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Ida and Dwinta stated that five measures that are needed in terms of managing good financial behavior are controlling spending, paying bills on time, the preparation of plans for future finance, provision of money for self and family. Abdullah et al. Beckmann and Menkhoff reported women are often referred to as risk-averse since they take a financial decision very carefully.
Agata confirmed that men took risks because they saw it as a way of investing and multiplying money. Therefore, we can develop a hypothesis;. There are several widely used definitions of financial literacy in works of literature. Financial literacy is the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing Dowling et al. Lusardi and Mitchell defined financial literacy in their review article as Enhancing financial literacy is essential for enabling people to have the necessary knowledge and skills to improve their financial well-being.
People from all aspects of life should have the capacity and be well prepared to manage personal savings and expenditure, to invest wisely, and to borrow responsibly according to their financial objectives and circumstances. Improved financial literacy in all sectors of society requires a systematic, sustainable and coordinated approach to bringing about long-term behavioral change.
However, inadequate financial literacy among emerging adults was high according to Mitchell and Poterba et al. The need for financial literacy is evidenced by the poor financial situation of individuals: drowning in debt without a budget plan and making misguided decisions about their money. Most of these poor financial behaviors stem from financial illiteracy. Lusardi et al. We showed that financial literacy is low; fewer than one-third of young adults possess basic knowledge of interest rates, inflation, and risk diversification.
Financial literacy was strongly related to sociodemographic characteristics and family financial sophistication. Specifically, a college-educated male whose parents had stocks and retirement savings was about 45 percentage points more likely to know about risk diversification than a female with less than a high school education whose parents were not wealthy.
The illiteracy about finance among emerging adults nowadays would make them live in a difficult situation once the retirement phase began. How emerging adults manage their money shapes their attitude towards money. Therefore, the formulated hypothesis is;. H2: There is a significant positive relationship between financial literacy and the financial behavior of emerging adults. According to Lapp , lower debt, fewer financial problems, lower financial stress, good savings management, and financial happiness have been associated with better financial self- efficiency.
Emerging adults with a high degree of recognized financial self-efficiency are convinced with their ability to obtain information for financial decision-making, their ability to make smart choices, and their ability to have good financial control Hadar et al.
Furthermore, Xiao et al. Farrell et al. Their findings revealed that women with higher financial self-efficacy — that is, with greater self-assuredness in their financial management capacities — are more likely to hold investment and savings products, and less likely to hold debt-related products.
Besides, previous studies show a positive correlation to financial well-being in terms of financial efficacy Shim et al. A hypothesis has therefore been derived as follows:. H3: There is a significant positive relationship between self-efficacy and financial behavior of emerging adults. Coping skills are activities or behaviors we have learned, or may do naturally, that we utilize at the moment to help manage stressful situations or overwhelming emotions.
Based on the previous study, researchers rarely study coping strategies other than direct financial support, for financial strain and subjective well-being. The mechanism for self-copying is the strategy adopted by individuals in individual and environmental transactional events. Stress comes when people face higher demands which exceed the resources of individuals.
Transactional events cause stress and lead to various types of self-control strategies, which entails reducing stress Lazarus, Generally, health and psychology involve coping strategies when people experience stress due to medical problems or problems of mental health Folkman et al. Low socioeconomic status SES is linked to greater use of emotion-focused financial coping and lesser use of problem-focused financial coping. Problem-focused and emotion-focused financial coping are differentially related to financial stress and general psychosocial distress.
Alamgir et al. Extended periods of stress can take their toll on physical, mental, and emotional health, compounding the difficulties that many low- and moderate-income communities face during troubled economic times. As we think about ways to strengthen health and community development finance at the institutional level, we need to remember the impact that financial instability can have on health outcomes at the individual level Choi, The self-coping mechanism refers to the way individuals manage stress, which exceeds the internal or external resources of each individual.
Therefore, we can develop a hypothesis that:. H3: There is a significant positive relationship between self-copying and the financial behavior of emerging adults. The sampling technique employed in this research is a systematic sampling. Systematic sampling is a probability sampling method in which researchers select members of the population at a regular interval or k determined in advance.
Each branch was targeted to obtain respondents. The respondents were Credit Counselling and Credit Management AKPK participants and walk-in customers, including those who seek credit counseling services, advice for debt management, and who attended financial education program. Respondents should age between 18 years and above. Every 3 rd participants and walk-in customers will be chosen as a respondent.
However, for this article, we have sub-sample respondents in the age group between 18—40 years old. The reason is that we want to understand what are the determinants of financial vulnerability among young employees. The questionnaire comprised six main sections.
The following sections featured questions for each construct, namely financial behavior, financial literacy, self-efficacy, and self-coping. Financial behavior is manifested in five sub-dimensions with 24 items, namely cash management, credit management, retirement planning, estate planning, and risk management adopted from Rajna et al. The questions covered several domains, including cash flow management, debt management, saving and investment, retirement planning, risk management, Islamic products, taxation and estate planning, and general questions on the Malaysian financial system.
The measurement scale of self-efficacy was 12 items adopted from Chen et al. The self-coping instrument was obtained from Caplan and Schooler which measures household coping of financial strains. The alpha values exceeding 0. Thus, the scales have inter-related items for each construct and can measure the intended concept of the construct. Descriptive univariate analyses were used to describe patterns of response. The demographic and socioeconomic profiles of the respondents are described in terms of frequency, percentage, mean and standard deviation.
An independent sample t-test was performed to identify the difference in financial behavior based on gender. Pearson Correlation was used to determine the relationships for bivariate analyses. In this study, financial literacy, self-efficacy, self-copying, and financial behavior variables were entered into the regression.
Among the emerging adult respondents, males Though two-third had tertiary education, they had an income of less than RM3, a month. The majority were Malays The financial status of the respondents is displayed in Table 3. Only one-fifth of the respondents Those who were able to save comprised the smallest group among them Consequently, this justified the low savings ratio among the majority of them. Since the respondents are among those who are less than 40 years old, which is considered as young, the majority of them may have automobile hire-purchase or mortgage loan.
The debt service ratio was also in tandem with these possibilities with almost two-third This can support the high debt as compared to asset value among these emerging adults. The mean score for males is higher than females, thus the alternate hypothesis, Ha1, for the difference based on gender can be supported. It is concluded that males and females are different in their financial behavior. The significant result is consistent with Walczak and Kamieniecka who found that the financial behavior of men and women differ significantly because men more frequently use products and services available in the financial market and are more willing to take risks.
The results in Table 5 displays the correlation coefficient using the Pearson correlation for the variables in this study. Significant and positive relationships are revealed between financial literacy, self-efficacy, and self-copying with financial behavior among emerging adults participating in the study at the 95 percent and 99 percent confidence levels.
Hence, the three alternate hypotheses, Ha2, Ha3, and Ha4 on the relationships between financial literacy, self-efficacy and self-copying and financial behavior were supported. For financial literacy, higher knowledge and skills in managing financial matters will enable individuals to practice positive financial behavior. The result is consistent with Akben-Selcuk and Altiok-Yilmaz who assessed financial literacy and its correlates among Turkish college students, with special emphasis on the role of formal education, learning approaches, and parental influences.
Financial literacy was measured by the college student financial literacy survey, which assesses knowledge in four areas: general financial management, saving and borrowing, insurance, and investing. Regression results showed that formal finance education in college, a deep approach to learning, and direct financial teaching by parents were significantly associated with higher financial literacy scores.
Higher self-efficacy refers to the belief in our abilities, to meet challenges and complete a task successfully Akhtar, Self-efficacy will lead to more positive financial behavior. It also results in lower debt and more savings Lapp, Greater self-copying among the respondents will result in a better understanding of how financial behavior and financial practices activities are linked to improving the lives of emerging adults in Malaysia.
Thus, higher self-coping mechanisms are important. As such, past studies for self-copying have been examined by Ahmad et al. It was found self-copying mechanisms mediated the relationship between financial strains and financial security. Other relationships in the correlation matrix among the independent variables used in the multiple regression such as financial literacy, self-efficacy, and self-copying, though significant, gave low correlations among them.
The low correlations suggest no issue of multicollinearity among the independent variables in the multiple regression for financial behavior. The multiple regression results shown in Table 6 indicate that the model explained Thus, the three independent variables are significant and positive determinants of financial behavior. An alternate hypothesis on the determinants of financial behavior, Ha5, is supported.
This study examined financial literacy, self-efficacy, and self-handling from a behavioral perspective. The study showed that a lack of financial literacy and poor management practices affect a large number of emerging adults in Malaysians and that financial literacy is vital to guide their financial behavior.
Further, it was found that self-efficacy is the strongest determinant as compared to financial literacy and self-copying in the financial behavior model. Findings emphasize that financial literacy must be introduced in schools and colleges as part of their curriculum. Further, authorities must ensure the availability and ease of access to financial experts and counselors for young working adults for them to receive proper advice. Findings on the importance and the influence of financial behavior on overall financial literacy, self-efficacy, and self-copying strategy must be well communicated to independent financial counselors and advisors to have an impact on their services.
Further, emerging working adults must be made aware of the importance of possessing the right financial behavior by budgeting, control over their spending, practice living within means, continuous monitoring of expenses, the practice saving and planning for old age and unexpected expenses.
Families and educational institutes must encourage the young to save, train them not to be impulsive with unnecessary, unplanned buying, and be achievement orientated. For this purpose, they must be guided to consider alternative financial products, policies, and companies before making any final decision on financial matters. Further, they must be educated on the importance of expenditure monitoring and saving behavior.
Hence, the study findings and implications apply to all Malaysians. This study has several notable findings, but in future research, it has several limitations to address. First of all, this study is cross-sectional which limits its capacity to infer causation. For future research, a longitudinal study is suggested to examine the effects of the predictors presented in this study.
Secondly, this study employed a subjective measurement of managing the money domain. Although valid, future research can supplement this study with an objective measurement that compares the two measurements of objective and subjective measurement. Such approaches would provide a successful direction for future research. Click here to choose a searching target image or drag and drop a searching target image.
Article Info. Abstract This study examines the relationship between financial behavior, financial literacy, self-efficacy, and self-coping among emerging adults. Introduction In Malaysia, the debt problems affecting emerging adults are alarming as the household debt service ratio is on an escalating trend. Literature Review 2. Emerging Adults Emerging adults, born from to are currently aged between 20—40 in Malaysia, 11, Financial Behaviour The terminology of financial behavior can be defined as any human behavior that is relevant to money management.
Therefore, we can develop a hypothesis; H1: There is a significant difference in financial behavior between males and females. Financial Literacy There are several widely used definitions of financial literacy in works of literature.
Therefore, the formulated hypothesis is; H2: There is a significant positive relationship between financial literacy and the financial behavior of emerging adults. A hypothesis has therefore been derived as follows: H3: There is a significant positive relationship between self-efficacy and financial behavior of emerging adults.
Self-Coping Coping skills are activities or behaviors we have learned, or may do naturally, that we utilize at the moment to help manage stressful situations or overwhelming emotions. Therefore, we can develop a hypothesis that: H3: There is a significant positive relationship between self-copying and the financial behavior of emerging adults. Methodology 3. Data and Sample The sampling technique employed in this research is a systematic sampling.
Variable and Measurement The questionnaire comprised six main sections. Results and Discussion 4. Financial Behaviour by Gender An independent sample t-test was administered to compare the financial behavior scores for females and males. Table 4: Difference in Financial Behaviour by Gender 4. Relationship Among Variables The results in Table 5 displays the correlation coefficient using the Pearson correlation for the variables in this study.
Conclusion and Implications This study examined financial literacy, self-efficacy, and self-handling from a behavioral perspective. References Abdullah, N. The relationship between attitude towards money, financial literacy, and debt management with young worker's financial well-being. Pertanika Journal of Social Sciences and Humanities, 27 1 , Financial behavior and state of the financial well-being of working adults.
The relationship of income and money attitudes to the subjective assessment of the financial situation. Ahmad, S. Factors predicting financial security of female-headed households. Journal of Emerging Economies and Islamic Research, 5 1 , Human development in adulthood. Akben-Selcuk, E. Financial literacy among Turkish college students: The role of formal education, learning approaches, and parental teaching. Psychological Reports, 2 , What is self-efficacy? Bandura's 4 sources of efficacy beliefs.
Positive Psychology. Coping strategies for financial burdens in families with childhood pneumonia in Bangladesh. BMC Public Health, 10 1 , Emerging adulthood: A theory of development from the late teens through the twenties. American Psychologist, 55 5 , Finance matters: Understanding gen y. Bank Negara Malaysia. The financial stability and payment systems. Will women be women?
Analyzing the gender difference among financial experts. Kyklos, 61 3 , Transitions in emerging adulthood and stress among young Australian women. International Journal of Behavioural Medicine, 15 4 , Financial literacy: An overview of the practice, research, and policy. Federal Reserve Bulletin, 88 11 , Socioeconomic status and financial coping strategies: The mediating role of perceived control. Social Psychology Quarterly, 70, Validation of a new general self-efficacy scale.
The survey found that Utah had the highest state requirement in the nation, while in Alaska , Delaware , Washington , District of Columbia , Hawaii , Rhode Island and South Dakota , students are entirely dependent on the initiative of their local school board. Between and , surveys were performed for a myriad of players in the Brazilian financial market. The Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees recommended that publicly traded companies have at least three members with "a certain basic 'financial literacy'.
Such 'literacy' signifies the ability to read and understand fundamental financial statements, including a company's balance sheet, income statement and cash flow statement. Academic researchers have explored the relationship between financial literacy and accounting literacy. In this context Roman L. Weil defines financial literacy as "the ability to understand the important accounting judgments management makes, why management makes them, and how management can use those judgments to manipulate financial statements".
Some financial literacy researchers have raised questions about the political character of financial literacy education, arguing that it justifies the shifting of greater financial risk e. Many of these researchers argue for a financial literacy education that is more critically oriented and broader in focus: an education that helps individuals better understand systemic injustice and social exclusion , rather than one which understands financial failure as an individual problem and the character of financial risk as apolitical.
Many of these researchers work within social justice , critical pedagogy , feminist and critical race theory paradigms. From Wikipedia, the free encyclopedia. Possession of skills and knowledge to make informed and effective financial decisions. See also: Community organizing ; Critical consciousness ; Environmental, social and corporate governance ; and Pluralism in economics. Archived from the original PDF on 27 May Retrieved 3 October Ontario Ministry of Education. Journal of Pension Economics and Finance.
PMC PMID New Statesman. June 5, Archived from the original on July 20, Southern Economic Journal. CiteSeerX SSRN TV drama promotes financial education in Mongolia. The Times of India. March 1, Archived from the original on July 21, Archived from the original on DNA India. Retrieved The Financial Express. Saudi Gazette. Banque de France. Journal of Economic Behavior and Organization. Retrieved 20 March Archived from the original PDF on 28 July Archived from the original PDF on Department of the Treasury".
Archived from the original PDF on June 2, Center For Financial Literacy. Champlain College. Retrieved 17 December The Business Lawyer. May Harvard Business Review Interview. Interviewed by Gardiner Morse. Boston, Massachusetts: Harvard Business Publishing. Arthur, Chris ed. Educational Futures: Rethinking Theory and Practice. Rotterdam; Boston: Sense Publishers.
ISBN OCLC Journal of the Canadian Association for Curriculum Studies. Financial literacy education and the new regulation of consumer financial services" PDF. Journal of Education Policy. There are two types of financial accounts commonly used by students: checking and savings.
Checking Accounts - As the revolving door of your financial life, a checking account is where your income comes in and your expenses go out. In fact, we suggest keeping only one month's expenses in your account at any time. As we will learn in a moment, keeping your extra cash in a linked savings account can be a good strategy for maintaining your spending plan, avoiding fees, and for earning interest.
To keep the cost of your checking account as low as possible, here are some points to consider: Service Charges. While you should be able to find a checking account that does not require a monthly fee, "add-on" fees have reached record highs in recent years. To keep checking account fees as low as possible, make sure you understand the circumstances in which add-on or monthly fees would be charged.
Are you limited to a certain number of debit or ATM transactions per month before additional fees would be charged? What does it charge for using another bank's ATM machine? Is it easy to opt out of high fee services like courtesy overdraft protection? Avoidable service charges could cost hundreds of dollars per year if you're not careful.
Interest-bearing Accounts. Think twice about interest-bearing checking accounts. It's true that interest is free money, but unless you are already wealthy, the amount of money you would earn is negligible. And many interest bearing accounts have minimum balance requirements - dip below your required minimum just once and you could be charged more fees than you would earn in interest for a year or more.
Consider Direct Deposit or Automatic Transfer. If you have a job, setting up a direct paycheck deposit will reduce some fees at certain banks. Setting up automatic checking to savings deposits may also reduce fees.
Save Money When Reordering Checks. When reordering checks, you can buy checks anywhere - not just from your bank or credit union. Financial institutions typically offer several checking account plans with different interest rates, fees and minimum balance requirements.
The best choice for students is often a no-fee student checking account - just be sure to read the fine print about transaction limits and add-on fees. As the account you use the most, it really pays to understand how to get the most from your checking account. If you are unclear on the basics of balancing a checkbook, writing checks, and related topics, we offer a separate module to get you up to speed.
Savings Accounts are the other type of account commonly used by students. Many of you opened savings accounts as kids as a safe place to keep cash gifts or earnings from odd jobs. But savings accounts can be a powerful tool for helping you manage your money, even as an adult. They earn some interest without the risk of increased checking account fees, and can even help you stick to a budget. Here are some good reasons to consider a savings account: Automated Monthly Transfers.
If you get a lump sum of money each semester from student loans, keep most of your money in your savings account and then transfer the amount you need each month into your checking account. Having to wait until the end of the month helps to limit your spending and makes sure you don't have to rely on credit cards when loan funds are drained at the end of the semester.
You should also be able to set up automatic monthly transfers from savings to checking, making this strategy even easier to manage. Avoiding Penalty Fees. The money will simply be transferred from your savings to checking to cover the charge. We'll discuss overdraft protection in a moment, and courtesy overdraft protection in the next section.
Avoiding Monthly Fees. If you determine that a checking account with a monthly fee is the best deal for you, linking your savings account to your checking account may help you avoid fees if a minimum balance is maintained. Automatic Savings. If you earn a monthly income, automated monthly transfers from checking to a savings account not only build a nest egg, but some banks waive account fees if an automatic checking to savings transfer is set up. Savings Related Accounts - Money Market Accounts and Certificates of Deposits If you have a substantial sum of money that you will not need for a few months, there are a couple of savings options to consider.
Money market accounts are similar to savings accounts, but they tend to offer higher interest rates. If your balance drops below the minimum, you may be charged a fee or have your interest rate reduced. Certificates of deposit CDs are another option that may be a better strategy for most students. CDs do require, however, that your money is committed for a specific period, from one month to several years.
If you need your money before the end of the term, you will pay a penalty that, in certain circumstances, could leave you with less money than you started with. Be sure to understand possible penalties completely before committing to a CD. In this topic, you'll learn: The basic differences between credit and debit cards. Courtesy Overdraft Protection and why it's not always a good deal.
Simple strategies to maximize your consumer protection when mail order or internet shopping. Credit and debit cards look alike, and they are used in virtually identical ways. But there are some significant differences that make them both important tools to have in your financial toolbox.
By definition, spending with a credit card means you are spending borrowed money. Many people use credit cards and pay off their balances each month in full, incurring no fees or interest. Others carry balances from month to month, meaning they're paying interest on money they've already spent, and could be charged a fee for missing a payment.
These "revolvers," as they are called in the credit card industry, are a gold mine for credit card companies, earning them billions of dollars per year in interest and fees. On the other hand, spending with a debit card means you're spending your money - it comes directly from your checking account. When the money is gone, it's gone. When used properly, spending with debit cards can be part of a solid strategy for spending within a budget and staying out of unplanned debt. But be careful of something called "courtesy overdraft protection.
Courtesy overdraft protection is a fee-based service most financial institutions offer to help consumers avoid declined transactions. Here's how it works - if you overdraw your account, the charge will not be declined. No matter how small the overdraft, the same fee applies.
If you don't have a credit card, courtesy overdraft protection might be useful in an emergency, but it is an extremely expensive loan in the vast majority of cases. You may also be charged multiple fees before you realize your account is overdrawn. When you open your deposit account, the bank may ask you if you want courtesy overdraft protection for ATM and certain debit card purchases you make that overdraw your account.
If you agree, the bank may pay those transactions and charge you overdraft fees. If you do not agree, the bank will decline those transactions and not charge you fees. You can change your mind about whether you want the service at any time. Some banks may offer you these options on all transactions that overdraw your account, not just ATM and certain debit card purchases. So unless you don't have enough money in your checking account to make a purchase, why would you ever need to use a credit card?
Fraud protection is one important reason, as are protections from damaged or undelivered merchandise you purchase. Thanks to the Fair Credit Billing Act, you have little or no liability for unauthorized charges, damaged goods, or for merchandise that was never delivered. Credit card issuers also provide dispute settlement when you ordered something that wasn't what was promised or if a merchant refuses to refund your money.
These protections are especially important for mail order transactions or in cases of identity theft. If your debit card is stolen, your liability coverage depends greatly on when you report unauthorized activity to your financial institution. In the worst case scenario, meaning you don't discover fraudulent charges for more than 60 days after the bank sent you a statement showing the unauthorized activity, you could be responsible for all charges made after the 60 days.
Be sure to get full details from your financial institution, and monitor your account activity closely by reviewing your statements or using online banking. A good strategy is to use a debit card for everyday purchases and to use a credit card for internet and mail order purchases - just make sure to pay off your credit card balance to avoid interest charges.
Credit reports and scores determine the rates you pay when borrowing and can affect your ability to get certain jobs. In this topic, you'll learn: What is credit? What is a credit report? What is a credit score? What information is on your credit report. How to get a free credit report and what to look for when reviewing it. From buying a pack of gum at the quickie mart to financing a car to paying for a home, most of us use some form of credit every day. Credit offers a way for us to get the things we want without having to carry cash, and it allows us to buy things we might not be able to afford all at once by allowing us to pay for the item over time.
What is credit? At the most basic level, credit is a promise that you will repay any loan according to the terms of the agreement between you and a lender. The lender, who could be a financial institution, merchant, credit card company, or other type of lender, charges interest for the use of the money. If a friend has ever asked if he or she could borrow your money, you may have asked yourself whether they would be willing and able to pay you back.
Lenders ask themselves similar questions and have come up with a system to rate the likelihood that people will repay their debts. This system consists of credit reports and credit scores. A credit report is a detailed financial report card that contains detailed personal and financial information dating back 7 years or more.
You actually have three credit reports, each assembled by the three major credit reporting bureaus Experian, Equifax, and TransUnion. Credit reports include your:. A credit report filled with missed payments and other negative items will make it more difficult to get car loans, non-government education loans, home mortgages, and any other kind of loan, and the loans will be more expensive since the interest rate will be higher to offset the increased risk of default.
And the penalties don't stop there - banks, insurance companies, credit card companies, utilities, landlords, and even employers all have access to your credit report and use it to make decisions about you. In fact, about half of all employers use credit reports as a factor in making hiring decisions. Finally, if you have certain types of loans, your interest rate can actually be increased because of a negative item on your report, even on accounts that have been paid on time every month.
Given the pervasive use of credit reports, it's not difficult to understand the importance of maintaining a positive report. Besides paying all bills on time and using credit responsibly, you should review your credit reports at least once per year. By reading your report, you can spot errors and even identity theft. The government requires the credit reporting agencies to offer a free report once per year through the AnnualCreditReport.
Please note that the credit reporting agencies will also try to sell you services when you receive your report, even when going through the government-mandated website. While it can be a bit confusing, these extras are not required in order to receive your report.
There are many websites that offer so called "free" credit reports, and most of those sites try to sign you up for a credit monitoring service as a condition of receiving your report. If you do find errors on your credit report, call the credit bureau immediately.
Under the Fair Credit Reporting Act, the bureaus have 30 days to investigate and to correct any erroneous information. If your credit report is like a report card, your credit score is your overall credit grade. A credit score is a three-digit number that summarizes everything about your credit report into one number.
Credit scores typically range between and , with around being average. The higher the score, the better. Scores are determined using a proprietary formula that takes into account factors such as repayment histories, the number and age of open credit accounts, the percentage of available credit used, and even the number of recent credit inquiries.
The interest rate you receive on most loans is based, to a large degree, on your credit score. A good way to earn and maintain a high credit score is to build a solid credit history - and there are no quick fixes, no matter what the providers of fee-based "credit repair" services claim.
For more information on repairing credit, please review our materials on "Dealing with Financial Trouble. You can obtain a score through the FICO website or through the credit bureau websites. But be sure not to sign up for an expensive credit monitoring service, unless you want the service and do not mind paying a monthly fee. In this topic, you'll learn: The advantages of online banking. The importance of saving statements for three years or more. Three simple steps for managing your accounts.
Actively managing your accounts ensures that you always know your account balances, even when the true balance may differ from the amount printed on your last statement or ATM receipt. How could your bank not know the true balance? Think about mailing a check to pay a bill.
The same is true with any debit card transactions made without entering your PIN - it will generally take a day or two for the money to be withdrawn from your account and reflected on your statement. Otherwise, you could be charged overdraft fees, your transactions could be declined, or you could even be charged late payment or bounced check fees from merchants. It is ultimately your responsibility to monitor your account activity. Most banks offer the option of either electronic or paper statements.
No matter which type of statement you prefer, remember to save your statements for a minimum of three years and up to seven years. Bank statements are often needed for tax returns, financial aid verification and in the event of a tax audit. Most banks and credit unions offer online banking tools that make managing your accounts easier than ever. While online account management is not the only way to effectively manage your accounts, it does have many advantages.
If you bank online exclusively, meaning you never receive paper statements, make sure you understand how long your statements will be available online. Otherwise, you will likely have to pay a retrieval fee for older statements if you need them later. Performing these simple tasks regularly helps to ensure that you are in complete control of your account. In this topic, you'll learn: Reasons why students in particular may have trouble with credit cards.
When to use and when not to use a credit card. Avoiding the "Minimum Payment Trap. Credit cards can be a major source of financial hardship for students. Unlike student loans, credit card payments are not deferred until after graduation - you are responsible for repaying your debt as soon as it is charged. Since most students have modest income, your only source of money to pay credit card bills may be student loans, other credit cards, or you may even be forced to skip payments and take a blow to your credit score.
Coupled with student loan payments, credit card debt can mean starting your life after school with an unnecessary financial burden - imagine not being able to afford a car or a home, just because of your credit card payment! It happens to more people than you may expect.
So if credit cards are so bad, why not just use cash for everything? To a certain extent, using cash - especially for everyday expenses - is an option you may want to consider. Studies have shown that people spend less overall when using cash as opposed to credit. But at other times, you may not have the cash you need for an emergency situation or you may need to buy an airline ticket or rent a car - each of which is more convenient with a credit card as opposed to a debit card.
Like anything, credit cards can be used for sound and unsound reasons. Using credit for a financial emergency like a car repair far away from home would be a responsible use of credit. But using credit cards for dinners out, gadgets, and entertainment can be risky. As a general rule, if you can eat, drink or wear an item, it's usually not a good use of credit.
Minimum Payment Trap One of the most common problems people have with credit cards is that they fall into the minimum payment trap - confusing their ability to make the minimum monthly payment with actually repaying their debt. Believe it or not, making just the minimum payment means you may end up paying 3 times more than the amount you originally charged!
How is that possible? Thanks to the Credit Card Act of , credit card companies must now disclose more information on credit card statements, including late payment fees, repayment scenarios, the length of time it would take to repay the debt under each scenario, and how much interest would be charged.
Some companies are even modifying their minimum repayment policies to cut the repayment period using minimum payments to as short as seven years - still among the most expensive types of debt available. Also, if you bank online and never actually see a print-format statement, you will probably not see this additional consumer information. Coupled with much higher interest rates than education loans and the risk to your credit score from even occasional missed payments, and it's easy to see how credit cards could become a serious problem.
The Benefits of Credit Cards Since abusing credit cards can lead to serious financial trouble, should you cut yours up and avoid them entirely? We don't think so. There are many benefits associated with credit card use. None of us can predict the future, and unanticipated bills are a part of life. Building a good credit history. While not the only way to build credit, credit cards can help to establish a positive credit record, which you'll need for future loans.
Consumer protection. They allow you to order products by phone or on the Internet and offer fraud protection that some debit cards may not. Car rentals and hotel stays are more convenient with a credit card since a "hold" is not placed on funds in your bank account. Some banks also have daily spending limits on debit cards that could be a problem, especially if travelling overseas. We recommend that all students have one card to be used for emergencies and for Internet or mail order purchases in which the consumer protection provided by credit cards would be useful.
Daily purchases should be made with cash, a check, or a debit card. And before getting an additional credit card -- ask yourself if it's really necessary. If you're getting a new card because you've maxed out another one, that's a sign of serious trouble. Some people also get a new credit card because they have been offered a lower interest rate. While taking advantage of these teaser interest rates can save money for those with large balances, it's a strategy that does involve risk.
For example, getting a new card increases your total available credit, which gives you the potential to increase your total debt more easily. If you are planning to acquire a new card for a lower interest rate, it is often easiest just to call your current credit card company and tell them you are considering switching to a lower rate card - they may lower your rate on the spot. Finally, if you do choose to carry a credit card balance, please remember that you are the only one qualified to set your personal credit limit, which may be very different than the credit limit on your card.
Credit card companies will also raise the credit limits of those who pay their bill on time, leading some to feel that they can obviously handle more debt because their credit card company says so. That reasoning is a great way to get in over your head with debt. In fact, there is no appropriate or normal level of credit card debt other than zero.
As a financially responsible adult, you are the one who must say "no thanks" to excess debt, no matter what anyone else says. In this topic, you'll learn: The many undeniable benefits of a solid credit history. How to build your credit as quickly as possible. What to avoid when canceling a credit card.
A good credit history makes it possible to get credit, especially for major purchases like a home or car, and it keeps the cost of all borrowing to a minimum. A bad credit score may also make it expensive or impossible to get some education loans, potentially making it difficult to complete your degree or go to graduate school. If you've been denied credit based on information in your credit report, the lender is required under the Fair Credit Reporting Act to provide you with the name of the credit reporting agency and tell you that you may obtain a free copy of your credit report at your request.
Otherwise, you can use the AnnualCreditReport. When reducing your number of credit cards, it's tempting to officially cancel the account. But doing so could potentially lower your credit score. That's because your credit score is tied to both the length of your active credit history and to the amount of your total available credit that is used. The best way to "get rid" of a card is to pay off any outstanding balance and simply stop using it. In this topic, you'll learn: Various types of identity theft.
How thieves can get your personal information. You've probably heard the term "identity theft" or "ID theft" in the media. It's a serious problem that costs victims in the United States billions of dollars per year. Identity theft occurs when someone uses your personal information without your authorization to get credit cards, loans, cell phones and just about anything that requires detailed personal financial information. This can potentially leave you responsible for someone else's spending spree.
It can take months or even years to repair the damage done by identity thieves, during which time you could be denied loans or even jobs as the result of their actions. Identity theft starts with the misuse of your personal information, such as your name, Social Security number, credit card numbers, or other financial account information. For identity thieves, this information is as good as gold, allowing them to either make charges to your accounts or to open new bank or credit accounts.
Types of Identity Theft One type of identity theft involves the use of your existing credit card, checking, or debit card accounts to make unauthorized purchases. Credit card fraud typically occurs when a physical card is either lost or stolen.
Another type of credit card fraud involves stealing your account number through a device connected to credit card terminals, enabling the thief to make a duplicate of your card. Luckily, credit card holders are rarely responsible for unauthorized charges on credit card accounts when reported within 60 days of the date your credit card company transmitted your account statement reflecting the fraudulent transaction s.
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