Rhinebeck Bank Blog
February 21, 2017
The Downfall of the Check
A consumer need for convenience, increased regulation, and numerous advances in technology have all contributed to the drastic changes in check handling by the banking industry since 9/11. Prior to these changes, the only way to clear checks taken as deposits at bank branches were to physically transport them by plane, armored car or truck from the bank of deposit to the nearest Federal Reserve Branch. The checks were then sorted, and transported to the bank they were drawn on to post. The total check clearing process could take at least five business days! Writing checks is quickly becoming obsolete: almost all non-cash transactions are now done electronically through ACH, debit, and credit card transactions. In fact, in 2015, only 12% of non-cash transactions were made by check – this is a 34% decrease in check payments since 2003!
So what exactly has led to the demise of the paper check?
Let’s start with how you get paid by your employer. Gone are the days when you had to physically bring a paycheck to the bank to deposit it. Most people today get their paychecks via an ACH transaction called Direct Deposit; even Social Security and pension companies distribute monthly funds this way. ACH stands for Automated Clearing House, an electronic network enabling funds transfers between financial institutions.
And when was the last time you actually wrote a check to pay a bill or make a purchase? If you have physically written a check and mailed it recently, did you get a copy of it in your monthly statement or did it show up as an ACH debit with the check number referenced in your transaction history? These processes are a part of a federal regulation called Check 21. In October, 2004 the Check Clearing for the 21st Century Act (Check 21) was signed into Federal law. Check 21 enables banks to convert checks into electronic copies (substitute checks) for faster clearing time – eliminating the need for the physical transport of checks between banks and reducing clearing time by several business days in most cases. Not only is ACH used for direct deposit and check conversion, it is also the process that allows you to make payments for your car loan, mortgage, credit card, insurance or utility bill by phone, through your computer, or with an automatic transfer. Financial services such as Bill Payment and External Transfer continue to evolve and grow using ACH transactions, allowing you to pay your bills and other people electronically.
Although it’s involved in the processing of many transactions, ACH only accounts for about 20% of the overall non-cash transactions occurring every day. The overwhelming majority of non-cash transactions today are done with debit cards. In fact, overall debit cards usage has increased proportionately from 2003 to 2015 as check writing decreased: In 2003, only 19% of transactions were made by a debit card and by 2015 usage had increased to 48%! Debit cards have quickly replaced checks because of ease of use, convenience and worldwide acceptance. Unlike writing a check, using a debit card allows the funds to be deducted from your account immediately at the time of transaction, making it less likely to overdraw your account. Your transaction may not be approved if there aren’t sufficient funds in your account to cover it.
Innovations in technology through services such as Apple Pay, Google Pay and other wallet-type applications have made it easy for consumers to use their cards for every day transactions. Debit cards, like their credit card counterparts, are also backed by the card issuer (VISA or MasterCard), limiting your liability and increasing protection against fraudulent or unauthorized purchases. The newest EMV Chip cards have additional technology to counter the recent rise in counterfeit card activity as well.
As changes in technology continue to take place, it will be interesting to see if the trend of declining check usage continues and how other innovations may step in to replace what was once the only non-cash method of payment.
AVP, Customer Solutions Manager
February 14, 2017
EMV CHIP Cards, Why?
Rhinebeck Bank recently issued new MasterCard® Debit cards with new “Chip” technology. These cards are also referred to as EMV Cards, for the original developers Europay, MasterCard® & Visa®.
EMV began to be used extensively in Europe in the early 1990s. In 2011 the leading payment networks in the U. S. announced plans to transition to EMV technology, for both Debit and Credit Cards, by October 1, 2015. On that date liability for fraudulent transactions shifted to any entity that had not implemented the new EMV technology. Due to the expense involved in purchasing new terminals and issuing new cards many merchants and banks did not make the change by the target date of October 1, 2015. This, however, did not affect customer’s ability to use their cards, nor did it affect the consumer’s rights under regulations and network rules regarding liability for fraudulent transactions.
What is EMV and why the change?
EMV is an advanced technology where the information for each transaction is stored in the chip on the card. This information is dynamic (changing for each transaction) rather that static (remaining the same) as on the magnetic stripe on the back of cards. Magnetic stripe data is easier to copy using a simple and inexpensive card reader device, while the information on the chip changes for each transaction making it more difficult to create fraudulent cards.
As the transition to EMV cards has progressed throughout the U. S. there has been a notable decrease in counterfeit card fraud. The following statistics, recently published by the American Bankers Association, show the progress that has been made in EMV card use and combating fraud.
Consumer Use Up
Financial institutions have issued over 700 million chip cards in the U. S. market, more than in any other country in the world. Since October 1, MasterCard® and Visa® have increased the number of EMV cards by over 100%, and chip transactions were up 30% in the first quarter of 2016.
Merchant Use Up
Almost 36% (2.3 million) of U. S. merchants now accept MasterCard® chip cards, with an average of 100,000 new merchants becoming chip-ready each month.
As previously mentioned EMV cards began to be issued in the early 90s in Europe and the vast majority of merchants in Europe no longer accept cards without the EMV Chip.
Counterfeit card fraud has declined by over 54% in MasterCard EMV enabled merchants as of August 2016.
It took France four years to see a 91% drop in counterfeit fraud after shifting to EMV in 2005. The U.S. is growing at more than twice that speed with counterfeit fraud falling an average 50% between April/May 2015 and April/May 2016.
So after a slow start in the U. S. EMV cards are catching on, with reduced counterfeit fraud definitely being realized. While the recent re-issue of Debit Cards may have caused some minor inconvenience for our customers we, at Rhinebeck Bank, are certain that reduced fraud, and international acceptance of EMV cards are features that will be of great benefit to our customers.
February 7, 2017
Will the Real Jane Doe Please Stand Up?
We’ve all heard of identity theft. But what is the meaning behind the term? Are there any warning signs that it’s happened? What needs to be done if it does happen?
The short answer is that identity theft is a crime. Identity theft and identity fraud are terms used to refer to all types of crime in which someone wrongfully obtains and uses another person's personal data in some way that involves fraud or deception, typically for their own financial gain.
Many people do not realize how easily it is for criminals to obtain our personal data without having to break into our homes. Protection of personal information must be a top priority for all of us. It is important to recognize the warning signs of identify theft.
The Federal Trade Commission’s website lists several Warning Signs of Identify Theft.
Some clues to be aware of are:
- You receive notice that your information was compromised by a data breach at a company where you do business or have an account.
- You find unauthorized bank and/or credit card account transactions.
- You are receiving bills for accounts you didn’t open.
- You are not receiving your bills or other mail.
- Debt collectors are calling you about unknown outstanding debts.
- You find unfamiliar accounts or inquiries on your credit report.
- You find medical providers billing you for services you did not use.
- The IRS notifies you that more than one tax return was filed in your name, or that you have income from an employer you don’t work for.
In the event that you encounter any of these warning signs or if your wallet, social security number, or other personal information is lost or stolen, there are steps you can take to help protect yourself from identity theft.
While there are many paid resources available, there are also FREE resources available to everyone. The US Government provides information and resources to help identity theft victims through the maze of recovery.
For more information on identify theft visit the Federal Trade Commission (FTC) website at: https://www.consumer.ftc.gov/topics/identity-theft
If you find yourself a victim of identify theft visit FTC website to obtain a recovery plan at: https://www.identitytheft.gov/
Tonya A McCaughey
VP, Retail Operations Manager
January 31, 2017
EMV Chip Security: Facts you should know
So you have a fancy new chip in your Rhinebeck Bank debit card, and now your transactions at the store are taking a bit longer than before. What’s going on, and why do you need this? The chip uses a more advanced technology, called EMV. EMV stands for EuroPay, MasterCard®, and Visa®. Here’s why the new EMV technology is important:
To understand how we got to this point, let’s first look to the past. When was the last time you listened to your favorite song on a tape player? The cassette tape was developed in the 1960s, around the same time magnetic strip credit cards appeared. As a matter of fact, the core technology of magnetic strips was developed in 1928. Because of this, it’s easy and cheap for fraudsters to steal your information and use it fraudulently.
EMV chips, on the other hand, are extremely difficult to clone. When the chip is inside the payment terminal, a secure and encrypted communication takes place between the store and your bank. While the transaction time at a terminal may be a bit longer, you are getting a significantly more secure transaction.
The real question is, why do we still use magnetic strip technology for some transactions? Simply put, it works well and most businesses have the ability to accept it. Development of the technology and new EMV hardware comes at a cost for processors, banks and merchants. Phase one of the US migration, getting chip cards into the hands of consumers and having large merchants ready to accept them, is coming to a close; phase two, acceptance and adoption, is now in full swing. Getting banks, merchants, and processors to switch to a new technology takes time and can be costly, but the consumer ultimately benefits from a more secure transaction.
This technology is going to grow over time. While right now it may seem like an inconvenience, Rhinebeck Bank’s goal is to keep your money and information safe. Many countries around the world have already made the switch to EMV. The US is one of the last countries to make the switch, and businesses and banks all throughout the country are working together to make chip cards the new standard. Protecting consumers’ money is a top priority. The next time you have to wait an extra 10 seconds at the store, keep in mind what that little chip is doing for you.
Magnetic Strip Credit Cards - https://en.wikipedia.org/wiki/Magnetic_stripe_card
Compact Cassette - https://en.wikipedia.org/wiki/Compact_Cassette
Chip Card Security: Why is EMV More Secure - https://squareup.com/townsquare/why-are-chip-cards-more-secure-than-magnetic-stripe-cards
Why America has been slow to adopt modern credit-card technology - http://www.economist.com/blogs/economist-explains/2014/10/economist-explains-18
Six months after the US EMV liability shift, where do we stand? - https://www.mobilepaymentstoday.com/articles/six-months-after-the-us-emv-liability-shift-where-do-we-stand/
SVP, Operations and Technology
January 24, 2017
New Years Job Resolutions
Many of us make personal New Years resolutions. Exercising, eating better, spending more time with friends and family are popular resolutions we hope to keep in order to improve our personal life. But how about making resolutions for our work life? We spend a large percentage of our time at work, so why not make resolutions to improve the job we do?
Learn. Learn something new every day. It does not have to relate to the exact job you are doing at a particular time. Learn something about the company, what your manager does, technology that can help you be more efficient, or read more. Commit to expanding your knowledge base.
Excel. You are at work to do a job so why not do it to the best of your ability? Ask for clarification if you do not understand a directive, always double check your work, offer assistance if you have down time. Be accountable for your work at all times.
Reach. Think about how you can go above and beyond and then seek the opportunity to do so. Be proactive and make suggestions. Be ready with a plan to implement change.
Be Positive. So much can be overcome by having a positive outlook. Project a positive image and energy. It will help get you through “those” days and could very well be contagious.
Best wishes for much success in 2017!
SVP, Human Resources
January 3, 2017
Think About the Term
When it comes to buying a new car, many people ONLY look at the monthly payment. They don’t always pay attention to the price of the car or how much that car may cost in total.
Here is an example:
You are looking to buy a new car and looking to finance $25,000.00. You tell the dealer you would really like your payment to be around $400.00 per month. You know you have good credit so getting approved won’t be a problem.
The dealer then comes back and says we can finance the car for $363.90 per month. Sounds great! Right?
The deal they presented to you would be for 84 months at an interest rate of 5.89%. The total cost after you’ve made all the payments is $30,567.60.
But… what if you ask about the term and figured you could pay just a little more per month. After all, you were thinking about paying $400 per month when you started. The same loan for 72 months at a rate of 4.99% is $402.51 per month. Yes, it’s almost $40.00 more per month, but the interest rate is almost an entire point less. After you make all the payments, the total cost would be $28,980.72 with a savings of $1,586.88. Just for paying an additional $38.61 per month you saved a year of payments and almost $1,600 in interest.
If you’re the type of person who stops everyday for coffee… buy two less cups of coffee per week and you’ll have your additional $38.61 per month for your payment. Just food for thought, I always recommend to anyone who asks, take the shortest term possible that you can live with. You probably won’t notice that ten dollars a week but in the end, you will have saved a nice chunk of change.
(This blog post is for educational purposes only)
SVP, Consumer Lending
December 27, 2016
Most of us have heard the phrase “You never get a second chance to make a first impression.” This is especially true during a job search.
Your resume is usually the first impression you will make on a potential employer. I am amazed that in our technology driven world, so many resumes are submitted with typos or errors. One recent resume I received included years of employment “20o9 to 2015”. How did that error even happen?!? If the first work product you show to an employer has errors, what does that say about the work you will produce for them? Not much.
With many applicants applying for the same job, it is important to make yourself stand out. Make sure your resume is visually appealing. The font should be consistent, the words should be spaced evenly on the page and it should fit on one page if you have less than 10 years of work experience. And of course it should detail WHAT you did and HOW you did it.
Before finalizing your resume read it out loud, run it through spell check, give it to someone to proof read (teachers are great at this.) Ask yourself “Am I proud of this document? Does it reflect who I am as a potential employee?" After all, that is the story your resume tells.
P.S. – A firm handshake and good eye contact never hurt a candidate’s chance either.
SVP, Human Resources
December 20, 2016
Shop smart - don’t let criminals get your personal information this holiday season!
As many of you know, there are criminals out there looking to get your personal information and steal your money. There are dozens, if not thousands, of people illegally attempting to steal your identity, obtain access to your gift cards, or fraudulently access your money in many different ways. Don’t be a victim this holiday season!
Here are 7 ways to protect yourself this holiday season:
1. Only purchase from reputable online sites and sites you frequently use
- Use an online retailer that you know is secure. Sites that have a secure shopping cart and that you’ve used before may be your best bet.
2. Keep an eye on your Credit Card and Bank accounts
- Make sure you check your statements online when you make purchases to verify the correct amounts.
- Check them weekly. Even if you don’t make purchases, see if other charges are being made
- If you have a question about a purchase, even if it’s a small purchase, call your Bank or Credit Card company and ask questions.
3. Make sure your Gift Card scratch off area is still intact
- If the gift card scratch off is “scratched off,” money on the card may be missing. Hackers can drain your gift cards with the codes placed under the scratch off area. Make sure your gift cards have not been tampered with before you purchase them.
4. Look out for fake charities
- Make sure you know who you are donating to. Some online charities may not be charities at all. Research the charity before you donate, make sure the link you use to donate is on their website. Ask yourself, does this look like a reputable charity?
- Call and ask questions. If the charity does not have a phone number, it may be best not to donate.
5. Beware of package theft
- With the rise in online shopping, there’s a rise in package theft. Make sure there is someone home to carry your package inside upon arrival.
- If you don’t receive your package on the scheduled date, call the company and make sure it’s still on time for arrival.
- If you have the means, get a camera for your door step to see the activity happening outside your door.
6. Change the passwords to your online accounts, especially your Bank accounts, frequently and make the password complex
- This was stated in a recent blog post from us at Rhinebeck Bank. It’s always best to change your passwords monthly. This will help prevent your account from being hacked.
7. Don’t respond to pop-up advertisements
- These may take you to a site where hackers can take your information. Certain links that you click can leave your computer and information vulnerable. Don’t get click happy. Only click on links you feel are secure, if you’re unsure, don’t click.
This year use these methods to protect yourself and leave yourself with less risk! Good luck and happy shopping from all of us at Rhinebeck Bank!
December 13, 2016
Even in the age of technology, balancing your checkbook regularly is still a smart thing to do!
Over the course of any given month there are dozens of transactions going in and out of your checking account: direct deposits posting from your employer, your mortgage or rent, utility bills, car loans, insurance and other payments are withdrawn. There are also groceries to buy, dinners out, a gas tank to fill and perhaps a trip to the movies or shopping online. Do you know the true balance in your account before you spend money or do you just wing it?
Balancing your checkbook at least once a month can help you:
- Track your spending and budget easily
- Catch unauthorized transactions or errors with regular monitoring
- Avoid overdrafts by always knowing what you have available to spend
So how exactly do you balance a checking account?
1. Start with a checking account register – it’s a little booklet that has lines to write what was spent or deposited and includes an area to write the check numbers, dates and amounts of each transaction you perform.
A running balance is kept after each transaction to track what is available to spend. A register is usually included with your check order. Many banks also make them available upon request for customers as well. Every transaction processed on your account should be recorded in your register:
2. Each month, you should receive a statement of account activity from your bank which can be used to balance your checkbook. You can also balance your account with the transaction history available within Online Banking.
3. Compare the transaction listing to what you have recorded in your register. Many people use checkmarks to indicate what has posted or cleared to easily spot anything outstanding or unpaid. Add in any missing deposits, including interest earned credits and subtract out any payments, checks and debit card transactions that aren’t recorded into your register. If you find any errors, contact your bank immediately to notify them of the discrepancy. Should you find any fraudulent transactions, you have 60 days from the date of your last statement to dispute them. You should note the amount of any errors in your register and adjust your balance accordingly.
4. On a separate piece of paper, or using a calculator, start with the ending balance of your statement. (You can also use the available balance as shown within Online Banking.) Add in any deposits from your register that haven’t posted to your account yet and subtract all checks, payments or other withdrawals that are still outstanding or unpaid by your bank.
5. Your final total should match the last balance in your register. If it doesn’t, go back and compare the transactions again to find any differences. If you are still having trouble finding the same balance, stop in or call your bank for help.
AVP, Customer Solutions Manager
December 6, 2016
5 Tips to Improve your Online Security
The Wall Street Journal reported that financial institutions are projected to spend $2.6 billion more on cybersecurity in 2016 than they did in 2014. In addition to your bank’s security efforts, there are a few things you can do to help keep your accounts as secure as possible.
1. Avoid using public Wi-Fi to access sensitive accounts – Free Wi-Fi at Starbucks is great to check Facebook or LinkedIn, but avoid using it to access your financial accounts. Anyone connected to the same network can see your login information, making it easy for hackers to access your accounts long after you finish your coffee.
2. Create complex, unique passwords (and change them often) – You’ve heard this advice countless times for good reason – your account is only as secure as you make it. If you use the same password for all your accounts, it’s safe to assume that once one of them is compromised, ALL of them are compromised. Check out this article from The Telegraph (http://www.telegraph.co.uk/technology/2016/01/26/most-common-passwords-revealed---and-theyre-ridiculously-easy-to/) to see the 25 most common passwords of 2015, how to create a more secure complex password, and what hackers do once they have one of your passwords.
3. Check for abnormal activity often – Every few days, check your recent transactions to make sure all activity on your accounts is legitimate. If you see anything abnormal, report it right away. Check with your financial institutions to see what fraud you’re liable for – many credit cards will cover fraud liability as long as you report the transaction as fraudulent within a certain amount of time. Every financial institution’s policy is different, so it’s important to stay informed of how long you have to report fraudulent activity, and check in on your accounts accordingly.
4. Sign up for alerts – Many financial institutions have the ability to text and/or email you if they see something strange on your account. This should not replace your checks for abnormal transactions, but your bank may detect something strange before you do. Rhinebeck Bank’s online banking offers alerts for failed sign-on attempts, password changes, and low/high balance alerts. Additionally, all customers are automatically set up with alerts for mailing address changes, email address changes, phone number changes, and “forgot username” accessed. Check with your financial institution to see what alerts they offer.
5. Avoid clicking on links in emails (even if it looks legit) – Spammers have wised up, and have the ability to send emails that look like they’re from a company you do business with. This is called phishing. Just like your bank will never call you and ask you for your account information, it will never email you asking you to reply with sensitive information. Best practice is to type in the URL yourself, and avoid clicking links sent to you through email.
SVP, Operations and Technology
November 29, 2016
Rhinebeck Bank’s Offer - Express Business Loans
Have you heard? We’re offering an Express Business Loan with a credit decision within one business day. If you have a company that requires new equipment, this loan is exactly what you’ve been looking for. You can increase your productivity through this loan by purchasing the vehicle or equipment you need.
Some examples of vehicles and equipment we finance include: cars or trucks, plows, landscaping equipment, restaurant equipment, dental equipment or almost any type of equipment for your small business.
We’re proud to say that this loan not only has very low interest rates, but we will also waive the document preparation fee (for applications received before March 31, 2017.) These are just two perks out of many! Other highlights from our Express Business Loans include:
- Loan amounts up to $250,000
- Credit decision within one business day (for applications received before March 31, 2017)
- Available for new OR used equipment purchases
- Available for business vehicle purchases
- Minimal paperwork
Here at Rhinebeck Bank we strive to make the process seamless. If you have any questions or are interested in applying for an Express Business Loan, please call us at 845-454-8555, option 3. For more information, please visit:
(Member FDIC, All loans subject to credit approval)
November 22, 2016
Will Bank Branches Disappear?
The first Automated Teller Machine (“ATM”) in the U.S. opened in New York City on September 2, 1969.This original ATM was designed to dispense cash when a valid plastic card was used. By the 1980’s ATMs became widespread, handling many transactions that human bank tellers could perform. ATMs went on to revolutionize the banking industry.
Many in the banking industry believed that ATMs would eventually eliminate the need for human tellers, and eventually the need for bank branches themselves. In the 1980’s, On-Line Banking was introduced, and with the introduction of smart phones in 2007 Mobile Banking began to take off.
With all of these ways to transact business on your accounts, there are some questions as to whether the traditional bank branch will soon disappear. According to one survey*, more people bank on a computer or smart phone on a weekly basis than go to a bank branch. This would suggest that the bank branch is on the same path as the dinosaur. However, a survey conducted with data from the FDIC shows the number of commercial bank branches as of the first quarter of 2016 has declined only 5% since 2009.*
All that being said, what about bank branches in the Mid-Hudson Valley? In Dutchess County the number of bank branches (commercial and savings) as of 6/30/16 has increased 3.41% over the 6/30/06 number. The number for Dutchess, Orange, and Ulster counties combined for the period is a 7.91% decrease.*
What about Rhinebeck Bank? Rhinebeck Bank currently has 11 Full Service Branches, 9 in Dutchess County and 1 each in Orange and Ulster counties. The most recent opening was in Goshen in May of 2016. As a local community Bank, we see the importance of having branch locations. Here, our customers can conduct business with a financial professional, whether it is a simple cash transaction with a teller, or a complex transaction where a face to face meeting with a Banker would be helpful.
While the traditional bank branch may not be what it was 10 to 20 years ago, we at Rhinebeck Bank believe it remains vital to providing the kind of service we feel our customers deserve and want.
As a Teller with Rhinebeck Bank, I enjoy interacting with our customers. We have many customers who depend on us on a regular basis, such as our commercial customers who visit our branch every day, and consumers who prefer to do their business in person on a weekly basis. We do have ATMs, Debit Cards, On-Line Banking and Mobile Banking for those who wish to conduct business in this manner. However, we enjoy seeing our customers in person. So, if you haven’t been to your local branch in a while, come on in and say hello. We would love to see you
*Source: FDIC Summary of Deposits, published 9/30/16
November 15, 2016
Beware! If it sounds too good to be true... it probably is!
Have you ever received a phone call and wondered if it might be fraud? For instance, someone claiming to be a representative with Microsoft saying your computer has viruses? Or maybe, a call from the IRS saying you owe them money and if you don’t pay you will be arrested? Have you recently received an email or letter saying that you are the lucky winner of a lottery?
If you answered yes to any of these questions, you are not alone. The Federal Trade Commission reports that criminals are using clever schemes to defraud millions of people each year. These schemes often combine a variety of techniques to get people to send money or give out their personal information. Criminals are using a variety of methods such as phone calls and emails, along with the use of sophisticated technology, all in an attempt to obtain your private personal information. They then use that information to commit fraud. Callers may claim to work for a company you trust, or claim to be calling on behalf of a loved one. People need to remain vigilant to protect themselves. Anyone receiving calls or emails should never give out their personnel information to anyone over the internet or phone. Your Bank will NOT call you and ask for this type of information! If there is any doubt as to the legitimacy of the phone call or e-mail, you should verify the validity of the call by contacting the business using a publicly listed phone number.*
If you find you are the target of one of these scams, the scammer is counting on you to keep the information to yourself. It is important to tell someone. Whether you decide to report the incident to law enforcement or a federal agency such as IC3 (Internet Crime Complaint Center) you should still share with others to get the word out. So, share your story with your friends and family who will then share with their friends and families. The more we share, the more aware we will all be.
Check out these government websites for more information:
Report an internet crime here: https://www.ic3.gov/default.aspx
Tonya A McCaughey
VP, Retail Operations Manager
November 8, 2016
Don't Just "Fall" Into Your Career
Whether you are a high school student looking for your first job or a seasoned professional looking to make a job change, you should remember your career path is up to YOU. Many candidates take a position because it was offered. Just because a position is offered to you does not mean you have to take it. Ask yourself these questions:
1. Do the job duties match my learning/career objectives?
2. Does the management style complement how I work best?
3. Will I get along with my co-workers?
4. Are the salary and benefits competitive?
Do some research to make sure the position is the right fit for you. Speak to people who work(ed) at the company, search the internet to find information and ask the hiring manager some follow-up questions.
Most of all remember – you are your biggest career advocate. Your new employer will spend many hours training you and you are making a major life change. Realizing two weeks or even worse, two months later that the position is not a match can be frustrating to both you and the employer. It is in the best interest of both you and the employer to make sure this is the right job for you, so do your research and make an informed decision.
SVP, Human Resources
November 1, 2016
Predicting the Mortgage “Weather”
Let’s face it; The Weather Channel© has changed all of our lives. We watch live minute to minute updates of weather patterns and storm fronts. Experts try and predict events for the next half hour to the next 10 days, to years in the future. They consider longer term cause and effect (El Niño comes to mind) to try and identify what type of seasonal weather we will have. We need the forecasts to help us plan our day, month, and season. Do we bring an umbrella today? Do we buy a new snow blower? When should I plant the tomatoes?
They do this by gathering and analyzing incredible amounts of data. Trying to determine how each piece of information corresponds to the other.
All industries look to perform a similar type of forecasting, and the mortgage business is no exception.
We need to analyze and review incredible amounts of data (employment statistics, stock market prices, bond yields, political races, world events, and so on) and what affect it will have on rates, housing prices, new home sales, and construction, to name just a few.
We need to forecast to help run our business in the most effective and efficient manner. Will home sales be strong? What staff increases do we need to make in order to maintain our processing speed? How do we adjust sales and operations expenses? How will a changing rate environment affect application volume? I like to think of “what will the interest rate be tomorrow” as akin to “should I take an umbrella” and “what will the housing market look like in 2020” with “will we see El Nino in 2020”.
So let’s take a look at one specific piece of long term forecasting: how can we predict the First Time Homebuyer (FTHB) market in 2020?
Studies performed by Zillow® show us that the average age of a FTHB is approximately 33 years old (increasing), 40% are single (decreasing), and they are spending approximately 2.6 times their annual income on homes (increasing).
If we look at the US Census data from 2012, the US had 20,893,000 people who were ages 25-29. This means that today they are between the ages of 30-34. This is the prime FTHB age group.*
Reviewing the next two age groupings from the 2012 census, we would now have 21,878,000 individuals in the 25-29 age range and 21,239,000 in the 20-24 age range. These numbers would indicate that our FTHB applications should continue to be strong over the next 8 years. We could go much further to hone in on a more specific target number of FTHB applications, but I believe you get my point.
The most scrutinized aspect of the mortgage world is the rate environment. The overwhelming winner of most frequently asked question from a borrower is: “what is going to happen with the interest rate”? Will rates go up or down this afternoon? Next week? Or, what kind of rate environment will there be in 2020 that could possibly affect the FTHB market? So much to analyze!
All of these forecasts, including the weather, are subject to drastic changes. There have been predictions of a rising interest rate environment for the past four years. Despite some minor fluctuation, rates have remained relatively flat over this period. So, the lesson here is that with all of the data we have to review, the best we can do is make an educated guess. It is the same as the weatherman trying to predict landfall of a hurricane, they really don’t know.
So, my advice in trying to predict interest rates is this: take an umbrella.
US Census Data -https://www.census.gov/population/age/data/2012comp.html
VP, Residential Lending
October 25, 2016
Why Millennials need to start saving for retirement now!
For new professionals beginning a career in their early 20’s retirement can seem light years away. I certainly felt this way in my early 20’s, and to some extent still feel in my mid 30’s. The reality is retirement is not that far away. The longer millennials wait to start saving, the more difficult achieving retirement goals will be. For a long time the combination of Social Security and in most cases a pension ensured a semi comfortable retirement. Adding a 401k and/or IRA to the mix was just icing on the cake. For most job families pensions are a thing of the past, and social security is a big question mark. This leaves personal retirement savings as the most reliable way for millennials to achieve their retirement goals. So why is it so important to start early?
Building a savings habit
It’s easy to procrastinate when you first start your career. Common reasons for procrastination are, time, lack of disposable income, awaiting inheritance, etc. Although these feel like good reasons to wait I can ensure you they’re not. You’re in control of when and how you retire. Building a strong savings habit early is very important to building wealth. Starting a savings plan is often the hardest part, once established it becomes an addiction. Understanding money is tight when you first start your career, here are few tips to give you a kick start.
- Create a budget and include an amount for savings, whatever you can afford, it all adds up!
- Take advantage of your employer’s 401k plan. Most of these plans offer a competitive match, which is free money! Start with a small percentage and increase every year by 1%.
- Try the 52 week challenge. Start week one by saving $1, the following week save $2, increasing your savings $1 every week for 52 weeks. At the end of the year you’ll have saved $1,378!
Time is Money
Have you ever heard of compounding? Compounding is the ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings. Hypothetically speaking say you contribute $5000 to an IRA. In the first year your account balance grows by 10%. Your investment is now worth $5,500. In year 2, your account balance grows by another 10%. In this case your $5,500 account balance grows to $6,050. Rather than your investment growing $500 in the previous year, it grows $550. The additional $50 in growth is a direct effect of compounding. Each year growth takes place, compounding has a more dramatic effect than the year prior. Those that begins saving for retirement in their early 20’s have ten more years of compounding growth as compared to those starting in their early 30’s. In this case, time really is money!
Retire when you want, not when you can
The great thing about retirement planning is that you’re in the driver’s seat and in control. You control how much you contribute, the investment type, etc. Although fluctuations should be expected when investing, having the right plan will send you on the way to achieving your goals. At some point you may have been asked when you want to retire. Were you confidently able to answer this question? Most are not, nor should they be able to say definitively. However, having a plan in place with specific goals set will put you in the best position to answer this question.
VP, Area Sales Leader
October 18, 2016
Should I Refi? - Let's do the math!
Have you ever heard this one? “It’s not worth refinancing unless you are going to drop your rate by 2%”. It is generally preceded by “my parents told me”…
I cannot tell you how many times I have heard that in the past 13 years. So, where did the notion of the 2% threshold to refinance come from? It is driven by the average sales price of a new home. Let’s do the math.
If we take a historical look back at the average new home sales price in the United States, the price of a home in January of 1976 was $72,400. Fast forward to January of 2016 and it was $363,400. The average loan size of a mortgage is going to dictate how a change in interest rate will affect the viability of a refinance scenario. Let’s do the math!
I will assume each home was financed using a 20% down payment, leaving their loan amounts at 80% of the value ($57,920 & $290,720 respectively). Now, applying the average 30 year fixed interest rate for that period of time (January 1976: 9.02% vs. January 2016: 3.875%) we can determine how the mortgage amount will dictate our threshold of interest rate change:
1976: $57,920 @ 9.02% = $466.87 (principal & interest)
If we reduce the 1976 interest rate by 2% (7.02%), we have a new payment of:
$57,920 @ 7.02% = $386.12
Creating a savings of $80.75
In order to save the same $80 in principal and interest payments in 2016:
2016: $290,720 @ 3.875% = $1,367.07 (principal & interest)
If we reduce the interest rate by .5% (3.375%) we have a new payment of:
$290,720 @ 3.375% interest = $1,285.26
A difference of $81.81
Now, refinancing your mortgage to save $81 per month may or may not be worth it to you personally. The point of this exercise is that you do not need to wait and hope that rates fall by 2% in order for it to make sense to refinance.
You should always seek out a residential mortgage lender to help you calculate the monthly savings while taking into account any and all cost associated with a new loan. This will ensure you have the proper information to make an informed decision on one of the biggest financial decisions you will make in a lifetime.
- Average new home sales price via the US census.gov
- Average 30 year fixed interest rates via Freddie Mac interest rate chart
VP, Residential Lending
October 11, 2016
Millenials and Banking
For the past several years, a hot topic in banking circles has been centered on Millennials. More specifically, the talk has been how to tailor banking solutions to meet the needs of the next up and coming generation. Born between 1980 and 2000, Millennials are the largest generation in American history. As a Millennial myself, I can attest to the fact that being born in the early 80’s, as I was, is much different than being born in the late 90’s. That being said, if there’s one thing that’s shaped this generation as a whole, it’s technology. Technology has touched just about everything in the lives of a Millennial, most of whom don’t remember life without access to the internet. Over this same time period, banking has evolved tremendously along with technology. Technology has driven customers away from bank branches and to ATM’s, computers, mobile devices, and third party payment systems such as PayPal.
There’s no question, Millennials are changing the way banks do business. Many so called industry experts will say that Millennials only want digital solutions to manage their money - not traditional methods such as meeting with a Banker. I’m not completely sold on this idea. Although the role of a Banker is changing, my Millennial customers still see value in face-to-face contact and personalized advice, particularly as it relates to more involved needs, such as financing their first home, or planning for retirement. Even with the growth of technology, I believe that the “Banker” will continue to play an important role in the branch.
Although technology has made banking mobile and increasingly more convenient, customers can still find value in a local, personal relationship and great face-to-face customer service. Having a point of contact during financial milestones and challenging times can make all the difference in the world. With the endless information that can be accessed online, Millennials have questions like everyone else, especially with so much content to sort through. Having a Banker as their go-to for answers is priceless. With a generation so consumed in technology, our services and offerings need to be transparent and straight-forward in order to get Millennials to feel comfortable and confident with banking. Customer service is something that never goes out of style, and here at Rhinebeck Bank our goal is to always provide our customers, Millennials included, the most pleasurable banking experience we can possibly give.
VP, Area Sales Leader
October 4, 2016
Star light, star bright, Albany changed the S.T.A.R. program with all their might!!
In a deal between the New York legislature and Governor Andrew Cuomo, the state has changed the way new homeowners can take advantage of the STAR program. While the total amount of the tax relief remains unchanged, the difference is in “when” you receive it.
Under the previous program rules, homeowners eligible for the STAR program received the STAR refund in the form of a property tax exemption and thereby saw a reduction in their tax bill. So, homeowners who escrowed their taxes as part of their mortgage would see the benefits of the tax break on a monthly basis. Now, all home purchases will receive a tax rebate check for a portion of their school property taxes on a yearly basis. You will no longer be required to register with your local tax assessor but instead will now register directly with New York State.
Now, all home purchases will receive a tax rebate check for a portion of their school property taxes on a yearly basis.
The interesting part is that the change is being made retroactively to 2015 tax year!
So, if you purchased a primary residence after May 1st, 2014 you would now need to apply for the new STAR program if:
- You bought the home after the 2015 application deadline.
- You did not apply for the STAR exemption for your home by the 2015 application deadline.
Most municipalities have a March 1st, 2015 deadline; however some do have different deadline requirements. To check for yours please click on the following link https://www.tax.ny.gov/pit/property/star/2015-star-deadlines.htm
Should you need to register for STAR, go to Register for the STAR credit or call 518-457-2036. Make sure to have your school tax bill ready when you call.
Even though you now register directly with New York State, your local town assessor is still a great resource of information and guidance with this process. Reach out to them for assistance or information to ensure you are taking advantage of all the benefits that you are eligible for!
Reference: New York State Department of Taxation and Finance
VP, Residential Lending