Tips for Managing Credit Card Debt

 Ohioans may fair better than the average American when it comes to credit card debt.

The most recent ValuePenguin data showed the average Ohio household holds just $5,446 in credit card debt. That’s the least of any state, while the typical household in Alaska carries the most credit card debt at an average of $13,048.

While credit card debt varies widely by state and region, it’s clear that there is a crisis in America with debt approaching $14 trillion. Credit cards are a big contributor, making up over a quarter of that amount. According to Debt.org, more than 189 million Americans have credit cards. An average household has at least four cards, carrying roughly $8,400 in credit card debt.

Experian reports that credit card debt is the second-fastest-growing debt behind personal loans and has been on a steady climb since 2015. Interest rates seem to be on the decline, with CreditCards.com stating the average credit card interest rate for new cards is currently 17.3%, down three quarters of a percentage point since the Federal Reserve cut rates in fall of 2019. But the annual percentage rate (APR) is still at a near record high – up from 16.8% in 2018.

Credit cards certainly have their advantages if used responsibly, especially if you’re able to pay off the balance in full every month by the due date. Credit Karma reports that credit unions typically offer lower interest rates, as well as competitive rewards and membership benefits. If you do find yourself struggling with credit card debt, you’re not alone. Your local credit union may be able to help you get back on top of your finances.

Credit unions are not-for-profit financial institutions owned and democratically-controlled by their members. Built on the philosophy of “people helping people,” their focus is on better serving their members with great financial benefits, like making life more affordable by dealing with credit card debt.

 

Tips for dealing with credit card debt

 

  1. Assess your financial situation. Come up with a list of everything you owe, including monthly bills, credit card balances and the annual percentage rate (APR) for each card. Then, compare expenses with income.
  2. Prioritize your spending. Before tackling credit card debt, be sure to cover the basics first, such as food, housing and clothing. Next, pay the minimum amount on all secured debts, like your home and car loans. Then, start working on paying down credit card debt with useful tools like the Credit Karma Debt Repayment Calculator, followed by student loans. Try to use cash or debit cards only while paying down debt. Above all else, pay at least the minimum balance on all outstanding debt to avoid hefty late fees.
  3. Establish a budget. Once your debts have been prioritized, it’s important to come up with a budget to track spending and minimize credit card debt. Use online tools like YNAB (You Need a Budget) to get started. Try to adhere strictly to your newly established budget.
  4. Secure a better rate. Negotiate a lower interest rate on your credit cards. According to CreditCards.com, sometimes all it takes is a simple phone call to (politely) request a better rate. Shaving off even a percent or two could save you hundreds of dollars while repaying your debt.
  5. Decide on a strategy. When paying down credit card debt, it’s important to settle on an action plan. There are two main ways to do this. One is to focus on paying down the card with the highest interest rate first, while making minimum payments on the other cards. This is the fastest way to decrease credit card debt, eventually freeing up more cash to pay toward the lower interest rate cards and creating a snowball effect. The other strategy is to pay the lowest balance first, while paying minimums on the others. Though not as cost-effective, this is the fastest way to get rid of debt on a single card.
  6. Stay focused by creating concrete goals and staying motivated. Keep your eye on the prize! Perhaps getting rid of credit card debt will afford you a down payment on a house, new car or dream vacation. CreditCards.com suggests writing your goals down and keeping them in your wallet or purse. When tempted to overspend, take a peek at them for a big picture reminder.

Tips and Tricks to Help Manage Your Holiday Expenses

With the holiday season right around the corner, consumers are often unprepared for the additional expenses for those special presents and occasions and exit the holiday season with debt—a gift that unfortunately keeps on giving.

According to the annual survey released by the National Retail Federation and Prosper Insights & Analytics, consumers expect to spend an average of $1,047.83 this holiday season, which is a 4 percent increase from the $1,007.24 they said they would spend in 2018.

Research shows that many Americans who rack up holiday debt do so on high-interest credit cards, averaging $1,230 in 2018, according to an annual survey conducted by Magnify Money. This notes an increase from $1,054 in 2017, and $1,003 in 2016, in holiday spending.

A lack of preparation could be the problem. According to a 2017 survey conducted by mobile startup Varo, 74 percent of Americans say they often fail to budget properly for the holidays, forgetting to take into account the full range of holiday-related expenses such as last-minute gifts, food, decorations, and holiday outfits.

And then there’s always peer pressure. According to a 2018 survey by Bankrate, two in five Americans feel pressured to overspend during the holiday season, with parents and middle-income earners feeling the greatest burden.

Even after the decorations are stored away, debt on credit cards tends to linger beyond the holiday season. According to a Magnify Money holiday debt survey, 49 percent of holiday shopper respondents said it would take five months or longer to pay the season’s debt off of their credit cards. That means in 2018, those shoppers were still paying off their holiday debt into May of 2019.

The statistics are even more alarming for holiday shoppers who are planning to make minimum payments on their debt. For example, it would take more than five years to repay a debt of $1,230 on a card with an annual percentage rate of 16.5 percent if the cardholder was making minimum payments of $30 each month. That shopper would not be rid of the 2018 holiday debt until 2023.

Despite holiday spending pressure, consumers can still enjoy the season’s festivities and manage to avoid a lump of debt through these following spending tips:

  • Look for travel deals. Book your travel early and use online tools such as Expedia or Kayak to comparison shop. Try carrying on your luggage to avoid excessive fees and avoid peak travel dates where possible.
  • Make a gift list. Make an extensive list of all family members, friends, teachers, and more that you need to purchase gifts for so you can accurately define your budget, then set a specific amount you want to spend for each category of recipients.
  • Track your spending. Return to your gift list and budget after each purchase to track your spending and make sure you’re staying within your financial limits.
  • Pick a payment. Plan the way you’ll pay; cash or credit. If cash, start setting aside savings for your spending now. If credit, make a repayment plan to avoid carrying unnecessary debt into next year. If you need a new source of funds for the holidays, consider a seasonal job or suspending certain luxuries for a couple of months.
  • Do it yourself. Get creative and make your gifts. From pictures of the kids to holiday treats, candles and crafts, there are a lot of easy DIY options.
  • Shop the deals. Pay close attention to sales ads and take advantage of big sale days such as Black Friday and Cyber Monday. Sign up for email lists of your favorite retailers, so you receive notifications of exclusive discounts.
  • Share hosting responsibilities. If you’re hosting a holiday get together with family or friends, consider asking guests to each bring a dish and if sharing gifts, consider drawing names instead of buying for all.
  • Start saving earlier next year. In January, open a specialized savings account at your credit union. This will let you easily set aside money each pay period throughout the year, so you’ll be ready to shop more efficiently next season. To find a credit union near you, visit YourMoneyFurther.com
Heat in the winter

Winter is coming—save on energy costs

Ohioans are spending a significant chunk of change on household energy costs, yet most have not evaluated potential savings opportunities.

According to the 2018 Ohio Utility Rate Survey conducted by the Public Utilities Commission of Ohio, Ohio residents spend, on average, between $2,000 and $3,000 per year in household energy expenses.

This range is slightly higher than the national trends. Each household in the U.S. uses an average of 77.1 British thermal united (Btus) each year, costing each household about $1,856 per year, according to the U.S. Energy Information Administration.

Heating, air conditioning, and water heating account for more than 74 percent of the energy consumed per household nationally and for 60 percent of the household energy dollars spent, according to the U.S. Energy Information Administration. With its population, industrial economy, and seasonal temperature ranges, Ohio is one of the top 10 states in total energy consumption.

Heating costs may be more dramatic in Ohio than the national average. According to the U.S. Energy Information Administration, heating accounts for 15 percent of each U.S. household’s energy expenditures. In Ohio’s residential sector, nearly 7 out of 10 households use natural gas to heat their homes and accounts for almost 30 percent of the state’s total consumption.

The U.S. Energy Administration data mirrors Ohio and other states because it costs more money to heat than cool. According to the data, Midwestern states spend $1,695 per year in energy expenditures with $681 dedicated to heating costs. Meanwhile, households in Southern states spend $1,917 per year in energy expenditures at $465, surprisingly attributed to heating costs while $392 covers cooling. 

The Ohio Consumers’ Counsel calculates Ohioans spend more than 7 percent of their household income on energy costs and encourages consumers to make small home adjustments to reduce the financial burden on consumers.

With winter coming, now is the time to start saving on energy costs through these helpful tips:

  • Conduct an energy audit. Conduct a professional or DIY energy audit on your home to identify savings opportunities. 
  • Use the sun. Open the curtains during the day to allow sunlight to heat your home. Then close them at night to prevent losing heat through the windows.
  • Check window coverings. Cover drafty windows with a heavy-duty, clear plastic sheet on a frame during the cold winter months. Make sure the plastic is sealed tightly to reduce infiltration.
  • Be smart with the thermostat. Adjust the thermostat as low as is comfortable when at home and awake. When away or asleep, turn the thermostat back 10 to 15 degrees and save around 10 percent a year on your heating and cooling bills.   
  • Spot and seal leaks. Seal any air leaks around utility cut-throughs for pipes, gaps around chimneys, recessed lights in insulated ceilings, and unfinished spaces behind closets.
  • Tune-up. Schedule a routine tune-up on your heating system to ensure peak performance.
  • Clean air ducts. Clean your air ducts to ensure fresh, allergen-free air flows through your home.
  • Go LED. Use LED holiday light strings to reduce the cost of decorating your home for the winter holidays.
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Healthy Eating

How to Eat Healthy on a Budget

When was the last time you tried to eat cheaply? You probably focused on a lot of ramen, maybe some potatoes and rice, and occasional trips to the dollar menu. Although these foods are cheap, they are lacking in nutrition — and loaded with sodium.

Healthy food has a reputation for being expensive. And you may need to spend a little more than on a five-pound bag of potatoes and 25-cent packs of salty noodles.

But with a little careful planning, you can eat well without breaking the bank.

Here’s how.

Focus on fiber

Fruits, vegetables, beans, and whole grains are super-healthy — and cheap. Make these the centerpiece of your meal to save money. You don’t have to go meatless if you don’t want to, just cook smaller portions of meat and larger sides.

Want to get the best deals on whole grains and beans? Buy dry beans — these cost a fraction of the price of canned beans. And use the bulk bins to stock up on grains.

Skip pricey organics

If you prefer organic foods, make sure your organic dollars go to the most important items. The Environmental Working Group puts together an annual list of the Clean 15, fruits and vegetables that have the least pesticide residue and are safe to buy in the cheaper conventional version.

Buy in season

Why buy a pale bland tomato in the middle of winter — especially when it costs about four times as much as it would in the summer. Seasonal produce will be the best bargain.

Not sure what’s in season? Eat the Seasons posts a list of fruits and vegetables that are in season by month. You can also tell by seeing what’s got the lowest price in the product section at the store.

Want bonus points? Try shopping at your local farmer’s market or through a community-supported agriculture cooperative. Not only will your food be in season, it will be super-fresh.

Learn to preserve

If you’ve got a freezer, you can turn some of that in-season bounty into off-season delights. You can blanch (lightly boil) and freeze many fruits and vegetables. You can even make your own freezer tomato sauce and salsa so you can enjoy fresh tomato flavor in mid-winter. And your homemade frozen items will be much cheaper than the bags you find in the freezer section of the grocery store.

And consider buying meat in bulk and freezing it in meal-size portions. You can typically save more than a dollar per pound, depending on the type and cut of meat, when you buy the family packs. Ensure it will stay fresh longer by investing in a vacuum sealer. This affordable appliance will pay for itself easily — and you can use it to seal your frozen vegetables and fruits, too.

Stay home more

If you’ve been spending on eating take-out and sit-down restaurant meals, you’ll be amazed at how much money you can save by cooking at home. (As a bonus, many meals take less time than calling ahead and driving to pick up your dinner.) Can’t bear to part with your favorite take-out? Try a web search for “RESTAURANT NAME DISH copycat recipe.” You’ll be amazed at how many great recipes you can find that way.

Now, what will you do with all the money you saved on food?

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Emergency Savings

Nearly a Quarter of Americans Have No Emergency Savings

Nearly a quarter of Americans have no emergency savings, according to a new report from Bankrate.com.

However, the percentage of those without an emergency fund currently sits at a six year low, down to 24% this year from 28% last year.

Additionally, Americans with an adequate savings cushion – enough to cover six months’ expenses or more – jumped to 31% (from 22% in 2015 and 28% last year), a new high during the seven years Bankrate.com has been polling on this subject.

Overall, Americans are doing a better job at saving. Those with some savings, but not enough to cover three months’ expenses, increased from 18% to 20%. Americans with enough savings to cover 3-5 months’ expenses nosed higher from 16% to 17%.

Bankrate.com chief financial analyst Greg McBride, CFA commented, “With all the spending that is not happening in the economy, something else apparently is – Americans are putting money in savings! We’re still not out of the woods yet – everyone should strive to have at least six months’ expenses socked away for the unexpected – but it’s encouraging to see progress being made.”

The tendency to have no emergency savings is highest among those ages 53-62, who seem to be all-or-nothing, as they have an equal propensity to have no emergency savings and enough to cover six months’ expenses (32% for each).

After that, the likelihood of having zero emergency savings declines substantially; the oldest Americans (63+) report the lowest likelihood of having nothing set aside for a rainy day (17%) and the highest probability of at least a six month reserve (44%).

While one quarter of Millennials and Generation Xers lack any emergency savings, younger Millennials (ages 18-26) seem to be well on their way; they have the highest propensity to have enough to cover 3-5 months’ expenses (31%). Generation X is most likely to have some savings, but not enough to cover three months’ expenses (28%).

Not surprisingly, those with enough emergency savings to cover at least six months’ expenses tend to be higher income and more highly educated, while those with no emergency savings are more likely to be lower income and have lesser levels of education.

That being said, lower-middle income households ($30K-$49.9K per year) are more likely to have enough savings to cover six months’ or more of expenses than to have no savings at all.

Residents of the Midwest are most likely to have enough to cover six months’ expenses or more, while residents of the South are least likely.

If you are looking at jump-starting your emergency savings, talk to a representative at ProMedica FCU. ProMedica FCU has several products and services to assist your savings plan including a save your change account that makes savings easy and automatic. ProMedicaFCU also has financial counselors on staff to assist with other important financial areas such as budgeting and credit. Contact ProMedica FCU at 419-479-4040.

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Car Prices

Car Prices: Something Funny Is Going On

People are paying way too much for new vehicles these days, with average transaction way out of whack with average household incomes.

According to Kelley Blue Book, the estimated average transaction price (ATP) for light vehicles in the United States was $33,261 in May 2017. According to the government, the median household income in the U.S. was $56,000 in 2015.

This is just too much, once we apply the time-tested “20/4/10” rule.

Use This Rule to Determine How Much Car You Can Afford:

This rule stipulates that a car is affordable when a buyer can make a down payment of at least 20%, use financing lasting no longer than four years — with principal, interest and insurance not exceeding 10% of a household’s gross income.

If a median-income household cannot buy a median-priced new vehicle using the “20/4/10” rule, then we have a problem with affordability.

So, why are new vehicle sales so strong? The answer to this is simple: people aren’t following the “20/4/10” rule, and automakers keep coming up with ingenious new financing strategies that ensure they won’t.

Think about the number of “0 Down” financing schemes on offer; think of all of the factory leasing deals.

Leasing used to represent a tiny portion of new vehicle transactions. Today, more than 50% of all new vehicles are leased in certain vehicle categories.

In short, car companies are making it easier than ever to help Americans drive away in vehicles that they cannot really afford (according to the “20/4/10” rule).

Don’t Buy the Payment

Car salesmen are trained to “sell the payment” to buyers. If the monthly payment is do-able, a sale can be made. The trouble is, getting that monthly payment down to an “affordable” level often means stretching payment out to 60 months, 72 months or even more. It also means factory lease deals that may seem cheap, until you factor in that they leave you with nothing at trade-in time.

Before You Shop for a Vehicle, Go See ProMedica FCU

The simple truth is that following the “20/4/10” rule is still an excellent way to buy a new vehicle without threatening your long-term financial health.

If you’re considering a new vehicle purchase, do yourself a favor and go see ProMedica FCU before you drive to a dealer lot.

ProMedica FCU will help you to see how different car buying scenarios fit in with your other financial goals – such as saving for emergencies and retirement. It’s the best way to ensure that you don’t buy yourself a shiny new mistake.

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Travel

Travel Smarter and Save Bigger this Summer Vacation

Spring flowers are in full bloom, which can only indicate one thing: summer is nearly upon us. For many, that means it’s time for a well-deserved vacation with family and friends. In a year-end 2016 survey conducted by the Ohio Credit Union League, an overwhelming majority of respondents, 71 percent, are planning to get some rest and relaxation with a vacation this summer.

Whether heading somewhere new or traveling back to a family favorite, most Ohioans plan their vacations in advance, but at varying times – 34 percent plan six months to a year in advance, 31 percent plan three to six months in advance, and 15 percent plan one to three months in advance. And, while ample time to organize is important, budgets definitely play a role in those plans as well, with 70 percent of Ohioans surveyed noting the cost of the trip as a major influence on where they go for vacation. Other factors included travel distance, scheduling, and amenities or activities at the destination.

We all want and need downtime, but a large financial burden will long outlive the benefits of a vacation. In 2016, households likely to take a vacation spent $1,798 on average, up roughly 11 percent from 2015, according to Condé Nast Travel. In addition, a survey conducted by ValuePenguin noted that the typical vacationing family spends 44 percent of their travel funds on transportation.

Since many vacation decisions are driven by cost, here are a few tips to spend wisely when you take those hard-earned vacation days.

• Scheduling matters: When planning low-cost trips, timing is everything. To save money booking accommodations, try traveling during an off-season or even a few weeks before peak-season starts. If you’re booking airfare, do so at least a month in advance, if not earlier. Airlines price their flights differently depending on the day of the week, so use an airfare tracker site or app, like Hopper, to keep up with changes.

• Travel smart: Many vacation destinations take advantage of the naiveté of travelers, so tourist hot spots may be higher priced than smaller, locally-owned places. Do your research before deciding where to say, what to eat, and what activities you should embark on and you’ll likely save during your trip.

• Use rewards: ProMedica FCU’s VISA Platinum Card earns rewards points that can be redeemed for airfare or other vacation expenses. Even though you may not consistently travel, airlines, and booking services may also offer rewards points.

• Set aside a little at a time — If traveling is important to you, make room for vacation savings in your annual or monthly budget. ProMedica FCU has an account specifically for saving for your dream vacation. ProMedica FCU is also a great resource to consult if you’re looking for ways to save and budget for vacation.

To learn more about ProMedica FCU and how they can help you afford life, call us at 419.479.4040.

Budget

Does sticking to a budget work?

While many Ohio consumers plan to start 2017 off with a household budget/Personal Spending Plan (I like to use the term Personal Spending Plan (PSP) instead of budget. Budget sounds too restrictive and that is not what a PSP is), sticking to that PSP may pose a problem. Data from a consumer survey conducted by the Ohio Credit Union League reveals 75 percent of respondents plan to start the New Year off with a household PSP, but 45 percent of those respondents said they need a lot of improvement when it comes to sticking to a PSP.
Also revealed in this survey was that 70 percent of Ohioans are looking forward to a milestone event in 2017, such as a wedding, the birth of a baby, or a vacation, all of which require months of planning.

Managing money is often a top New Year’s resolution for Americans. In Fact, 34 percent of Americans make money-related resolutions at the beginning of a new year, according to the 2016 Brain Research Institute. Unfortunately, only 46 percent of people who make a resolution maintain it longer than six months and only 8 percent achieve their goals.

With so many missing the mark on their goals, what can consumers do to get on the right financial path this year? Here are the first steps to getting finances in order before creating your PSP.

• Save receipts. It’s hard to know how to start planning if you don’t have a good understanding of how you spend. Save your receipts for a month to track where you’re spending money. Then, add them up and compare your income. After doing this, ask yourself if you’re saving any money and what purchases maybe weren’t necessary.

• Put the bare minimum in checking. Only put a planned amount of money into a checking account for spending each month and put the rest into a savings account. Making money less accessible can help you spend less.

• Get a special savings account. Open a Holiday or Vacation account at ProMedica Federal Credit Union. These types of accounts keep you from scrabbling before last minute events, which can ruin any PSP. The Holiday account only allows a certain number of withdrawals each year to help keep you on track.

• Get a PSP/budgeting app. Download an app to your smartphone or tablet to help with you plan. Many financial apps include planning platforms, monthly account monitoring, and tips for getting out of debt. According to GotToBeMobile.com the best 2017 mobile PSP/budgeting apps include; Mint, PocketGuard, You Need a Budget, GoodBudget, and Mvelopes.

ProMedica Federal Credit Union in partnership with the ProMedica Ebeid Institute and Toledo Community Foundation will also be offering financial seminars throughout the ProMedica footprint including how to Create a Personal Spending and Personal Savings Plan. Please check the events area on our Facebook page for upcoming seminars.

Categories:
Credit Card Debt

American Household Credit Card Debt a Growing Burden

American households with credit card debt have an average of $16,061 of it, according a study from NerdWallet. NerdWallet adds that consumers who carry credit card debt pay an average of $1,292 per year in interest on it.

Now, maybe you read that top line statistic and say, “great! I’m below the average.” But there are two big points to consider when it comes to credit card debt:

1. It’s all relative. Just about any amount of credit card debt becomes unsustainable when a financial crisis occurs. Keep that in mind before you accumulate it.

2. All credit card debt is very expensive. Credit cards are a bad bet. Meaning, the companies that issue them are betting against you at every step. They are betting that you won’t pay balances off before “0 interest” promo deals expire. Especially companies where purchase rates are in the high double-digits.

In other words, it’s all bad debt. You need to pay off your credit cards each month.

If you can’t, come see ProMedica FCU. We have some ideas to help you to consolidate some of the high-interest debt into a lower-interest solution. We can also discuss how to free up cash flow to pay down your cards quicker.

Again, the best solution is to pay of those cards each month. If you can’t come see ProMedica FCU before you find yourself shelling out hundreds or thousands of dollars on interest.

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New Year

5 Steps to a New Financial You in 2017

Holiday shoppers have been careful each season to make their lists and check them twice. Budgets have become more discerning and savers have become better planners for their holiday spending, prioritizing savings along the way. According to a September 2016 report, two out of five millennial shoppers got a head start this year and had started buying gifts for the season before summer had even come to a close.
These successful financial habits don’t have to stop there. With the New Year comes an opportunity to make some improvements to your financial health. Don’t make just another resolution that disappears by Valentine’s Day. Take your financial wellness to a whole new level: a New Year, a new financial you.

These five steps will help you to establish your best financial path for 2017, and you can have all the heavy lifting done before the clock strikes twelve:

1. Take stock of your finances. Take account of all your income, expenses, and existing savings/investment accounts. And no matter how nice you were, don’t forget to include any naughty debts you may have incurred in the spirit of the season.

2. Sketch out a budget “template” for the year to come. Think big picture. Plan your holiday spending for 2016 and find the method for budgeting that you’re going to use in 2017, and rough out what you’d like it to look like from month to month. Be pragmatic about your needs and be honest about where your money is going. Plan to make adjustments and really dig into your spending habits when you check back in on a regular basis.

3. Check your credit report. It is your legal right to get a free copy of your credit report every 12 months from each of the three major credit reporting bureaus. Add a visit to AnnualCreditReport.com to the calendar as an annual “holiday” or divvy up the bureaus to get a free report from a different bureau every four months. If you are not sure how to read your credit report, please contact ProMedica FCU. We would be happy to assist!

4. Set up bank and credit alerts, and financial reminders. Whether you’re at your computer or on your mobile device, you are in an ideal position to receive notifications about upcoming payments, suspicious activities on an account, transactions over a certain dollar amount, low balances, and more. Find out what online services your financial institution(s) offer, and supplement what they don’t with an app or calendar reminder. It’s all right there at your fingertips. ProMedica FCU has multiple alert functions available on checking and credit card transactions. We can even alert you when your credit card payment is due.

5. Make a Commitment to Yourself to Save. Those who make a commitment to themselves and their family to save usually save more than those who don’t. Think of this as your New Year’s Resolution. ProMedica FCU can show you how easy it is to systematically save. We even have an account that automatically does it for you based on your transaction habits.

A new financial you is an achievable goal for 2017. Please let ProMedica FCU know how we can assist
with your savings endeavors. Let’s make 2017 you best saving year ever!

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