May 06, 2021, 4:22 PM
Do you want to buy a house?
There are many reasons you might. Maybe you’re tired of paying rent every month without gaining any equity in the place you’re living. Maybe you want to avoid the ever-present possibility of lease termination, landlord changes and rent spikes, or you want the privacy of no more shared facilities.
Perhaps you just want the freedom to paint the walls, build a fence or plant a garden without asking anyone else’s permission.
Whatever the reason, homeownership is a valuable goal – one that pays off in more than just pride. After all, it enables you to build equity, earn tax breaks and save for retirement. So whether you’re in the market for a new home or a first home, here’s your step-by-step buyers guide.
Step 1: Decide Whether You’re Ready to Buy A Home
Just because you want a new house doesn’t mean you’re necessarily well positioned to get one – and reaching that optimum position can take time. Almost no one can just shell out hundreds of thousands of dollars for a new house, so most people have to get a loan, called a mortgage*.
Lenders are happy to help, but they also need some reassurance that you’re going to be able to repay that loan. So first, the lender will want to see proof of your work history, usually going back two years, to make sure you have a stable, reliable income source. This can be demonstrated with pay stubs and W-2s if you work for someone else, or tax returns and other documents if you’re self-employed.
The lender will also calculate your debt-to-income ratio using the debts on your credit report (credit cards, other loans, etc.) to determine how much of your income already goes to paying off debt. This helps them determine how much more debt you could reasonably take on without defaulting on those loans. The ratio is calculated by dividing your monthly debt by your gross monthly income. If your debt already accounts for more than 50% of your income, you probably will not qualify for a mortgage.
Even if you qualify for a mortgage, you still need liquid assets (easily accessible funds, like cash, a cashier’s check or money order) for your down payment and closing costs, and if you don’t have that on hand, you’ll need to save up. The larger your down payment is, the less you’ll have to finance – and certain benefits come with that – but the size of your down payment will be based on your loan type and the amount you borrow. Closing costs are the fees you pay the lender and other third parties for creating your loan. The amount differs by loan type and where you live, but it’s a good idea to plan for closing costs in the range of 3%-6% of the home’s value.
Check your credit score. It’s based on your payment history, your total debt, the length of your credit history, the types of credit you’ve used and how often you pursue new credit, and it makes a big difference in what loans and interest rates you qualify for.
While a lot of financial calculations go into the process, being ready to buy a house isn’t just about money – it’s also about you. Do you want to live in the same place for the next 30 years or more? Can you achieve your career goals in that place? Will it fit your family dynamic and any future family obligations, like raising children or caring for an elderly parent? While you certainly can sell your house and move, it’s more complicated to buy another house while also selling your current one. It’s a delicate matter of timing.
Step 2: Calculate How Much House You Can Afford
Let’s say your finances are in order and you’re well positioned to qualify for a mortgage. Now, you need to figure out exactly how large or small that mortgage loan can be.
Examine your debt-to-income ratio. How much money can you reasonably afford to spend each month on a mortgage? This can help you determine the price range of houses you should look in.
But hold on – just because a lender says they can give you $300,000 doesn’t mean you should really borrow that much. Remember, your monthly mortgage payment should leave you enough from your monthly income to cover your other expenses: food, clothing, utilities, entertainment, etc. And your mortgage payment isn’t the only home expense you’ll have.
When you own a home, you’re responsible for the costs of all repairs – unlike when you’re renting – and you’ll need to maintain homeowners insurance. You also need to factor in how high property taxes are in your desired areas, because those will be added into your monthly mortgage payments.
Step 3: Save For A Down Payment and Closing Costs
Investments and savings accounts are a great way to save up the money you’ll need for the down payment and closing costs on your new home, as well as the costs of any changes or repairs you want to make and the hundreds or thousands you’ll spend on moving expenses. But you also want to make sure those payments won’t wipe out your savings. If they would, you should continue saving until you have emergency savings to cover all your expenses for three to six months.
However, you don’t necessarily need to save 20% of your new home’s cost for a down payment – that kind of money isn’t realistic for many first-time homebuyers, and there are many programs available that do not require 20% down. But remember, the more you put down, the better your options are. A larger down payment usually means smaller monthly payments and a lower interest rate.
You should also prepare to pay 3%-6% of the home’s value in closing costs – for a $200,000 house, that’s $6,000-$12,000. Sometimes these costs can be negotiated during the purchase; for instance, the seller may agree to pay them. But you should plan ahead under the assumption that you’ll pay them.
Step 4: Get Prequalified for A Mortgage
Once you’re ready to begin looking at houses, you need to get prequalified for a mortgage. Your lender will give you a prequalification letter stating how much you’re approved for based on your credit, assets and income. Show the letter to your real estate agent so they can help you find homes in your budget.
Step 5: Find the Right Real Estate Agent
When you step into a complicated, unfamiliar situation, wouldn’t you feel better having a trained professional at your side, helping you along the way? That’s what a real estate agent does – he or she is your representative in the purchase transaction, looking out for your best interests by finding homes that meet your criteria, getting you showings, helping you write offers and negotiating. They are also local market experts who can advise you how much to offer for a house.
While it’s possible to buy a house without an agent, it’s not recommended – especially for first-time homebuyers – because the process is complicated. An agent can help you navigate the market, submit a legally sound offer and avoid overpaying. And usually, working with a real estate agent is free for the buyer, because the seller pays the commission for both the buyer’s and seller’s agents.
To find the right real estate agent for you, start with recommendations from friends and family members in the area. They’ll give you honest opinions about people they’ve worked with.
Step 6: Begin House Hunting
There are a lot of variables to consider in a house, so think about what matters to you. It’s a good idea to make a list of your priorities. How important is it to stick to your target price? How much square footage do you want, and how much do you need? How about the number of bedrooms or bathrooms? Do you need access to public transportation? If you have children, or plan to, you may want to consider school options – what schools are nearby and how are they ranked?
Rank your priorities and show the list to your real estate agent so they know what’s most important to you and can show you homes that best fit your criteria. Then look at plenty of options to figure out what you do and don’t like.
Check out the neighborhoods. Are other houses well maintained? How much traffic is there? Is there sufficient parking? During your showings, get hands-on: run the shower to test the pressure and how long the water takes to get hot; flip switches to test out the electrical system; open and close windows and doors.
Remember, some things you don’t like can be fixed – the paint color or carpet are easy and fairly inexpensive to change. If you’re on a tight budget, you might opt for houses that need a little TLC to save money on the purchase price. Then save up for renovations later, or do them yourself, if they’re within your skill level.
Step 7: Make an Offer On A House
When you’ve found the right house, it’s time to make an offer – that means submitting a written offer letter that includes details about you, the price you’re willing to pay and a deadline for the seller to respond to the offer. Your agent will almost always write the offer on your behalf (unless you choose to do it yourself) and then your agent will contact the seller’s agent to submit the offer.
Most offers also come with an earnest money deposit that shows the seller you’re making a serious offer and want to purchase the house. Your offer should contain contingencies about what happens to that earnest money in case the deal doesn’t go through.
The seller can accept the offer as is, reject it or give a counteroffer. If the seller accepts your offer and the deal goes through, the earnest money goes toward your down payment. If the seller accepts but the buyer later backs out, the seller keeps the deposit for their trouble; however if the deal later falls through because of a failed inspection or other contingencies in the contract, the buyer gets it back.
If the seller rejects the offer, the buyer can decide to submit a new offer or move on to a different property. If the seller counteroffers – returns an offer with a different purchase price or terms of sale – the buyer can either accept that counteroffer or make a counteroffer of their own. Negotiations can go on for some time.
If you can’t reach an agreement you’re happy with, don’t be afraid to walk away, but once you and the seller agree, it’s time to start finalizing the sale.
Step 8: Get A Home Inspection
You should get the property inspected before buying any house. It’s generally not required within the terms of your loan, but in the same way you wouldn’t buy a car without a test drive to make sure everything works properly, you shouldn’t buy a house without having it inspected to make sure there are no major problems. That’s what the inspector does: check the electrical systems, roof, appliances, etc., and then give you a list of the problems they found.
Step 9: Get A Home Appraisal
You’ll also want to get your prospective new home appraised. An appraisal gives the current value of the property you want to buy, so it’s a requirement for a mortgage (because lenders can’t loan you more money than the property is worth). That said, if the appraised value comes in under your purchase price, you may have trouble getting financing for it.
Step 10: Ask For Repairs Or Credits
If your inspection reveals major issues that could be a health hazard, you should ask the seller to remedy the situation, either by discounting the purchase price, covering some of the closing costs or correcting the problems before you close.
If your appraisal is under the purchase price, you should attempt to renegotiate that price.
Your agent should submit your request to the seller’s agent, and the seller can either accept your request or reject it. If they reject it, you must decide how to proceed – but it’s probably a good idea to move on, because any major repairs still remaining when you close become your responsibility to fix.
Step 11: Do A Final Walkthrough
Before you close, do a final walkthrough to make sure all needed repairs were completed, the property has been cleared out for you and everything is working properly. Keep an eye out for any pests.
If everything looks good, you’re ready to close.
Step 12: Close On Your New Home
Your lender must give you a Closing Disclosure at least three days before closing, specifying what you’ll need to pay at closing and summarizing your loan details.
For your closing meeting, bring your identification, a copy of your Closing Disclosure and proof of funds for your closing costs – probably a cashier’s check, but your agent will specify that. You’ll sign a settlement statement, listing all costs related to the sale; pay your down payment and closing costs; sign the mortgage note, promising to repay the loan; and sign the mortgage or deed of trust.
When closing is finished, you’re a homeowner. Welcome home!
Remember to continue all those good money-saving habits you adopted, because there will be unexpected expenses and you’ll need to perform regular maintenance to keep your home in tip-top shape. But most of all, remember to enjoy your new house. You’ve earned it!
If you’re ready to buy or are just looking for more information on home loan and mortgage programs, talk to one of our expert Mortgage Consultants by calling us at 800-687-2265.
*This is not a commitment to lend. Some restrictions apply.
April 26, 2021, 11:06 AM
Celebrated during the first week of May, Small Business Week is an annual chance to recognize the critical contributions of America’s entrepreneurs and small business owners. According to the U.S. Small Business Administration, which has celebrated this week for more than 50 years, more than half of Americans either own or work for a small business. These businesses also create nearly two out of every three new jobs in the U.S. each year.
In conjunction with Small Business Week, we’d like to share some financial management tips for small business owners.
1. Create a budget. Focus on both your expenses and how much money you’ll need to make to cover those expenses. Maintaining a reminder of your goal can motivate you to sell more and encourage you to limit your expenses to only those you need to make. If accounting isn’t your strength, invest in a bookkeeper or accounting software, but remain familiar with the finances yourself to avoid any potential employee fraud or theft.
2. Price yourself correctly. You provide a worthwhile service, so ask for what your service is worth. If you price yourself too low, you’ll feel increasingly resentful of all the work you do for too little income. But also beware of overpricing yourself, which could drive potential customers away.
3. Manage expenses. Minimize travel costs and, when possible, capitalize instead on the recent surge of virtual options. Offer only government-mandated benefits to maximize your flexibility during potential lean times in the future. Limit legal fees by setting clear expectations, choosing cost-effective billing for your needs (hourly or per project), and considering do-it-yourself legal documents in simple situations. You can even delay purchasing business cards, signs, marketing materials, cars or inventory until actual revenue starts coming in to prevent a cash flow backup. In short, remain frugal and study not only what you’re paying, but the return on those investments – if they’re not worth what you’re spending, cut them out.
4. Manage cash flow. When money comes in and out can be nearly as important as whether it comes in and out. A good billing strategy that encourages quick payments – perhaps even utilizing small discounts – can keep the money rolling in to cover the expenses you can’t cut out. Stay on top of your invoices, using invoice numbers and cross referencing those with payments. City Bank’s Cash Management technology gives you flexibility and in-depth access to your accounts, 24/7, letting you simplify payroll procedures, designate your desired level of employee access to specific functions within accounts, and use Positive Pay to help prevent check fraud.
5. Plan ahead. You should keep enough cash on hand for three months’ worth of living expenses and business expenses, just in case. And keep an eye out for potential obstacles so you can anticipate and address them. When you have extra funds, invest in your future growth.
6. Don’t wait too long on loans. Hand in hand with planning ahead, if you wait until you’re in financial trouble to seek a loan, your likelihood of being approved decreases. Apply for a loan when your finances are in good shape so you have extra on hand. The influx of capital can allow you to purchase equipment, grow your team, boost your cash flow, pay employees and suppliers, or even respond to an unforeseen emergency. But to get that loan, you have to maintain good credit, so pay your debts as quickly as possible and only seek funding you can repay swiftly and easily.
7. Don’t mix business and pleasure. That is, if you make a personal loan to your business, keep accurate records of that and pay yourself back. Also, keep a designated business account so you can easily track your expenses and gauge your profits. City Bank’s Small Business Checking account is a great option that gives you free online access to your balance, activity, paid check and deposit ticket images, and more. And with no monthly service charge, it even helps small businesses minimize expenses. Additionally, use a business credit card, not your personal card. Do you need a business credit card? City Bank offers a line of feature-packed, low-rate credit cards1 designed to give you convenient purchasing power. There is even a card option that allows the ability to set individual spending limits for employees. See the full suite of cards here.
8. Pay yourself first. Don’t get greedy – you still want to limit expenses, after all – but you need to make sure you are setting some money aside consistently for your future, regardless of whether the business succeeds.
9. Take care when expanding. The goal is to grow steadily and wisely, not drastically. Along those lines, you may want to consider renting – not buying – your office space and some equipment. Leasing can help you avoid maintenance costs and simplify the process of relocation as your business grows.
10. Don’t be afraid to ask for help. Some things you can do yourself – after all, you started a business on your own. You can even take control of your own marketing and public relations, so long as you follow established strategies to keep your efforts focused and intentional. But in areas where you don’t feel capable, look for partners whose strengths complement your own.
From new technology to process payments more efficiently to remote deposit opportunities, City Bank offers a range of additional services to help small businesses succeed. For more information on our full scope of Treasury Management tools, call (800) 687-2265 and speak to a Treasury Management Specialist today.
Happy Small Business Week, and from all of us at City Bank, thank you for everything you do!
1Subject to credit approval. Ask for details.
April 06, 2021, 3:57 PM
If you’re wondering how to teach your children to better handle their money, the internet is full of tips, such as budgeting their allowance, saving their ice cream money for a big toy instead, discussing charitable giving and letting them learn the hard way from their bad choices.
But precisely why you should teach your children to better handle their money is perhaps the more important question. So, let’s explore several of the most logical reasons.
If you don’t teach them, they won’t learn.
In his book, “Allowances: Dollars and Sense,” financial planner Paul Lermitte lists six dangers that can result when parents don’t teach their kids healthy habits and attitudes about money:
1. Your kids could become financially irresponsible, have poor money skills, become deeply in debt, and/or remain financially dependent on you.
2. Your kids could develop a destructive relationship with money, equating it with self-worth or becoming addicted to possessions. They may believe that their happiness depends on having all the latest gadgets and toys.
3. Your kids could become victims of paralyzing credit card debt and have no understanding of how to set financial goals, save money for the future, budget, or be a wise consumer.
4. Your kids could lack the confidence to make sound financial decisions, which could affect other parts of their lives.
5. In spite of your good intentions, you could inadvertently teach your kids the wrong values about money.
6. Families are often torn apart by financial disputes. You need strong principles and a plan of action to avoid the tension and arguments over money that can destroy family relationships.
These may sound like worst-case scenarios, but remember: as adults, problems with money can almost certainly exacerbate whatever other problems your children are facing.
That said, teaching your children how to deal with money gives them an advantage in life. Not only will they understand how to use, save and invest money, they can enjoy more personal responsibility and confidence and they’re more likely to avoid debt and the problems that accompany it.
If you don’t teach them, they won’t learn correctly.
You probably know that if you write a check, certain information has to go in each blank on that check. If the check is written incorrectly, the funds won’t transfer from your account to the account of the check recipient, and then you will end up paying an extra fee for the failed transaction.
But think about it from your child’s perspective. Children can learn by watching, but how often do they get to see you write a check? If you do most of your financial transactions electronically – either online or with debit or credit cards – they may not pick it up organically. Children can also learn if you take the time to teach them, but if you don’t typically write checks, it may never occur to you to teach your child how to do it either.
The same principle extends to all aspects of handling your money. Do you maintain a budget? How much money do you make? How much of that do you pay for necessities? How much do you save? How much you give to charitable organizations? How much do you spend on things you want?
The key: Be transparent with your children. It may be easier to pay the bills and handle all your financial transactions either electronically or after they’ve gone to bed, but letting them in on the process teaches them what they’ll need to do with their money.
If you don’t teach them, someone else will – and that someone may not have your child’s best interests in mind.
Now, it may not be anything sinister – perhaps just advertisements encouraging an impulse buy on the latest action figure – but a study from the University of Cambridge found that money habits in children are formed by the time they’re 7 years old. In other words, if your child is learning to regularly indulge in impulse buys, those behaviors can last into adulthood. And, as adults, the impulse buys are likely to be significantly more expensive than that action figure.
Then again, it may be someone sinister looking to scam a child, counting on their willingness to give their money to those in need. Or it could be someone who merely has different values about how to prioritize saving, spending and investing money, and the lessons would differ from yours.
Ultimately, it all boils down to two major messages: It’s important to teach your children how to manage their money and giving them firsthand experience can dramatically change their outlook for future financial success.
City Bank offers savings and checking accounts specifically designed for minors. The savings account’s interest shows how they can make more money on top of what they save. The checking account is a joint account with a parent or legal guardian, allowing them some financial freedom and you the opportunity to oversee their choices.
Teaching your children to be financially responsible takes time, and the process can be frustrating. But for children to be able to manage their money as adults, they need you to teach them early on.
Call us at 800-687-2265 to speak to a Customer Xperience Representative about available minor bank account options or open an account online here.
March 05, 2021, 3:15 PM
Besides a house, a new car is usually the biggest purchase we make in our lives. When you’re planning to shell out tens of thousands of dollars for a vehicle, you want to make sure you pick one that fits your need and your bank account. And, most importantly, there are a few other steps you can take to limit how much you pay over that purchase price.
Step 1: Are you ready for a new car?
This is the step most people miss, because it seems intuitive, right? If your current car is failing you and is no longer reliable, then yes, you’re probably ready for a new car.
If you’re tired of your current vehicle, but it’s still working fine, you might not be ready. Here’s the question to ask: Are you still paying for it?
If you are, you might not want to buy a new car yet, and here’s why. Many dealers will offer to pay off your current loan, but really the balance on that loan could actually be added into the financing of your new car. In essence, you’re paying for two cars – one of which you don’t even own anymore.
So, if you’re still paying on your car, the better plan might be to wait until that loan is paid off and you’ve saved enough money for a down payment on your next vehicle.
Step 2: Get prequalified for a loan before you look at vehicles.
This is a good idea for multiple reasons.
For one, how much can you afford to pay? You should spend no more than 20%-25% of your monthly household income on all the cars in your household, including loan payments, gas and insurance. For the monthly payment on your new vehicle, shoot for 15% of your monthly income.
Getting prequalified can also help reveal any issues with your credit that might affect the terms of your loan. Dealerships are allowed to offer you a much higher interest rate than you qualify for, so understanding all your options can help you avoid paying more in interest.
Once you have your preapproval in hand, you can use it as a bargaining chip at the dealership.
Step 3. Do your homework.
This is the time to think not just about your new car, but also your life and driving style.
Do you want new or new to you? A new car is in perfect condition, but it’s also much more expensive. A used car can be substantially cheaper, but you also have to consider the condition it’s in – and how long it will last. A certified pre-owned vehicle offers a good balance of price and condition: it’s still under warranty from the manufacturer and has to meet approval that it’s still in like-new condition, but it can be thousands of dollars less expensive than a new model.
Once you’ve considered these questions, think about what you need your vehicle to do. Is it for in-town or highway driving? Do you need to haul equipment? Does it need to carry multiple children with bulky car seats? Thinking about your needs can help you decide whether a sedan, truck or SUV is a better fit, but remember to consider both your situation now and what you expect it to be within the next few years.
After narrowing down to what you need, think about what you want. Online research can help you find models you like and how much you should expect to pay for them. Are you planning to trade in your current vehicle? A little extra research will tell you approximately what your trade-in should be worth.
Armed with all this information, it’s time to go look at your choice vehicles in person. Visit multiple dealerships. If you find one you prefer but its price isn’t the lowest, see if it can match another dealership’s quoted price.
Step 4. Drive a hard bargain.
After you’ve picked the car you want, it’s time to buy it – that means negotiating a price. Keep in mind how much you want to pay, and how much your research says you should pay.
Once you’ve agreed on a purchase price, you’ll find yourself in the finance office, where the dealership will offer you lots of added-on products and services, like extended warranties. They’ll be putting the pressure on, because that’s one of the ways they make money, but just say no. You don’t know what those “extras” are really worth, and if you want the extended factory warranty, you can always buy it later.
Understand there are some things you can negotiate and some you can’t. The car’s registration and taxes, for instance, are set by the government, and there’s no wiggle room on them. It is possible to negotiate some of the dealer fees or unwanted extras, however. Use that to your advantage, and if you make any concessions in price, make sure you get something you want out of the deal – like upgraded floor mats or lifetime oil changes.
Using your loan preapproval for comparison, consider the loan the dealership is offering you. Look at the both the interest rate and the length of the loan. A six- or seven-year loan may have enticingly lower monthly payments – but you’ll pay much more in the long run. That’s because longer loan periods have higher interest rates, and the interest is front-loaded, meaning you pay more interest than principal in the first four years.
Most importantly, don’t be afraid to walk away at any point in the process if you’re not getting the deal you want. Spending thousands of dollars on a bad deal just to avoid walking away is a bad choice. Remember, you have plenty of options out there, and if something just doesn’t feel right, it’s probably not.
Step 5. Signing isn’t the last step.
By the end of a long day of car shopping, you may want to just be done and go home. That’s fine – go home and consider it, and then buy the car tomorrow. When it’s time to sign the paperwork, you want to take your time to read and understand what you’re signing. Make sure it says what you agreed to because, after you sign, there’s probably no going back.
Once you’ve signed the paperwork and driven away in your new car, you could be done with the process. But here’s an expert tip: to make sure you have the absolute best deal on your loan, check out the loan market a few months later. It’s possible that interest rates have dropped, and you could get a cheaper loan by refinancing.
If you have any questions about auto loans, give us a call at (800) 687-2265. One of our auto loan lenders would be happy to guide you through the process.
Ready to buy*? Apply today.
*This is not a commitment to lend.
February 22, 2021, 8:34 AM
In our increasingly electronic world, debit cards are everywhere. They’re fast and convenient, they’re secure and, because they withdraw funds from your account immediately, you’ll find out instantly if you don’t have sufficient funds in the account to cover the purchase.
So why should you learn how to write a check? It’s pretty simple: Sometimes, you don’t have another option. And if you do it wrong, it can cost you.
When might you want or need to write a check?
· When a business charges an extra fee for card payments. Governmental agencies and utility companies may accept debit or credit cards, but their third-party payment processors charge a fee on each usage. By writing a check, you actually pay less.
· When a business requires a minimum amount for card payments. Because of the fee businesses must pay on card transactions, your small purchases using a card might actually cost them money. To prevent this, they may not allow card payments for small amounts.
· When a business doesn’t accept card payments. From insurance and governmental transactions to donations, organization dues and rent, a variety of purposes still may require a check.
· During outages. Debit and credit card transactions require electronic equipment, which may not work if the power or phone systems aren’t working. In that situation, you’ll need cash or a check.
· When gifting money. Gift cards restrict where a recipient can use the money, and cash can’t easily be replaced if it’s lost, whereas checks solve both problems. After the check is deposited, the money can be used anywhere by the recipient, and if the check goes missing, you can always void it and send a new one.
Now you know why you should write a check, let’s talk about how to do it.
Writing checks correctly is important because, if you don’t, the check may bounce – that means, the funds won’t transfer and you’ll end up paying a fee for the failed transaction.
If you write a check without sufficient funds in your account, it’s considered a “bad” check. The bank may charge you a fee and, if you do it repeatedly, you could lose the ability to write checks altogether, not to mention the legal problems you’re risking.
So, here’s how to write a check:
1. In the top right corner, on the line marked DATE, write the current date. While it’s not illegal to write a date that’s still in the future – called “post-dating” – it’s a good idea to tell the person you’re paying so they don’t deposit it immediately. Banks may return checks with a missing or future date.
2. On the line marked PAY TO THE ORDER OF, write the name of the person or business to whom you are writing the check.
3. In the box following the dollar sign, write the amount of the check in numerals, including both dollars and, after the period, cents. For instance, 174.29.
4. On the line below, write out the same amount in words for the dollar amount and cents as a fraction out of 100. For instance, One hundred seventy-four 29/100. Draw a line from the end of the cents to the word DOLLARS to make sure no one else can change the amount you’ve written. Double check that the written amount matches the numeral amount – this is one of the most common mistakes, and banks may return such checks.
5. On the line marked MEMO, write what the check is for. For instance, “Babysitting” or, if you’re paying a bill, the account number the check should be applied to. That way, if your check gets separated from the account slip, it can still be processed.
6. On the final line in the bottom right corner, sign your name. This is one of the most important parts. Banks absolutely will return unsigned checks.
7. You’re done writing the check. Take another look at each blank. If you see a mistake, it may be possible to simply cross through it, write the correct information above it and initial the change. For more serious errors, write VOID in large letters across the entire check, flip to the next check in your checkbook and redo it.
8. When you’ve double checked everything, and the check is ready to give to its recipient, don’t forget to list it in your check register so you have a record of it later on, particularly if you don’t have carbon copies in your checkbook.
Happy check writing!
February 01, 2021, 4:33 PM
If you are one of the millions of people planning to shop online this year, it will be vitally important to make sure you’re doing it wisely. One of the most important questions you should ask is, credit or debit?
What’s the difference?
A debit card is similar to a credit card in that it can be used to make purchases at millions of locations worldwide. But there’s one important difference between the two.
A credit card essentially gives you a small loan, letting you pay later for the purchases you make now. If you pay it back right away, it won’t cost you any more than the initial purchase. However, if you can’t pay it off that month, you’ll be charged interest, meaning you ultimately pay more. Whether you pay it back immediately or take your time, using a credit card and paying it off builds credit. That means when you need a good credit score for a big purchase – think, a car or a house – you’ll have it already, just by virtue of your normal, everyday purchases.
By contrast, a debit card purchase is immediately deducted from your checking account – there’s no borrowing, so no credit check is required to get a debit card, you won’t incur debt and there are no interest charges or late fees. However, because the money comes out immediately, if you try to spend more than you have in your account, you could incur an overdraft fee1 depending on how your account is set up. Keep in mind, also, that your card may have a limit on how much you can spend each day.
Which is more secure?
You know that new microchip on the end of your credit and debit card? It’s designed to make it harder for someone to fraudulently collect your card information. The bad news, and what you may not know, is that technology doesn’t extend to online purchases.
The good news, though, is that card purchases still carry certain protections online.
Federal protections are greater for credit card purchases. Thanks to the Fair Credit Billing Act, if your credit card number is used to make a fraudulent purchase and you report it within 60 days, your liability is capped at $50.
Also, if your purchase arrives broken, doesn’t arrive or if the wrong item arrives, you are able to dispute a charge or withhold payment. All card issuers will help you file a dispute but credit card companies are especially helpful. Think about it this way: With a debit card, the money has already come out of your account, so it’s your money on the line. With a credit card, the card company’s money is on the line – which situation will they work harder to remedy?
With debit cards, because the funds come out of your account immediately, fraud could cost you everything you have – plus overdraft1 charges if the thief tries to use more than you have. City Bank mitigates this with daily limits and the option to opt out of overdraft completely but this may not be the case for all debit cards. Under the Electronic Funds Transfer Act, if your card is Compromised –– you have 60 days to report a fraudulent charge with no liability. Remember, though, that 60 days begins on the first day of the statement period in which the charge occurs, so you need to monitor your statements carefully.
Which is the better choice?
A credit card almost certainly offers more fraud protections, but not everyone can get a credit card. If you don’t have a credit card, you can still limit your potential loss by taking a few simple steps. One option is to limit the amount of money in the account you’re spending from, so no more money is at risk than you intend to spend immediately. Another option is to use a prepaid card onto which you’ve loaded only a set amount of money.
You should know, using a debit card works slightly differently for online purchases than for purchases in stores. Unlike purchases at a checkout counter, you will have the option to provide your personal identification number, or PIN. Online purchases are processed as a “credit” transaction, meaning funds may be pending on your account until hard posting about 2 – 4 days later.
City Bank, like most credit card issuers, offers rewards on their cards2. This could be in the form of cash back, travel rewards or some other benefit. Why not cash in on your spending, especially if you plan on paying it all off at the end of the month.
Another point to consider is where you’re shopping. If you’re shopping from a reputable, well-known online retailer, the debit vs. credit card debate is probably a moot point, as the company likely will work to rectify any problems without involving your card issuer. But if you’re buying from a company you aren’t familiar with, a credit card might be the way to go.
So, which is the better choice? In short, it depends on the situation and, especially, on you. If you’re more likely to overspend while shopping, it might be a better idea to use a debit card to limit yourself. If you’re more concerned about potential fraud, a credit card might be the better call. Don’t hesitate to contact your local City Bank representative for more info on our Credit and Debit Card offerings.
Either way, happy shopping!
Here are some tips to make the most out of your online shopping experience:
· Check the URL. Sites that begin with https:// and show a locked padlock icon in the URL space have added security measures to protect your card information. Sites that begin with http:// do not. Remember, no “s” = not secure.
· Use a secure Wi-Fi connection. Not sure if it’s secure? Wait until you’re at home or work to do your online shopping.
· Use common sense. If a website seems unprofessional or if something just feels wrong, it probably is.
· Be vigilant. You can’t fix fraudulent charges if you aren’t looking for them, so check your account regularly.
· Pay off your balance. If you pay your credit card balance every month, in full, you will never have to pay interest. This ultimately could save you lots of money.
1Always a discretionary service: Overdraft Protection does not constitute an actual or implied agreement between you and City Bank. 2Subject to Credit Approval. Ask for details.