Should I Use a Credit Card at the Pump?

Q: Is it a good idea to pay for gas with a credit card? 

A: On average, Americans pump close to 392 million gallons of gasoline a day. That’s more than a gallon for every American! Each day! With fuel prices spiking, you want to make sure you’re paying for that gas in the best manner possible. Many people reach for a debit card or cash when filling up on fuel, but there are several key advantages to using a credit card to pay for gas. Here are four reasons you may want to use your credit card at the pump. 

  1. Paying with plastic makes it easy to track your spending

Cash leaves no paper trail. Once you’ve spent it, you have no way of knowing where that money went unless you actively record the expenditure at the time of the purchase. When you pay with plastic, though, there’s always a record of the transaction. You can review your spending habits, or calculate how much you are spending in one budget category (transportation) to help you stay on top of your finances as best as possible. Just check out the credit card statement at the end of the month or billing period to see how much you’ve spent on fuel costs. 

  1. Earn rewards for every gallon

If you own a credit card that offers rewards or miles for every purchase you make, you can earn a lot of rewards by using your credit card to purchase the gas you’d buy anyways. In just one year, you may have enough rewards or miles to fund a full vacation! Just make sure to choose the card that offers the most bang for your buck.

  1. Fraud and theft protection

When it comes to protecting your funds from fraud, credit cards are the number-one choice of payment methods. Unlike payments made in cash or with a debit card, a credit card purchase can always be disputed if found to be faulty. Many cards offer a zero-liability plan in cases of fraud as long as the credit card company is notified within a predetermined amount of time. Finally, paying with cash always carries the risk of theft, but a stolen or hacked credit card account can easily be closed. 

  1. Free up your money

When you choose to pay with a debit card at the pump, you’re choosing to put your money on hold. Gas stations present a unique risk to their owners, as the consumer can fill up and drive away without paying. To avoid this form of theft, gas stations will immediately authorize cards by placing a hold on the debit card account as soon as the consumer initiates the transaction, which is before they’ve even begun to pump fuel into their car. The hold is generally between $50 and $150. After the consumer has finished pumping gas, the card will be charged for the appropriate amount. However, the hold on the card may not clear for several days. If you need every dollar in your account immediately after paying for gas, you may want to use a credit card rather than a debit card at the pump. 

Many drivers choose to pay for gas with cash to save on surcharges that some stations issue for payments made via credit card. However, if you use a rewards card and get cash back on every credit card purchase, the small surcharge can be more than offset by the rewards. In addition, some stations will waive the surcharge upon request. 

It’s important to note that, as always, credit cards should only be used responsibly, even when paying at the pump. Only use a credit card if you know you will be able to pay the bill in full before it’s due. Otherwise, the interest charges you’ll accumulate mean you’ll be paying for far more than the actual price of gas.

Using a credit card to pay for fuel can have unique advantages over other payment methods. The next time you’re at the pump, consider pulling out your credit card instead of paying with a debit card or cash. 

Your Turn: Do you use a credit card at the pump? Why or why not? Tell us about it in the comments. 

Don’t Get Caught in a Shopping Scam!

Shopping in 2022 is worlds away from what it was at the turn of the century, or even just a few years ago. According to retail research firm, Digital Commerce 360, ecommerce sales surpassed $870 billion in 2021, a 50% jump over 2019. Online shopping is quick, easy and convenient. 

Unfortunately, though, when a lot of shopping moved online, it also ushered in a wave of scams that are often successful. Some of these scams can be difficult for the untrained eye to spot, and many offer no way for the victim to reclaim their lost funds. Here’s what you need to know to recognize an online shopping scam and avoid being the next victim. 

How these scams play out

There are several variations to the online shopping scam. 

In one version, a shopper will scour the internet for a specific item in their desired price range. They’ll find the item retailing on a site at an attractive price and then proceed to make the purchase. They’ll share payment information, input their delivery address and complete the transaction. Unfortunately, though, the item never arrives on their doorstep. Alternatively, a cheap knockoff of the product will arrive instead of the item they’ve purchased. When the buyer tries to demand a refund, they are unable to reach the seller. 

In another variation, a shopper finds an item online and tries to make a purchase. They’ll be asked to input sensitive information, such as a credit card or checking account number. At this point, the shopper will be unable to complete the transaction and will continuously run into errors on the site. However, the scammers now have their information and can proceed to empty the victim’s accounts, or worse.

In a third version of the online shopping scam, a seller clicks on an ad, or on a site that came up in a Google search for one of their favorite stores. They’ll proceed to make an order, not knowing they’ve actually clicked into a bogus look-a-like site run by scammers. The rest of the scam will follow one of the scenarios described above. 

Red flags

Watch for these warning signs that you may have stumbled upon a shopping scam:

  • Prices are too good to be true. If you find an online offer for a new iPhone retailing at just $450, you’re likely looking at a scam. 
  • The offer urges you to act now. If an offer warns that the bargain prices it’s offering won’t last until sundown, it’s likely a scam. 
  • The seller demands specific means of payment. If an e-tailer insists that you pay via prepaid gift card or wire transfer, opt out. 
  • The website is full of typos and grammar errors. If the site is badly in need of editing, it may be run by scammers. 

Stay safe

Follow these tips to keep yourself safe from online shopping scams:

  • Only shop on safe, secure sites. Check the URL for the lock icon and for the “s” after the “http”.
  • Check the URL for proper spelling of reputable sites. Make sure the URL of the site you’re on matches the authentic URL for that retailer and that you haven’t landed on a spoof site. You may want to save the genuine URLs on your computer for future use. 
  • Avoid clicking on high-pressure pop-ups and banner ads. These are often scams.
  • Pay with a credit card when shopping online. A credit card offers the most protection for your purchases. 
  • Never share personal information with an unverified contact. Don’t input your credit card number or account details unless you’re absolutely sure you’re dealing with a reputable website. 

If you’re targeted

If you’ve fallen victim to an online shopping scam, there are steps you can take to mitigate the damage. 

If you’ve paid via credit card, call the company to dispute the charge. At this point, you may want to consider closing the card and placing a credit alert and/or a credit freeze on your name. Next, alert the FTC about the scam. If the alleged retailer is on the BBB website, you can let them know, too. Finally, let your friends know about the scam so they know to be aware.

Stay safe!

Your Turn: Have you been targeted by a shopping scam? Tell us about it in the comments. 

The Ultimate Grad Gift Guide

Your soon-to-be grad has worked super-hard to reach this momentous occasion and to have their diploma in hand. Celebrate with your grad and show them how proud you are of their hard work and dedication with these low-cost, but awesome, gifts!

  1. ID lanyard

Make it easy for your grad to carry their ID and wallet around campus or the workplace. Super-cute and durable, these lanyards make the perfect graduation gift. 

  1. Oh the Places You’ll Go

You can’t go wrong with this Dr. Seuss classic! Whimsical, yet inspirational, it’s a great read for the older teen setting off into the big world of adulthood. Add your own words of wisdom to the front inside cover for a personalized touch. 

  1. College survival kit

Hit the dollar store and scour the aisles for a big basket and all sorts of stuff you can add to it for making a college survival kit or house/apartment warming kit. You can include essentials, like flip flops and hair ties, kitchen utensils and hand soap. Don’t shy away from having fun by adding extras, like Bluetooth speakers, wall decals and more!

  1. “Open when” letters

Your recent grad’s got a long road ahead of them, but you can make it a little easier with a few well-worded missives. Pen some letters for your grad to open at specific milestones and/or at more challenging times, such as after the first round of final exams, when they’re feeling homesick, when they need a laugh, after handing in their first term paper, etc. Your letters will be the gift that keeps on giving throughout their time in college.

  1. Picture collage

Help your grad have the most awesomely decorated room in college with a fantastic homemade picture collage! Check out their social media pages for the best snapshots of your grad and their friends and family. Then, put together a low-cost, meaningful gift they’ll always treasure. As a plus, they’ll think of you every time they see the collage hanging on their dorm room wall.

  1. Laundry essentials

Spring for an adorable laundry hamper and fill it with all your grad needs to master the wash. Think detergent, dryer sheets, stain remover and more. Add a cute note, like “Have LOADS of fun in college!” to complete the gift. 

  1. Chef’s special

Is your grad a foodie who’s thrilled to prep their own meals? A kitchen-phobic young adult who is worried about being in charge of their own meals? Either way, they’ll love a chef package to help them out. Take a huge mixing bowl, Bundt pan or another large, round cooking essential, and fill it with all they need to master the kitchen. You can load it up with spatulas, measuring cups and spoons, a cute apron, oven mitts, a skillet and more. To make it even more personal, fill a small cookbook with your favorite easy recipes for your grad to try out. If you don’t have a collection of recipes, you can purchase one of the many college cookbooks you’ll find on sites like Amazon.

  1. Bright light

If you’re looking for a cute way to present a cash gift to a grad, try this bright idea: Throw some money in a fake lightbulb and add a note that says “Wishing you a future that’s as bright as you are!” For a variation of this idea, insert cash into the photo slot of an empty picture frame and add a note that says, “In case of emergency, break glass!” Cash is always appreciated, and a creative presentation makes it personal and fun. 

Your grad is off to college or into the workforce soon. Show them how proud you are and prepare them for the exciting years that are ahead. Use these ideas to find the perfect low-cost gift for your grad. 

Your Turn: Have you found the perfect low-cost gift for your grad? Tell us about it in the comments. 

Should I Buy Out My Lease?

Q: My lease agreement is nearing its end, and I’m getting many offers to buy out my lease due to the current state of the economy. Should I ignore the hype, or is it really a good idea to buy out my lease?

A: With cars in hot demand, and selling at all-time high prices, many lease customers are looking at trade-in values for their vehicles with the intention of buying out their lease. While this can be a smart choice for many consumers, it’s important to consider all relevant factors before making a decision. Here’s what you need to know about buying out your lease.

What is a lease buyout?

Many drivers are confused by the offers they’re getting and the promotions they’ve seen for buying out leases. How is it possible to buy a lease when a leased vehicle, by definition, is essentially a rented car?

First, buying out a lease involves paying the car’s “buyout price” as specified in the lease contract, which makes you the car’s new owner. Second, it’s important to establish that buying out a lease generally makes the most sense when you are nearing the end of your lease term.   Finally, this may necessitate taking out an auto loan to afford the buyout price, just like you might do when purchasing a new or used car at a dealership.  

How can I determine my car’s buyout price?

To estimate how much you’d need to pay to buy your leased car, look for the term “residual value” in your lease contract. This tells you what your leased vehicle is expected to be worth at the end of the term, which may be months or years away. To reach your vehicle’s buyout price, add the residual value to any remaining payments. For example, if your car’s residual value is $25,000 and you owe another 10 payments of $500, the car’s buyout price is $30,000. Of course, the more time left on your lease, the higher price you can expect to pay to buyout.

Will I need to pay any fees in addition to the buyout price?

Depending on your home state, your vehicle’s buyout price may be subject to an auto sales tax. Your lender may also charge additional fees, such as a ‘purchase option fee’. It’s important to know about any additional fees you may need to pay in addition to the buyout price and to 

estimate the total you’ll be paying before deciding to purchase a leased car.

The good news is that you won’t be accountable for the typical lease-end fees, which can include the costs of reconditioning the vehicle for resale, fixing any damage the car may have incurred during your term, and an over-mileage penalty for every mile you may have driven over the official limit.  

What are the advantages of buying out a lease?

Many drivers are opting to buy their leased vehicles now due to the current state of the auto industry. Supply is low and both new and used cars are in high demand. A driver nearing the end of their lease agreement may find it challenging to purchase or lease another car. Buying a car you already lease will give you first dibs at a hot commodity.  

Some drivers are choosing to capitalize on the high demand for used cars by buying out their leases and then flipping the car to a dealership or selling it privately to a new owner. They assume they will earn enough from the sale to help offset the price of a new car. While this may be true, it’s important to remember that it may be difficult to find a new car in a desired model and at an affordable price.

Before taking out a loan to buy out a lease, find out what your car is actually worth. Due to the state of the market, it’s likely worth more than you’ll pay. However, if it’s worth less than the buyout price, you’ll be upside-down on your loan, which is never a good idea. In addition, you may find it difficult to qualify for a loan in an amount that is higher than the value of the asset.  

How do I buy out my lease?

If you decide to go ahead and buy out your lease, you’ll first need to run the numbers as described above to be sure it’s a financially responsible decision. When you have the total buyout price, your next step is to work on financing. You can choose to take out an auto loan or a personal loan to help cover the costs. 

Next, you’ll contact the company behind your lease and complete the purchase. The sale process will be similar to the sale of any car. Finally, be sure to notify your insurance company about the change in ownership of your vehicle. Leases generally require plans with low deductibles and high premiums, so you may want to choose a new plan with higher deductibles and lower monthly premiums.

If you’re looking to finance an auto loan for a lease buyout car, look no further than Advantage One Credit Union! Our auto loans offer low interest rates [see for current rates], easy payback terms and a quick approval process. Call, click or stop by to get started or discuss available options!

Your Turn: Have you bought your leased car? Tell us about your experience in the comments. 

What to Buy and What to Skip in June

Summer is here and it’s time to work on your tan–and on finding big bargains! Though there are no major shopping holidays in June, you can still find fantastic deals on all kinds of products. There are some purchases you should skip this month, though, and we know what they are. Here’s what to buy and what to skip in June.

Buy: Swimwear and lingerie

Get ready to hit the beach in style! Retailers offer steep discounts on swimwear as summer gets underway, and you can pick up a sweet deal on the swimsuit of your choice. Also, Victoria’s Secret famously hosts one of its semi-annual sale events in June, so also add lingerie to your “to buy” list!

Skip: Grills

Grills are in high demand this month, so they are retailing at full-price. If you’re looking to upgrade your grill, wait until mid- or late summer for a better deal. As with most timely products, the longer into the season you wait, the more you’ll save.  

Buy: Dinner for Dad

It’s Dad’s time! Restaurants know you’ll be taking him out to eat, and they offer great deals on meals to lure prospective diners inside. Some of these discounts might only be available through gift card purchases, so be sure to check it out in advance. 

Skip: Mattresses

If you need new mattresses, you’re out of luck. The Memorial Day sale events, which happened last month, will typically offer the best discounts on mattresses. If you’ve missed out, you’ll want to wait until Labor Day to score a deal.

Buy: Workout wear and gear

Consumers are building their beach bodies this month, and retailers want in on the action. Check out your favorite brands for steep discounts on workout wear and gear throughout the month of June. Getting fit is always easier – OK … a little more fun – when you’re outfitted in style!

Skip: Brand-name clothing

Don’t go all out on designer clothing this month, unless you love paying full price. In just a month from now, you can save hundreds of dollars on brand-name clothing, handbags and shoes from most major department stores, partially due to the Nordstrom Anniversary Sale. Put the designer wardrobe on hold, and save a bundle.

Buy: In-season produce

The fresh fruits and vegetables are especially abundant this month. You can enjoy great prices and full flavor on in-season produce all June. Pick up some refreshing watermelon, stock up on all kinds of berries and load up the crisper with stone fruit of all kinds. You can also bring your barbecue dinners up a notch by grilling fresh and in-season corn on the cob, summer squash and even tomatoes. 

Skip: Electronics

School’s out, and so are the deals on laptops and other electronic devices. Older tech has been cleared out, so you won’t find discounts on last year’s models in June. If you need to upgrade your electronics, wait it out a bit until the back-to-school sales start in July and August. 

Buy: Tools and paint

The best deals on tools and paint won’t hit stores until November, but you can still pick up a sweet bargain on these home-improvement essentials in June. Discounts are generally offered around Father’s Day. Look for sales on these items at major home improvement stores, like Lowe’s and Home Depot, to stock up on all you need for your DIY summer project. 

Skip: Patio furniture

You might be spending hours of each day outside this month, but that doesn’t make it an ideal time to furnish your patio in style. Outdoor furniture retails at full-price this month, and won’t start to see discounts until deep into the season, in another month or two. Wait it out a bit to save a ton.

Use the tips here to know what to buy and what to skip this June. 

Your Turn: Have you picked up any great deals in June? Tell us about it in the comments. 

15 Fun Gifts for Dad that Don’t Break the Budget

It’s Dad’s time, and you want to go all out to make your all-time favorite hero happy. Fortunately, that doesn’t mean you need to drain your wallet. You can make Dad’s day, and keep your budget, too. Here are 15 fun and low-cost gifts that’ll make Dad smile this Father’s Day.

  1. IPhone, Apple Watch and AirPod charging dock

This awesome charging dock can give some juice to an iPhone, Apple Watch and AirPods all at the same time. With a sleek design and sturdy structure, the dock is compatible with Apple Watches and iWatches of all sizes and styles, and with all iPhone models as well. Get Dad’s 3-in-1 charging station for just $19 on Amazon

  1. BenShot pint glass with real golf ball

Does Dad love to golf? Surprise him with this unique pint glass that has a real golf ball embedded in it. Make him smile every time he fills up a frothy glass. Just $26 on Amazon.

  1. KingCamp foldable fire pit

This awesome travel fire pit is like a campfire on the go. The rollable stainless steel net and folding legs are collapsible and compact enough to take anywhere. No assembly needed—just unroll and light up! Get yours here.

  1.  Classic charades

You don’t have to spend much to make Dad happy. The classic game of Charades, just $12 at Chroniclebooks.com, will help create warm family memories well beyond Father’s Day.

  1. Open bottle wine rest

This adorable mountain-shaped wine bottle rest is the perfect gift for the outdoorsy dad who loves to enjoy a good glass of wine and save the rest for later.

  1. 6. Rainbow socks pizza socks box

Everyone knows you can never have enough novelty socks. The pizza-box packaging of these socks makes them a super-fun Father’s Day gift. Just $26 on Amazon

  1.  Baby Yoda device holder

Let the Force be with Dad when you give him this device-holder that’s shaped like a baby Yoda. Prop up phones, video game controllers, and more. $25 on UrbanOutfitters.

  1. Bluetooth speaker beanie

With its built-in Bluetooth speakers and a super-warm design, Dad won’t want to take this beanie off all winter! Just $28 on Amazon.

  1. Mosiyeef pop-up wallet with money clip

Dad can finally toss that overstuffed and worn-out wallet when you gift him this minimalist, ultra-modern one! Crafted from aluminum and stainless steel, this pop-up wallet is lightweight, yet functional, holding up to six cards at a time, all of which can pop up at the push of a button. Available in 16 colors for only $19 on Amazon.  

  1.  Fitness dice

At-home workouts are fun again with this innovative fitness dice set. Every roll gives you one out of 45,000 possible routines, all with no equipment required. Only $19 at uncommongoods.com.

  1. Bean Box coffee subscription

If Dad loves his morning cup of Joe, he’ll love getting a regular delivery of fresh bags of whole bean coffee from artisanal brand Bean Box. Subscriptions are highly customizable and start at just $16.50.

  1. Chillsner

Dad will never have to wait for his drink to chill again when he has this nifty little gadget. Keep the Chillsner in the freezer and pop it into any drink for an instantly chilled beverage. $10 at uncommongoods.com.

13.  Marvel’s greatest comics

Let Dad dive into an anthology of the greatest Marvel comics of all times, including all-time favorites like Iron Man, Captain America and more. Get the collection here.

  1. Harry’s Truman shave set

Dad will look dapper when he uses this luxury shave set, complete with a signature handle, textured rubber grip, three German-engineered blade cartridges, foaming shave gel and more. $15 from Harry’s

  1. Zippo FireFast torch

It’s a blazing flame whenever Dad wants it. Ultra-hot and precise, the torch will help Dad get his outdoor fire pit going, add some char to his entree or dessert or light up a dark campsite. $15 on Amazon.

It doesn’t cost much to make Dad happy. Use this guide to find the perfect gift for Dad that doesn’t break the budget.

Your Turn: What’s your gift to Dad this Father’s Day? Tell us about it in the comments. 

Step 5 of 12 to Financial Wellness: Practice Mindful Spending

Creating a budget and deciding to stick to it is easy; it’s actually carrying through on your plan that’s the hard part. For too many people, financial responsibility ends at having good intentions and real life gets in the way of all well-laid plans. A large part of the discrepancy between what they want to do and what they actually do is caused by their failure to spend mindfully. When every indulgence and impulse buy is just a swipe away, it can be super-challenging to rein in that spending instinct – but it is possible. Here’s how to learn the art of mindful spending. 

Find alternative ways to de-stress

Too often, people claim they need “retail therapy” and use it as an excuse to practice mindless spending. But choosing to turn to shopping for alleviating stress, dealing with a challenging situation or just to escape real life for a bit makes it very difficult to make smart, responsible choices. In addition, the bills, or debt that will likely accumulate as a result will increase stress levels considerably. Instead, it’s best to find another way to lift a heavy mood. Find someone to talk to, take a long, hot bath, go for a jog while listening to your favorite pick-me-up playlist or take up a forgotten hobby again. 

Consider disabling the one-click feature for online shopping

If you’re big into online shopping and often end up buying more than you’d planned, you may want to disable the one-click feature on sites like Amazon. You can also choose not to have your device “remember” your payment information so you have to input it whenever you shop. The more resistance or friction required to complete a purchase, the greater the chances of that purchase being a mindful choice and not a decision you’ll soon regret. 

Leave your cards and cash at home

When you don’t plan on spending any money, don’t take any with you. For safety reasons, you may choose to carry a card with you, but it’s a good idea to keep it as out-of-reach as possible. If you make all your payments with your phone, keep it tucked away, too. Similarly, if you’re hitting the shops to pick up a specific item, bring just the amount you’ll need for the purchase and nothing more. 

Put large purchases on hold

One of the best ways to avoid buyer’s remorse is to put all large purchases on hold. Set your own dollar amount for what you consider to be a large purchase and resolve to wait a while before completing any purchase in that amount or more. For example, you can decide to wait two weeks for every purchase of $50 or more. Delaying a large purchase will give you time to think it over and consider whether you really want to spend this money now. Of course, if you’ve been saving up for a large purchase for a while, you’ve already thought about the purchase and decided it’s worthwhile. 

Avoid temptation

It’s hard to keep telling yourself no when temptation is constantly flashing across your screen. Opt out of social media accounts that get you to spend more than you should, and unsubscribe from email lists. Avoid browsing on brand sites that often trigger overspending and only visit when you need to make a purchase. You can do this in real life as well, being careful to avoid shops that provoke mindless spending. Similarly, when shopping for groceries, keep away from aisles and checkout counters that cause you to overspend and purchase more than you have on your list. 

Mindless spending can be the undoing of the most carefully-crafted budget. Follow these tips to learn how to spend mindfully. 

Your Turn: How do you practice mindful spending? Share your best tips and tricks in the comments. 

Should I Pay my Utility Bills with a Credit Card?

Q: Is it a good idea to pay my utility bills with a credit card?

A: Like taxes and rush-hour traffic, paying bills is a necessary, albeit painful, part of life. The bills will show up in your mailbox or inbox month after month after month. As you pay those bills, it’s a good idea to choose a payment method that works best for you and might provide a little giveback, such as paying via credit card. Paying your monthly bills this way can have several significant advantages.  

Here are 5 reasons to consider using your credit card to pay your utility bills. 

  1. Automate your payments

When you pay utility bills with a credit card, you can set up your bills to be paid automatically when they’re due. This is a lot more convenient than remembering to pay each bill before it’s due by phone, via mailed paper check or by calling and having the amount charged to a debit or credit card. When your bills are paid automatically, you’ll have just one payment to make – your credit card balance. Take one task of money management off your list and never miss a payment!

  1. Earn rewards

You need to pay your bills; why not earn rewards when you do? A high-rewards card, or one that pays in points or miles, can help you earn loads of bonus points or miles in a year’s worth of bills. You can also pay your bills through a credit card to help you reach a spending minimum to earn your new card sign-up bonus.

  1. Track your spending

Budgeting is easier when your payments are digital and happen within one channel. You’ll see all of your bill payments on your credit card statement each month, and you can easily track your expenses for utility bills that fluctuate with use. Having your spending tracked through your credit card account makes budgeting simple. 

  1. Protect your purchases 

Many credit cards offer outstanding consumer protection on purchases made by cardholders. This can include zero liability in cases of fraud. When you pay your bills via credit card, you can keep an eye on your account to ensure all payments are proceeding properly. If you see any errors, such as your card  being charged twice for the same payment or being charged the wrong amount, you can dispute the charges. On the flip side, if you pay your bills via paper check or cash, you have zero protection if the money is lost in transit

  1. Keep your cards active

If you’re looking to improve your credit score or to grow your credit file, it’s a good idea to have multiple open and active cards. Paying your utility bills via credit card will help to ensure your card(s) is/are getting used each month. This can help your score improve within a few months.

Before using your credit card for bill payments

While there are significant advantages to paying your utility bills, there are several pitfalls to note before you go this route:

  • Extra fees. Some service providers charge a convenience fee for paying a bill via credit card to help them cover the processing fee for each transaction.
  • Interest. Only pay your bills via credit card if you can pay the credit card bill in full when it is due. Otherwise, you can rack up interest on your credit card balance and ultimately pay a lot more for your utility bills than you’d originally been charged.
  • Debt accumulation. If you’re already struggling to pay off a large amount of debt, it’s best not to charge more payments to your credit cards.  
  • Increased credit utilization ratio. For consumers who constantly use their credit cards, paying monthly utility bills with a credit card can push their credit utilization ratio over the recommended 30% limit and adversely affect their credit score.

Paying your utility bills with a credit card can have several advantages. Before going this route, though, ensure that it is the right option for you and your money management style.                                                                                                                                                                                                                                       

Your Turn: Do you pay your utility bills, or other bills, with a credit card? Tell us about it in the comments.

How does a Rising Interest Rate Environment Affect the Economy?

Q: I’ve heard that the Fed plans to raise the interest rate this year. How will this impact the economy and the current inflation rates? 

A: The rising inflation rate, once determined to be a transitory and natural consequence of pandemic lockdowns, now appears to be here to stay, given that headlines announced a 7% increase in the consumer price index (CPI) in the beginning of 2022. To help control prices, the Federal Reserve will likely increase interest rates this year, possibly up to four times in total. 

Let’s take a deeper look at what the current economic circumstances mean for the average consumer as well as steps you can take to protect your investments and manage your money in the most optimal manner. 

What is the Fed and what purpose does it serve?

The Federal Reserve, also known as the Fed, is the central bank of the United States. Its purpose is to keep the U.S. economy operating at optimal efficiency. The Fed primarily focuses on employment and inflation. To prevent the Fed from gaining too much power, it has a system of checks in place, including the following: 

  • A Board of Governors that is independent of the federal government
  • Twelve semi-independent Federal Reserve Banks, each of which represent a particular geographic area of the U.S. and are the operating arms of the Fed
  • The Federal Open Market Committee (FOMC), consisting of 12 people

To help the country maintain maximum employment levels and stability in prices, the FOMC votes on whether their current target range for the monetary policy rate is appropriate for the contemporary economic climate. This target rate, also known as the Federal Funds rate, is the rate at which financial institutions, like banks and credit unions, lend money to each other. As a general rule, if inflation is rising, the Fed will raise its interest rates to contain it. On the flip side, if the economy is heading toward a recession, the Fed will lower the interest rate to help promote lending and economic activity. 

What happens when the Fed raises interest rates?  

When the Fed increases interest rates, as it plans to do this year, financial institutions raise their rates as well. Consequently, the cost of borrowing money becomes higher and consumers are more hesitant to take out large loans. This may discourage people from buying homes, cars and launching new businesses. Conversely, it encourages more people to save as the savings rates offered by banks and credit unions will typically increase, too. These factors mean less money is circulating in the economy, which will hopefully reduce the level of inflation. 

How does a rising rates environment impact the stock market?

Unfortunately, there’s no way to predict how the stock market will react to an increase in interest rates. The market’s volatile nature means there’s no direct correlation between its performance and the Fed’s rate. In general, though, rising interest rates is not good news to stock investors since it means companies will be hesitant to borrow the capital they need to grow their businesses. This will likely result in lower revenues and smaller returns for investors. However, certain sectors, like financial institutions, may benefit from an increased interest rate. 

How does a rising rates environment affect the value of bonds?

The price of bonds is inversely related to interest rates. This means an increase in interest rates will cause an equivalent drop in the price of bonds. The price drop is caused by newer bonds on the market, which offer higher coupon rates, or the ratio between the interest the bond pays and its price, to reflect the recently increased interest rates. 

How do I manage my finances in a rising rates environment?

The average consumer has been hit hard by the increased prices of everything from gas to groceries over the past year. There’s good news ahead for the struggling consumer, as the anticipated increases in interest rates are expected to help tame inflation. However, there are other steps you may want to take to protect your investments and manage your money as rates increase:

  • Stay calm and ignore the news. Alarming headlines get the most clicks, but stock market news nearly always sounds more distressing than it actually is. It’s rarely a good idea to liquidate a stock based on headlines alone. In addition, long-term growth can usually make temporary losses obsolete. 
  • Plan ahead. As always, it’s best to have savings set aside for any economic circumstance. If you don’t already have one, build an emergency fund of at least 3-6 months’ worth of living expenses to prepare for any economic reality. As a bonus, beefing up your savings when interest rates are rising means giving your money a better chance at growth. 
  • When in doubt, seek professional advice. If market news takes an especially disturbing turn, you may want to seek the counsel of a financial advisor for the best steps to take with your investments. Rebalancing your portfolio with a new asset allocation can help your investments maintain peak performance levels even during a rising rates environment. 

Interest rates will likely be going up soon as the Fed tries to control rampant inflation. Use the tips outlined here and consider the steps you may want to take with your finances. 

Your Turn: How are you preparing financially for the expected interest hike? Tell us about it in the comments. 

Beware of Debt Relief Scams

High debt can be a beast, taking huge bites out of a household or personal budget and destroying any chance of financial wellness. To make matters worse, being in high debt can mean being stuck in a desperate cycle that never ends, as payback is often accompanied by high interest rates that make it nearly impossible to get ahead. Unfortunately, scammers know this well, so they target victims with debt relief scams to get at their money.

Here’s what you need to know about debt relief scams and how to avoid them. 

How the scams play out

Debt relief scams target consumers who may have significant levels of credit card debt using any, or a combination, of the following false premises: 

  • Debt repair service that greatly increases their credit score in a short time 
  • Service to remove negative credit report information
  • Student loan debt reduction
  • Promise to reduce credit card interest rates 

The target, who is desperate to get rid of their debt, will pay any price for these services. The scammer demands a non-refundable upfront fee before getting started and happily pockets this money. The scammer then fails to come through as promised, leaving the consumer even deeper in debt. 

In a variation of this scam, the bogus debt relief company will collect payments in small increments, promising to bring the target’s credit score up and their debt balance down over a short period of time. The target will continue making payments to the fictitious service until they finally smell a scam, which might ultimately cost them thousands of dollars in losses. 

Red flags

Debt relief scams can be difficult to spot because there are legitimate debt relief services available for debt-straddled consumers. However, there are several signs you can watch for to let you know when you’re being targeted by a scammer. Most importantly, it’s crucial to remember that overcoming a significant amount of debt takes lots of time. 

Look out for these red flags to help you identify a debt relief scam: 

  • The service guarantees to bring your credit score up by a specific amount of points in a short amount of time.
  • The service promises to get rid of factual credit report information that’s on your credit file.
  • The service demands an upfront payment.
  • The service claims to be affiliated with a credit card company, but the card company does not recognize the service. 
  • The service advises you to cut off all communication with creditors. 

The do’s and don’ts of credit repair

If you’re looking for a legitimate credit repair service, these tips can help. 

Do: 

  • Research the debt relief service you consider using very thoroughly. Look for a secure site, a phone number and street address on their website, as well as positive reviews from past clients. You can also do a quick Google search of the company’s name and the word “scam” (such as, “ABC Debt Saviors Scam”) to see what the internet has to say about them. 
  • If the service claims to be affiliated with a credit card company, give the card company a call to see if this claim checks out. 
  • Ask for a clear explanation of all fees and conditions of the service before signing up. This includes the timeframe for the service, the total you can expect to pay and any risks you should know about before using the service. 
  • Consider other options for paying down debt, such as credit counseling, negotiating for a lower interest rate from your creditors or taking out a [debt consolidation loan] [or personal loan] from Advantage One Credit Union.

Don’t:

  • Never pay an upfront for a debt relief service.
  • Don’t believe a service that guarantees to bring up your score by a certain amount in a specified timeframe. There are no guarantees when it comes to debt relief. 
  • Don’t agree to let a company enroll you in a debt relief program without fully knowing any details. 
  • Don’t believe a service can get rid of negative information on your credit file. There are laws dictating how long specific information must stay on your credit report, and a debt relief service can’t change that. 

  • Your Turn: Have you been targeted by a debt relief scam? Share your experience in the comments.