Seven Lessons on How to Pay More Bank Fees

Do you want to pay more in bank fees on your checking account? Follow my advice you will spend more than intended on bank fees!

1. Ignore your account between paychecks.

• Lots of people only look at their account on payday when they make a deposit. “I’m in a negative balance. Why?” They don’t keep a running total on their check register nor use online or mobile banking to track their usage. This can result in multiple overdrafts costing at least $35 for each occurrence.

2. Ignore financial institution correspondence that comes with your statement.

• Financial Institutions can make changes to their accountholder agreements. Often these changes affect the fee schedule of the institution. If one ignores the changes by failing to read the statement enclosures, they may fail to heed a warning that their minimum balance has increased and start paying a monthly fee or miss out on some other change that will result in higher fees.

3. Ignoring minimum balance or direct deposit requirements

• To maintain a free checking account, many financial institutions require that an accountholder maintain a specified minimum or have their paycheck directly deposited to their account. Drawing funds so the account balance falls below the required minimum or changing employers and forgetting to set up direct deposit can result in a member paying higher fees.

4. Skip Overdraft Protection

• Yeah, you probably won’t make any mistakes with your account so Overdraft Protection is probably unnecessary. But, of course, if you do make a mistake, you will pay $35 or more per occurrence. Good overdraft protection provides you with a line of credit or a transfer from your savings account that is paid to your checking account if an item is presented for payment and there are insufficient funds. Your fee for the transfer may be free or as little as $5. That is a lot less than an overdraft or Non Sufficient Funds charge.

5. Move to another financial institution and ignore your old account.

• You moved to a new bank or credit union and left a few bucks in the old account in case something comes in. After a while, you forget about the old account. Does your accountholder agreement have built in fees for inactivity? Some institutions enforce inactivity fees of $5 or more per month should you stop using your account and allow it to become inactive or dormant. Remember to close old accounts when you change institutions. Not only can you lose money with inactivity fees, your account could just get old and after three years of inactivity, it may go dormant. Allowing your account to go dormant means that any money remaining in the account at the end of three years of inactivity can be sent to the State of California’s Controller’s Office. The money can be redeemed by the accountholder but it takes time to go through the bureaucratic process.

6. Using money orders to pay for items that require guaranteed funds.

• A financial institution will charge $5 or more to issue a money order or cashier’s check. Did you know that if you send a check through your online banking it is a guaranteed check and it is free?

7. Use ATM’s indiscriminately

• If you are not using the ATM’s that are authorized by your financial institution you will likely be charged for each instance of usage. Those fees are not just from your bank, they are charged by the foreign financial institution’s ATM for non-customer usage. Costs: usually $5 -$7 per instance. You could be charged $2-3 by your institution and as much as $5 by the company that owns the ATM. 

        *   *   *
What is the difference between banks and credit unions? Some teenagers in Alberta, Canada came up with an ingenious video to describe the differences. It is linked here. I hope you enjoy it! 

Federally insured by NCUA. We do business in accordance with the Federal Fair Housing Law and Equal Credit Opportunity Act.
Copyright 2013 Meriwest Credit Union. All rights reserved.

Happy Valentine's Day! Save your Money!

On Valentine’s Day, we tend to spend money on our significant others. Like many holidays, it is conspicuous for its spending. We buy flowers, jewelry, chocolates, and meals all in the hopes that he or she will be our Valentine. They say you have to “Spend money to make money.” I wish there were an easy rhyme that goes along with spending money for your Valentine’s date! How about “Spend money to get a Honey?”  

A dozen roses can cost from $40 to over one hundred depending on where you get them. Today, many restaurants are advertising special deals for Valentine's Day. Several are advertising $150 complete four course meals for two. Maybe I'm cheap, but for $150 they should change the oil in my car, too!

Couples do a lot of things together; they dance, they dine, and they drink just to name a few. But one of the most significant things they can do for themselves is save money. There was an old saying that “Two can live as cheaply as one.” For obvious reasons we know that is not true, but two can live together cheaper than two living apart. What do I mean? The sharing of Expenses.

When we get married or decide to share our home with someone, we can realize some significant savings in our expenses. By combining our budgets, we can find ourselves with a lot of extra cash. We share rent with someone. We also share our utility bills such as cable and electricity. Buying our ingredients and cooking most of our meals at home rather than eating out can almost make it seem as if two can eat as cheaply as one. The challenge is to take the savings amount of each of these categories and invest it in a savings or money market account. Couples need to have commitment, discipline and focus to do this.

Spare change is always good. We might have a savings plan and budget our spending, but there is always spare change in our pockets. Save that change and turn it in annually for a nice savings surprise. I average $250 annually in accumulated coins from my pocket. I have been told that is low!

These are adhoc methods of saving. The best way is to have a plan and a goal for your dollars. A simple goal of $50 in savings deposited each month at a savings interest rate of 3.5% can turn into $3,282 in five years! (Rates are low now, but with inflation, they will be going up in the future.)

Do we need two cars? Selling one car can save you a payment, insurance, gas, maintenance and repairs on it. Get a monthly fast pass for the local metro and bank the rest!

But there are also a lot of compelling reasons to save:

Young couples typically get invited to other couples’ weddings and showers with gift obligations. Savings can offset some of the expense of this compulsory gift giving.

Appliances break! Hair dryers, curling irons, razors, microwaves, toasters, blenders, mixers, etc can break and need replacement. How many women can go without a hair dryer or curling iron for even a day? How many men can go without a coffee maker or microwave? These are expensive to replace and can be trouble for your monthly budget. Save money for their replacement. 

Cars breakdown. Tires go flat, hoses leak, batteries go dead, and belts break. A broken transmission can cost you over $1,500! Just owning a car is a good reason to save. 

Is there someone the couple loves who lives far away? A grandparent, parent, or other favorite relative? Suppose that relative became gravely ill? Would they want to see them? Emergency travel is another good reason we save! Considering the expense of traveling, this may only be possible thru savings. (or the dread use of credit).

*   *   *

Our next financial workshop is for teens: Reality Based Budgets - The Post College Simulation
February 20th at 6:30 PM at our Main Office 
Meriwest Credit Union
5615 Chesbro Ave
San Jose CA 95123

Please contact gmeyer@meriwest.com to RSVP for the workshop.

Federally insured by NCUA. We do business in accordance with the Federal Fair Housing Law and Equal Credit Opportunity Act.
Copyright 2013 Meriwest Credit Union. All rights reserved.

                                                     

Why do prepaid cards have a bad reputation?

Prepaid cards have a bad rep due to fees. People with modest incomes, such as students, seniors, or those on public assistance have very limited funds to pay for their living expenses. If one is only making about $400-$500 a month, the cards can be very costly. Depending on how you use a typical prepaid card, you could lose up to 10% of your monthly income in fees. Often they are seen as a predatory type of transaction card due to the charges they have for loading the card with money, using it at merchants or accessing cash at an ATM. All three transactions would be free at a credit union or a bank if they were using their checking account.

What would a typical month’s worth of fees look like?

I have looked up several prepaid cards over the past several weeks in researching them for use by the clients of some of our nonprofit partners in the community.  The fees I am quoting here are averages based on several typical cards.

Here is an example list of typical fees charged on a prepaid card:

Initial Purchase 5.00 Monthly Charge 5.95 Often Monthly service charges may be waived if one maintains a minimum balance or performs several transactions to offset fee. ATM Withdrawals-participating ATM's                N/C (non-participating ATM's.) 2.50 There may be charges from the out of network ATM Teller Withdrawals 2.50 Transaction Fee (Point of Sale/PIN Purchase) 0.15 Balance Inquiry Fee 0.50 Reload cash fee 4.95

In this scenario, let’s say I bought the card, reloaded it twice during the month with my paycheck of $250. I am a student making $500 a month in a part time job. I get paid twice a month on the 1^st and the 15^th. I had five ATM transactions, three of which were out of the network. I used the card to make 12 purchases at various merchants. I made three inquiries at ATM’s.

Purchase price	5.00
Two reloads @ 4.95	9.90
Two In network ATM withdrawals	0.00
3 out of network withdrawals @ 2.50	7.50
Out network ATM Fees @ 3.00	9.00
12 point of sale transactions @ .15	1.80
3 ATM inquiries @ .50	1.50
Total	34.70

Would a checking account have been cheaper?

Generally, yes. It depends on where you bank. With a checking account at most credit unions, the only fees I would have paid would have been the out of network ATM fees. Most financial institutions do not charge you to make a deposit, take money from your account with a teller, make point of sale purchases, or inquire on your account. 

But many checking accounts today have a fee unless there is a minimum monthly balance or you use direct deposit. Be sure to verify what the requirements are for your checking account before you open it

How are people confused about Prepaid cards?

People mix these up with gift cards. Gift cards typically charge a fee to purchase the card itself, but not for transacting on the card. Prepaid cards often charge for both items.

Also, people are confused by the fee schedules. There are fees for virtually anything you do with the card. Often, people think these are similar to their bank or CU ATM cards and can be used the same way. The fees eat into their balance and limit the amount of money they can use to pay for expenses.

Is a prepaid card a viable option for an unbanked person?

Yes, with caveats! If one is careful about its use. Card owners must use network ATM’s to avoid withdrawal fees. Use the internet to inquire on their balances as that is generally free with most cards. They must also keep tabs on and limit their purchases to avoid excessive point of sale transaction fees. 

How about using these for travel? 
That might be a good idea. If the card is lost or stolen, it can easily replaced and your accounts back home are not subject to identity theft. I suppose you could consider the cost of the fees part of your vacation expense!

*   *   *

The next Meriwest Credit Union workshop-

Tax Changes for 2013

Speaker: Will Slade of Slade and Associates. Mr. Slade is an IRS Enrolled Agent with many years of experience in counseling his tax clients and tax preparation.

10am February 9^th at the Meriwest Credit Union Main Office

5615 Chesbro Ave. San Jose CA 95123

Please RSVP with Gmeyer@meriwest.com

The Mr. Slade will cover the following:

• Tax ramifications of “Obamacare”
• Alternative Minimum Tax (AMT) patch
• Permanent implementation of Bush era Tax Cuts

I hope you can join us.

 

Federally insured by NCUA. We do business in accordance with the Federal Fair Housing Law and Equal Credit Opportunity Act.
Copyright 2013 Meriwest Credit Union. All rights reserved.

Business Credit Cards: Good for Business?

When someone is business credit card shopping it pays to shop around. This is because the credit cards are managed by the credit card company and not the institution. The financial institution may have their name on it, but that’s just branding. I spent 15 years as a branch manager working with businesses. At no point in my career could I call the credit card company with which we were affiliated to ask them for concessions for a business client. Once in a while I could get a late fee waived, but as far as personal guarantees, interest rates or credit lines, I had no say in that. Rates and lines of credit are determined through a matrix that combines the credit rating of the business owner with their ability to pay from the business’s income.

Yes, they are looking at the personal credit rating of the owner, not the business. I could not tell you how many times I have had business owners, even those who are just getting their business started, tell me they want a business credit card based on their business without having to give a personal guarantee. Sure, Microsoft or Ford Motor Co would not have to qualify based on their personal credit rating. But these are sophisticated and dynamic multi billion dollar businesses. A sole proprietor or small S Corp owner in a business with a gross annual revenue of less than a million dollars who applies for a credit card would absolutely be judged for credit based on their personal credit scores. These constitute the majority of small businesses in the country. (In a 2007 economic census, there were 6,049,655 businesses in our country. Five and a half million of those had less than 20 employees.)

Small banks and credit unions contract with large card issuers from Bank of America, Chase, Citi, Card Member Services, etc. These institutions are referred to by the card issuing companies as “Member Banks” or “Member Institutions.” The card issuers work with their member institutions to negotiate underwriting criteria, terms and rates for the new branded card. As a general rule, your branch manager, that manager’s regional manager, and most likely the district or retail VP in charge cannot change the terms of a business credit card.

Financial institutions can change issuers and negotiate a better overall card program if they are not happy with the deal they have from their present issuer. Today there are fewer issuers due to consolidation in the business. Bank One was a major card issuer with member banks all over the U.S. Now, they are part of Chase. MBNA issued millions of cards nationwide for years and now is part of FIA that is owned by Bank of America. With fewer issuers, it is hard to get a good deal and harder to negotiate because of narrow competition. Due to the volume of credit cards issued by credit union card programs, CU’s can often negotiate some very good deals for their members.

The small business owner’s best bet is to shop on the Web or shop their credit union for the best deal. There are a variety of low cost card issuers with which credit unions work; often offering smaller fees and slightly better rates. As credit unions are not for profit businesses without shareholders clamoring for higher profits, they can negotiate good deals for their members. Small business owners will not be able to avoid the personal guarantee requirement, but they can look for a card that best suits their business’s needs.

*    *    *

Our next free financial workshops:

Credit Myths and Repair Workshop  Free - Open to the public

Wednesday Jan. 23rd at 6:30 PM at the Meriwest Credit Union Main Office 

5615 Chesbro Ave

San Jose CA 95123

Please RSVP with gmeyer@meriwest.com  or call at 408-365-6328

Tax Law Changes and Updates for 2013 - Open to the public

Saturday Feb. 9^th at 10 AM at the Meriwest Credit Union Main Office

5615 Chesbro Ave

San Jose CA 95123

Please RSVP with gmeyer@meriwest.com or call at 408-365-6328

 

Setting Financial Goals...And Reaching Them!

Are your financial goals set in concrete or can they be blown away as easily as a dandelion? 

Achieving your dreams and creating the financial future you want always begins with one important first step: a goal. Whether you're looking to help your child set goals so she achieves academically or have your own financial or self-improvement goals for the New Year, there IS a science to setting and meeting them.

A 2010 study in Applied Psychology followed college students who went through a multi-step goal setting program. Those who followed it completely showed significant improvement in their grades compared to those who did not.

While New Year's resolutions are notoriously short-lived, a clear process will put any objective you've set for yourself within reach. No matter what you have in mind, you can apply these steps to whatever goals are important to you, and the whole process should take less than 90 minutes.

1. Take a few minutes to write about the financial future you'd like to achieve. It's okay to start with a vague idea, but include as many specific details as possible.

2. Looking at the financial future you've envisioned for yourself, pick six specific and attainable financial goals that could help you achieve that future.

3. Number your goals according to their order of importance.

4. Look at each goal and write a paragraph about how achieving that specific step will benefit you.

5. For each financial goal, break it into smaller more manageable steps.

6. Identify obstacles that may get in the way and come up for a strategy for overcoming them should you need to do so.

7. Write about your commitment to reaching these ultimate financial goals.

That's it. Sound easy? Perhaps. But by taking the step of committing your goals to paper and working through these steps, you've laid the groundwork for success.

A goal is simply a dream with a deadline....may all your dreams come true!

*    *    *

Reality Based Budgets for Teens and College Students – Jan. 16^th

Our next Financial Education Workshop will be Reality Based Budgets for Teens and College Students. It is a post college simulation of renting an apartment, buying a car, and developing a spending and savings plan. It is a fun and interactive session for the whole family and really opens the door to discussions about managing money. If this is something you or a member of your family needs, please feel free to join us. These workshops are open to the public.

Reality Based Budgets

6:30pm January 16^th at our Chesbro Main Office Location

5615 Chesbro Ave, San Jose CA 95123

Please RSVP with Gmeyer@meriwest.com.

Consolidating Debt with Personal Loans - Good idea?

The New Year is nearly here. A lot of us are thinking about our finances and how we can improve them in 2013. Personal loans play an important role for those who are trying to get out of debt quickly. Properly used, they can be an easy way to paying off high interest credit card debt. If they are used improperly, they are a fast ticket to a lower credit score.

Let’s keep in mind that bill consolidation, from the standpoint of a credit union, means eliminating debt, building credit scores, and creating a consumer solution that can be easily managed based on the member’s income. Depending upon the extent of the member’s debt, we will often ask that they close several of their outstanding credit cards. Why? It will do no good to consolidate their debt and have them run it back up. We will take a look at their credit and income to determine what credit can be retained by the member and what they would need to close in order to receive the loan or line of credit for the bill consolidation.

Often, CU’s will recommend a member gets credit counseling prior to their consolidation. Credit Counselors teach the member how to budget, to use their online banking to manage their finances, and help them understand the consequences of extensive debt and its effect on their credit scores. It can also be helpful if the credit union offers workshops on these subjects as Meriwest Credit Union does. For more info on personal lines of credit, click here.

Any bill consolidation should offer you a lower rate of interest than that which you are currently paying and a more affordable payment. Currently, for someone with a 740 FICO score, we can offer 15% on a personal bill consolidation loan or 10.50% on a personal line of credit. Please keep in mind the line of credit is adjustable and when rates go up, which they will, this rate could rise rather quickly.

One of the dangers of bill consolidation is irresponsible borrowers. A person can get a consolidation loan, consolidate their debts into a more reasonable and affordable alternative and then go out and acquire more debt. This completely defeats the purpose of bill consolidation and puts them on the fast track to a low credit score or worse.

We must also consider that closing out a credit card account can lower your credit score. Closing out cards that we have had for a long time will negatively effect our credit. When those credit lines are removed we lose the available line as part of our balance ratio calculation (for more info on this, see our blog “Your Fico Score, Mystery No More”) and we lose the history of managing that credit after a few months. Opening a new line can offset some of the FICO points lost to closing a line.

Don’t want to close the line of credit? You have some options. You can cut the card in half and simply not use it thus leaving the account open. If you are a disciplined person, you can lock your credit cards in a drawer and avoid using them; out of sight, out of mind.

Homeowners have another option available to them; the Home Equity Line of Credit or HELOC. The HELOC is line of credit based on your home’s equity. Typically, it has a lower rate than unsecured personal loans and may offer tax advantages for some homeowners. It is handy for home improvement, bill consolidation, and a myriad of other uses. As a matter of fact, Equity Lines of Credit are worthy of their own blog! We will have one for you on that next year.

Alternatives: There are offers from credit card vendors to transfer balances at a lower rate. They encourage borrowers to use a credit card check to pay off debt at other vendors and transfer that debt to their card. Consumers need to be mindful that the low interest rate offered on these is usually a teaser and may go up in time. Some cards may offer a lowered rate for the life of the transferred debt. These can be a pretty good deal provided the borrower is responsible and does not incur further debt during the pay off period. But don’t miss a payment! You could be subject to penalty interest and see your preferred low rate rise well above 18%.

Some things to consider before combining balances on another credit card:

-          Do you have adequate credit limit for the transfer?

-          Is the Introductory rate a temporary Teaser Rate or fixed for the term of payoff?

-          Is there a fee for the balance transfer? (this increases your cost of borrowing.)

Finally, before considering any consolidation, can you buckle down and get out of debt on your own without help? Can you rearrange your budget, be disciplined in your spending, and commit your spare dollars to paying off your debt? If one eats out for lunch everyday, it can cost over $35 a week. Bringing a lunch from home can save $100 a month. That money can go a long way toward paying off debt. On any credit card or loan, you can make larger payments and any amount you pay over your monthly interest gets credited against your principle, thus reducing the amount of interest you will pay the next month. Keep that cycle up and you will pay off your debts a lot faster.

*           *           *          

Reality Based Budgets for Teens and College Students – Jan. 16^th

Our next Financial Education Workshop will be Reality Based Budgets for Teens and College Students. It is a post college simulation of renting an apartment, buying a car, and developing a spending and savings plan. It is a fun and interactive session for the whole family and really opens the door to discussions about managing money. If this is something you or a member of your family needs, please feel free to join us. These workshops are open to the public.

Reality Based Budgets

6:30pm January 16^th at our Chesbro Main Office Location

5615 Chesbro Ave, San Jose CA 95123

Please RSVP with Gmeyer@meriwest.com.

*           *           *

Hungry for more information on Money Management? Check out Len Penzo’s Financial Blog. Len provides excellent financial insights with a sense of humor.

Managing Holiday Credit Card Debt

Imagine yourself at a department store. You are approaching the check out. How are you going to pay for this purchase? Are you using your debit card because you planned your holiday spending? Or are you using your credit cards because your only plan is to spend and eventually pay it back?

When it comes down to holiday spending, we have a choice.

Choice #1: We can go into the holidays financially blind and spend to our heart’s content and put our heads in the sand and deal with it in the New Year. This is the way a lot of people approach the holidays and they pay for it monetarily and emotionally. Not only that, but their credit scores take a hit as their credit card balances rise. Their monthly costs go up because the minimum payments on their cards increase due to larger balances. This reduces their spending power until they pay off some of that holiday debt!

Choice #2: Go into the holidays with a spending plan that let’s you buy thoughtful gifts for your family and friends but does not allow you to break the bank. That is really the best course of action. A plan is always better than winging it and winging it with money is never a good idea. To make this action effective, you have to save before the holidays come. Set up an automatic transfer from your checking to a savings account.

Next year in January, you may want to open a “Christmas or Holiday Club” account for your holiday savings if your bank or credit union still offers that. The old club accounts had money automatically transferred from your checking account and was cashed in before the holidays and paid out to the accountholder to pay for gifts. Lacking a “Christmas Club” type of account? Open a savings especially for your holiday spending and set up an automatic transfer from your checking account each month. The automatic transfer happens without any action on your part. Just remember to enter it in your check register or monitor your online banking so you don’t overdraw your checking. When the holidays are here, draw the funds from your savings and spend it to your heart’s content.

If you must use credit to pay for your gift giving, let’s consider some things that might save us some money. Let’s assume you plan to pay this newly incurred balance off in six months. How much do you plan to spend on gifts? That’s the starting point. Take that amount and divide it by six and add that to your current monthly payment on that card. Can you afford that payment monthly for the next six months? Then you may have the right amount to spend on gifts. Is it too high? You need to adjust your spending plan, not your time horizon for pay off! Remember, extending the pay off time for any balance adds more interest to your debt. Paying interest is like renting money. Who benefits when you pay interest? Certainly not me or you. The bank does! If this sounds like a good idea, you use way too much credit and need an intervention!

But, if you really like making that monthly payment and the cost is no object for you, then you might be more inclined to take Choice #1.

*           *           *

Our next financial education workshop will be “Real World Budgets for Teens” and will be presented at our Chesbro Main Office on January 16^th at 6:30pm. Real World Budgets takes a teen and their parents thru a post college simulation of managing money, a job, and the payments that come with independence. I hope you can join us.

Please RSVP with Greg Meyer at gmeyer@meriwest.com or 408-365-6328.

Click here for a list of all of our financial education offerings.

Check us out on Facebook! WWW.Facebook.com/MeriwestCreditUnion