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SPECIAL EDITION
SAVING MORE
7 Tips on Putting Your Dollars to Work…for You!
Make the Most of Your FDIC Guarantee
BORROWING WISELY
Ways to Get a Good Loan
Your Credit Score: It Pays to Aim High
If You Can’t Afford Your Payments
When a Debt Collector Calls
Take Charge of Your Credit Cards
F E D E R A L D E P O S I T I N S U R A N C E C O R P O R A T I O N
MANAGING YOUR M ONE Y I N GOOD T I M E S AND BAD
Spending Less
Good Ways to Get Started Cutting Back
It’s always smart to control your
spending. But if you or others in
your family are facing difficult times
financially, perhaps from a job loss or
wage cuts, it is especially important
to spend less so you can have more
money to pay essential bills or to add
to a savings account you can tap in an
emergency. Here are some strategies.
Take a serious look at your
spending. As a first step, think about
creating a spending plan, commonly
known as a budget. Make a list of
your monthly expenses divided into
two groups — your “needs” and your
“wants.” The needs are expenses that
are absolutely necessary, such as your Finally, don’t use your credit cards or monthly payment after also weighing
housing, utilities, clothes, food and other loan products to buy things you the up-front costs of refinancing.
transportation. The wants are optional really can’t afford. For more tips about “Refinancing your mortgage or auto
purchases. borrowing money, start on Page 7. loan can save you money over the
coming years that you can put to better
“After you differentiate between Keep banking costs down. “Look
use in a savings account or paying off
spending for needs and splurging at the most costly fees and recurring
other debt,” said Mary Bass, FDIC
on wants, cut back on the second charges on your bank and credit card
Senior Community Affairs Specialist.
category, especially if you’re already statements and consider how you can
suffering an income loss or other reduce or eliminate them,” Reynolds Be careful before cutting insurance
financial hardship,” said Luke W. said. Among the possibilities: If you coverage. It’s important to have
Reynolds, Chief of the FDIC’s routinely pay bank fees, shop for a adequate insurance, especially for life,
Community Affairs Outreach different account that meets your health, disability, personal liability,
Section. He said possible places to needs at a lower cost. Also review your and coverage of property. “While it’s
cut back on unnecessary spending banking habits to cut unnecessary fees. a good idea to review your insurance
include restaurant meals, monthly For example, use your own bank’s coverage every year or so and not carry
subscriptions and premium TV ATMs for cash withdrawals instead more coverage than necessary, think
channels. of going elsewhere and paying a twice before trying to save money by
surcharge, and keep close tabs on your dropping insurance coverage,” added
But also consider opportunities to checking account balance to avoid Bass. “All it takes is one illness or auto
save on your necessities. Examples bounced checks, which can be costly. accident to realize the importance of
from experts and consumers alike: having adequate insurance.”
Try carpooling or taking public Likewise, ask your credit card lender
transportation to work instead of to consider lowering your interest rate, The bottom line: Cutting back on
driving by yourself. If you have particularly if you have a relatively an already tight budget may seem
multiple cars, see if you can live good payment history and could daunting, but you can find ways to
without one of them. Ask yourself if qualify for a lower rate elsewhere. Also spend less without sacrificing your
you really need those $200 sneakers pay as much as you can as soon as you quality of life. For more ideas on ways
or if a less expensive pair will do just can. It will mean you’ll pay less interest to cut spending, see articles in back
fine. Buy used instead of new. Take and avoid late fees. issues of FDIC Consumer News online
better care of what you buy so it will at www.fdic.gov/consumernews, as
And if you have a mortgage and you
last longer. And, make your own coffee well as tips from “66 Ways to Save” at
expect to continue to own your home
at home and bring your lunch to work www.66ways.org. For suggestions on
for the foreseeable future, see if you
instead of eating out. how to put your savings to good use,
can save money by refinancing to
including in an emergency savings
account, see the next page. Q
get a lower interest rate and a lower
Saving More
that spare change you put once a
month into a bank savings account can
add up faster than you think.”
7 Tips on Putting Your Dollars to Work…for You! Review your existing accounts and
comparison shop for the best deals.
Look at what is being offered by your
While it’s important to pay your bills, or stock or bond mutual funds that bank and a few competitors. The
it’s also wise to “pay yourself” — to can lose value in a volatile market,” idea is to make sure the interest rates
contribute to your savings accounts, said Mary Bass, an FDIC Senior are competitive and that the fees and
even in uncertain times when you may Community Affairs Specialist. features are appropriate for how you
be strapped for cash. use each account. For example, if your
Try to save money for long-term
“During tough financial times, you goals, such as your retirement. money is sitting in a low-rate checking
may believe you cannot pay your If your employer matches a portion or savings account, consider moving it
bills and continue to put money into of your payroll contributions to a to a higher-yielding account, perhaps
savings,” said Sandra L. Thompson, tax-advantaged retirement savings a CD where the earnings can get an
Director of the FDIC’s Division of plan, “not participating means you are extra boost.
Supervision and Consumer Protection. passing up free money and perhaps Turn a debt payment into a deposit.
“However, we encourage you to follow losing out on a valuable tax break,” If you pay off a debt, such as the
a few simple money-management tips added Reynolds. outstanding balance on a credit card,
that can help you cut your expenses or if you make that last loan payment
Pay yourself first. That means each
and put money aside for savings.” on your car, put that money to work as
month, before you’re tempted to spend
First, start by following our suggestions money, commit to putting a good bit part of your savings.
on the previous page for trimming of it into a savings account. You can “If you take the loan amount you
your spending. Doing so, you should write out a check to be deposited into had been paying and start putting
have more money available to set aside your savings account, but it’s much it directly into savings each month,
for other needs. Beyond that, here are easier to arrange with your bank you’ll be earning interest — not paying
ways to start saving more. to automatically transfer a certain interest — and there will be hardly any
amount from your paycheck or your noticeable change in cash flow,” said
Have an emergency savings account.
checking account into savings. And Robert W. Mooney, FDIC Deputy
This is an account you can tap if you
as you pay your bills, your mortgage Director for Consumer Protection and
lose your job or have major, unforeseen
and other obligations, take satisfaction Community Affairs.
expenses. “Emergency savings will help
in knowing that some of your
ensure that you don’t have to borrow Save, don’t spend, a financial
hard-earned dollars are already saved…
from your retirement nest egg or take “windfall.” If you receive a large
for you!
out additional loans that would push sum — perhaps from an inheritance,
you into debt,” said Luke W. Reynolds, Start small. “By consistently saving an insurance payment, a tax refund or
Chief of the FDIC’s Community small amounts, even $25 out of every a bonus at work — deposit that money
Affairs Outreach Section. paycheck, your savings account will into a savings or investment account
A general rule of thumb is to have
grow and you will be motivated to try before you’re tempted to spend it. Q
to save more,” said Reynolds. “Even
enough money in this “rainy day” fund
equal to at least two months of living
expenses. If your employment outlook
is especially uncertain, consider setting
aside enough to cover six or more
months of anticipated expenses.
Also, keep your emergency savings in
an account that will be fairly liquid —
such as a bank savings account, money
market account or a short-term
certificate of deposit (CD) — so you
can withdraw the money relatively
quickly, if necessary. “You should
probably also keep your emergency
money in a deposit account, where
your funds are protected by federal
deposit insurance, as opposed to stocks
FDIC Consumer News Winter 2008/2009
3
MANAGING YOUR M ONE Y I N GOOD T I M E S AND BAD
For the last 75 years, especially four beneficiaries, and the same
during times of economic uncertainty, applies to the wife.)
families have counted on the certainty
If you have more than
of federal deposit insurance. “The
$250,000 at one insured
American people can rest comfortably
institution, find out if it is
knowing that their FDIC-insured
fully insured. It’s especially
deposits are 100 percent safe,” said
important to take a closer
FDIC Chairman Sheila C. Bair. “In
look at your deposit insurance
fact, there’s no safer place in the
coverage after an unusually
world for their checking, savings or
large deposit, such as after
retirement money.” How can you
a home sale, an inheritance,
make sure all your deposits are safely
or if you “roll over” a large
protected within the federal insurance
company pension into an IRA
limits?
at a bank. insurance limit, consider taking
Learn the rules for deposit steps so that all the money is
Another time to review your
insurance coverage. In particular, be fully insured. Depending on your
insurance coverage would be after
aware that Congress has temporarily situation, one possibility may be to
the death of a joint account owner or a
raised the basic deposit insurance place some funds in another ownership
beneficiary on a revocable trust deposit
coverage from at least $100,000 to at category at the same institution. That’s
account. Likewise, look at your deposit
least $250,000 per depositor, through because deposits in separate insurance
insurance if you have accounts at two
(under current law) December 31, categories are separately insured up to
institutions that merge.
2009. That means, through 2009, the FDIC’s limit.
if you (or your family) have up to The FDIC has resources you can turn
Another option is to move some
$250,000 in your deposit accounts at to if you have questions about your
funds to deposit accounts at another
one insured bank, you don’t need to deposit insurance coverage. They
FDIC-insured institution. This option
be concerned about the safety of your include information online at
works well for people who don’t want,
money. www.myFDICinsurance.gov, which
or don’t qualify for, other ownership
features our Electronic Deposit
Also remember that you may qualify categories at their existing bank.
Insurance Estimator (EDIE), an
for more than the basic insurance
interactive Web site that can be used “Remember, you can always check with
coverage at one insured bank if the
to calculate your deposit insurance the FDIC if you are unsure about your
funds are held in different “ownership
coverage. A Spanish version of EDIE is coverage or your options for becoming
categories.” For example, under
available at www.fdicseguro.gov. fully insured,” said Martin Becker, also
existing law, if a couple has deposits
a Senior Consumer Affairs Specialist at
in single accounts, joint accounts and EDIE also will provide you with a
the FDIC.
Individual Retirement Accounts (IRAs) printable report for each bank that
at the same bank, through year-end shows whether your deposits are For more information about FDIC
2009, they could qualify for up to $1.5 within or exceed coverage limits. insurance, visit www.fdic.gov/deposit/
million of FDIC insurance coverage “EDIE’s ability to provide insurance deposits. Q
(see the box on the top right). information about your accounts makes
it much more useful than a brochure,” If you have more than $250,000 at
In addition, if you have deposits in
said Kate Spears, an FDIC Senior
another category called revocable one insured institution, find out if it is
Consumer Affairs Specialist.
trust accounts — typically payable- fully insured. It’s especially important
on-death and living trust accounts — You also can call the FDIC toll-free at
to take a closer look at your deposit
you’d receive up to $250,000 in FDIC 1-877-ASK-FDIC (1-877-275-3342).
insurance coverage for each beneficiary. Information specialists are available insurance coverage after an unusually
7:00 a.m. to 8:00 p.m. (Eastern Time), large deposit, such as after a home sale,
That means a revocable trust account
Monday through Friday, and from 9:00 an inheritance, or if you “roll over” a
owned by a husband and wife naming
a.m. to 5:00 p.m., Saturday and Sunday.
four beneficiaries would be insured up large company pension into an IRA
to $2 million. (The husband is insured If you’re sure that some of your at a bank.
up to $1 million because he has named deposits are over the FDIC
numbers, perhaps as part of a fake go home and fill out an evaluation of high-yielding accounts have strings
job application. Or, you could face the store’s money-transfer service. attached, like a requirement that you
major losses if your new boss requests But eventually, perhaps a couple buy insurance or annuities you may
that you deposit a check or electronic of weeks later, the cashier’s check not want. Other accounts may be
transfer into your bank account and you deposited will be returned as deceptively advertised as FDIC-insured
wire funds out of your account (after counterfeit, and you will be responsible accounts but they’re not, and that’s a
deducting your “commission”), and for the money you withdrew from violation of federal law.”
later your bank tells you that the your account.
In general, how can you protect
original deposit was bogus and you’re
“Part of what makes this swindle yourself from financial scams and
responsible for the money.
successful is that the criminals stress rip-offs?
According to Nelson, “If the check or that the entire assignment must be
• Be wary of requests to “update”
electronic deposit is fraudulent, you ‘confidential,’ from ordering the
or “confirm” personal information —
will likely lose the money wired out money transfer at the store to filling
such as your Social Security numbers
of your account, plus you may have out the evaluation form,” explained
and bank account and credit
difficulty opening a new bank account Millie Spencer, a financial crime
card numbers (including security
until your name is cleared from any specialist with the FDIC.
codes) — in response to an
suspicion that you were a willing
Fraudulent e-mails, calls and faxes advertisement or an unsolicited
partner in any fraud.”
related to bank failures, mergers call, text message or e-mail. Be
For more information about or other current events: Crooks extremely skeptical of any unsolicited
work-at-home scams and a complaint are pretending to be from a financial offer that requires you to send a
form, go to www.IC3.gov, a Web site institution in the news (perhaps one payment or provide bank account or
established by the U.S. Department of that has acquired a failed institution) other personal information before
Justice and the National White Collar or a government agency (such as the receiving anything in return.
Crime Center. FDIC) asking for consumers to supply
• Take the time to thoroughly research
personal information, such as account
“Mystery shopper” scams: It’s the people or organizations offering a
and Social Security numbers or
common for businesses and consulting job, loan, deposit, investment or other
passwords. Don’t fall for this trick.
firms to pay consumers to visit and “opportunity” involving your money or
shop at their retail locations or dine “For example, your bank, credit card personal information.
at their restaurant and then submit issuer and any other reputable business
• Walk away from any offer from
confidential reports about the you deal with won’t call or e-mail
a stranger that would involve a
experience. These part-time workers you to confirm account numbers or
large deposit into your account and
are known as “mystery shoppers” and passwords because it will already have
instructions to wire any of that money
“secret shoppers.” But fraud artists that information,” said Nelson.
back, perhaps to someone in another
are cashing in by setting up fake
False or misleading sales of country.
mystery-shopping programs that look
certificates of deposit (CDs):
very real, including job applications • In general, assume that any offer that
Bank CDs issued by FDIC-insured
(requesting Social Security numbers) sounds unrealistic or otherwise “too
institutions have long been considered
and professional-looking Web sites, good to be true” — especially one from
to be among the safest financial
and then convincing new recruits to a stranger or an unfamiliar company —
investments available because of the
wire money using funds from their own is probably a fraud.
deposit insurance protection. However,
checking account.
with the slow economy resulting To learn more about common financial
Here’s a typical scenario. Your first in relatively low interest rates on frauds and how to protect yourself,
assignment as mystery shopper is to insured CDs, savers looking for high see back issues of FDIC Consumer
deposit a $2,000 cashier’s check into yields may be tempted by Internet or News (online at www.fdic.gov/
your bank account — supposedly to newspaper advertisements offering consumernews) and our multimedia
cover a $1,900 purchase you’re about unusually high returns. While most presentation “Don’t Be an Online
to make for your new part-time “job,” advertising for CDs is accurate and Victim” (at www.fdic.gov/consumers/
plus a $100 advance payment for your legitimate, beware that some may be consumer/guard).
services. You’re then instructed to misleading or even untrue.
Also visit www.mymoney.gov/
withdraw $1,900 in cash from your
“Look very closely at the fine print in scams.shtml, the scams and frauds
bank account, take it to a particular
those eye-catching ads,” said Richard section of the U.S. government’s Web
site dedicated to financial education. Q
store to have the funds wired to a
M. Schwartz, an FDIC attorney who
person (a “colleague” of your new
specializes in consumer issues. “Some
employer) in Canada. Later, you’ll
Borrowing Wisely
over again and again and they end up
paying very substantial fees for a very
small loan,” said Robert W. Mooney,
FDIC Deputy Director for Consumer
You Can Get a Good Loan: Ways to Make It Happen Protection and Community Affairs.
Before risking getting trapped in
You probably know from recent news payment, and they don’t consider other high-cost debt such as this, Mooney
reports or your own experience that very important and potentially costly said, check with your primary financial
lenders are tightening their standards, parts of the package. institutions for lower-cost sources of
making it harder for some people to short-term cash.
For example, be sure to check out the
get a loan or charging more for some
fees associated with the loan, which Save money on your existing loans
types of credit than in the past. But
could dramatically raise the “real” and credit cards. For example, with
what you may not know is that credit
interest rate you’re paying. That’s why your credit cards and department store
is still available. “You need to make
it’s important to shop among several charge cards, which tend to charge
sure you are in the best position to
lenders and compare the Annual high interest rates, you can cut costs
get a good loan at the best price,” said
Percentage Rate (APR), a required by paying off most or all of the balance
Janet Kincaid, Chief of the FDIC’s
disclosure showing the total cost of the each month. However, if you’re unable
Consumer Response Center.
loan, including interest charges and to pay most or all of a card balance,
Here are ways to try to get a loan that many fees, expressed as a yearly rate. pay as much as possible, at least the
makes sense for you. “A loan with a straight interest rate of minimum amount the card issuer says
around 5 percent could have an APR is due.
Try to raise your credit score,
of 8 percent when you figure in fees or
preferably months before you may Also consider your options if your
other charges,” said Kincaid.
need to apply for a loan or credit lender raises the interest rate on
card. A credit score is a numerical Likewise, if you have to borrow a small your credit card. If you’ve got a good
summary that reflects how risky amount of money fast — perhaps to payment history, you can call your
someone is as a borrower. Among help make ends meet — do so wisely. bank and ask it to reconsider the rate
other things, it takes into account how increase. “Sometimes banks will make
Many people turn to “alternative”
well the person has handled credit in an accommodation to keep a good
financial services providers, such as
the past. Lenders look at a credit score customer, especially in the credit
pawnshops, car-title lenders (for a loan
when deciding on loan applications. card area, where there is so much
secured by the borrower’s car) and
By aiming for the best possible score, payday lenders (for unsecured loans competition,” said Joni Creamean, an
you may be able to obtain a lower-cost that borrowers promise to repay out of FDIC Supervisory Consumer Affairs
loan and save hundreds each year in their next paycheck or regular income Specialist.
interest, especially if you are borrowing payment). “While the upfront fee for If it appears unlikely your lender will
to pay for a home or car. “You need to one of these loans may appear to be reduce the interest rate on your card,
plan ahead,” said Kincaid. “Before you low, many consumers are unable to pay
even think about borrowing money, the loan when it is due, so they roll it continued on the next page
you should be taking steps that can
ensure you will qualify for a loan or
credit card with the best possible
interest rate and terms.”
If you intend to apply for a mortgage
or a car loan, make sure your
credit reports are accurate and do not
include negative information about you
that is incorrect. For more specifics
about improving your credit score —
and your borrowing power — see the
next page.
Be a smart shopper for credit
products: Many people looking for
a new loan or credit card make the
mistake of focusing on one thing, most
likely the interest rate or the monthly
When Payments
President Announces Aid for Millions of
Are a Problem
Distressed Mortgage Borrowers
What to do if you can’t afford
a loan or credit card Plan features loan modifications and refinancing assistance
On February 18, 2009, the Obama significantly decreased in value.
With the economy weakening, more
Administration announced a major For updates and more information,
people are finding it difficult to make
assistance program to help millions in areas such as who may qualify
mortgage, credit card and other
of distressed mortgage borrowers for loan-modification or
payments. If you’re having financial
avoid foreclosure or overcome refinancing assistance, visit
difficulties — due to a job loss, a
obstacles to refinancing their loans. www.financialstability.gov.
higher mortgage payment because
of an interest rate reset or any other The program was announced as The Administration stressed
reason — it’s important to take FDIC Consumer News went to that there will be no fee for
action, preferably as soon as you think print, and details were still being loan-modification or refinancing
you may not be able to afford your developed by the Administration. assistance through the new program,
expenses. The plan features two types of so borrowers should be wary of
assistance for borrowers — loan any organization charging a fee,
“The possibility of not being able to
modifications that reduce the especially if it asks for money in
meet monthly financial obligations,
monthly payment amounts for advance.
especially if it leads to the loss of your
home, can be terrifying,” advised those at risk of losing their home For basic tips from the FDIC on
Susan Boenau, Chief of the FDIC’s to foreclosure, and refinancing what to do if you have problems
Consumer Affairs Section. “If you’re opportunities for borrowers who paying a mortgage or other
having difficulty paying your debts, the are current on their mortgage expenses, including ways to find a
worst thing you can do is ignore the payments but have been unable to reputable counselor, see the other
situation and do nothing.” refinance because their homes have article on this page. Q
Regardless of the reasons for your
financial difficulties, here are some Nagle, FDIC Associate Director for Housing and Urban Development
basic steps to take. Consumer Protection. Immediately (HUD) by going to www.hud.gov/
Consider moves that can enable contact your creditors and attempt to offices/hsg/sfh/hcc/hcs.cfm or
you to make your payments. Look work out a solution. calling 1-800-569-4287. (Also see
for ways to cut expenses (see Page 2). the box above regarding a major new
Be proactive if your payment
If possible, pay your bills using funds assistance program for distressed
problems have already begun.
in your bank and brokerage accounts, homeowners announced by the Obama
Remember, if you can’t make your
and avoid withdrawing or borrowing Administration.)
mortgage payments, you risk losing
money from your retirement savings. your home to foreclosure. You need Likewise, if you’re having problems
Keeping current on loan, credit card to seek help…and do so fast…by paying your credit card, student loan or
and other bill payments also will discussing your options with your other debt, contact your lender to work
help minimize damage to your credit lender or loan servicer (the company out a solution. And if you need help
score (see Page 8), which is especially that collects payments and performs negotiating with a lender or otherwise
important if your financial difficulties other work for the lender, including getting a debt problem under control,
are because of a job loss. Why? Because negotiating new payment plans with consider asking an attorney, accountant
as you apply for new jobs, employers borrowers who are late or delinquent or another trusted advisor to refer you
may review your credit report. on their loan payments). to a reliable credit counselor who, at
little or no cost, can help you develop a
Contact your lenders if you Or, you may first want to seek
recovery plan. Many communities have
anticipate payment problems. help from a trained, reputable
free legal-assistance programs that can
“Don’t wait until after you can’t housing counselor. To find one,
provide advice and referrals.
make your mortgage payment or start by contacting groups such
the minimum payment due on your as NeighborWorks America Finally, for warnings about scams that
credit card, because by then, you may (www.nw.org) or by calling target consumers having credit or debt
have damaged your credit rating and 1-888-995-HOPE (4673). You also problems, see Pages 5 and 10. Q
you may have fewer options available can find a housing counseling agency
for getting help,” said Kathleen certified by the U.S. Department of