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ALSO INSIDE: President Announces Aid for Distressed Mortgage Borrowers

SPECIAL EDITION

Managing Your Money in


Good Times and Bad
SPENDING LESS
Good Ways to Get Started Cutting Back

SAVING MORE
7 Tips on Putting Your Dollars to Work…for You!
Make the Most of Your FDIC Guarantee

PROTECTING AGAINST FRAUD


When the Economy Cools Down, Scams Heat Up

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

FDIC Consumer News Winter 2008/2009


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M A N A G I N G Y O U R M O N E Y I N G O OD TIM ES AND BAD

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
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MANAGING YOUR M ONE Y I N GOOD T I M E S AND BAD

Make the Most of Your FDIC Guarantee


How to be sure your deposits are fully insured

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

FDIC Consumer News Winter 2008/2009


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M A N A G I N G Y O U R M O N E Y I N G OOD TIM ES AND BAD

Protecting Against Fraud


When the Economy Cools Down, Financial Scams Heat Up
Protect yourself from con artists preying on distressed homeowners and others facing difficulties

The economy may be slow, but for


thieves prowling for victims, business is
always brisk.
“Crooks are taking advantage of the
difficult economy, including tighter
credit and higher unemployment, to
trick people into accepting fraudulent
and deceptive offers that seem
beneficial on the surface but actually
could cost a lot of money or result in
identity theft,” said Michael Benardo,
manager of the FDIC’s Financial
Crimes Section.
Here are some common schemes
being reported, followed by tips for
protecting yourself.
Mortgage rescue schemes: Con
artists are preying on hard-pressed
homeowners in the current depressed
housing market. David M. Nelson, a
fraud examiner in the Financial Crimes
Section, said that companies posing referral to a counseling agency certified Consumer Protection. “And in most
as foreclosure specialists “promise by the U.S. Department of Housing cases, loan fees are typically collected
miracles,” such as falsely claiming they and Urban Development (HUD), at the end of the lending process, not at
can save a home from foreclosure by visit www.hud.gov/offices/hsg/sfh/hcc/ the beginning.”
lowering the loan balance, interest rate hcs.cfm or call 1-800-569-4287.
For guidance about avoiding scams
and monthly payments, and “all for a
To see a Federal Trade Commission involving credit counseling for people
large upfront fee.”
warning about foreclosure rescue behind on their bills, see Page 10.
Instead, distressed homeowners should scams, go to www.ftc.gov/bcp/edu/
Work-at-home scams: Thieves prey
contact their mortgage loan servicer pubs/consumer/credit/cre42.shtm.
on people who have lost their jobs or
to request a modification of their
Other credit-related scams need extra cash by sending unsolicited
loan at no cost (see Page 9). “It’s very
involving upfront fees: Several of e-mails and running advertisements
important for qualified borrowers
these have been circulating since on the Internet and in newspapers.
to understand that the industry
problems emerged in mortgage and The ads offer flexible, easy part-time
best practice is loan modifications
other credit markets. In some cases, jobs working at home and involve a
free-of-charge,” said FDIC Chairman
con artists claim they can “guarantee” lot of pay for doing very little, such as
Sheila C. Bair. “They do not need to
loan approvals to people with credit processing payments or shipping items.
spend thousand of dollars to get help.”
problems — in exchange for a big These offers may seem especially
Before contacting your lender or loan upfront fee. Of course, after collecting attractive if you’ve just lost your job.
servicer, though, think about getting the nonrefundable fee, the loan falls What can go wrong? Here are two
help from a trained, reputable housing through. common scenarios.
counselor who can help you for no
“No legitimate lender can promise a Your “employer” may steal your
charge or a small fee. Find one through
loan without looking at a borrower’s identity and commit fraud by obtaining
groups such as NeighborWorks
financial condition,” explained Michael your bank account and Social Security
America (www.nw.org) or by calling
L. Jackson, an Associate Director of
1-888-995-HOPE (4673). Or, for a
the FDIC’s Division of Supervision and continued on the next page

FDIC Consumer News Winter 2008/2009


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MANAGING YOUR M ONE Y I N GOOD T I M E S AND BAD

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

FDIC Consumer News Winter 2008/2009


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M A N A G I N G Y O U R M O N E Y I N G O OD TIM ES AND BAD

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

FDIC Consumer News Winter 2008/2009


7
MANAGING YOUR M ONE Y I N GOOD T I M E S AND BAD

consider a written request to repay the


outstanding balance under the “old”
interest rate and terms. “If the lender
Your Credit Score: It Pays to Aim High
approves your request, this means Having a good credit score is always credit bureaus — Equifax,
you’ll save on the remaining finance important to consumers planning to Experian and TransUnion. Go to
charges but you’ll probably also be apply for a loan or to get or keep a www.AnnualCreditReport.com or call
closing your account,” Creamean good deal on a credit card, but that’s toll-free 1-877-322-8228 to order
explained, “so be sure you have other especially the case in an uncertain free credit reports.
options for borrowing money before economy. “In difficult times, lenders
Experts suggest that consumers
you take this course of action.” are pickier about the loans they make
spread out their annual requests —
and who they lend to, and that means
You also can shop around for a credit for example, to get a credit report
consumers can and should be more
card with a better interest rate, but from a different agency every four
proactive in improving their credit
factor in any fees you’d pay. months — to monitor big changes.
score,” said Janet Kincaid, Chief of the
Also, it’s important to get reports
There also are ways to cut your FDIC’s Consumer Response Center.
from each agency because the
mortgage costs, such as by periodically
First, what is a credit score? It’s a information may differ.
adding a little extra to your monthly
number calculated by a credit bureau,
payment (assuming you can spare Pay your bills on time. One or two
a lender or another company to
the money). Doing so will reduce the late payments on your loans or other
summarize each person’s financial
length of your loan, which in turn can obligations over a long period of time
reliability. You also may hear a credit
cut the total amount of interest you may not significantly damage your
score referred to as a “credit rating”
pay. credit record, but making a habit
or as a “FICO” score (the latter a
of this can count against you. Be
With any type of loan, make sure your reference to a widely-used credit
especially careful with payments in the
payment is received on time. Don’t score produced by the Fair Isaac
months before you apply for a loan.
wait to pay at the last minute. “Paying Corporation).
Your payment history is the largest
on time will help minimize the finance
In general, when it comes to borrowing percentage of your credit score, so
charges and stave off any potential late
money, the higher your credit score, make every effort to pay your bills
fees,” explained Kirk Daniels, also an
the more likely you are to get a loan or on time.
FDIC Supervisory Consumer Affairs
credit card with a low interest rate and
Specialist. Having a mortgage, especially one
low fees. But credit scores also can be
that is paid on time, can be especially
In addition, be sure to read all used for other purposes, such as when
beneficial in improving a credit score
the literature from your lender you apply for a job, rent an apartment
or maintaining a good one.
that describes account terms and or obtain insurance.
conditions, starting when you open an Keep your debt levels low. The
How can you improve your credit
account and later in your monthly or higher the ratio of your debt to your
score and get a better deal, especially in
other mailings. income or your available credit lines,
a turbulent economy?
the more you will be viewed by
“Sometimes a lender may send a notice
Review your credit reports potential lenders as a higher-risk
of changes to your credit card account
for incomplete or erroneous borrower. “Just because you have a
and you may easily mistake it for an
information and get it corrected. $20,000 limit on your credit card or
advertisement,” Daniels added. “These
Credit reports, produced by credit home equity line of credit doesn’t mean
mailings often ask you to confirm
bureaus, detail each person’s financial you can borrow that much money
the changes or ‘opt out’ by providing
history (such as how you pay your bills without it affecting your credit score,”
notice to the bank. You don’t want to
or if you have filed for bankruptcy) and said Kincaid.
be surprised when your next statement
are used to develop credit scores. It’s
arrives and you find new or higher She added that paying off your credit
important to review your credit reports
charges you easily could have avoided if cards every month is one of the best
periodically — especially in the months
you had responded to the mailing.” strategies for keeping a good credit
before you make a major purchase,
score and saving money on interest at
Want to learn more about how to such as a new home or car — to make
the same time.
manage your loans and credit cards? sure that inaccurate information hasn’t
See the Summer 2007 special edition lowered your credit score. For more suggestions, start at the
of FDIC Consumer News entitled Federal Trade Commission’s Web site
By federal law, you are entitled to one
“51 Ways to Save Hundreds on Loans about credit reports and credit scoring
free copy of your credit report every
and Credit Cards,” online at at www.ftc.gov/bcp/menus/consumer/
credit/reports.shtm. Q
year from each of the three nationwide
www.fdic.gov/consumers/consumer/
news/cnsum07. Q

FDIC Consumer News Winter 2008/2009


8
M A N A G I N G Y O U R M O N E Y I N G O OD TIM ES AND BAD

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

FDIC Consumer News Winter 2008/2009


9
MANAGING YOUR M ONE Y I N GOOD T I M E S AND BAD

When a Debt Collector Calls Take Charge of Your


Beware of unfair practices and scam artists offering to “help” with Credit Cards
credit counseling and debt management
Credit cards offer tremendous benefits
People who are late making payments improperly or illegally. If you’re not for consumers, including the ability to
on a loan, a credit card or other bills sure how to locate that regulator, you afford purchases big and small, in good
may eventually be contacted by a “debt can contact the FDIC for guidance (see times and bad. But chances are you
collector,” a third-party hired by the the back page). can get even more out of your credit
original lender. Dealing with a debt cards — and save more money — if
Also be on guard against scam artists
collector can be stressful. But be aware you remember these basic tips.
who prey on people who are late
that if you are overdue on a bill and
paying their bills by offering to “help” Choose them carefully. Don’t choose
get contacted by a debt collector, the
by reducing or eliminating their debts. a card just because of the freebies that
federal Fair Debt Collection Practices
come with it or because there’s no
Act requires that you be treated fairly “Consumers should be especially wary
annual fee. Look for a card that’s best
and without harassment. of promotions and unsolicited offers
for your borrowing habits.
by companies that advertise credit
In general, the law prohibits certain
counseling services or that promise to Ask yourself if you expect to pay your
unfair and deceptive collection
settle your debts with your creditors balance in full or if you’ll routinely
practices. For example, the law
for less than you owe,” said Deirdre carry a balance on your card from
prohibits a debt collector from calling
Foley, an FDIC Senior Policy Analyst. month to month, which means
you before 8 a.m. and after 9 p.m.,
“While there are many reputable you’ll be charged interest. Generally
unless you agree. The law requires a
organizations that offer credit speaking, if you expect to pay your
debt collector to stop contacting you if
counseling or that help consumers credit card bill in full each month, your
you make the request in writing.
manage their debts, other companies best bet is a card with no annual fee
Also, within 30 days from the initial charge high fees for questionable and with the kind of rebates or rewards
contact made by a debt collector, you services or for services that are never that fit your lifestyle. If you don’t
have a right to dispute any of the debt delivered.” (Also see Page 5 for tips on expect to pay off your card balance in
you are told you owe. If you dispute how to avoid mortgage rescue schemes full most months, look for a card with
the bill in writing, the debt collector and a variety of credit-related frauds.) a low interest rate and the right mix of
can’t contact you again to collect the rebates or rewards to justify any fees,
money until you are provided with Be on guard against scam artists including an annual fee.
proof of the debt, such as a copy of a who prey on people who are late Also, before you apply for a card,
bill.
paying their bills. Be especially wary of carefully review all other terms and
If you have a problem with a debt promotions and unsolicited offers conditions, which must be disclosed to
collector, you can report it to your you before you incur any charges on
that promise to settle your debts with
state Attorney General’s office (listed the account. Once you use a card, you
in your local phone book or other your creditors for less than you owe. have entered into a contract with the
directories) and the Federal Trade card issuer and you are obligated to
Commission (visit www.ftc.gov or call Foley added that before working with abide by the terms disclosed to you.
toll-free 1-877-FTC-HELP, which is any company or organization that says
Use them carefully. Credit cards offer
1-877-382-4357). it will settle or negotiate your debts,
great benefits, especially the ability to
Note that the Fair Debt Collection check it out with your state Attorney
buy now and pay later. But you’ve got
Practices Act covers debt collectors General and the Better Business
to keep the debt levels manageable
but not banks or others that lend Bureau.
and pay on time. If you don’t, the costs
the money initially. However, under For more information about how to in terms of fees and interest, or the
federal law governing unfair or protect yourself when dealing with a damage to your credit score (see Page
deceptive business practices, banks debt collector or a credit counselor, 8), could be significant. Among the
cannot engage in abusive behavior read the consumer facts published by most important things to know and do:
when trying to collect a debt. If you the Federal Trade Commission
• Understand your card’s terms,
have a question or a concern about at www.ftc.gov/bcp/menus/consumer/
especially when interest will be charged
your bank’s practices, contact its federal credit/debt.shtm.
and at what interest rate. Be aware of
or state banking regulator. You have
For guidance from the FDIC about the circumstances that would allow
the right to file a complaint with the
how to handle difficulties making a your card issuer to increase your
regulator if you believe the bank acted
loan or bill payment, see Page 9. Q interest rate.

FDIC Consumer News Winter 2008/2009


10
M A N A G I N G Y O U R M O N E Y I N G O OD TIM ES AND BAD

• Pay as much as you can to avoid or


minimize interest charges. If possible, FDIC
pay your bill in full each month. Consumer News
Remember, paying only the minimum Published by the Federal Deposit
due each month means you’ll be paying Insurance Corporation
a lot of interest for many years with
little reduction in the amount you owe. Sheila C. Bair, Chairman
Those interest costs could far exceed Andrew Gray, Director,
the amount of your original purchase. Office of Public Affairs (OPA)
• Pay on time to avoid late fees. One Elizabeth Ford, Assistant Director, OPA
option is to arrange for an automatic Jay Rosenstein, Senior Writer-Editor, OPA
withdrawal from your checking
account to cover your credit card bill Mitchell Crawley, Graphic Design
and perhaps other recurring expenses FDIC Consumer News is produced
(but be sure to record the transaction). quarterly by the FDIC Office of
Another option is to pay online, Public Affairs in cooperation with
generally at least two days before the other Divisions and Offices. It is
due date to be sure it is processed intended to present information in a
on time. If you pay by regular mail, Guard your credit card numbers nontechnical way and is not intended
allow enough time for delivery and from thieves. Never provide your to be a legal interpretation of FDIC
processing by sending your payment credit card numbers — both the or other government regulations and
about a week before the deadline. account number and expiration date policies. Mention of a product, service
on the front and the security code or company does not constitute an
• Stay below your credit limit to avoid endorsement. This publication may be
on the back — in response to an
penalties and a reduction in your credit reprinted in whole or in part. Please
unsolicited phone call, e-mail or other
score. credit FDIC Consumer News.
communication you didn’t originate.
• Read all the mailings from your card In general, only give your credit Send your story ideas, comments,
issuer. They may include notices of an card or card numbers to reputable and other suggestions or
interest rate increase, a reduction in merchants or other organizations, questions to: Jay Rosenstein, Editor,
your credit limit or other changes in and preferably only when you initiate FDIC Consumer News, 550 17th
your account. the transaction. Street, NW, Washington, DC 20429
jrosenstein@fdic.gov
• Check for errors on your credit card When using your credit card online,
bill. If you find charges you didn’t make sure you’re dealing with a Find current and past issues at:
make, call your lender immediately legitimate Web site and that your www.fdic.gov/consumernews
to guard against fraud. Also, protect information will be encrypted
Subscriptions: To receive an e-mail
your rights under the law by mailing (scrambled for security purposes) notice about each new issue with links
a letter to the card issuer’s address for during transmission. to stories, go to www.fdic.gov/about/
billing disputes (found on your credit subscriptions/index.html. To receive
For more guidance, see “How to
card bill) within 60 days of the date of FDIC Consumer News in the mail,
Choose and Use a Credit Card” at
the bill. A phone call, fax or e-mail isn’t free of charge, call the FDIC toll-free
www.fdic.gov/consumers/consumer/
ccc/choose.html. Q
enough to fully protect yourself. at 1-877-275-3342, send an e-mail to
publicinfo@fdic.gov or write to the
FDIC Public Information Center,
This FDIC Special Edition May Be Reprinted 3501 North Fairfax Drive,
Room E-1002, Arlington, VA 22226.
The FDIC encourages financial institutions, government agencies, consumer
groups, educators, the media and anyone else to help make the tips and For More Help or Information
information in this special edition of FDIC Consumer News widely available to
Go to www.fdic.gov or call
the public.
toll-free 1-877-ASK-FDIC — that’s
This and other editions of FDIC Consumer News may be reprinted in whole or 1-877-275-3342 —
in part without advance permission. In addition, the FDIC offers a PDF version
Monday through Friday
at www.fdic.gov/consumernews that looks just like the printed publication and
can easily be reproduced in any quantity. Space on the back page of the PDF 7:00 a.m. to 8:00 p.m., ET
version also was intentionally left blank so that an organization could add its Saturday and Sunday
name, logo, a special message and/or mailing information. 9:00 a.m. to 5:00 p.m., ET

FDIC Consumer News Winter 2008/2009


11
How to Learn More
Sources of Help and Information on Managing Your Money
The Federal Deposit Insurance upon request (by calling that same job loss, mortgage problems and other
Corporation has staff and other telephone number and selecting the financial concerns during difficult
resources that can answer questions option for “FDIC publications”). You times.
about deposit insurance and banking. can also e-mail us using the Customer
For additional information from
If you have a complaint involving an Assistance Form at www2.fdic.gov/
the U.S. government on money
individual institution that you are starsmail or send a letter to the FDIC,
management, go to www.usa.gov/
unable to resolve directly with the Division of Supervision and Consumer
Citizen/Topics/Money_Taxes.shtml
institution, you may contact the FDIC Protection, 550 17th Street, NW,
or call toll-free 1-800-FEDINFO
or another government regulator for Washington, DC 20429-9990.
(1-800-333-4636).
assistance.
Other federal, state and local
You may also find additional
Start at www.fdic.gov/quicklinks/ government agencies also publish
information or assistance at your state
consumers.html or call toll-free consumer information and have staff,
or local government’s Web site or by
1-877-ASK-FDIC (1-877-275-3342). Web sites and other resources that
calling a consumer affairs office listed
Information specialists are available can help answer questions on financial
in the government pages of your phone
7:00 a.m. to 8:00 p.m. (Eastern Time), matters.
book.
Monday through Friday, and from 9:00
Start at www.mymoney.gov, the federal
a.m. to 5:00 p.m., Saturday and Sunday. Financial institutions, consumer
government’s central Web site about
organizations and the news media
FDIC publications, including our managing your money. Its tips from the
also publish personal finance tips you
can find by searching the Internet. Q
quarterly FDIC Consumer News, are FDIC and other government agencies
available at that same Web site and include suggestions for dealing with

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