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Credit Card Tips for College Students

For many college students, a credit card represents an opportunity to enjoy more spending flexibility. A credit card can also be a tool for building your credit as you lay the foundation of your financial future. Responsible credit card management can go a long way toward demonstrating your commitment to good financial habits.

How do you manage your card responsibly? These tips may help.

Understand How Credit Works

Let’s start with the basics. Make sure you understand how credit works and why it’s important to build good credit. In short, building good credit means building a history of responsible money management. It helps you establish a strong credit score, which serves as a quick reference tool for lenders and others who want to be assured that you are conscientious about managing your money before they engage in a financial relationship with you. This can impact everything from borrowing money for a car to student loans to renting an apartment.

Used wisely, a credit card can be helpful for building your credit. When you pay your monthly credit card bills on time and you don’t overspend, those healthy financial habits will be reflected in your credit history and credit score.

Understand How Credit Cards Work

A credit card can be used to make purchases (online and in person) and to pay bills. It works as a kind of short-term loan — you can buy now using the credit card company’s money, and pay them back later by paying your monthly credit card bill.

When a credit card company considers your application, they evaluate your credit history, credit score and income to determine whether you meet their criteria for creditworthiness. If they decide to issue you a card, then they set a credit limit, which is the amount of money available for you to charge against. While there is no “typical” credit card limit for a college student, student credit cards (cards designed specifically for college students with a limited credit history) tend to have lower limits than standard cards, often $1,000 or less.

Don’t Open Too Many Credit Cards

There are a couple of good reasons to stick with a single credit card at this point in your financial journey. First, it will give you the chance to get the hang of managing a credit card without having to juggle multiple balances and repayment dates. Second, it will protect your credit history from multiple “hard inquiries” — requests by card issuers to review your credit report — which can negatively impact your credit score.

Always Pay Your Monthly Bill on Time

The best way to manage your credit card is to pay your monthly bill in full and on time each and every month. If you occasionally find yourself in a position where you can’t pay off the full balance, make at least the minimum payment due by the due date. Be aware, though, that any unpaid balance will be subject to interest charges that will be added to the amount you owe. The Annual Percentage Rate (APR) specified on your credit card account statement is the percentage that will be applied to your balance to determine how much that extra charge will be.

If you don’t make at least the minimum payment by the due date, the card issuer can charge you late fees in addition to interest. Repeated missed payments can also result in a higher APR for your card, damage to your credit score and credit report, and even having your credit card account closed.

Consider setting up alerts or automatic payments from your bank account so you never miss a payment.

Only Charge What You Can Pay Off

If you’re unable to pay your credit card bill in full each month and you carry a balance from month to month, interest charges can snowball. That’s why it’s important to charge only as much as you know you can comfortably pay off at the end of each month. Be sure to track your expenses just as you do with your debit card so there are no surprises when your bill comes.

Also keep in mind that using too much of your available credit can be harmful to your credit score. A common recommendation is to keep your credit utilization ratio — the amount of credit you’re currently using divided by your total credit limit — under 30%. For example, if you have a $1,000 credit limit, you should keep your credit card balance under $300 to continue building good credit.

Avoid Fees

In addition to potential late fees, some cards charge an annual fee, which is a fee imposed simply for carrying a particular card. Unless the card provides some specific benefit, having an card with an annual fee typically isn’t a good idea. A student card may be a good choice, since they typically have no annual fee.

Check Your Credit Score Regularly

Once you start using your credit card, be sure to check your credit score regularly. There are a number of free monitoring services available online, and you can request a free credit report from each of the three credit reporting bureaus — Experian, Equifax and TransUnion — once a year. If you ever see an error or fraudulent activity on your credit report, alert the reporting bureaus to have it wiped from your history. Don’t let inaccurate information or illegitimate charges undo your hard work!

American Federal Bank offers many different Credit Cards including a Visa College Real Rewards Card and a Secured Card. Contact your local American Federal Banker to learn more, or apply now.

Teaching Kids About Money

Educating your children about finances at an early age is a great way to help them develop good saving habits and a healthy relationship with money. As a result, they’ll be better prepared to handle whatever financial situations that life may throw at them later.

Get Comfortable

Many parents are hesitant to discuss money with their children. They may feel they don’t have a strong understanding of financial concepts themselves or there may be some discomfort around their own financial situation. That’s okay. This is a great opportunity for parents to learn along with their children. In addition, educating children about money can help keep them from developing bad spending habits.

It’s Never Too Early

The earlier you start teaching your children about money, the better. Basically, you can start the conversation around money as soon as they can count, often in preschool or kindergarten. Even at an early age, they can understand some of the basic concepts like saving and spending.

Explain Needs vs. Wants

Understanding this difference is key because it introduces the idea of prioritizing spending. Housing, food, and clothing are needs. The latest headphones are a want. One way to help kids understand this difference is by looking at some of the items in your home and determining whether they are a “need” or a “want.”

Share the Benefits of Delayed Gratification

We live in an age where FOMO (fear of missing out) is a constant presence and instant gratification seems to be everyone’s default setting. Help your kids understand how taking the time to earn and save money to purchase a “want” can make the purchase more satisfying. Also, let them know that comparing their lives to their friends’ or what they see on social media is a bad idea because every family’s financial situation is unique.

Show Them that Money is Not Given, It’s Earned

Having your kids work for their money will help them understand money’s role in society: that it is given in exchange for work performed, not handed out for free. Your children can earn their money by performing chores around the house. While this payment is traditionally referred to as an “allowance,” many are now calling it a “commission” to better convey that the money was earned.

Give Them a Place to Keep Their Savings

For preschool and early elementary school-aged children, a piggy bank or clear jar works great. A clear jar will let them watch their money grow as they add to it. For older children, a savings account will introduce them to banks, statements, and more.

Help Them Set Their Own Budget

Have them write down items they’d like to buy, as well as their weekly earnings. That way, they can see how much of their earnings they’ll need to set aside, and for how long, before they can buy the items on their list.

Don’t Stop Now

Teaching kids about money in not a one-time proposition. It’s important to keep the conversation going and to regularly reinforce financial concepts as your children grow older and can understand more advanced concepts.

The Benefits of Certificates of Deposit (CDs)

Certificates of Deposit (CDs) are a popular choice among individuals seeking a low-risk investment option. CDs offer a secure way to grow savings over a fixed period, providing a guaranteed return on investment. Here are some key benefits of investing in CDs:

Safety and Security

CDs are considered one of the safest investment options as they are typically insured by the Federal Deposit Insurance Corporation (FDIC) up to the maximum allowable limit. This insurance ensures that even if the issuing bank faces financial difficulties, the investor’s principal amount is protected.

Predictable Returns

One of the main advantages of CDs is the predictability of returns. When you invest in a CD, you agree to a fixed interest rate for a specified term, which means you know exactly how much you will earn by the end of the term. This predictability makes it easier to plan for future financial goals.

Higher Earning than Regular Savings

Compared to traditional savings accounts, CDs generally offer higher interest rates. The fixed nature of the investment allows financial institutions to offer set rates as a reward for the investor’s commitment to leaving their money in the account for a set period.

Flexibility in Terms

CDs come in various term lengths, ranging from a few months to several years. This flexibility allows investors to choose a term that aligns with their financial goals and liquidity needs. Although longer-term CDs typically offer higher interest rates, that’s not always the case.

Low Maintenance

Investing in CDs requires minimal maintenance compared to other investment vehicles. Once the initial deposit is made, there is no need for active management or monitoring. This makes CDs an appealing option for individuals who prefer a hands-off approach to investing.

In conclusion, certificates of deposit offer a secure, predictable, and flexible investment option that can be an essential component of a well-rounded financial portfolio. Whether you are saving for a short-term goal or looking to preserve your wealth with minimal risk, CDs provide a dependable solution. Contact your American Federal Banker for more information.

Is a Money Market Savings Account Right for You?

Determining whether a money market savings account is right for you depends on your financial goals, risk tolerance, and other individual circumstances. Below are some factors to consider when deciding if a money market savings account is a suitable option for you.

Short-Term Savings Goals

If you have short-term savings goals, such as building an emergency fund, saving for a vacation, or accumulating a down payment for a major purchase, a money market savings account can be a good option. It offers liquidity and stability while providing a higher interest rate compared to a traditional savings account.

Risk Tolerance

Money market savings accounts are relatively low-risk investments compared to stocks or long-term bonds. If you prefer to minimize the risk of losing your principal investment and prioritize capital preservation, a money market savings account can align with your risk tolerance.

Need for Liquidity

Consider your need for access to funds. Money market savings accounts offer easy access to your money, allowing you to make withdrawals, online transfers, or in-person transactions. If access is important to you, a money market account might be a better option that investments that tie up your money for a specified amount of time.

Talk With Your American Federal Banker

Ultimately, whether a money market savings account is right for you depends on your individual financial situation and goals. Talk to your American Federal Banker for personalized advice based on your specific circumstances so you can make an informed decision about your savings.

How Do Interest Rates Work When Building a Home?

Building a home is a big commitment, and interest costs can play a major factor in deciding if and how much to build. We’re often asked about how exactly interest rates work when building a home.

Construction – A Two-step Process

Generally, home construction is a two-step loan process: you will have a construction loan for financing the construction costs and a permanent loan financing the home itself. Each loan will have its own interest rate.

During the construction phase, you will typically be responsible for interest-only payments calculated on the amount of the construction line advanced at that time. During the permanent phase, you will be paying principal and interest based on the full loan amount.

Your banker will provide you with information regarding which type of permanent financing (fixed-rate or adjustable-rate) makes the most sense for your situation.

Many borrowers want to lock in an interest rate on their permanent loan. In many instances this is possible as early as nine months prior to project completion. Your banker will spend time talking about long term rate lock options and what may make the most sense for you. Payments will vary depending on what you choose.

Your American Federal Banker will answer your questions to ensure that you know you’re making the best decisions for your situation.

Selecting a Contractor

When building a home, one of the first and most important decisions you will make is selecting your general contractor. The contractor is the person (or company) that will keep your project moving and work with you throughout the building process. The following are some questions to consider or actions to take when weighing your options:

Do they finance the construction, or do you have to? If they do, you may be able to have a lower down payment requirement with the bank. This is often referred to as a turn-key purchase.
If you are responsible for the construction financing, ask if there are discounts available for you carrying the interest expense during the building phase.
What are the down payment and/or earnest money requirements with the contractor?
How many years of experience do they have? Do they have referrals? Consider touring some of their previous builds.
Negotiate finish-on-time penalties. Many general contractors will guarantee a close-by or finish-by date. If they are not met, the contractor is responsible to pay the borrower a pre-determined amount.

We’re Here to Help!

If you’re interested in learning more about home construction loans, or any other mortgage products, contact your American Federal Banker.

American Federal Employees Earn ‘Sales Star’ Recognition

Eighteen American Federal Bankers and employees have earned ‘Sales Star’ recognition from American Federal Bank for outstanding sales and sales referral performance in 2023.

A “Sales Star” is the highest honor of recognition an employee can earn at American Federal. American Federal’s 2023 Sales Stars are:

Cindy Ackley – Moorhead
Adam Braunberger – Fargo Downtown
Paul Craigmile – Hallock
Daniel Erdman – Crookston
Brian Frisk – Crookston
Matt Heinzen – Fargo Home Office
Jason Jaeger – Fargo Downtown
Michael Jaeger – Crookston
Andrew Lerud – Fargo Downtown
Stephanie Overgaard – Crookston
Dan Paulson – Fosston
Ryan Paulson – Fosston
Alison Perez – Grand Forks
Erin Pollestad – Hallock
Spencer Rehovsky – Moorhead
Christopher Schenck – Fargo South
Patrick Stadum – Fargo Downtown
Jon Swenson – Hallock

In recognition of their achievement, American Federal “Sales Star” employees and their families were invited to attend a weekend Sales Star Retreat, training seminar and awards banquet in their honor at the Arrowwood Resort and Conference Center in Alexandria, MN January 26-28, 2024.

Employees Compete in Six Divisions

Throughout the calendar year, every employee at American Federal competes in one of six Divisions in the Sales Star Recognition Program. The winners for the respective divisions for 2023 were:

Ag/Business Banker – Adam Braunberger, Fargo
Private Banker – Alison Perez, Grand Forks
Personal Banker – Erin Pollestad, Hallock
Sales Manager – Dan Paulson, Fosston
Business Unit Referral – Michael Jaeger, Crookston
Home Office Referral – Matt Heinzen, Fargo

Congratulations to the Division winners and all Sales Stars!

The Role of a Reliable Banker when Buying a Home

Purchasing a home is one of the most significant financial decisions you’ll make in your lifetime. It’s a complex process that requires careful planning, precise financial management, and access to the right resources. One of the most crucial partners you’ll need in this journey is a reliable banker.

Expert Guidance on Financing Options

A reliable financial advisor like your American Federal Banker possesses a deep understanding of various mortgage products, interest rates, and financing options. They can help you navigate the complex landscape of home loans, explaining to you the pros and cons of each option. Whether you’re considering fixed-rate, adjustable-rate, or government-backed loans, a knowledgeable banker can guide you to the financing solution that best aligns with your financial goals.

Pre-Approval for Better Negotiation

Obtaining pre-approval for a mortgage is a critical step in the home buying process, and a reliable banker can assess your financial situation, including your credit score, income, and debt-to-income ratio, to determine how much you can afford. This pre-approval strengthens your position as a buyer, allows you to negotiate confidently, and demonstrates to sellers that you are a serious and financially capable buyer.

Personalized Financial Planning

At American Federal, we go beyond merely providing a mortgage. We’ll work with you to create a personalized financial plan that considers both your short-term and long-term goals. This might include discussing the impact of the mortgage on your overall financial health, advising you on down payment strategies, and helping you understand the costs associated with homeownership.

Problem Solving and Support

Sometimes, unexpected challenges can arise during the home buying process. Perhaps there are issues with the property appraisal, or your financial situation changes. Your American Federal Banker will be your advocate, helping you navigate these challenges and providing solutions to keep the purchase on track.

More than a Mortgage

Working with a reliable banker is not just about securing a mortgage – it’s about gaining a trusted partner who will guide you through the complexities of the home buying process, provide expert advice, and look out for your financial interests. As you embark on your home buying journey, count on your American Federal Banker to ensure that you make one of life’s most significant investments with confidence and peace of mind.

Making Informed Decisions as a First-Time Homebuyer

Buying your first home is a significant milestone in life, marking a transition from renting to homeownership. It’s an exciting journey, but it can also be overwhelming and filled with unfamiliar decisions to make. Making informed choices as a first-time homebuyer is crucial to ensure you find the right property while staying within your budget. Below are some key strategies to help you navigate the homebuying process effectively.

Define Your Budget

Before you start browsing listings or attending open houses, it’s essential to establish a clear budget. Consider your financial situation, including your income, savings, and outstanding debts. A general rule of thumb is that your monthly mortgage payment should not exceed 30% of your gross income. Create a realistic budget that includes not just the purchase price but also closing costs, maintenance, property taxes, and homeowners’ insurance. Your American Federal Banker can assist you with any budgeting questions you have.

Research Mortgage Options

Understanding your mortgage options is crucial. Consult with your American Federal Banker to explore various mortgage types, interest rates, and terms. Common mortgage options for first-time buyers include fixed-rate mortgages, adjustable-rate mortgages, and government-backed loans like FHA loans. Carefully compare the options to find the best fit for your financial situation.

Prioritize Your Needs and Wants

Make a list of your ‘must-have’ features and amenities in a home, as well as your ‘nice to have’ features. Prioritizing your needs will help you focus your search and make more informed decisions. Consider factors like location, number of bedrooms and bathrooms, yard size, and proximity to schools, work, and essential services.

Likewise, think beyond your immediate needs and consider your long-term goals. Are you planning to start a family? Do you expect your career to take you elsewhere? Understanding how a potential home aligns with your long-term plans will help you make a more informed decision.

Work with a Real Estate Agent

Engaging the services of a qualified real estate agent is highly beneficial, especially for first-time homebuyers. A knowledgeable agent can guide you through the process, help you find suitable properties, negotiate on your behalf, and provide valuable insights into the local real estate market.

Research the Neighborhood

Beyond the property itself, research the neighborhood thoroughly. Visit the area at different times of the day and week to assess traffic, noise levels, and overall ambiance. Investigate crime rates, school quality, public transportation options, and nearby amenities such as grocery stores, parks, and healthcare facilities.

Get a Home Inspection

Never skip a home inspection. A qualified inspector will assess the property’s condition, identifying any potential issues that may not be visible during a casual viewing. A thorough inspection can save you from unexpected repair costs and provide leverage for negotiating with the seller.

Understand the Closing Process

Familiarize yourself with the closing process, which includes signing the final paperwork, transferring ownership, and paying closing costs. Ensure you review all documents carefully and ask questions if anything is unclear. Your real estate agent and your American Federal Banker can guide you through this stage.

Don’t Rush

While it’s natural to feel eager to become a homeowner, avoid rushing into a purchase. Take your time to thoroughly assess each property, weigh your options, and seek advice from professionals. A well-informed decision is more likely to result in a home that brings you joy and financial security for years to come.

Count on Us!

As with any major financial decision, your American Federal Banker is here to help you with any questions you have about your situation. We’re here to help, and are just a call or click away!

Choosing the Right Contractor for Your Home Improvement Project

Undertaking a home improvement project is an exciting endeavor that can enhance your living space and increase your property value. However, choosing the right contractor to bring your vision to life is a critical decision that can make or break the success of your project. Thankfully, there are a few essential steps to help you select the best contractor for your home improvement needs.

Define Your Project Scope

Before you start searching for a contractor, it’s crucial to define the scope of your home improvement project. Determine the specific details of what you want to achieve, including design preferences, materials, and budget constraints. The more clarity you have about your project, the easier it will be to communicate your needs to potential contractors.

Ask for Recommendations

One of the most reliable ways to find a reputable contractor is to ask for recommendations from friends, family, and neighbors who have recently completed similar projects. Their firsthand experiences can provide valuable insights into the contractor’s work quality, communication, and professionalism.

Research and Check Credentials

Once you’ve gathered a list of potential contractors, conduct thorough research on each of them. Verify their credentials, such as licenses, insurance, and certifications. Check if they are a member of professional organizations like the National Association of Home Builders (NAHB) or the Better Business Bureau (BBB). A legitimate contractor should have no reservations about providing this information.

Review Portfolios and References

Examine the contractor’s portfolio of past projects. This will give you an idea of their style and the quality of their work. Additionally, ask for references from previous clients and contact them to inquire about their experiences.

Questions to ask may include:

Did the contractor meet deadlines and stay within budget?
Was the communication with the contractor effective?
Were there any issues during the project, and how were they resolved?

Request Multiple Bids

Obtain detailed bids from multiple contractors to compare prices, project timelines, and materials. Three bids is a good place to star. Be wary of significantly lower bids, as they may indicate cutting corners or using subpar materials. The best value may not always be the lowest price, but a combination of quality and affordability.

Conduct Interviews

Arrange face-to-face or virtual interviews with your top candidates. Use this opportunity to discuss your project in detail and ask questions about their experience, process, and approach to problem-solving. Pay attention to their communication skills and whether they actively listen to your needs and concerns.

Check for Permits and Compliance

Ensure that the contractor understands local building codes and obtains the necessary permits for your project. This knowledge reflects their professionalism and commitment to complying with legal requirements.

Review the Contract Carefully

Before signing any contract, thoroughly review its terms and conditions. The contract should outline project milestones, payment schedules, warranties, and dispute resolution procedures. Do not hesitate to seek legal advice if you encounter any confusing or unfair terms.

Trust Your Instincts

In the end, trust your gut feeling about the contractor you choose. A contractor who makes you feel comfortable, listens to your ideas, and communicates effectively is more likely to deliver a successful project.

Choosing the right contractor for your home improvement project is a significant decision that requires careful consideration. By following these steps and conducting thorough research, you can increase the likelihood of finding a reputable, skilled contractor who will turn your vision into reality. Remember that a well-chosen contractor not only ensures the success of your project, but also provides peace of mind throughout the construction process.

If you’re interested in starting a home improvement project, contact your American Federal Banker for more information, or being the application process today!

Tips for Building Your Financial Knowledge

Financial literacy is crucial when navigating life and planning for your future. Whatever you do or don’t already know, below are some tips for building up your financial knowledge.

Commit Time to Financial Literacy

It’s important to set aside time to focus on personal finance. Better yet, choose a day and time you can stick to, such as when you have downtime in your schedule. During a commute or other time spent waiting can also present opportunities to beef up your financial knowledge. Even just five or ten minutes can be enough to get started.

Committing time to learn about finance is sort of like creating a good new habit. A powerful way to do that is by habit stacking or connecting a new habit to an existing one. For example, if you drink a cup of coffee every morning before you go to work, habit stacking could involve adding a new activity, like reading financial news while you drink your coffee.

Be a Sponge for Financial Information

Read up on finance with books, articles, magazines, newsletters, and other written materials. Look for content that’s conversational. Finance can get complicated, but the language we use to discuss it doesn’t have to be. So, scout out materials with accessible, plain language.

Bite-size material can be more welcoming and less intimidating to dive into and tackle, so look for resources that will let you dip in and out at your convenience, like chaptered books, serialized articles, or otherwise encapsulated content.

Take a financial literacy quiz to see what you don’t know, so you know where to focus your attention.

Take a Class or a Workshop

Sign up for a financial course or workshop online or in person. There are tons of free and paid options out there that are specifically geared toward the fundamentals of personal finance. Remember, if you’re handling money, it’s never too early or too late to take a course or try out any of these tips for improving your financial literacy.

Join a Financial Literacy Group

There’s no shortage of social media groups, forums, and other groups dedicated to financial education and learning. That can give you a ready-made support group with access to tons of knowledge and resources. It can also help you stay accountable and motivated.

Talk to a Financial Professional

Meet with a financial professional to get one-on-one advice and answers tailored to your needs, concerns, and objectives. You don’t know what you don’t know, and life can get busy, stressful, and complicated, no matter how much you plan for the future.

Still, you don’t have to forge ahead in your financial life alone. Financial professionals, such as your American Federal banker, can offer essential support, education, and guidance, especially in uncertain times or when you’re at a significant financial crossroads. They can also help you improve your financial literacy. Call us today to discuss any of your questions or needs.