The Center For Debt Management
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Practical Advice For Everyone
On How to Save and Manage Money

... Continued From Previous Page

Keep banking costs down. With planning, you can sidestep some of the more costly fees and penalties. Examples:

  • With credit cards, try to pay the card balance in full each month to avoid interest charges. If you can't pay in full every month, send in as much as possible to keep interest costs to a minimum. "Think twice before accepting an offer from your credit card issuer to skip a payment," said Luke W. Reynolds, Chief of the FDIC's Community Affairs Outreach Section. "It's likely that interest will still be charged, so you'll actually be paying more in interest because you'll carry a higher balance on your card for a longer period of time."

In addition, pay your credit card bill on time. One reason is to avoid late fees. Another is that late payments can damage your credit record. If repeated, they could even trigger interest rate increases on your credit cards and loans.

  • With your checking account, avoid fees for insufficient funds and bounced checks. "Record every deposit and withdrawal in your checkbook — especially remember your debit card purchases and ATM withdrawals," said Reynolds. "It is important to know how much money you have in your account so you won't overdraw your balance."

Your bank may offer various "overdraft protection" services for your checking account, but be aware that these come with their own costs. Reynolds added that one of the least expensive options could be to ask your bank to cover insufficient funds by automatically transferring money from your savings account.

  • At the ATM, limit or avoid "surcharges" (access fees) by using your own bank's machines or those owned by institutions that don't charge fees to non-customers. If you definitely need cash when you're out of town or otherwise not near an ATM owned by your bank, consider getting cash back when you use a debit card to make a purchase at a supermarket or another merchant.

  • Don't be afraid to ask for a break. Bounce a check or send in a late payment for the first time ever? Think the fees for your mortgage application are a bit steep? Depending on the circumstances, your bank might be willing to reduce or waive a fee or penalty, especially if you've been a good customer and don't have a history as a "repeat offender."

Understand your FDIC insurance coverage so you can be fully protected if your bank fails. If you (or your family) have $100,000 or less in all of your deposit accounts at the same insured bank, you don't need to worry about your insurance coverage. Your deposits are fully protected under federal law because the basic insurance coverage is $100,000 per depositor per insured institution.

You also may qualify for more than $100,000 in coverage at one insured bank. For example, the money you have in your individually owned accounts (not including your retirement accounts) is insured up to $100,000 separately from your share of any joint accounts at the same bank. Deposits designated to pass to named beneficiaries upon the death of the owner, such as in payable-on-death accounts, also can be insured for more than $100,000 under certain circumstances. And, some retirement accounts (notably Individual Retirement Accounts) are insured up to $250,000.

Remember that investments can lose value. Investment products include stocks, bonds and mutual funds. Over the long term, investments might produce higher returns than bank deposits. However, investments are not deposits, they are not FDIC-insured — not even the ones sold through FDIC-insured institutions — and they can lose value. Because of the risks associated with any investment, always deal with a reputable, licensed salesperson and research the product before making a purchase.

Certain annuities are a type of investment. In general, an annuity is a contract with an insurance company. The consumer makes one or more payments to the insurer, as an investment, and the insurer agrees to make a series of income payments to the consumer as long as he or she lives. Be particularly careful before investing in "variable" annuities which frequently come with high fees and penalties if you withdraw money early.

Especially troubling have been reports of marketers steering people into annuities that are unsuitable for them. The National Association of Insurance Commissioners has published a consumer alert to help consumers, especially seniors, better understand annuities and recognize questionable sales practices.

There also have been reports of marketers making false statements about the FDIC — such as claims that the FDIC doesn't have the financial resources to protect insured deposit accounts — as a way to sell investments or annuities to consumers.

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