Banking
Low interest rates good for borrowers, bad for savers
Americans are saving more of their earnings than they have in years, and that's a good thing. But unfortunately, we're not being rewarded for it the way we were in flusher years. By now, everyone has heard about the government's unprecedented actions to drop interest rates to historic lows so cash-strapped individuals, businesses and banks can borrow on more forgiving terms. The down side of this is that bank account holders are now getting rock-bottom interest returns on their money.
Currently, we're saving around 3% of our collective income. That's not really an achievement to be proud of -- not yet, anyway --- but it's still a great step up from where we were a couple of years ago when the U.S. had a negative savings rate, meaning that we as a nation were literally spending more than we made.
If you can't afford mortgage, don't borrow to send kid to college
When I can't think of anything else to write about, I sometimes like to pick up a copy of US News & World Report's America's Best Colleges, and spend about 30 seconds flipping through to find one piece of really, really, really horrible advice.And so here it is, from an article by Kim Clark:
The federally backed parent PLUS loan can cover the student's entire cost of college (less any other financial aid). But PLUS loans can cost as much as 8.5 percent a year plus a fee of 4 percent of the loan amount, for a total annual percentage rate of as much as 9.4 percent. Shoppers can find discounts, however. Those who borrow directly from the federal government and make automatic electronic payments are charged just 7.65 percent in interest. (After fees, the APR totals 8.55 percent.) And the eligibility criteria are comparatively forgiving, even for parents who are a little behind on their mortgages.
Personal checks poised to be a relic
Is the personal check on its way out?The Dallas Morning News recently suggested that -- and, no, they aren't the first to suggest it, nor will they be the last -- but they point out that several stores lately have made it their policy to refuse personal paper checks: Diesel, True Religion, Ed Hardy and Lululemon Athletica, which are all clothing stores. And maybe there's something in the water, since the clothing giant Gap is also exploring the concept of no longer accepting personal checks.
My WalletPop colleague Martha C. White has also written about Whole Foods no longer accepting checks in some stores, as part of a get-rid-of-checks experiment.
Scam busters turn the tables on those running the Nigerian scam
Beloved One,I have the Courage to Crave Indulgence for this most opportune business venture...
Look familiar? A day doesn't go by day that I don't receive an e-mail from people with names like Dr. Fortunate Goodpence or Mrs. Pius Motubo soliciting my aid in recovering millions from banks in Nigeria, if only I just sent a little money to get started. Which means I greet each morning with the same thought: who still falls for this crap?
Modern advance-fee scams, commonly called 419 scams after the number of the Nigerian Criminal Code, have been around for over twenty-five years, but exploded with the growth of the internet. So you'd think we'd all be wise to them, yet the latest statistics available show that worldwide losses to these kind of scams topped $4.3 billion in 2007 - and those were just the ones reported. Because, let's face it, losing money due to greed and a sense of colonial superiority to Africans is super embarrassing.
How to find a small bank or credit union
When we wrote about sneaky bank practices, a lot of readers wrote in suggesting that fee-weary customers ditch the big bailout-recipient banks in favor of small community banks or credit unions. In fact, many professional personal finance advisers say exactly the same thing, so WalletPop talked to a few of them to get their recommendations and advice for how to go about finding one of these friendlier financial institutions. First, you'll need to find a place. While finding a bank can be as easy as driving down your local main street or commercial district, finding a credit union can take a little more sleuthing. Since credit unions are membership organizations, you need to find out which ones you are eligible to join, says David Beck, director of policy at Center for Community Self Help, an organization which includes the Self Help Credit Union and the Center for Responsible Lending.
In many cases, this may be as simple as living or working in an area that is home to a particular credit union, but being a current or former member of the military, many trade unions, religious communities and educational institutions may also qualify you for credit union membership.
Fewer Americans using credit cards for the holidays
In yet another sign that Americans are still cautious -- and growing more so -- about their spending, new research shows that fewer of us will be using credit cards to make our holiday purchases this year. According to a survey conducted by BIGresearch for the National Retail Federation (as reported here by Reuters), the number of consumers using credit cards for holiday purchases will drop more than 10% this year. Only 28.3% of shoppers say they'll use credit cards to buy presents, down from 31.5% last year.
What are we doing instead? Paying cash. The number of survey respondents who said they'll be using cash to buy holiday gift this year rose by almost exactly the same percentage as the drop in credit-card users, at 9.1%. This is a step in the right direction for consumers, as more of us are making a conscious decision to live within our means.
It's bad news for the already-beleaguered credit-card industry, though; we've recently written about new data showing that credit-card companies will probably have many more defaults next year.
It's also bad news for the nation's retailers, which are already bracing for a weak holiday shopping season. The National Retail Federation survey also revealed that we're buying more practical gifts this year. A greater percentage of consumers plan to buy clothing this year, and fewer are buying electronics and jewelry.
New credit card data shows Americans still struggling
A recent report shows that credit card charge-offs have dropped a bit from their highs, but delinquencies -- that is, payments more than 30 days overdue - are still on the rise.This article from MSNBC says that spells continuing trouble for Americans' personal finances and our nation's still-shaky economic recovery.
While the drop in charge-offs -- meaning that the issuer writes off the amount owed as a loss -- was attributed to people funneling tax refunds into their credit card debt, the high and still rising level of unemployment triggered the growth in delinquent payments.
Overdraft protection coming ... at a snail's pace
As we told you earlier, the Federal Reserve just announced it would begin reigning in the scourge of debit-card users nationwide: overdraft charges. The good news is that the new ruling will prohibit banks from foisting this so-called protection on customers automatically; instead, consumers will have to voluntarily sign up (don't all line up at once, now!) The bad news: It's going to be another eight long months before this relief comes. The government is making Americans wait until July 1, 2010, to get the relief they've been literally begging for, even though Federal Reserve chairman Ben Bernanke called the new ruling "an important step forward in consumer protection."
Faces of loan modification: Christine Attalla, Bolingbrook, Ill.
How well is the government's loan modification working? WalletPop's four-part special report continues with profiles of some of those trying to get help. To read the overview, click here.Christine Attalla is among the lucky. The suburban Chicago homeowner not only got a temporary loan modification, but she's on track to convert it to a long-term adjustment before Christmas.
She even calls herself lucky, although when she does there's a quiver in her voice. That's because in the process, her credit took a beating.
For a solo entrepreneur -- Attalla, 38 and divorced, runs her own public relations company -- poor credit is a serious problem.
It all began last spring, when Attalla realized the economic downturn was making it increasingly difficult for her to manage her $3,000-a-month payment on her Bolingbrook home. And she was pregnant, so she knew she'd have less earning power later in the year.
Attalla heard from a friend about the modification program, applied in April through her lender, CitiMortgage, and waited.
She was approved for a three-month trial reduction -- for June, July and August -- which cut her monthly payments in half. If she kept current, she said, she would qualify for a permanent modification that started with a 2% interest rate and tiered up after a decade. So far, so good.
Faces of loan modification: Kathy Partak, Auburn, Calif.
How well is the government's loan modification working? WalletPop's four-part special report continues with profiles of some of those trying to get help. To read the overview, click here.Kathy Partak went into loan modification armed with the powerful combination of knowledge and motivation. She had worked in the mortgage business, so she knew her rights and the right vocabulary to use. And she had a step-rate loan that was about to step up dramatically.
Add to that an on-the-job shoulder injury that left her unemployed and Partak figured she was a perfect candidate for modifying the loan on her three-bedroom home in Auburn, Calif.
But Chase Manhattan Bank denied her a modification, Partak said, telling her, "Unemployment is not a permanent hardship."
"Hopefully not!" said Partak, 42. "But it's one of the reasons they allow for on their paperwork of qualification."
Faces of loan modification: Mark Bonacorso, Tucson, Ariz.
How well is the government's loan modification working? WalletPop's four-part special report continues with profiles of some of those trying to get help. To read the overview, click here.Public relations consultant Mark Bonacorso faced the good and bad news of divorce with resolve. The good: he got the 3,500-square-foot adobe in northwest Tucson. The bad: he also got the first and second mortgages and the $2,700-a-month payments.
He wanted to make it work, especially since his home was worth less than he owed.
At first, with business strong at his firm, Media Ink, this seemed feasible. Then, as the recession slowed work, forcing him to lay off his two employees in March, those payments became daunting.
Bonacorso was not looking for Bank of America, his lender, to cut his principal. He called hoping to reduce his monthly payments by combining his first and second mortgages, lowering their interest rates -- now 5.875% on his first; 7.625% on his second -- and extending the loan's term from 30 years to at least 40.
Officially, the overdraft bank fee nightmare is almost over
The Federal Reserve announced on Thursday that starting July 1, 2010, financial institutions can no longer allow customers to overspend their account and then charge overdraft fees -- in most cases -- unless the customers have signed up for a bank's overdraft protection plan that includes such fees. My guess is, most won't.As The Washington Post explains, the overdraft fee won't disappear entirely. Banks can still charge overdraft fees on checks or an automatic bill payment. But the days of buying a cup of coffee or stick of gum with your debit card without realizing you don't have the funds and then getting slammed with a $37.50 fee--that will end on July 1, 2010. Instead, you'll simply have your debit card declined. And if that thought truly embarrasses you, then tell your bank you want that overdraft protection.
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Interest Rates
| Type | Current | APR |
|---|---|---|
| 30 yr fixed mtg | 5.02% | 5.16% |
| 5/1 ARM | 4.18% | 3.79% |
| $30K HELOC | 5.22% | 0.00% |
| 36 month new car loan | 6.67% | 0.00% |
| 1 yr CD | 1.56% | 1.57% |
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Interest Rates
| Type | Current | APR |
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| 3 month CD | 0.77% | 0.77% |
| 6 month CD | 1.12% | 1.13% |
| 1 yr CD | 1.56% | 1.57% |
| 5 yr CD | 2.59% | 2.62% |
| MMA | 1.03% | 1.04% |
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