminder to track when each bill is due.

If you're trying to gain access to a credit card before you turn 21, which of the suggestions rely on the support of your parent or guardian?

- Get a co-signer - Be added as an authorized user on someone else's credit card

Which of the suggestions fo NOT rely on the support of a parent or guardian?

- Get a secured credit card - Begin making student loan payments while still in college

What are some of the disadvantages of being locked out of, or choosing not to belong to, the traditional banking system?

- High fees at Check Cashers for services that most banks usually offer for free - Inability to take advantage of debit cards or checking accounts, meaning bills generally have to be paid in cash - Bills have to be paid in person, which requires gas, time, and energy

Some information you can expect to find on a credit report.

- History and track records of paying bills - Opened/Closed accounts - Late payments - Credit inquiries

10 Reasons to Open a Checking Account

- It's quick and easy - Convenient access to your cash - Help tracking your finances - Pay day is right on time - Online and mobile banking make your life easier - Your money is safe - Save on other financial needs - Help and support when you need it

What marketing strategies do credit card companies use?

- More spending means more points to redeem for things you want - This card will make your life EASIER - Complimenting you on what a smart consumer you are - Showing that they value YOU

Name ways you could LOSE money using person-to-person apps

- Paying fees to have your money instantly transferred to/from other accounts, rather than waiting the specified # of days - Transaction service fees 2-3%, particularly when linking to/from a credit or debit card - Sending money to the wrong person and/or being scammed by another user of the app - NOT in the article, but also propensity to overspend or be overly generous because it's so easy/conveniet and doesn't feel like "real money" changing hands

What features of credit cards are showcased?

- Points reward system on everything you buy--earn by spending: redeem for fun - Cash back is EASY compared to point system; 1% back on everything; no limit to cash back - Low rate, fixed APR, accepted worldwide, backed by the bank, friendly staff/good customer service

Which of NerdWallets safety recommendations do you think is MOST important for protecting your money when using P2P apps? Why?

- Review safety policies/procedures before signing up - Use a PIN to complete transactions, use a different PIN to unlock your phone - Set an alert to get an email or text with every transaction -Only use P2P with people you know, never strangers - Link an external account (FDIC insured) rather than keeping all your money inside the app

What to look at when opening a savings account

- Savings account features - Savings account insurance - Savings account fees - Interest rates

Making early loan payments will:

- Start building your credit history, which will increase your score, and make you more eligible for a credit card (or good rates) in the future - Reduce the total amount of interest you'll pay on the loan

As a young person, why is it important to have FREE checking account, if possible?

- There won't be a monthly maintenance fee and/or maybe no minimum balance you have to maintain. - As a young person, this is super important because you probably don't HAVE much money in the account.

Reasons why someone might want to open a secured credit card?

- They are unable to open an unsecured credit card because they have bad or limited credit history - Secured cards can enable;e them to develop a stronger credit history with little risk of overspending - They don't need support of a cosigner or someone willing to add them as an authorized user

Explain the importance of reading through your credit card statement regularly.

- To check for errors - To understand the terms of your credit card and see if any changes have been made

Disadvantage of a Lease:

- Will have to pay more money if you damage the car - Cannot use resale value for down payment for a new car - There are lease restrictions (ex: mileage restrictions)

Ways to get money OUT of your checking account

- Write checks - Use your debit card to buy things - Use your ATM money to remove cash - Withdraw at your local bank branch - Use online bill pay to transfer money out to pay bills electronically - Transfer funds electronically to other accounts

Does the method for calculating credit scores seem fair?

- Yes, if you have a bad payment history, lenders should not trust you. - No, because you need credit to have credit history, and it's hard to get credit without a credit history, so it can be difficult to get started.

What are the possible consequences of making a late payment?

- You will be charged a fee - You could trigger the default penalty rate (your APR will increase)

3 ways savings accounts differ from checking accounts

1. Balance in checking accounts rarely earn interest, so they are poor saving vehicles, but excellent for transactions. Balance in savings accounts earn interest and are good saving vehicles. 2. Balance in a savings account are far less accessible than that in a checking account; there are not debit cards and no checks can be written against balances in a savings account. 3. Banks readily lend out money in a savings account to other customers, which is why they pay interest on balances in savings accounts.

5 Simple Saving Tricks

1. Four banks, not one! 2. Set Savings Goals! 3. Save First, Not Last! 4. Cut your expenses 5. When you do spend, be a smart shopper

What are two reasons someone might purposely choose a HIGHER monthly payment?

1. Higher monthly payment means a shorter term: the car buyer will pay less interest to the financial institution. 2. Some people feel more comfortable with paying off their debts as quickly as possible.

List at least four people or companies you might want to pay regularly by using online bill pay

1. Pay rent 2. Phone bill 3. Utilities 4. Groceries

What are the 5 factors taken into account when calculating a credit score?

1. Payment history 2. Amounts owed 3. Length of credit history 4. New credit 5. Types of credit

The four main sections of your credit report

1. Personal Information 2. Credit History 3. Public Records 4. Credit Inquiries

Reasons why it's important to request your 3 credit reports and review them regularly

1. To see if there is someone else using credit under your name (identity theft) 2. To see if there are any errors

Identify two ways to deposit money into and withdraw money out of your checking account.

1. Use debit card to buy things 2. Go to the ATM to withdrawal money

What percent of current college students use their credit cards in emergency situations, only?

11%

How much does Kal Penn recommend you save?

20% of income to savings. Savings includes money in 401k/retirement account through an employer, piggy bank, emergency funds, college savings account/529.

What percent of payments were completed by credit card in 2018?

23%

What is the difference in credit scores between those over the age of 55 and the between 18-24 yrs. old?

55+ yrs. old (696) - 18-24 yrs. old (63) = a difference of 66

At what credit score range you think it's unlikely that banks would offer you a loan or credit card?

579 or lower

What percent of Americans do know their credit score?

63%

Payment history and Total Debt, together compromise how much of your score?

65%

How long do financial records remain on your credit report?

7 to 10 yeards

What is the difference between Apple Pay and Apple Pay Cash?

Apple Pay is for paying merchants; Apple Pay Cash is person-to-person.

Balance transfers and cash advances are bother optional ways one can use a credit card. In 2018, what percent of overall fees were incurred by using these two options?

Approximately 13-14% (~10% balance transfer and ~3-4% cash advance)

What banking activity do most consumers use mobile banking for?

Balance Inquiry

Which item would not appear on a credit report?

Balance from your bank accounts

What is the purpose of a bank statement?

Bank statements are to provide you with a log of all your transactions from a certain time period in your account, including withdrawals, deposits, and fee charges.

Why is it important to consider APR when comparing credit card offers?

Because that is the amount of interest you have to pay if you don't pat your balance in full and on time. Paying interest makes the total cost of your purchase even higher.

What is the relationship between age and credit scores? What are the factors that explain this relationship?

Between ages 18 and 44, there's basically stagnation in credit scores, all hovering around 630. Then there's a large jump to scores for 45-54 and then the largest additional increase for those 55+. Factors for younger people might be cost of student loan debt & other big loans (car, mortgage), lower incomes, and shorter credit history. Older people might have job stability, higher incomes, longer history of credit decisions and more experience managing credit.

Between 2016 and 2018, what payment type experienced the greatest decrease, and how much did it change?

Cash, decreased by 5% (31-26)

Cut your expenses

Create a money diary to see what you are spending your money on, them make cuts.

Which of the main sections is the most important?

Credit history: It allows people to reevaluate the value of any unused accounts. It is also a great way to see if any fraudulent charges have been made in your name.

Which payment types have you seen an increase in usage between 2016 and 2018?

Credit, debit, electronic, other

In what month and year were the lowest personal savings rate the LOWEST? What was the lowest rate?

December 2015 - 5.8%

Before March 2020, what month and year did the US personal savings rate peak? What was the peak?

December 2018 - 8.8%

How are direct lending and dealer financing similar?

Direct lending and dealership financing are similar because they both offer financing for vehicles.

Why does it make sense to start saving or investing right now?

Max out match and invest when young because the closer a person gets to retirement, the less time money has to grow (interest compounds less). The earlier a person starts, the longer the money invested or saved has to grow (interest compounds more).

What term describes the amount you must pay in order to be considered "up-to-date" with your credit card payments?

Minimum payment

Grace Period

You want to know how many days you have to pay off your balance without being charged interest or to pay the minimum so you aren't hit with fees/penalties.

Annual Fee

You want to know if you have to pay a fee every yr. The fee could be greater than the amount of rewards earned.

What is direct deposit?

Your paycheck funds are deposited electronically straight into your account. To use it, your employer will need your routing number and account number.