IOUs: ‘There’s an app for that!’

It’s a common joke, but it seems to be holding true.  We use apps to share pictures, check e-mail, and chat with friends—now, we have the ability to transfer money to our friends and family, regardless of our location or which financial institution we belong to.  Cash may have been king in the past, but it’s looking more like our smartphones are king today.

Have you heard of Venmo? Squarecash? These are just a few of the apps that allow you to send money to anyone, anywhere, anytime.  From a convenience standpoint, these advances are amazing—but what are the costs of convenience?

You may still think of identity theft as the result of sneaky thieves rummaging through your trash, gathering bank statements and those annoying credit card offers you threw out last week.  While this method is still common, it’s only one of the ways that thieves steal financial information today.  Why go dumpster diving when you can use hacking to gather financial information and access money electronically?

Creepy.

It’s important to protect your sensitive information regardless of whether you have $20 in the bank or $2,000 in the bank. Identity theft can damage not only your liquid assets (cash in your checking or savings account), but your credit scores as well. Even your criminal record can be affected by identity theft. Sounds crazy, but you could be arrested for a crime someone else commits while pretending to be you.  Every time you link your personal information to a website or an app, there’s a chance that information can be accessed and abused, so it’s important that you protect yourself.

Here are some tips to assess security risks of peer-to-peer transfer apps:

The Federal Trade Commission recommends that you look for three factors to help make your account(s) less vulnerable:

  • Two-factor authentication: This requires you to enter a password plus something else — like a code sent to your phone —  to prove it’s really you.
  • Pin code: Look at creating a pin to send a payment — like a pin you might use at an ATM.
  • Social media permissions: If a payment service is linked to social media, it could broadcast your payment history to your network so make sure you check those permissions.

Additionally, think about the protections built into your financial accounts. For example, some apps may charge you for using a credit card, but if something goes wrong you have more protection under the law by using a credit card than if you use a debit card or link a checking account directly.  To learn more about protections under the law for credit and debit cards, watch the Staying on Good Terms: Credit & Debt Webinar HERE.  Take the quiz to work towards your Borrowing Badge!

Know what happens if something goes wrong–will you get an e-mail explaining a new recipient, access from a new location/device or if your account information, like your associated e-mail, is changed?

Learning more about security features may not be fun, but 5 minutes could save you from identity theft which can take months or years to recover from.  Remember, knowledge is power!

Sources:

FTC Tips, 2015: https://www.consumer.ftc.gov/blog/paying-your-friends-through-app-read-0

More Information: Citizens Utility Board, 2013 http://www.citizensutilityboard.org/pdfs/ConsumerInfo/P2P.pdf

Written by Carol Brobeck, University of Illinois USFSCO Student Money Management Center

How can I prepare financially for transitions while in school?

What’s up next for you?  A big move? An internship? Graduation? Marriage?

Unexpected costs can often be overwhelming and sometimes difficult to manage.  The busier we get, the easier it is to miss something or develop a bad habit.  It could be a bad eating habit or it could be a bad spending habit.  Both increase stress, which is the last thing you’ll want during that time.  So, take some time now to prepare so you don’t experience even more stress during what should be an exciting time!

Create or maintain savings.  Savings is often that last thing we add to our budget, if at all, but even setting aside $5 a week yields $260 after 1 year!  It can be hard to predict how much money we need during times of transition, which is why creating a habit of saving can reduce the burden if not eliminate it.  However, to prepare for a transition you can consider all the costs you know you’ll experience and use that amount, or a little more, to help set a goal.  Divide your total goal by the amount of time you have until your transition. For example, if you need $1,000 by September 2017 you’ll need to save $91 a month, or $3 a day.

You can use a savings account to separate that money and you’ll earn some interest!  Take a look at our blog post Why get a savings account? for more information about why savings accounts can be beneficial for you.

It’s easy to make split second decisions that can derail your savings goals.  If you don’t have a budget, this is a great time to make one.  If you feel comfortable and confident to make it on your own—great!  Stop by the Student Money Management Center’s website for tips and tricks to create a solid budget.

Written by Carol Brobeck, University of Illinois USFSCO Student Money Management Center.

How can I get help building a budget or spending plan?

Creating a budget and sticking to it is difficult for a lot of people, but there are so many tools you can use to both create a plan and track your spending that there’s no reason not to do it! Like with any other life skill, you just have to make it work with your own lifestyle, values and preferences.

Budget & Spending Plan Tools: Both the Student Money Management Center and University of Illinois Extension’s Financial Wellness for College Students have budgeting and expense-tracking resources for you to use.

Let us know if you have other questions about the best tools to use to build your budget and track expenses! You can even request an individual financial coaching session with the Student Money Management Center by completing this form or with the financial Wellness for College Students peer educators by emailing financial.wellnessuie@gmail.com to set up an appointment.

Be in the know. Stay updated on important events and activities at the University of Illinois to help build your financial future by subscribing to one of our e-newsletters. Each e-newsletter caters to your unique needs! Subscribe below:

Students

Parents

Staff & Faculty

To learn even more about how to manage your finances while in college, including what to look for in a financial institution, you can watch another recorded webinar, Cash at College: Spending, Saving & Student Loans.

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What is a good tool to help manage my debt?

According to a 2012 Sallie Mae report, “How America Pays”, 35% of students borrowed education loans to pay for college and, although credit card ownership has decreased recently, 35% of undergraduates have a credit card.

Credit is an important financial tool that students need to learn how to manage wisely. Learn more about how credit card debt can affect you now, as well as in the future by watching the recorded webinar, “Staying on Good Terms: Credit & Debt“.

Credit Management Tool: Use powerpay.org to help you manage your credit, pay down debt and plan your spending. This website was created by Utah State University Extension and WebAIM.org.

To learn even more about how to manage your finances while in college, including what to look for in a financial institution, you can watch another recorded webinar, Cash at College: Spending, Saving & Student Loans.

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Credit Cards vs. Debit Cards: What are the pros and cons of a credit card and debit card? What are the differences between them?

A credit card is a small plastic card issued by a bank, credit union, or other financial company which allows you to purchase goods or services on credit. The financial company usually establishes a credit limit that has the potential to increase or decrease depending on your spending habits and if you make payments on time. On a positive side, credit cards have a few advantages. In general, a credit card can be looked at as a 30-day, interest-free loan, as long as your monthly bills are paid off in full. Your credit card will allow you to begin to establish a credit history.

On the other hand, credit cards usually have high interest rates that will go into effect if you don’t pay a bill on time or don’t pay a bill at all. The interest amount accumulates over time, depending on how long it takes you to pay off the debt. Credit cards also are very vulnerable to fraud. It is important to monitor your purchase history, usually through a monthly paper or electronic statement. Monitoring helps you notice fraudulent activity. Lastly, if payments aren’t submitted on time, your credit history will be negatively affected, hurting your chances for future loans and other financial options to be issued to you.

A debit card is also a small plastic card that allows the holder to purchase goods and services, but it is usually issued by a bank or credit union. These cards are usually linked to a savings or checking account, where you will deposit funds for usage on the card.

Debit cards have several advantages that may be appealing to you! When you use a debit card, you are only allowed to spend the amount of cash that is available in your checking or savings account. (If have overdraft protection and you spend more, there may be immediate fees.) With this in mind, there is usually no need to carry cash as this is an equivalent. There are no interest rates ever associated with debit cards, due to the fact that you are spending your own money as opposed to taking a loan out with credit cards. Debit cards also have no effect on your credit history as there is no credit being used. Taking this into account, anyone who has a checking or savings account is able to sign up for a debit card, making it a viable option to consumers.

On the other hand, debit cards come with possible overdraft fees, which are put into effect if you spend more than what is in your checking or savings account associated with your debit card. If you choose a debit card, you are also required to remember a PIN number to make any transactions with the card. This PIN number must be kept confidential at all times!

Surely, several differences exist between credit and debit cards. If you have a credit card, monthly bills can be accessed electronically, or you can choose to have them mailed to you. On the other hand, debit cards have no monthly statements, which means you must keep track of your own expenses via your checking or savings account. For credit cards, there is a liability limit of $50. More often than not, you are not held liable for fraudulent activity. Furthermore, there is a lot less fraud protection with debit cards. There is a liability limit of up to $50 if you report in within two days of noticing the fraud. But your liability increases to more — or even everything in your account — depending on how quickly the fraudulent activity is reported.

 

Written by Joey Gangichiodo, Financial Wellness Peer Educator, December 2014. Reviewed by Kathy Sweedler, Consumer Economics Educator, University of Illinois Extension.