Financial Literacy

Money Smarts

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Payment Options

People today have access to a variety of payment options that fit their daily purchasing needs. While it should be simple to choose what payment option is best in any given situation, below are a few examples, including the benefits associated with each.

Cash

The most traditional form of payment is cash. You carry what you have and spend what you have, making it easy to know how much is available at your disposal. The risk to carrying cash is that you are not protected if your cash gets stolen, and there is often little you can do to retrieve money lost.

Debit Cards

Debit is the most popular form of payment among many consumers today because it's a convenient way to access money. Debit cards allow you anytime access to your money by withdrawing funds directly from your checking or savings account. In fact, today it's more accurate to call a checking account a "debit account." That means no monthly bills or interest charges.

Since you draw money directly from your checking account by using a debit card, there are no future bill payments or interest payments later. Paying by debit offers two forms of cardholder authorization: PIN and signature-based, allowing you to choose how you want to complete your transactions.

Prepaid Cards

Prepaid cards operate like a debit card in that funds are directly debited from the actual balance of the card. It's a payment alternative for people who do not have a bank account or wish to access a certain amount of money that is preloaded or reloaded on the card. You may use only the amount of money stored on the card. Should your card get lost or stolen, many prepaid cards may offer replacement cards and replace the remaining funds, subject to certain conditions.

Checks

Checks allow card account holders to access money directly from their card accounts, but without the transaction-processing speed of PIN-enabled debit cards. While checks have been around longer than debit cards, they don't offer many of the same conveniences of debit and, historically, have had higher rates of fraud associated with them than debit cards.

Credit Cards

Credit cards enable you to access funds from a previously approved line of credit and pay off those borrowed funds, plus interest in most cases, over time. Credit card transactions are authorized by signing a receipt. Responsible use of credit cards – which includes making at least the minimum monthly payment, on time, each month – helps to build your credit record, which can assist you in securing future loans such as mortgages. Most consumer credit cards offer zero liability, and many include rewards programs.

Comparing Debit Cards and Credit Cards

Debit and credit cards may look alike, but they are two very different forms of payment. Here's how:

Debit Cards Credit Cards
Available to virtually all prepaid and checking account holders,

Adults 18 years or older can build their credit by using a credit card.

Draw money directly from your prepaid or checking account, helping you keep track of your daily spending.

Purchases are charged against a pre-approved line of credit.

No additional processing or future bill payments are required on your part, meaning s no interest payments.

Allows you the flexibility to make monthly payments for purchases over an extended time period.

Offers two forms of security options: PIN-based and/or signature-based transactions.

Signature is the dominant form of transaction authorization in the U.S. However, some credit cards allow for PIN-based cash advances at ATMs.

Debit cards are covered under the Electronic Fund Transfer Act, also known as "Regulation E."

Credit cards are covered under the Truth in Lending Act.

A Whole New World of Money Management

You may not realize it, but as a young adult you're venturing into a new world of money management. Here are ways to be prepared:

Save Money That Could Make Your Dreams A Reality

Put money aside for purchases you expect to make in the next few months or years. Create a budget that includes: how much you earn each month, and how much you pay for essentials like housing, meals or books, and how much is left over for everything else. Arrange with your financial institution and employer to automatically transfer a certain amount each month to a savings or investment account.

Build A Good Credit Record

Always pay your credit card bills and other debts on time. Charge on your credit card only what you can afford to pay off immediately or within a reasonable time frame. Whenever possible, pay your credit card bill in full each month or pay as much as you can above the minimum amount due.

If You Need To Buy A Car, Consider The Best Way To Pay For It

Monthly lease payments are usually lower than monthly loan payments but at the end of the lease you don't own the car you've been paying for. If you buy, you have a vehicle you can sell or trade.

If You're Renting A House Or Apartment, Consider If It's Time To Buy

Look at the costs of renting versus paying a mortgage. Buying a home includes paying real estate taxes and insurance, mortgage interest payments and the cost of maintenance. However, the upsides to buying a home are tax benefits, the potential for your home to appreciate in value and the satisfaction of having a place to call your own.

What is Identity Theft & How to Protect Yourself

Identity theft occurs when someone uses your personally identifying information, such as your name, Social Security number, or credit card number, without your permission, to commit fraud or other crimes. The FTC estimates that as many as 9 million Americans have their identities stolen each year. In fact, you or someone you know may have experienced some form of identity theft.

The crime takes many forms. Identity thieves may rent an apartment, obtain a credit card, or establish a telephone account in your name. You may not find out about the theft until you review your credit report or a credit card statement and notice charges you didn't make—or until you're contacted by a debt collector.

Identity theft is serious. While some identity theft victims can resolve their problems quickly, others spend hundreds of dollars and many days repairing damage to their good name and credit record.  Some consumers victimized by identity theft may lose out on job opportunities, or be denied loans for education, housing or cars because of negative information on their credit reports. In rare cases, they may even be arrested for crimes they did not commit.

There are a number of things you can do in your everyday life to ensure the protection of all of your personal information. These additional safety tips will help safeguard you against theft and identity fraud:

  • Shred all personal and/or financial documents before disposing of them.
  • Destroy unused credit, ATM and debit cards.
  • Remove mail promptly from your mailbox.
  • Match receipts to monthly billing statements.
  • Memorize PINs, passwords and Social Security numbers.
  • Use longer, more complex PINs and change them periodically.
  • Sign all debit and credit cards immediately.
  • Notify financial institutions of address changes in advance.
  • Immediately report any unauthorized activity.
  • Never use your PIN as a password.

Safely Conducting Transactions

Because most transactions take place in a public place, it's easy to assume that you are safe when making purchases. However, card and information theft can take place whether you are aware of it or not, in person, over the phone or online. To make sure you're not the next victim, follow these simple safety measures when making transactions:

Keep your PIN a secret.

ATM transactions and PIN debit purchases require the use of a secret code known as a personal identification number, or PIN. Memorize your PIN, never write it on your card or store it with your card. Never let someone else enter your PIN for you. Many security experts recommend changing your PIN often and using different PINs for different accounts. These are steps that make it more difficult for criminals to use your card if it's lost or stolen.

Do not disclose information about your card over the telephone.

No company or individual should ever ask for your PIN, not even your financial institution. If you perform transactions over the telephone using your debit card, never disclose your PIN.

Make certain your Internet shopping sites are secure.

Look for secure transaction symbols when shopping online to ensure your account information is protected. These include a lock in the lower right-hand corner of your browser window and a Web address that begins with "https." Always log off from any site after you make a purchase. If you can't log off, close the browser to prevent unauthorized access to your account information.

Report a lost or stolen card at once.

Immediately call your financial institution if your card is lost or stolen to reduce the chance that it will be used improperly. Immediate notice of lost or stolen cards will also limit your potential liability for unauthorized transactions.

Review your account statements for unauthorized transactions.

Review all account statements from your financial institution promptly, and report any errors (including transactions you believe may be unauthorized) as soon as possible. Most financial institutions offer secure online access to accounts. Checking accounts online often can help you spot suspicious activity quickly. Prompt notification will limit your potential liability for unauthorized transactions.

Protect your card's magnetic stripe.

Do not expose your card's magnetic stripe to magnetic objects. Magnetic objects can damage your card.

Additional Safety Tips

  • Never allow the cashier or any other person to enter your PIN for you, even if they are assisting you with the transaction. Always keep your PIN a secret.
  • Block the view of others when using an ATM or PIN debit terminal.
  • Be certain your ATM or debit transaction is complete and review your receipt before leaving.
  • If you receive cash back from a transaction, put it away before leaving.
  • When using an outdoor ATM or debit terminal, such as at a gas station, always observe your surroundings before making a transaction.
  • When using an outdoor terminal, if anyone or anything appears to be suspicious, leave the area at once.
  • It is a good idea to take another person with you when using an outdoor ATM or PIN debit terminal at night.
  • If anyone follows you after conducting a transaction at an outdoor terminal, proceed immediately to a crowded, well-lit area and call the police.

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