2014 Mitchell-Beall-Rosen Scholarship Contest Concludes

2014 Scholarship

On Wednesday, May 21, 2014, the Credit Union officially concluded its 2014 Mitchell-Beall-Rosen Scholarship Contest by hosting the annual Scholarship Luncheon to recognize and honor the year’s Scholarship winners. The Scholarship, which is based on the quality of a 1,000-word essay and an in-person interview, is now in its 31st year and has awarded over $160,000 to more than 150 local students. Attendees received scholarships in amounts ranging from $1,000 up to the grand prize of $7,000.

Congratulations and best wishes go to these promising young members. For more information on the Mitchell-Beall-Rosen Scholarship Contest, visit nasafcu.com/scholarship.

Ransomware and Mobile Devices

One moment, you’re surfing the Internet. A minute later, a pop-up shows your files have been taken hostage and that you’re required to pay a $300 ransom to have them released back to you. You stare at the screen in disbelief. How is this possible, especially considering you are on your mobile device?

Ransomware – malware that accesses your computer system and blocks access to your files until a ransom is paid to restore access all while stealing your payment information – has been becoming more prevalent among PC users. While these attacks typically focused solely on PCs, they are now adapting to include mobile devices. That’s right, the very same mobile devices you use to access your credit union accounts for checking balances, transfer funds and make payments.

An example of a Russian-based mobile device ransomware is called “Svpeng.” It focuses on tactics for infecting mobile phones and mobile banking applications. It infects the device with a phishing window when the application is opened. This overlay attack is used to steal online banking information as the malware pretends to be the application’s login screen. The user enters login and password information, which is then stolen by the hackers. Once they have access to the account, they can control the account. Svpeng also phishes through Google Play if that is on the mobile device.

This tactic also involves SMS messages being sent to two Russian banks to determine if the phone number of the device is connected to any payment cards. If a card is indeed connected to a number, the hackers use commands through the device to transfer the victim’s money into their own accounts. While Svpeng has currently been seen only in Russia, it is expected to expand into other countries; one of the features of the ransomware checks the mobile device’s language settings to determine the appropriate language to use for the attack.

As time goes on, other PC-based ransomware programs may also be adapted for mobile devices or more ransomware programs that are specifically designed for mobile devices may be created. Hackers are always looking for ways to evolve their tactics in hopes of stealing more information and making immediate profits. Svpeng, for example, had 50 modifications to its malware within a three-month period.

How does this type of malware get onto a PC or a mobile device? It could be through a “drive-by download” where malicious software is downloaded without the user even knowing about it. This happens as the user surfs the Internet without a care, yet comes across a compromised Web page or clicks to a website through an HTML-based email. It could have been downloaded through a phishing email, which appears to be from a credit union, yet is a fake email linking to a compromised Web page. The ransomware could also come through an email attachment that is malicious.

After the infection occurs on the mobile device or PC, the overlay or ransomware tactics are used as was described with Svpeng. That way the hackers can either directly steal the login and password information when the credit union account is accessed, or the user is blackmailed by a direct ransomware attack to send money to unlock the mobile device.

Many of the ways ransomware can be prevented from infecting a PC are the same for preventing on a mobile device. Make sure data on a mobile device is regularly backed up. This will help with recovering information if the device is hijacked. Make sure an antivirus program is running on the mobile device. Follow safe Web browsing habits. Block suspicious emails.

Don’t download data or apps from questionable sources. Don’t “jailbreak” a device where built-in controls and security features are overridden; this removes an additional layer of protection against ransomware attacks.

If you think your mobile device has become a victim of ransomware, you can try to remove it by running a virus scan through mobile antivirus software. Don’t pay any ransom because it won’t guarantee the release of your data and you are giving additional payment information to the hackers. If none of these work, talk with your mobile device or cellular provider and/or their tech support. Of course, notify your credit union to monitor your accounts for any potentially fraudulent activity.

10 Myths About Credit Unions

How much do you know about credit unions? Test yourself on these 10 myths-how many did you believe until today?

Myth #1: You must meet strict eligibility requirements.

Fact: While credit unions do require that members meet certain requirements to satisfy a common bond, many of these are broad and few of them truly limit membership.

Myth #2: Getting to the ATM is difficult because my branch isn’t nearby.

Fact: With 5,000 shared branch locations and 30,000 free ATMs available through shared networks, availability is not an issue.

Myth #3: Changing my banking from a traditional bank to a credit union will be a hassle.

Fact: Credit unions offer the same services as banks, including automatic bill payments and direct deposit. Most services will transition easily and go uninterrupted.

Myth #4: With all the fancy advertising, banks must have more money than credit unions.

Fact: While this may be true, it’s because credit unions are not-for-profit organizations. Rather than spend money on advertising and marketing, credit unions rely on the community for marketing. The money saved is rolled back into services for members or distributed back to members as dividends.

Myth #5: Credit unions don’t offer reward programs.

Fact: Many credit unions do offer reward programs on credit and debit cards. For those that don’t, take a look at the fees that are associated with the various accounts. At a credit union, you’ll save on fees. Do your bank rewards outweigh the fees you’re paying on each account?

Myth #6: Credit unions aren’t very tech-savvy.

Fact: Credit unions don’t promote mobile banking and remote deposit options as aggressively as banks, but that doesn’t mean they don’t offer them. According to a study by CFI Group, bank customers rated their satisfaction at 86 out of 100 in online and mobile banking versus 90 out of 100 among credit union members.

Myth #7: Credit unions are just like banks.

Fact: Credit unions are not just like banks. Members own a piece of the organization and own a vote in determining how the credit union is managed. Credit unions also return all earnings back to members with their low fees and great dividend rates.

Myth #8: Credit unions have an unfair advantage over banks because they don’t pay taxes.

Fact: Actually, credit unions DO pay taxes. As a not-for-profit, member-owned financial cooperative, there are some taxes that credit unions don’t pay. Those “unfair advantages,” of course, are passed on to members.

Myth #9: Credit unions are not regulated.

Fact: Credit unions are held to the same laws and regulations as banks. In fact, credit unions face more restrictions on the investments and loans they make.

Myth #10: Credit unions are good places to save money, but that’s about it.

Fact: Credit unions offer consumer loans, debit and credit card services, online banking and bill pay, checking accounts, retirement investments, mortgages, car loans, and more. They are a great place to take care of all your banking needs.

Six Questions Your Auto Dealer Hopes You Can’t Answer

Navigating automobile financing can be one of the biggest financial headaches you’ll encounter. But, unless you want to walk everywhere, it’s something you’ll have to deal with. The biggest hurdle is figuring out the angles and understanding the entities that stand to profit from the transaction. Let’s go through some of the more challenging parts of automotive financing by addressing some of the questions about automobile financing your dealer hopes you won’t ask.

1) How do dealerships secure financing?

Car dealers usually have a department that is responsible for setting up financing and insurance (commonly referred to as “F&I”). These people take the estimated price of the car, the actual value of the car, and your credit history to a number of different credit providers. These include major national lenders, auto manufacturer financial departments, and depending on the dealership, some local lending institutions. These vendors each quote an interest rate and other fees.

Car dealers usually have longstanding business relationships with their lenders, which often include incentives for the dealer as a “reward” for financing a loan through that lender. Because the lenders are competing for the dealer’s business, not necessarily for yours, those incentives are for dealers and not consumers. While the dealer knows that lower interest rates make you more likely to buy a car, in this transaction, you’re not the customer. You’re the product. The dealer is trying to sell your business to a lending organization and usually makes a profit on the transaction.

2) When should I tell the dealership I already have financing?

Let’s be clear: Financing is profitable for dealerships in many ways. If they know they can’t turn a profit from financing, they’re more likely to push harder to find profit elsewhere. You’re almost always better off keeping the auto loan for the last part of your transaction with the dealership, particularly if you plan on securing outside financing. This doesn’t mean, though, that you don’t want to think about financing until that point in time. Discuss your plans with a representative at the credit union; including the type of vehicle you are planning to purchase. Figure out what kind of rates they can offer. By doing your research ahead of time and knowing what financing options are available to you, you can let the dealer think there’s still money to be made in the financing, which may strengthen your negotiating position on other parts of the transaction, like the price of the car or the value of the trade-in.

3) How do dealerships make money offering 0% financing?

If you’re shopping for a car because you’ve seen an advertisement for 0% financing, you’re not alone. Campaigns, like Toyota’s “Toyotathon,” offer manufacturer’s deals like 0% financing for 60 months and are incredibly popular for car buyers and dealers alike. If it were honestly a losing proposition for the manufacturer, they wouldn’t keep doing it. This might invite you to ask how they could possibly make money on the financing. The answer is two-fold: volume and selectivity.

The volume part of the money-making strategy is simple. 0% financing gets people on the lot and encourages them to think about buying a specific brand of car. The manufacturer and the dealer both make money on each car sold, so the 0% financing trades some profit per car in the hopes that they’ll make up for it in number of cars sold.

Selectivity is the other side of volume. Not everyone who comes to a 0% financing event will qualify for that rate. Because most people who get to the point of discussing financing have decided to purchase a car, they’ll settle for a non-zero rate when it’s presented to them. Between these two strategies, advertising 0% financing does pretty well for a car dealer.

4) Does my salesperson benefit from financing my car purchase?

This really depends on the dealership. Most of the time, your salesperson only benefits from the price of the car, the warranty, and some high-markup items, like undercarriage treatment, upgraded tires, and other products. The financing department – the people who are responsible for getting quotes and delivering them to the salesperson – is likely to be the folks who receive any kind of commission on the financing. In these instances, it’s also very likely that the salesperson with whom you’re dealing has little to no control over your financing. He or she might be able to go back to the financing department and ask them to attempt to negotiate a better rate, but this negotiation may not have much success. In any case, someone at the dealership profits from getting you a loan.

5) What is GAP insurance, and is it right for me?

“GAP” or guaranteed asset protection insurance is automobile insurance that covers the difference between the total amount of the loan and the value of the car. It provides protection against the worst-case scenario, that you total a car (or the vehicle is stolen) and you owe more than it is worth. Your comprehensive insurance coverage will only pay out the value of the car, leaving you on the hook for the remaining interest and finance charges. A dealer may require you to purchase GAP insurance as a condition of financing your purchase. The cost of the insurance is almost always paid up front as part of the financing charges.

GAP insurance is designed for long-term, high-interest, or low down-payment financing. If you are buying a car without putting a lot of money down, or if your credit history is not stellar, you should consider getting GAP insurance. But, like any other purchase, you should shop around. Because most financing arrangements require you to purchase GAP insurance, dealerships maintain institutional arrangements with insurance agencies, expecting you to purchase it without much thought. It’s one last effort to make money off your purchase, and they rely on you to not notice. You may be able to find better rates on GAP insurance from a broker or from another lending institution.

6) What steps can I take to avoid being railroaded by last-minute financing changes?

Financing is among the easiest places for dealers to make money, because it’s almost always the last stop in the car-buying process, and they expect you to be both committed to purchasing a car and exhausted from making a series of decisions. High-pressure salespeople use this fact to their advantage. When it comes time to talk financing, frequently, the license plates are off your old car, and you’re sitting down with a sales manager. While it may seem counter-intuitive, this is the best time to walk away and get a second opinion on financing. If you have not already sought pre-approval from them, see if your credit union can offer you a better rate, lower fees, or a more flexible term. Ask them to commit as much as possible to a price on an offer sheet. Then, tell them you’d like to take some time to think about it. If you come back with a cashier’s check in hand, the sales manager may hem and haw a bit. But, at the end of the day, they’d rather make the sale than make a little extra on financing.

This is an especially important step if your history with credit is complicated. A giant lending corporation won’t see the steps you’ve taken to solidify your financial position. They don’t have the same relationship with you that your credit union does. They see you as a risk number and an interest rate they can justify, not as a member of a community institution. Always give your credit union the first chance to beat the dealer’s offer – your credit union works for you, not for a commission.

Ready to finance your next car? Still want to learn more?

If you’d like to discuss your auto financing options with a Auto Loan Specialist, call 301-249-1800, Ext 222.

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Best Ways To Save For A Home

Except for Veterans Administration loans, it still generally takes some cash up front to get into a home. How much cash you’ll be required to have up front depends on the type of mortgage (whether FHA or conventional) and your personal financial situation. The better your credit, though, the lower the down payment the lender will typically expect.

How much will you need to save? If you are applying for an FHA loan and your FICO score is between 500 and 579, plan on a 10 percent down payment or more. If your score is 580 or better, you may be able to qualify for a 3.5 percent down mortgage.

Conventional mortgages tend to have somewhat higher down-payment requirements. You begin to become competitive for a 5 percent down mortgage when you have a FICO score of around 660, though lenders vary widely in practice. However, to save on private mortgage insurance costs (PMI), you may want to go with a VA loan, if you qualify, or save up 20 percent.

So what’s the best way to go about saving that money? Here are the factors to keep in mind:

Safety. Unless you are planning to wait years to buy your home, you don’t want to take a lot of risk with this money. Hopefully, you will have your down payment saved up within a year or two. It doesn’t make sense to risk a large market loss and throw your dream of home ownership off schedule.

Liquidity. You don’t want to lock this money up for years. You want to be able to access your money quickly and cheaply.

Returns. You want to get a reasonable return, or yield, on your money. But don’t sacrifice safety for yield if it means risking your goal of home ownership.

A Guarantee. Investments carry risk. But some financial vehicles come with an in-writing guarantee. Examples include balances in checking and savings accounts and share savings certificates at credit unions, which come with a guarantee of up to $250,000 in the event the credit union becomes insolvent. Banks have a typical arrangement via the Federal Deposit Insurance Corporation.

Options

So where should you put your money? Here are some common options that have stood the test of time – along with the advantages and disadvantages of each.

Cash. You can stuff cash in a mattress or coffee can. This is convenient, but not very secure. Your money is subject to the hazards of theft, flood, fire or loss. It also generates no return whatsoever.

Checking or Savings Accounts. These generally produce a small return, but at least it’s something. They are, however, very convenient, if you are disciplined about not spending the money that’s earmarked for your down payment. If your savings is very small, it may make sense to keep it here instead of paying fees to maintain a low balance account. These are guaranteed against bank failures up to $250,000 per account holder, either from FDIC (for banks) or the National Credit Union Share Insurance Fund, or NCUSIF. Because credit unions are mutually-owned by depositors just like you, you can frequently get a better deal in the long run by using a credit union.

Certificates of Deposit (AKA “Share Savings Certificates” at Credit Unions). These typically pay a higher yield than checking or savings accounts, and also qualify for federal insurance coverage. However, they do require you to commit your money for a specific period of time. The penalty for early withdrawals is usually the equivalent of six months of interest.

Money markets. This is a type of mutual fund that’s made up of low-risk, short-term bonds and commercial paper designed to maintain a stable per-share price of $1 per day. By and large, they have been able to do so, historically, though there are no guarantees. They may offer higher yields than guaranteed accounts, and do not require a time commitment. However, there is a possibility that your money market will lose money. Some financial institutions do offer insured money markets.

Other Options

Permanent life insurance. If you own a permanent life insurance policy, such as a whole life policy, it accumulates cash value over time. Whole life and well-funded universal-life insurance policies can be effective tools for savers – especially since whole life insurance cash value receives a guaranteed crediting rating and is guaranteed never to decline in value as long as you pay premiums as scheduled.

Individual Retirement Arrangements. You can withdraw up to $10,000 from your IRA to put a down payment on a home with no penalty. For traditional IRAs, you will need to pay income taxes on any such withdrawals.

Thrift Savings Program. If you are a federal employee or member of the United States military, the Thrift Savings Program, or TSP, allows you to borrow money to make your down payment on a home on advantageous terms. For more information, visit www.tsp.gov.

401(k) Loans. Some employers allow you to borrow from your 401(k). Typically, you will need to repay the loan within five years or face taxes and penalties on any remaining balance. However, if you leave your employer, you will have to repay the loan immediately or face taxes and penalties on what you’ve withdrawn. This makes using 401(k) loans tricky for longer terms – especially where employment prospects are not certain.

Whatever vehicles you choose to utilize in accumulating your savings, your credit union is ready to assist. Come in and speak with one of our lending or financial services professionals for a no-obligation consultation, or simply some advice on how to get started. We want to be part of your home-ownership dream.

Ready to finance your next home? Still want to learn more?

If you’d like to discuss your home financing options with a Mortgage Loan Specialist, call 301-249-1800, Ext 207, or fill out this contact form.

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Financial Advice for Graduates

By definition, graduation is a state of transition and students no longer are students in the typical sense. It’s easy to make mistakes during this transition, and they can create serious problems later in life. Here are some of the common questions students face while in this transition and how to deal with them.

I’ve just graduated. What should my first financial priority be?

There are a lot of options for those first few paychecks. Some experts will tell you to invest in a retirement fund or to focus on paying your debts. You may have different ideas, too, like saving for a car, a wedding, or a house.

The number one cause of financial struggle is sudden and unexpected expenses. The easiest way to avoid these problems is to build an emergency fund. If you have a sudden windfall from graduation presents or tax refunds, use it to start a short-term savings account. This fund should be in an interest-bearing account such as a money-market or deposit account.

Making these investments should be your first priority. Make minimum payments on your other debts and keep saving until you have at least one month’s living expenses. This savings is how you avoid getting into more debt. Avoiding new debt is the biggest step toward getting out from under old debt and moving toward financial security.

Is more education worthwhile?

There’s a growing public controversy about whether college or graduate school is worthwhile. The question is much more complicated and depends upon the kind of education and its cost. Statistics about lifetime earnings aren’t reliable. They tend to survey only people who are employed and rely upon self-reported incomes. Instead, do research about the outlook in your field and the education most people have in that field.

Making this decision should be about the costs versus the expected rewards. Opportunities like community college and trade school have low costs and significant likely rewards. Other opportunities need more careful scrutiny. In any event, don’t view these opportunities as a way to escape the job market. Getting a job, even volunteer work or an internship, will help build a resume and get you closer to your financial destination.

When thinking about the costs and benefits, you need to think about more than the financial cost. There’s the money you will pay for tuition and living expenses, which you will likely have to finance with debt. There’s also the opportunity cost. Even working a low-wage job will earn you some money, which is more than making nothing while attending school.

Should I focus on eliminating debt or saving for retirement?

The answer to this question depends upon what your short-term goals are and what kind of debts you have. If you’re planning to buy a house or car, or start a small business, you need to lower your debt use percentage. This will get you a better credit score and ensure that you can get cheaper access to credit for these activities. If you plan to go to work and don’t mind putting off home-buying, then the paying off debt and investing are equal. This being the case, you need to think about the kind of debts you hold.

For subsidized student loans, the interest rates are no higher than 4%. You can likely earn a higher rate of return than that with an IRA or other long-term investment. For private loans, the interest rate will vary based upon when you took out the loan and the kind of loan. These may be closer to an 8% interest rate, which would be close to the return on an IRA. If you have credit card debt, the interest rate is in the 20% range. Paying down this debt is far more important to building long-term financial security.

Remember, in making this decision, that retirement savings is more about time in the market than principle. Starting your investment early is the best thing you can do to provide for your financial security. You may need to strike a balance between paying for your past and saving for your future.

What’s the biggest mistake to avoid?

The biggest danger facing new graduates is “lifestyle inflation.” Every product that’s advertised becomes the solution to all life’s troubles. A 60′ television would make your evenings more enjoyable, which is how you justify spending $1,000 on it. It does provide a measure of happiness for a few weeks, but you get used to it in a short period of time. Then, a new reclining couch or a sports car becomes the answer. Spending experts call this the “hedonistic treadmill.” It most often happens right after getting a new job that brings a bigger paycheck.

The best way to avoid it is to make a budget and include some room for luxury expenses. You can spend it every month on dinners out, concerts, or other items. You can also save it in a short-term savings instrument for a bigger splurge. Building space into your budget for this kind of spending can help keep you from feeling “entitled” to expensive luxuries and overspending.