Banking and finances can sometimes be thought of as confusing and difficult to learn. Clearing up these five common misconceptions could not only help you with your finances, but could be crucial for a healthy financial future.
“Credit cards are dangerous”
False. Credit cards are very helpful and can only be dangerous if they’re not used correctly. Credit cards are like taking out a mini-loan every time they are used. If they are used correctly and the loans are paid on time, it can be very good and raise your credit score. The dangerous part comes in if credit cards are not paid off on time, and interest rates are added to the balance.
“Budgeting is hard”
False. It does not have to be! Budgeting is as hard as you makes it. Budgeting money is just like budgeting time, which is something people do everyday. Comparing how much time there is in a day and how much needs to be done in that time. Write a list of things that need to be paid for. For example, rent, groceries, electricity, and so on. Then, allocate the right amount of money for each. If it is an estimation, round up to avoid not having enough. The hardest part about budgeting can be sticking with it, but you can do it!
“A bank and a credit union are the same thing”
False. They are both financial institutions and offer the same products and services, but there is one major difference. That difference is that credit unions are not-for-profit. The earnings they make go back to the members by raising dividends, having low fees, and by giving back to the community. Banks are a business, making them for-profit and don’t give customers that extra money back.
“Credit scores don’t matter”
Yes they do, and they are extremely important. Credit scores are a number attached to your finances, describing how well you pay people back. Financial institutions look at your credit score to decide if you’re qualified for a loan and with what rate. Renters for apartments look at credit score of potential residents to see if they can handle the responsibility of paying their rent and paying it on time.
“Identity theft doesn't exist”
YES it does, and it is more prevalent than ever. Social media has evolved identity theft, making it a lot more common and advanced. It can happen when people put their credit card information in untrustworthy sites, when online shopping, or accidentally post information without realizing. Always make sure not to post a home address, social security number, or passwords online. Be conscious about accidentally posting answers to any security questions online. For example, if your security question is “What was the name of your first pet,” make sure the answer isn’t clearly written online as a picture caption or “status.”