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Credit Cards

Credit Cards are a more modern credit proposition. With the advent of EFTPOS and online shopping, they have become even more popular because they make buying electronic and virtually instantaneous.

The old “fantastic plastic” is taking over the world because it is more convenient than carrying cash, and it’s global – most credit cards can be used all over the world.

You’ve probably heard of common credit card brands…Visa, MasterCard, BankCard and American Express are a few of them. On the whole they all work the same.

The card provider issues you with the card and nominates a limit on how much you can spend. That’s right, it’s not free for all! For most people starting out $1000 is a normal credit limit, although some veteran credit card holders’ limits are well above and beyond that amount.

You can then use your card to make purchases up to your limit in stores, to pay bills and over the phone and internet.

Most credit card interest rates sit between 16-25% p.a., and many involve an interest free period of up to 55 days. This means when you buy something using your card, they won’t start charging you interest on that purchase for up to 55 days.

This can be great if you are disciplined enough to always pay your card off before the 55 days is up. If you do, then the credit (for once) is costing you nothing. To keep you honest, the credit card provider will also set a minimum repayment that you must meet each month to stay ahead of compounding interest, and late fees.

Normally credit cards will have an annual fee too, and this can really vary, from as cheap as $30/year up to a whopping $120, so it’s worth shopping around.

Some cards also offer rewards programs that are a bit like Fly Buys. The more you buy, the more points you accrue toward rewards, or frequent flyer points.

Pros:

  • Convenience with a capital C! It’s so much easier to shop and pay bills with a credit card – no racing off to the ATM or carrying around cash
  • Excellent for the disciplined user, with 55 days interest free
  • You can spend up to your credit limit and repay the amount over and over again.
  • In some cases (but not all) your credit card transactions are fee free. Check with the retailer, because they may slip in a little fee of their own. Some do, some don’t
  • You can shop online, over the phone, and around the world when you’re travelling without currency conversion hassles
  • Allows you to cover the unexpected with no fuss
  • Rewards schemes can score you some cool prizes

Cons:

  • Potential debt danger for undisciplined spenders and repayers! Getting rid of your credit card debt can take years if you don’t stay on top of it and keep paying before the 55 day period.
  • Interest rates are higher than loans
  • Makes it possible to live day-to-day off credit which is right up there with the worst of the other bad habits.
  • Not as secure as your PIN/card combination. If someone steals it, they can use it pretty easily.

If you want to know how a Credit Union Protects You and Your Money, check out Riegelwood Credit Union.

 

Ten Tips for Buying a Car

Whether new or used, buying a car can be a traumatic experience if you are not prepared. Below are ten tips to help take the stress out of purchasing a car.

  1. Figure Out How Much You Can Spend

Create a budget. The monthly payment should be no more than 20 percent of your monthly gross income. Also, it’s important to know your credit up front-so get a credit report pulled in advance. Don’t let the dealer know more than you do.

  1. Research Online

Research and select a vehicle before you visit the dealership. Vehicle purchases are usually emotional decisions made at the dealership. Proper planning can turn this purchase into a logical decision that meets all of your needs. Select a vehicle and options based on your lifestyle and how much you can afford.

  1. Know How Much the Dealer Paid for the Vehicle

Knowing the invoice price on a new vehicle will help you negotiate a better deal. This is the price the dealer paid for the vehicle, not including any costs for advertising, destination charges, or special regional pricing. Only the dealer knows the actual price paid, but the invoice price gives you a starting place for negotiations. On a used vehicle, know the wholesale and retail values.

  1. Set Your Price

Figure out the cost for options and subtract any rebates or incentives currently offered for a new vehicle. Also consider whether you will be paying cash or financing, and if you have a trade-in, find out how much it is worth. Research trade-in values online and make sure to accurately factor in the condition of your vehicle.

  1. Call, Email, or Submit for Pricing Online

Some vehicle research websites work with dealers to provide you with pricing before visiting the dealership (either online or by phone). Before requesting a price, make sure to detail all options and descriptions to compare apples to apples with the dealer. Make contact with an individual (preferably in the Fleet Department) at the dealership and work with this person consistently from pricing and negotiating, to test driving and purchasing the vehicle. Contacting the Fleet Manager is one way of circumventing the usual sales process that is run on commissions. Fleet Managers do not make commissions from the sales, and usually manage large orders for companies and Internet sales at franchised dealerships. They also work with credit union members and can usually provide a better deal!

  1. Negotiate

Negotiate up from invoice, not down from Manufacturer’s Suggested Retail Price (MSRP) or “sticker” price on a new vehicle. On a used vehicle, negotiate up from wholesale value, not down from retail value.

  1. Credit Union Financing is Usually Your Best Bet

Don’t be fooled by zero percent or low interest rate financing. Read the small print. Few people qualify for these rates, they are usually given in lieu of the manufacturer’s rebate, and it may be better to take the rebate and a low rate loan from your credit union. Do the math before making a decision.

  1. Test Drive

Don’t ever buy a car without taking a test drive-even on a new vehicle! It’s important for you to like how the car drives since you will be spending much of your time in it. On a used vehicle, we highly recommend that you have your own mechanic check it out. Once you’ve negotiated the best price, set an appointment with that person at the dealership, and make sure you do not get handed off to someone else. On a used vehicle, make sure you request a conditioning report. Some dealers now call these conditioning reports “certification.” A certified used vehicle is usually a little more expensive, but includes a warranty and special financing terms. In comparison, a dealer usually spends an additional $600-$800 on a conditioned vehicle vs. $800-$1,000 on a certified vehicle.

  1. Close the Deal

Don’t forget to use the information you researched on your trade to get the most for it. Have the dealer show you the price for your trade separate from the deal-often dealers disguise the amount offered on your trade into the final figure of your monthly payment. It’s important that you get the best overall price for the car, a reasonable monthly payment, and a good deal on your trade.

  1. Avoid Too Many Extras

Once you reach the Finance & Insurance (F&I) office, the dealer will try to sell you on all kinds of extras, most of them needless. Of the multitude offered, we suggest considering the following, if it makes sense for you:

  • Guaranteed Auto Protection (GAP): Purchasing GAP is crucial if you owed more on your last vehicle than it was worth and you agreed to have the dealer add it to your loan. Even if you put a down payment of 20%, but you drive a lot of miles each year, GAP protection could be a wise choice. The value of your new vehicle at the time of delivery decreases tremendously the minute you drive off the lot (and even more with a used vehicle). GAP will protect you from the difference between what your insurance company says your vehicle is worth and what you actually owe the lender. Be sure to read the fine print, because not all GAP coverage is the same.
  • Service Contract/MBI: If you’ve financed or leased for a short term (36 months) you probably don’t need a service contract or Mechanical Breakdown Insurance (MBI). If you are planning to keep the vehicle for 5 years, consider purchasing one of these warranties. Make sure the service contract or MBI covers wear and tear and mechanical breakdown. Also, know the difference between a service contract and MBI. With MBI, a part usually has to break on the car to warrant repair, and often you must pay the bill with the repair shop and submit a claim on your own. Service contracts are accepted almost everywhere and cost more, but usually provide more coverage. The more dependable the car you choose, the cheaper the warranty. Don’t be fooled by manufacturers’ warranties that give you 100,000 miles of protection, because they usually do not cover everything!