Personal FInance Archives - Common Trust FCU

Digital Vs. Paper: Understanding Online Payment Services

Ever get stuck behind a customer paying by check at the grocery store? Or get forced to make change when someone owes you their half of the dinner bill? It’s getting less frequent by the day as the digital age expands and money becomes more about 1s and 0s than paper currency. 

As these online methods of payment spring up and gain popularity among the tech-savvy younger generations, older generations are increasingly wary of their reliability, deciding instead to cling to more traditional payment methods. It’s time to debunk the myths of online payments. The reality is that, since their induction into our lexicon in the late 2000s with e-tail and mobile banking, online transactions can be safer, more reliable, and less of a hassle than whipping out a wallet full of cash. 

Let’s take a look at the most popular online payment services:

  • PayPal — Since its 2002 IPO, PayPal has stood strong as the de facto method of online payment. It’s linked directly to your debit card or bank account, is as simple as a normal banking transfer, uses email addresses for payments, and is free for personal use.
  • Venmo — When you have to make a personal transaction — pay back a friend or send money to one of your kids — this free service is simple to use. There is a 3% fee if you use a credit card, so avoid that, if possible.
  • Payza — Link your credit card and bank accounts easily to securely transfer and receive money from personal acquaintances. You can even exchange currencies within the app for a fee. 
  • Dwolla — This app has stringent account verification practices that could include photo IDs — which might make you feel a bit safer. It’s free for transactions under $10 and only $0.25 for anything above that. 

With each option, your bank, debit, and (in some cases) credit cards are linked to your account, which is typically an email address. Sending and receiving money is as simple as accessing the app, typing in an email address and amount, and hitting send. Aside from the occasional fee, depending on the service and transfer amount, the only catch is that the person you’re sending money to or receiving money from has to have their account on the same service. Meaning, you can’t send someone money on Vemno using a PayPal account. 

Okay, But Are They Safe? 

The simple answer is YES, they are safe to use — the more complicated answer is that, with all methods of payment, there are risks. You could always drop your wallet full of cash. Someone could steal your purse with all your credit cards in it. You could misplace your checkbook, giving any signature forger open account access.

However, there are digital methods in place for each of the above sites to help protect your identity. Most sites/apps use two-factor authentication — which means you have to provide a password and a one-time code sent to your phone or email — or fingerprint scans to ensure you have full access to your account. 

In some cases, online transactions are even more secure than physical ones based on the digital trail you’re leaving as evidence that you paid or were paid. This gives you peace of mind, which is what we are all really looking for with any type of transaction. 

If you are still uneasy with the idea of online banking, it’s simple to allay your fears with online account tools offered at Common Trust Federal Credit Union. We offer mobile and online banking, remote check deposits, even online security best practices to keep your accounts secure. Questions? Contact us today! 

Retirement for Beginners: 5 FAQs about the 401(k)

Getting your first job can be both exciting and scary, especially when dealing with the onboarding paperwork associated with those big financial decisions. This is a watershed moment that most young workers will recognize: According a survey from Fisher Investments, 80% of millennials want to work for companies that offers a 401(k) — yet, only 25% of those working at companies with >200 employees actually enroll in their retirement savings program. 

Why? Though the process seems fairly straightforward, it can get complicated quickly if you don’t understand how the various contributions, penalties, and investments fit together. Let’s take a deeper dive into the 5 most frequently asked questions when faced with your first 401(k) plan and give you the answers you need to start planning for your future today.

1. What is a 401(k)?

In its most basic definition, a 401(k) is a type of Individual retirement account (IRA) into which you contribute money each month. This money can be invested on your behalf into various funds (more on that later) and is left to accrue tax-free until you retire — at which point you will hopefully have a nice nest egg ready to fund the rest of your life. 

2. What is my company’s match?

When you’re choosing the amount you want to contribute to your retirement account, it’s critical to know if your company offers a match. Let’s say you make $50,000 per year. If your company offers a match of 5%, they’re willing to contribute up to $2,500 per year into your 401(k) — but only if you contribute that much, too. If you choose to only contribute 2.5% (or $1,250), you’re giving up an extra $1,250 your company was willing to give you for free. 

3. What is vesting? 

Some companies offer generous matches that are saddled with “vesting” timelines. This means that they could offer a 10% match, but in graded increments based on how long you’ve been with the company. This can affect the amount shown in your 401(k) balance statement; if you’re not fully vested (meaning, if you haven’t been at the company long enough to earn the full amount of their contribution), your account may show more than you actually have.

4. Can the account be moved?

Yes — and this is a critical step in changing jobs. When you end your employment with Company A, you need to take the money from your 401(k) account with them and either move it over to your next employer’s 401(k) account or cash it out with tax penalties. You can also set up a personal IRA (like with Common Trust Federal Credit Union) to house your retirement funds so you don’t have to move them after every job.

5. How should I invest my funds?

A large — and risky — part of the 401(k) account is choosing to invest your saved retirement money. Here are the most common options:

  • Stock funds: Choose the stocks in which you can invest a percentage of your 401(k).
  • Target-date funds: Simply pick your target date for retirement, then pick the matching fund. There’s little maintenance, as the fund adjusts your asset allocation over time.
  • Blended-fund investments: Choose a set ratio of stocks and bonds appropriate for your situation and risk assessment.
  • Bonds/managed income: These can safeguard your money, but it won’t grow much.
  • Money market funds: There’s zero growth, as these funds barely keep up with inflation. 

The choice is yours and can be adjusted over the life of your retirement account, based on your situation.

When you transition from one life stage to another — be it graduation or retirement — it’s a scary move no matter your age. You face new financial decisions, but you just aren’t sure how to make the right choices for your future now that you’re the one in charge of it. What you need is a crash course in financial education designed to help you choose the path using sound information and advice. 

Common Trust Federal Credit Union understands your concerns and offers our Financial Education Center to help you best understand and prepare for new life milestones. Get started today!

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