Tips for Making Safe Credit Card Purchases Online

In today’s digital age, you need to be especially careful when making online purchases

With online shopping becoming the norm, people have also become more susceptible to identity theft. It’s imperative that you be careful and mindful of how you shop online.

A November 2016 article in The Balance by contributor LaToya Irby outlines seven tips for safe online shopping:

Conduct your online shopping only on websites you trust
It may sound obvious, but using your credit card to make online purchases only on those websites you know and trust could save you from becoming a victim of fraud. Never click on links provided via email; instead, type the entire URL of the website into your browser to open the site.

Never shop from a public place
Public computers are susceptible to hacker technology, such as software that captures your keystrokes and retains your personal and credit card information. Additionally, public Wi-Fi is unsecured and, as such, could redirect your device to a fake internet connection that an identity thief can monitor and use to intercept your personal information.

Keep your devices protected from viruses
Always stay up to date with virus and spyware protection software, and make sure you are using antivirus software that is reputable, not the type for which you receive an ad via email or in a pop-up window.

Check with the BBB first
The Better Business Bureau marks websites with poor customer service records, so make sure to check out the credibility of the site in question using the BBB before making a purchase.

Use credit cards, not debit cards
Credit cards have better protection services against fraud than debit cards, so you’re liable for fewer fraudulent charges if they occur. Additionally, you could lose access to your account and your funds while the financial institution sorts out a debit card that has been compromised, whereas with a credit card the only access that’s affected is that line of credit.

Make sure the website you use is secured
Always look for the green lock symbol at the start of your URL browser, and make sure you type in the website using “https” to ensure the site is secured to encrypt your information when making online purchases.

Keep track of your purchases with receipts
Just as with in-store purchases, printing a copy of the receipt of your online transaction will help you track your credit card activity. Use the printed copy to compare against your monthly credit card statement and watch for fraud.

In a November 2016 article in the Better Business Bureau by APR, CFEE Janet C. Hart recommends checking both your credit card activity and your bank account activity once a week, rather than waiting for the monthly statement. This ensures you catch fraudulent activity shortly after it’s occurred instead of finding out weeks later.

Hart also advises that we be wary of phishing scams—emails seemingly from a business claiming an error with your order or your account and asking you to confirm personal and identifying information. Legitimate businesses do not send these types of emails.

“Beware of ‘GREAT’ deals — if you find a website offering deals that seem too good to be true, they probably are. You may get a knock-off product, a product that is not the brand you ordered, or you may get nothing at all,” adds Hart.

Lastly, Hart recommends always checking the website’s privacy policy before making purchases online, so you know exactly how your personal information will be used.

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How a Personal Loan Impacts Your Credit

The relationship between loans and credit scores
It’s well-known that your credit score has a big impact on your ability to take out a loan, as marchfeatured_prsnllnimpactwell as on the total amount of the loan and interest rate your lender offers. But did you also know that the relationship works in the other direction as well?—that a loan can impact your credit score?

To understand this relationship, you have to consider where your credit score comes from. Your credit score is calculated using a variety of factors, including your payment history, the total debt you owe and the number of credit lines recently opened. When you take out a personal loan, the last two factors are affected.

Even just applying for a loan has an impact, since your credit score goes down slightly each time an inquiry is placed on your credit report by a lender checking your credit.

The financial advantage of finding a great loan far outweighs the negative impact that an inquiry has on your credit score. If you take out a personal loan to pay back a high-interest credit card, for example, you would benefit from the reduced interest and your credit score could be improved overall.

“A personal loan may help your credit score by moving credit-card debt over to the installment loan column,” states NerdWallet staff writer Amrita Jayakumar. “The way credit scores are figured, borrowers who use all or most of the available credit on their cards get hit with a significant penalty.”

Another thing to know about the impact that loan applications have on your credit score is that each inquiry may not count fully against your credit score if you are just comparing the rates of more than one loan. For example, if a car dealership places an inquiry on your credit score in the process of offering you an auto loan, and you want to check with your local financial institution to find a better deal, the second inquiry may not count against you.

“Generally any requests or ‘inquiries’ by these lenders for your credit score(s) that took place within a time span ranging from 14 days to 45 days will only count as a single inquiry, depending on the credit scoring model used,” according to the U.S. Consumer Financial Protection Bureau. “You can minimize any negative impact to your credit by doing all of your shopping in a short amount of time.”

Once you have taken out your loan, it is important to make regular payments in order to maintain and improve your credit. A strong payment history goes a long way toward achieving a good credit score, and as you pay down your loan, your overall debt will decrease, further benefiting your credit.

So if you are considering taking out a loan, don’t let fear of a negative impact on your credit score stop you from exploring your options.

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Personal Loans Versus Credit Cards

Advantages and drawbacks of each type of lending

Personal loans andCardsVsLoans_Featured credit cards, should they be used intelligently, can be great ways to finance your wants and needs. As personal finance author Greg McFarlane writes on Investopedia.com, credit in general grants us temporary access to other people’s money, and for a time, it is a win-win for all parties.

“The lenders get interest, the borrowers get leverage and the economy grows. What’s not to love?” he said. “Without credit, capitalism would stagnate.”

But which lending method is better: personal loans or credit cards? Let’s look at some of the high points and low points of each.

Personal loans
This type of credit is unsecured, meaning there is no collateral involved. Because this is a higher risk for the lender, as there is nothing of which they can take possession in the event of default, interest rates are fairly high. And because you will have a balance to be paid from day one, you are paying that interest starting the moment you sign on the dotted line. Still, these interest rates are typically lower than those of most consumer credit cards, giving personal loans an advantage there.

Another advantage of a loan is that it comes with a set term during which you will be repaying it, and a set amount to pay, which helps with budgeting. At the same time, credit card terms are either longer or unspecified, allowing for lower, although inconsistent, payment amounts.

“Many personal loans have a payback period of no longer than 60 months, or five years. Credit cards tend to amortize your payment over eight to 10 years, resulting in a lower payment over a longer time,” said debt adviser Steve Bucci of Bankrate.com.

Credit cards
While credit cards do come with inherently high rates — so high, in fact, that the president and Congress had to artificially cap those rates from outside the free market — for the first month after you purchase something on the card, you are technically getting a zero percent interest rate, McFarlane says.

“Should you choose to take 30 days or longer to pay for an item you bought on a credit card? Well, that’s when you’re failing to take advantage of the inherent benefit of the method of payment,” he explains.

Furthermore, credit card companies often offer a grace period for payments. That means you have more than a month to come up with enough money to pay off your balance and avoid being charged interest — that’s at least two pay periods to gather your own money and use it to pay off the money you borrowed.

Also, not having to wait for paperwork approval when you need or want the money, as you do with loans, is yet another way your credit card acts just like cash (except in plastic form).

Exceptions to these details exist when you are talking about business loans or credit cards, or about personal loans obtained for use of credit card consolidation. Regardless of how you are using your means of credit, make sure you are looking carefully at the terms of the agreement. Let us help you choose the method that best suits your needs, and then take full advantage of its benefits.

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Watch Out for This Chip Card Scam

Make sure you don’t fall victim to this chip card scam

The country isCreditScam_Featured progressing quickly on the path to replacing magnetic strip swipe cards with new, more secure chip cards. The switch to chip cards marks an effort to improve security and prevent fraud and identity theft.

The move to embrace this technology, which is already the standard in many other countries, was partially motivated by the highly publicized security breaches at several major retailers over the past few years. While the move to chip cards will improve security overall, there are some scammers who are trying to take advantage of the temporary confusion during the switch.

Last October marked the deadline for retailers to update their point-of-sale systems so that they could read the new chip cards. Any retailers that didn’t meet that deadline were at risk of being held liable for fraudulent transactions that may have been prevented with the new chip card systems.

“The new cards provide more security because the microchip creates a unique code for each use to help authenticate a transaction,” according to Kathryn Vasel of CNN Money. “Older cards store that payment data in the magnetic strip on the back, which is easy to steal, replicate and put on fake cards.”

As retailers across the country switched over, financial institutions began sending out new cards. During this time, a new identity theft scam arose. The scammers pose as financial institutions and send emails in an attempt to collect valuable personal information. They sometimes ask people to confirm or provide updated personal information so that a new card can be sent.

Other times, they provide a link that they claim will take people to their financial institution’s website so they can start the process of getting a new card. Unfortunately, these sites are used to gather information that can be used for identity theft. Even if you don’t input any information, just clicking the link can cause problems.

“If you click on the link, you may unknowingly install malware on your device,” according to Colleen Tressler, a consumer education specialist with the Federal Trade Commission. “Malware programs can cause your device to crash, monitor your online activity, send spam, steal personal information and commit fraud.”

You can avoid these scams by keeping in mind that your financial institution will never ask you for personal information over email or the phone. If you receive a call asking for information, hang up and call back yourself, using the number provided on the back of your card. You may have to give your account number over the phone when you call, but since you typed in the number yourself, you know the correct people are hearing it.

Likewise, do not respond to emails with any personal information. If you think you may have a legitimate email from your financial institution, it is important to close the email and navigate to the financial institution’s website from a new browser. That way, you know you are going to the correct URL — one that you type in yourself — and not risking a link that redirects to a scammer’s site. You should also check that the website you are on is secure before putting in any information. If you can’t find the page that the link referred to, you can call your financial institution to confirm the email was legitimate before you use the link.

If you keep this information in mind and remember that it is always better to play it safe and take the extra step to ensure that your communications are with your actual financial institution, then you can stay safe from this chip card scam.

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Tips for Building Your Credit Score

If your credit score could use a boost, read these foolproof tips

There’s a certain three-digitCreditScore_Featured number that can make all the difference between being denied or approved for credit, and whether you’ll receive a low or high interest rate. That number is called a credit score, and it’s derived from your payment history, accounts owed, length of credit history, types of credit used and other factors.

Many of the credit-related decisions you make can have an impact on your credit score. For example, skipping a payment on a credit card bill can have a negative impact on your score. Your credit score defines you financially, and if you do something to negatively impact it, you could face a risky financial future with poor credit.

“A low score warns lenders that you might be an unreliable borrower, which can thwart you from getting the credit you need,” writes Credit Karma contributor Jenna Lee. “A high credit score can save you tens of thousands of dollars in interest over the life of your loans.”

So how can you build up your score in the unfortunate event it’s not where you’d hoped? Read on for expert advice on improving your credit score.

Get rid of small balances on several cards. “A good way to improve your score is to eliminate nuisance balances,” says John Ulzheimer, president of consumer education at Credit Sesame. “That way, you’re not polluting your credit report with a lot of balances.”

Since your credit score takes into account how many of your cards have balances, charging a few dollars on one card and then a few on another, instead of using the same card to make multiple purchases, can negatively impact your credit score. To build your score up again, pay off all the small balances you have on your cards, and then use just one or two cards for the majority of your everyday purchases.

Pay bills on time. If you’re skipping payments or paying them late, your credit will suffer. If you’re struggling to pay bills by their deadlines, try setting reminders on your smartphone or leaving sticky notes on your desk with the payment information and deadline for all your bills. Or hire a financial planner to help you get organized, which will help with paying bills on time.

“It isn’t necessarily hard — it just takes discipline,” says Hitha Prabhakar, a retail and consumer analyst and spokesperson for Mint.com.

Keep old debt. It sounds counterintuitive, but it’s actually better for your credit score if you leave old debt on your report. Some of that debt is good for your score, and trying to get older accounts off your credit score simply due to the fact that they’re paid off isn’t wise either.

Why? The longer your history of good debt, the better it is for your credit score. When you attempt to eliminate old good debt, it’s like getting great grades throughout school and trying to get your records erased down the line. You want to keep it around.

Get rid of student loans. If feasible, try to pay off those pesky student loans in a timely manner.

“If you pay your student loans in full and on time each month, the credit bureaus will make a record of that on a continuing 30-day basis,” writes contributor for NerdWallet Divya Raghavan. “And that will demonstrate to future lenders that you can be trusted to handle money responsibly.”

Keep new accounts to a minimum. Every time you open a regular or retail credit card, or even just apply for one, your report is looked at to determine whether or not you’ll receive the credit.

“Since a lot of hard inquiries may make it look like you’re desperate or aren’t getting approved for credit, it’s best to minimize how often you apply for more credit,” says Lee.

“You just don’t want to do anything that would indicate risk,” explains Dave Jones, retired president of the Association of Independent Consumer Credit Counseling Agencies.

Your credit score is an important part of your financial success. As an AOFCU member, you are entitled to a FREE Credit Score Analysis. We can offer a comprehensive list of actions you can do based on your credit report to help you raise your credit score.
Ask for your FREE CSA today!

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Credit Scores and Loans

The relationship between your credit score and the loan you need

If you’re interested in applying for a loan in the near future, you may be wondering about the relationship between credit scores and loans. Not only does your credit score impact the type of loan you can receive, loans also affect your credit score. The following information will help you understand more about the ways that loans and credit scores impact each other.

Credit score affects loan interest rates
When you need funds for a large purchase, such as tuition, a new vehicle or a home, it’s important to understand all of the factors that will be important during the loan application process. Your credit score is one of the most important of these factors. If you already know your credit score, you’re one step ahead of many people, but you still have to know exactly what it means.

“Today’s economy runs on credit,” states Erin Peterson from Bankrate. “Good credit can be the make-or-break detail that determines whether you’ll get a mortgage, car loan or student loan.”

Your credit score represents your financial history and paints a picture of how responsibly you have used your credit. Lenders use this information to assess how likely you are to repay a loan. If you have a low credit score, lenders fear that you may not be able to pay off your loan, which will cost them money. In order to balance this risk, lenders offer people with lower credit scores loans with higher interest rates.

“If you have a higher mortgage rate because of a low credit score, it means you’ll be paying that much more in interest in the end,” according to Elizabeth Rosen, Banks.com contributor. “Thus, a strong credit rating can help secure a low mortgage rate, which gives you lower monthly mortgage payments overall.” This is why it’s important to pay attention to your credit if you need to secure a loan.

Loans also affect your credit score
Your credit score has a big impact on your ability to get a loan, but loans also affect your credit score. The application process itself can have an impact on your credit score because each time a lender checks your credit, your score goes down a few points.

“That’s because 10% of your credit score comes from the number of credit-based applications you make,” according to About.com guide LaToya Irby.

Fortunately, this won’t hurt your ability to shop around to find the best loan because there is a grace period during which multiple lenders can check your credit without your score going down. This means that the second lender you speak with will see the same credit score as the first, so you have the opportunity to receive competitive offers.

“Even after you’re done rate shopping, the loan inquiries are treated as a single application rather than several,” explains Irby. “That window of time is between 14 and 45 days depending on which credit score the lender checking your score is using.”

Any loans that you have now can also impact your credit score. You can improve your credit score and prospects for future loans by making payments for any current debt on time. Irby notes that “payment history is 35% of your credit score. That’s more than any other credit score factor.” This also means that paying late or defaulting can seriously harm your credit, so be sure to take your current financial responsibilities seriously.

The balance of your current loans also affects your credit; you gain credit points as you pay back the balance.

“The larger the gap between your original loan amount and your current loan balance, the better your credit score will be,” states Irby.

Your credit score and loans go hand-in-hand. Good credit can help you receive a good loan, and good loan repayment patterns can help you achieve good credit. The steps you take today to repay your loans responsibly and take care of your credit will boost your ability to get a great loan in the future.


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Six Myths About Credit Cards

Credit cards can be an incredibly valuableshutterstock_64945411 part of your financial toolbox. With the amount of credit card advice offered on the Internet or by friends and family, it can be difficult to separate fact from reality. Suggestions about the best way to cook eggs so that the shells peel off easily or chop an onion without crying may contain more fiction than fact, but these innocent pieces of misinformation aren’t especially harmful. Credit card myths, on the other hand, can be damaging. Here are six credit card myths that you may have heard before and maybe even repeated. The corresponding facts will clear up the confusion:

1) Credit or Debit? It Doesn’t Matter
Unless you have a personal assistant who does all of your shopping, you are probably asked “Credit or debit?” several times a day. If you answer, “It doesn’t matter,” then you are perpetuating this first myth. Even if your credit card has the same logo as your debit card and you monitor them on the same site, they don’t do the same thing for your finances. Only purchases made on your credit card affect your credit score. If you use your credit card reliably and pay your bill responsibly each month, you will build credit, so stop to consider this next time you swipe your card. Your credit score can also be harmed if you do not use any credit at all.

2) You Need to Pay Only the Minimum Balance
A credit card statement lists several figures in summary of the previous month’s activity. These include the balance of the previous statement period, minimum amount due, APR and total available credit. Checking your statement online gives even more information, including current balance, current available credit and activity since the previous statement. With all these numbers to consider, you may zero in on the phrase “amount due” when you write your check or pay online. The minimum amount due is not the most important figure, however, because it is only the amount of money that you need to pay to avoid a late fee or other penalties. The total balance of the previous statement period is actually the complete amount owed. If you pay only the minimum balance, you will be charged interest on the remainder. This is how credit cards make money and why they typically suggest such low minimum balances.

Furthermore, if you avoid paying your full balance because you’ve heard that having a balance is better for your credit score, you are paying interest for no reason. MSN Money contributor Liz Weston clears up the confusion, stating that “your credit reports and scores don’t ‘know’ whether you’re carrying a balance or paying it off in full every month.”

3) You Should Always Pay Your Current Total Balance
If you have focused on the total balance of your online statement, you are in better shape than are those who pay only the minimum but don’t fully understand how much they owe. Paying off the full balance is important, but it is the full balance from the previous statement period that matters. The total balance includes both the previous statement balance and all activity since that statement. You will not be expected to repay those new charges, however, until they appear on your next statement. Paying just the previous statement balance and not the total balance will not hurt your credit or accrue interest.

4) There Is No Minimum Credit Card Purchase
If your desk drawers are full of packets of gum that you’ve grabbed in check-out aisles to bolster your bill to a minimum credit card purchase amount, you may be interested to know that this practice is not technically legal. Although not usually enforced by credit companies, there is no true minimum purchase necessary to use your credit card. Stores enforce this to offset the fee they pay on each purchase made with a credit card. If you are uncomfortable with this practice, you can seek out local businesses that do not enforce minimums or that charge a small fee for credit card transactions on small purchases, which is a more transparent policy.

5) Your Fixed Interest Rate Will Stay Fixed
If you have a fixed interest rate, you may think that the case is closed, but that is not so. In fact, you may find that your rate increases if you miss a monthly payment, fail to pay the full amount, transfer your balance to a new card or take a cash advance. Make sure to find out how much you will be penalized for these activities in order to decide if they are worth the price.

6) You Should Use All of Your Credit
Even though you are allowed a certain amount of credit, you do not have to use all of it. Yes, using little or no credit can negatively affect your credit score, but so can using all of your credit. Paul Sisolak of the website GoBankingRates.com says that “creditors also make use of a term called ‘low utilization,’ which means that using a smaller amount of credit in your account looks better to the credit bureaus, and subsequently, your credit score.” Monitoring your credit score can help you determine if you are using an appropriate amount of your credit.


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