Five financial urban legends you need to forget
When it comes to your financial health, it's time to stop believing in several misguiding urban myths that live in your news feed.
Everyone knows at least one urban legend that dates back to childhood.
While Bigfoot and the Loch Ness Monster are scary, what's really frightening is when myths influence your financial decision-making. Modern day myths often start on social media and spread like wildfire.
And much like childhood urban legends, many of these ideas are purely fictional.
Before you make a major financial decision, be sure to consult the professionals -- not your news feed. Bankers debunk some of the urban legends that keep them up at night.
1. Myth: A backward PIN is an ATM distress call
If you're on social media, it's hard to avoid a viral post about ATMs that's been plaguing news feeds. The post informs users that if they are ever being robbed at the ATM, all they need to do is simply type their ATM PIN in backward to alert the police and freeze the money.
Ken Justice, senior vice president and ATM executive at PNC Bank, says this idea is false, offers too much opportunity for false alarms and could even increase the risk of a consumer being hurt by a robber.
"I have been in the ATM industry for more than 36 years and I have never heard of any ATM supporting a reverse PIN distress call."
Instead, when using an ATM, be sure to follow these safety tips to help protect yourself, your accounts and your personal information.
2. Myth: Market volatility is bad
When markets undergo a sharp downturn, it's normal to feel uneasy. However, it's certainly not time to panic. Corrections are both common and healthy for equity markets. Any sound financial plan should account for market volatility through design that is focused on long-term goals and positioning to help weather volatile markets.
3. Myth: Holding a balance on your credit card improves your credit score
Todd Rosenthal, PNC's head of credit card product management, says if you can pay off your credit card in full, pay it off. Never carry a balance if you don't have to.
Intentionally carrying a balance on your credit card means you'll pay more in interest fees, and it won't help your credit score.
Your goal should be to show yourself and your creditors that you can use credit wisely. That means always paying your bills on time. On time doesn't mean mailing them the date they are due. Also, if you do choose to borrow money on a credit card, try to pay more than your minimum balance. Ultimately, the way to maintain a good credit score is to manage your spending, saving and borrowing responsibly.
4. Myth: Closing an unused credit card hurts your credit score
Rosenthal says at the end of the day, you should only have enough credit cards to cover the total amount of borrowing you might need. And yes, it's always OK if part of your reason for keeping an extra credit card is for emergencies. You should close any and all credit cards that don't meet that need.
"Credit cards are no different from the rest of your life and your overall financial well-being. Keep only what you need," says Rosenthal.
5. Myth: Your will ultimately dictates where your money goes
When most people start using a 401(k) plan in their first full-time job, they need to name a beneficiary right away and typically choose a parent. When you get married or have kids, you probably want them to receive the money if something should happen to you. However, prior accounts are often left unchanged. It's a common misconception that what's written in a will ultimately supersedes beneficiary designations. Like a number of assets, retirement funds will go to the beneficiary listed on the account, not those written in your will.
PNC Wealth Management's James C. Kelly and Mike Moyer stress the importance of consulting a financial adviser who will meet with you regularly to ensure your estate plan and will are up-to-date throughout your many life changes. Moyer, a Certified Financial Planner and senior wealth strategist, says that it's important to be proactive with your estate plan.
"The truth is, if you don't take care of it, you're leaving it up to chance."
Kelly, a vice president and wealth strategist, says that many people believe their power of attorney and executor have the power to fix everything after the fact.
"Powers afforded to these positions are limited by the respective documents. A power of attorney's authority stops at death, which is where an executor's starts. It's important to know the difference, as well as what they can actually do under the documents. They can't solve a bad plan, which is why it's important to review these plans on a regular basis," said Kelly.