Under the new rule which would implement a “Real Time Clearing” process, debit transactions at gas pumps would be processed immediately, or at least within two hours of the transaction. This means customers will have access to their funds soon after they swipe their Visa debit cards. But wait, isn’t this what already happens? The answer is not always. See our blogpost, “Who’s Holding Your Money.”
First, gas merchants and their banks need to adopt the new rule which begins in October. To read more about Visa’s new rule and Consumers Union’s response, see Consumer Report's Money Blog, "Visa offers some relief from painful 'debit holds.'"
In the meantime, Consumers Union recommends that you pay for gas with the attendant using your PIN or pay with cash. When October comes around, make sure that your local gas station has adopted or will adopt “Real Time Clearing,” so you’ll have access to all your funds by the time you drive away.
Take our quick survey on your experiences with debit holds at the pump.
We're also interested to know whether you are experiencing debit holds on other transactions, such as when paying with your debit card at restaurants, hotels and car rental agencies. Let us know.
Direct Express cardholders won’t have to worry about whether their checks are safe, or the cost and time it takes to cash in the checks. Also, the Department of Treasury has negotiated certain protections with Comerica, who issues the card. Among these protections are lower fees than those found with other prepaid cards.
All Social Security recipients can sign up for the Direct Express debit card. It will be available nationwide starting August 2008. Social Security benefit recipients in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina and Texas already can take advantage of the card.
Check out our Fact Sheet for answers to any questions you might have about the card, and for a useful chart on the card’s fees.
One warning: Beware of any potential copycat cards that are bound to be laden with huge fees and lesser protections!
Take this example from a report by the Center for Responsible Lending (CRL):
You go into the supermarket and used your debit card for a purchase that was $80 more than what you had in your bank account, all because a check you deposited that day had not yet cleared. Though you didn’t know it, you were automatically enrolled in an overdraft program when you opened your account. So instead of declining the transaction, your bank loans you $80 to cover the overdraft, and the transaction goes through for a fee of $26.90. (The average overdraft fee is actually $34.) If you pay that “loan” back one week later, you’ve paid 1,753 percent APR on a short term loan which you never signed up for.
The kicker is that your bank probably offers a number of services that would have covered the transaction for much less money. You may have the option to link your checking account to a line of credit or a credit card which usually carries an APR between 18-30 percent. If you have a savings account with the bank, you can link it to you checking. Instead of the bank giving you a loan when you overdraft, it takes the money out of your savings and charges you a one time fee of approximately $10.
ASK YOUR BANK
1. Did your bank automatically enroll you in an overdraft plan that will “loan” you money to cover all of your transactions if you exceed the amount in your checking account?
o If so, find out what is your bank’s fee per transaction.
o Ask whether your bank charges an additional fee for every day that your account is overdrawn.
o Will the bank remove the overdraft loan feature from your account or link your checking to your savings account or line of credit, which would be less expensive.
2. Do you already have a savings account or line of credit that is linked to your checking account?
o Find out about the fees associated with these services and determine the most cost effective option for you.
3. Maybe you do not have any overdraft service. This means, if you don’t have money to cover a transaction, your checks will bounce and debit card purchases will be declined. In deciding whether this is your preferred option, consider the following facts: paper check’s trigger only 26 percent of all overdraft fees, while debit and ATM transactions trigger 46 percent and fee-based overdraft loans are very small, averaging $27, whereas the fees charged by the bank average $34. See CRL’s reports: Debit Card Danger and Out of Balance.
As money mom has mentioned in previous weeks, the Federal Reserve Board has issue proposed regulations to protect consumers from unfair credit card and overdraft practices. The credit card protections are an improvement, but the overdraft protections do not go far enough. Tell the Fed if you’ve had problems with your bank’s overdraft program.
]]>Don't live in Alaska? Tired of giving out your Social Security number? Read about what your state lawmakers could do to protect you..
]]> The new law, enacted as HB 65, has the groundbreaking Social Security number restrictions, plus a security freeze, a rule on how records containing sensitive information should be disposed of, and a notice of secuirty breach requirement. See the full text.]]>The concept was launched last week by GreenNote, Inc. The company describes itself as “an innovative new company that has been created to help students obtain loans for education via social networking rather than through traditional lending methods.” Basically, GreenNote facilitates lending relationships and funds between students and lenders, for a fee of course.
Money mom decided to poke around on the company’s website. This seemingly simple concept is not as simple as you might think.
Here’s what she found:
Students must raise at least $1,000 during a “pledge drive;”
Lenders must loan at least $100;
Lenders have no guaranteed rate of return and only GreenNote can go after the borrowers for the money;
One of the ways lenders may loan money by credit card (this seems rather risky);
GreenNote charges service fees for each pledge drive, either $49 or 2% (whichever is greater);
GreenNote also charges a servicing fee of 1/12% the outstanding principle to the lender at the beginning of each month when a loan is in repayment;
The standard agreement issued by GreenNote may or may not be valid, depending on the where they’re being used. (you may need to consult an expert on your own)
Students should make sure that they maintain their credit histories no matter what type of lending they seek or obtain. We have some tips for students and parents on how to leave school with less debt and good credit for your futures after college.
]]>Know your score: Once you borrow money from a lender that reports to the nation's three major credit bureaus - Experian, Equifax and TransUnion - you will have a credit report. Home and student loans and most credit cards are reported to the bureaus. Utility, medical and other unpaid bills might be reported if they are turned over to a collection agency.
Your credit usage and payment history will be used to generate a credit score. The most widely used is the FICO score, developed by Fair Isaac Corp. Lenders will use your score and report to decide whether you will get a loan and at what interest rate. Many landlords will check them before renting to you. Prospective employers might check them before offering you a job, especially one involving money. Insurance companies might check them before selling you a policy.
Review your credit report periodically to make sure there are no mistakes. You can get a free copy of your report from each of the three credit bureaus once per year at www.annualcreditreport.com. After getting your report, you will be asked if you want to buy a score. I recommend buying one from Equifax for $7.95 because you'll get a genuine FICO score. The others give you a different variety.
The best way to boost your score is to pay down debt and always make payments on time. To learn more, go to www.myfico.com and click on "Understanding Your FICO Score."
Use debt sparingly: Never borrow more than you can repay. Start out with one credit card. If you're a bit of a spendthrift, choose a gasoline or department store card that can be used only at limited outlets. Or consider a secured card from a bank, which is paid for in advance. For convenience, use your debit card. Save your credit card for emergencies.
Live frugally: Don't expect to replicate the lifestyle of your parents, who have worked years to get where they are.
"Don't go to Starbucks twice a day. Bring your lunch to work a couple times a week," says Ken McEldowney, executive director of Consumer Action. Visit the library instead of the bookstore. Find a cheap hobby like hiking.
If you live in an area with good public transportation, "maybe you don't need a car," McEldowney says. Rent one when you need one. You'll save a fortune on payments, insurance, gas and repairs.
Repay debt: You must begin repaying federal student loans (such as Stafford and Perkins loans) six months after you stop going to school at least half time. To make sure you don't miss any bills or lose benefits - such as interest rate reductions for on-time payments - make sure your lender knows your address.
"Most people lose borrower benefits on the very first payment because they forget to submit an address change," says Mark Kantrowitz, publisher of Finaid.com. "If you run into problems repaying your debt, call your lender before you start having trouble as opposed to afterward," he says.
Federal student loans let students postpone payments if they can demonstrate economic hardship. However, if you default - meaning you are more than 270 days late with a payment - you lose these valuable options.
College loans are much harder to get discharged than other types of unsecured debt. Even if you file for bankruptcy, it will be almost impossible to get out of paying your college debt, including private student loans.
Always pay off your highest-cost debt first. If you also have credit card debt, make the minimum payment on your federal student loans, which are cheaper, and use whatever you have left to pay off your credit cards.
Start a rainy day fund: "Start saving immediately, even if the amounts are small, and do so automatically," says Stephen Brobeck, executive director of the Consumer Federation of America. Set up an automatic monthly transfer from your checking account to savings or a money market fund.
This fund is not to get rich but to pay for emergencies such as a major car repair. The alternative is to borrow money, which will cost more in the long run. Aim to have three to six months of living expenses in your rainy day fund.
Capture the match: Many companies let you contribute part of your salary to a 401(k) plan. Schools and nonprofits offer 403(b) plans, and government employers offer 457 plans. They all work basically the same.
In a traditional 401(k) plan, any money you put in won't be taxed until you take it out. If you take it out before age 59 1/2 , you generally owe an extra 10 percent penalty.
Some employers offer a matching contribution. For example, for every dollar you put in, they might put in 50 cents up to some limit, such as 6 percent of your pay. If you leave the company, you can keep whatever you put in, plus whatever it earned. But you usually have to stay for some period - typically three years - to keep the employer contribution.
If your employer offers a match and there's a chance you will stay through this vesting period, do whatever it takes - even if it means borrowing form your parents - to get the matching contribution. Passing it up is like leaving money on the sidewalk.
Think long term: If, after doing all the above, you still have money, contribute additional, unmatched dollars to your 401(k) plan or open an individual retirement account at a bank, mutual fund or brokerage firm.
If you start investing in your 20s, thanks to the miracle of compounding, you will have far more than if you wait until your 30s or especially your 40s, Brobeck says.
Don't lend money to friends: "It really can complicate your friendships, and you may lose your money," says Gail Hillebrand, a senior attorney with Consumers Union.
Be skeptical: Never believe anything a salesperson tells you without carefully reading the contract. Fine print rules.
Choose your first job wisely: Money and benefits - especially health care and a retirement plan - are important. But more important are job satisfaction and advancement opportunities.
"Whatever job you take, prepare to work hard at it," Hillebrand says. "And I always tell people: Get out of the office. Join an alumni association, a professional association, and sign up for committee work so people get to know you. That way if you get laid off, someone else knows about you."
To sum it up: Make money, Save money, and Keep your money.
Some simple advice from Money mom.
At first, it sounds like a pretty good deal – more money to spend. But, if you place all the money in a gift certificate or gift card, your money is tied to that retailer. Unless you planned on spending your entire tax stimulus check at that particular retailer, that extra bonus may not help you.
Why? Because gift cards often go unused, and you could end up losing the balance. A November 2007 Consumer Reports survey found that 27 percent of consumers who received a gift card the year before still had not spent all of the funds.
Also, some states allow gift cards to expire, so you may not get to use the full value of your tax stimulus check.
And there’s always the chance in this economy that the store may go bankrupt! If you hold a gift card from a store that goes bankrupt, you may end up losing some money or be left empty-handed. Sharper Image consumers with gift cards recently had this unfortunate experience. California and Washington have laws that protect the value of the gift card when a company goes under, but most consumers will lose out if they’re holding a gift card for a retailer who has gone belly up.
Those extra bonuses and incentives can seem enticing at first, but not if you aren’t going to use all of your tax stimulus check money at one place -- and soon. The best solution – stick that tax stimulus check in your checking or savings account, because cash never expires..
Here’s an example of how a debit hold can cause havoc with your finances:
You check your balance on-line and see you have $100 in your checking account. You stop at the gas station, and swipe your debit card at the pump to pay for a $40 tank of gas. With $60 left in your account, you pay for $55 in groceries later in the day with that same debit card.
No problem? Wrong. Because you paid with a debit card at the gas pump, the gas station may have put a $75 “freeze” on your checking funds to pre-authorize your gas purchase. That freeze doesn’t immediately disappear – it can lock up your money for up to three business days.
Meanwhile, you now may be hit with a $35 overdraft fee for those groceries and any other purchases you made on insufficient funds. Recently, federal regulators have proposed putting an end to such overdraft practices. You shouldn’t be hit up with overdraft fees or insufficient funds because of a debit hold. After all, the money is still yours. And, banks shouldn’t allow you to overdraft funds unless you opt-in, or ask, for overdraft protection.
You can let the Feds know how you feel about overdraft practices by visiting www.CreditCardReform.org. Real people’s experiences with the banks and credit card companies prompted The Federal Reserve Board to propose tougher rules. Writing to them now will make sure they happen.
We’d also like to know about your experience paying with your debit card at the pump. Our quick survey will better inform us on how common this practice is. The more we can put the pressure on regulators and lawmakers to give consumers a break, the more good news for our wallets and pocketbooks this summer. After all, it doesn’t look like gas prices will be coming down anytime soon.
Let’s take advantage of this great opportunity to get some substantial credit card protections for consumers!
Let’s take advantage of this great opportunity to get some substantial credit card protections for consumers!
As I mentioned last week, the Federal Reserve Board and two other federal banking agencies have released a proposed rule that will reform some of the most unfair credit card tricks. The newly proposed rule finally offers some real protections against specific unfair and deceptive practices, not just more disclosure. If this proposal is adopted, it will stop some of the most outrageous credit card practices, bumping up your credit card interest rate because your credit score went down even if you were never late on your credit card, or giving you too short a time to pay the bill and then charging you a late fee.
Putting your personal story into the Federal Reserve Board's comment process can help to ensure that this rule is adopted, and that the Fed hears about all types of unfair credit card practices. Your comments have to be filed between now and late July 2008.
We have until August 4, 2008 to flood the Fed with comments on the proposal about unfair credit card practices. Tell the Federal Reserve Board about all those times when you’ve been subject to an unfair action by your credit card company.
Have you received your credit card bill, only to realize that that it was due so soon that you have to pay it right away?
Have you transferred a balance because of an amazingly low promotional interest rate, only to have your rate skyrocket on new purchases that can't be paid off until the low rate balance is repaid?
Do you think it’s unfair when your credit card company suddenly decides to apply a new, higher interest rate to an old balance? Has your credit card company raised the rate on money you've already borrowed for no reason or for a flimsy reason?
This is a chance for you and your family and friends to tell the Fed that you think these practices are unfair!
Submit a comment. The official name of the rule is Regulation AA - Unfair or Deceptive Acts or Practices.
Include the Docket number [R-1314] to be sure that the Federal Reserve Board sees your comments.
To file your comments:
-use our Consumers Union site, www.creditcardreform.org, and we'll send in your comment.
- online go to http://www.federalreserve.gov/generalinfo/foia/proposedregs.cfm., scroll down to Regulation AA -Unfair or Deceptive Acts or Practices.
- by e-mail to regs.comments@federalreserve.gov. Include Docket No. R-1314 in the subject line.
- by fax to (202)452-3819 or (202) 452-3102. Identify your comment by including Docket No. R-1314 on the top of your letter.
- by regular mail to Jennifer J. Johnson, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Ave, NW, Washington DC 20551. Identify your comment by including Docket No. R-1314 on the top of your letter.
The comments you submit will be made available to the public, so don't include your account number. You can also leave out your street address if you prefer, though you should include your city.
Let’s take advantage of this great opportunity to get some substantial credit card protections against unfair practices for consumers!
The proposed rule responds to a sustained outcry from consumers and strong interest in Congress in credit card reform and in reform of bank account practices such as overdraft loans.
]]> The federal banking regulators have finally done something about credit cards. They have approved for public discussion a proposed rule that would stop or limit some of the worst credit card practices. There is much more to be done, but also some reason for optimism. The proposed rule, announced on May 1st and made publicly available on May 2nd, finally acknowledges that consumers need real protection, not just disclosure. All the disclosure in the world can’t make it fair to send the bill too close to the due date; to raise the interest rate on money already borrowed: or to charge a fee for a problem caused by the bank’s practice to allow a credit hold or a debit hold.The proposed rule responds to a sustained outcry from consumers and strong interest in Congress in credit card reform and in reform of bank account practices such as overdraft loans. The new proposed federal rule includes these credit card reforms:
• No late fee if the bill was mailed to the consumer less than 21 days before the due date.
• Payments must be allocated among balances with different interest rates to give consumers the full benefit of a discounted promotional rate.
• No interest rate increases may apply to money already borrowed except for in these three circumstances: variable rate card, lost or expired promotional rate (then it goes to the regular rate and not a higher penalty rate); or minimum payment is 30 days late. If the bank wishes to raise the rates on a category of transactions, consumers who owe money in that category at a lower rate must be given either five years to pay off the balance or a new minimum payment that includes a percentage of the balance of no more than twice the percentage of the balance in the old minimum payment.
• No charging interest on amounts already repaid, through double cycle billing.
• No more credit cards where the fees or deposits use up the majority of the available credit on the account.
• No credit card or overdraft program fees where a credit hold or a debit hold (in an amount greater than the actual charge or debit) was the cause of the credit card over limit or the bank account overdraft.
The proposed rule also would make it an unfair practice to provide an overdraft loan on a bank account unless the consumer is given an opt-out opportunity. While it is helpful that the agencies are finally recognizing the problems posed by high cost overdraft loans for bank account holders, Consumers Union believes that this form of unsought credit is unfair unless the consumer affirmatively opts-in to such a program.
The proposed rule makes a great start on the basic idea that “a deal is a deal” in credit cards. Consumers Union says that the interest rate shouldn’t go up on money already borrowed, except under a variable rate formula. This rule gets an important part of the way there.
Bankers argue that any regulation restricting penalty rates will cause good consumers to pay for bad ones, but Consumers Union has heard from lots of consumers who tired to be good consumers but found that just one late payment, one overlimit, or a change in their credit score dumped them into the dreaded and hard-to-escape “penalty interest” category. The proposed rule will put a stop to those abuses.
There is more for the federal banking regulators, and for Congress, to do. The proposed rule doesn’t do any of these things:
• Restrict fees to pay a credit card by phone.
• Ban over limit fees if the credit card issuer approved the charge.
• Stop “any time, any reason” changes in the contract for future charges.
• Let consumers outside the Eastern Standard time zone pay until 5pm local time without being late.
• Stop overdraft and bounced check fees on bank accounts which are caused by check holds. The proposed rule apparently addresses credit holds and debit holds but not check holds. Consumers whose banks choose to impose long check hold times may still get stuck with overdraft and bounced check (NSF) fees due to this practice.
• Stop bounced check fees caused by debit holds. The rule apparently stops the overdraft fee when a debit hold causes an overdraft but it may not address the bounce (NSF) fee caused in the same way.
This is a three step process, and this was step one. Next comes public comment, then the agencies decide whether to make any changes in the rules and issue them in final.
Read the full proposed rule http://www.ots.treas.gov/docs/7/73419.pdf (The rule itself starts at page 153 of this long document).
Read about credit card tricks and traps. http://www.consumersunion.org/pdf/Top10CCTraps.pdf
In a future post, I’ll tell you how to make your views known to the regulatory agencies about this rule. In the meantime, if you want to make your views known to members of Congress, here is a place to do that. https://secure.consumersunion.org/site/Advocacy?JServSessionIdr007=qyq4pws8d1.app45a&cmd=display&page=UserAction&id=1877.
]]>I decided to call my bank. “Sandra” in customer service told me that I have a “custom account” and the average monthly service fee is $16. In order to avoid that service fee, I would have to “maintain an average balance of $40,000 otherwise there is a 20 cent charge per debit, 30 cent charge per credit and 18 cent charge per deposited item.”
I have to say that I almost fell off my chair. I explained to Sandra that I was never told about the $40,000 minimum balance, and that most people would invest that kind of money in a 401k or an interest bearing account, not in a checking account.
I could feel my blood boiling as I explained that I didn’t open the account with a large amount of cash. I told her that I felt as if I was being ripped off too and I felt I should be taking my business elsewhere. She said she could look around to see if there is a better checking account to suit my needs.
After waiting on hold for 4-5 minutes, which felt much longer, Sandra came back and told me about a basic business account with lower but still significant fees.
I wanted to know why this wasn’t offered to me when I opened the account. Sandra didn’t know, of course. I wasn’t feeling very good about keeping my money with this bank. I explained to Sandra that it isn’t right to say “I am sorry for the inconvenience when you have already charged me these high-rates.”
I wasn’t going to accept a brush-off, so Sandra put me on hold for another 2 or 3 minutes. This time, she put in a request to reverse the fees. It was sent to approval for an immediate answer, and I would know something within two hours... If I didn’t see it by the next day, then the request was declined. My perseverance resulted in a $61.12 credit… basically the difference between my high cost account and the cheaper one...
Whether you have a business or a consumer account, it pays to watch the fees and to ask for a better deal –at your own bank or somewhere else. I am still unhappy with the charges, so stay tuned as I check for other deals…and keep your eyes out for other ways your bank is charging you for your business.
Car dealers now offer six and even seven year car loans. This reduces the monthly payment, but increases the total cost of the loan. The low payment makes the car look cheaper than it really is – and it increases the time for which you will owe far more than the car is worth. That means when you are ready to trade in the car, you have to come up with extra cash or roll the amount you still owe into the loan on your next car, making the problem worse. Experts call this being “upside down” on the loan. To read more, click here.
A longer term on your car loan also means that you will still be making car payments as the car gets older and you start to face higher repair bills.
Sort out auto financing before you ever set foot on the car lot. You’ll usually get a better rate from your credit union or bank than from the dealer. You can pre-qualify for a car loan and know exactly what interest rate you’ll pay before you buy your next car. For some advice on arranging a car loan before you go out to buy a car, click here.
Consumer Reports points out: “Walking into a dealership with a guaranteed auto loan in your hand gives you bargaining power and flexibility.” To read more, click here.
Money Mom says:
• Start saving now for your next car. If you can pay cash, then you can always be saving for your next car, instead of paying off your last one.
• If you can’t pay cash, take the shortest car loan you can afford.
• If the payment is too high for a car loan of longer than four years, reduce your payment a different way – by buying a cheaper new car or a used car instead.
• For any type of loan, look beyond the monthly payment to the total cost of the loan. Compare the annual percentage rate of interest between loans. Comparing the monthly payments of two loans of different lengths presents a misleading picture –the one with the higher monthly payment may be the cheaper loan if it has a shorter duration.
• Arrange for your auto loan before you buy the car. You can usually get a better deal on your own than what the dealer will offer to you.
• Negotiate the price of the car before you start to discuss with the dealer how you plan to pay.
For more about shopping for an auto loan, click here.
]]>The Board acknowledges the need for strong regulation and the problems faced by borrowers when dealing with the mortgage lenders. But its proposals won’t prevent another mortgage meltdown. That’s because the Board continues to make access to credit the guiding principle for regulation – even when the terms of the credit are harmful to the consumer.
The Board acknowledges the need for strong regulation and the problems faced by borrowers when dealing with the mortgage lenders. But its proposals won’t prevent another mortgage meltdown. That’s because the Board continues to make access to credit the guiding principle for regulation – even when the terms of the credit are harmful to the consumer.
Consumer and community groups have done an in-depth critique of the Federal Reserve Board's regulatory proposal responding to subprime mortgage problems, that lays out the shortcomings of the proposal. http://www.consumersunion.org/pub/core_financial_services/005551.html
The California Reinvestment Coalition called the Fed’s proposal “baby steps” http://www.calreinvest.org/news-room/2008-04-08 and joined with 31 other groups to call for more protections.
Consumer groups are calling on the Federal Reserve Board to use its regulatory power in the subprime market to:
•End prepayment penalties, make it too expensive for consumers to refinance, locking them into bad loans.
•Eliminate yield spread premiums, which are fees the lender pays to the broker for loans made at rates higher than the borrower actually qualifies for.
•Protect consumers against steering, which is where the lender or broker offers the consumer a higher priced loan even when the consumer could qualify for a better loan.
•Promote pre-purchase counseling so that consumers have a better chance of understanding complex loan papers.
These measures should be accomplished without stopping states from going further or in new directions to protect their residents.
We all are feeling the economic fallout from the subprime-sparked credit squeeze. Home values have fallen and consumers who have never missed a payment are seeing their home equity lines of credit reduced, their credit card companies tightening standards, and other effects.
Consumers should pay their bills, but lenders should not make loans where there is no reasonable basis to expect that the consuemr will be able to reply the loan. Loan terms should be fair and understandable, and without time bombs such as steeply escalating payments that are clearly beyond the borrower’s means. Lenders shouldn’t lock the consumer into a bad deal for a long time, pay the broker to place the consumer in a higher-than necessary interest rate, or play other tricks on the borrower.
The Federal Reserve Board and Congress have the ability to make sure the current mortgage crisis doesn’t happen again. This is an opportunity they should lock in now.
In the Enron meltdown in 2001, employees lost their jobs and a significant portion of their retirement funds. Now, Bear Sterns employees face not only the loss of their jobs, but big chunks of the part of their retirement savings which were invested in their employer’s stock. It’s hard to feel sorry for highly paid employees who appear to have helped to create the subprime mortgage mess, but when a company’s value plummets, employees at all levels can be hurt if their retirement savings are linked to the company’s value. If a chunk of your 401(k) or other retirement funds is in your employer’s stock, this latest Wall Street wakeup call is a good time to diversify.
Put simply, diversifying reduces your risk by dispersing your investments between types of investments that do well or poorly at different times – stocks, bonds and investments in different sectors of the economy.
If your company makes its 401(k) contribution to your retirement fund partly in company stock, be sure you know when you’ll be allowed to sell that stock, and watch the calendar to make sure you do so. Also, if you leave a company with a 401(k) plan that has lots of company stock, you might be able to roll your 401(k) over into an IRA and then sell the company stock and replace it with a more diversified set of investments.
We all want to trust our employers. But remember that you are at more risk if both your job and your retirement depend on the well-being of your employer. When it comes to retirement, remember Mom’s advice – don’t put all your eggs in one basket.
Those who live in neighborhoods with high foreclosures rates are facing loss of home value and a reduced property tax base. Families with a foreclosed home on their block have to worry about vandalism, lack of maintenance, and other spillover problems. Everyone who uses credit in the U.S. economy, both consumers and businesses, will face higher credit costs for some time due to the confidence crisis. We will all feel the recession, partly attributable to this credit contraction.
This meltdown reminds us of a key role of government in markets - to keep dangerous products out of the marketplace. We should start including in our definition of a "dange"’ those financial products which are so complex that consumers can’t tell what they are getting into, and those where the terms change substantially after the contract is signed. There are too many of these products in the consumer financial services market today.
We should be demanding that government oversight have a goal of safe financial products for all - customers included. If this approach had been in place for the last decade, we might not be seeing the falling stock markets, devastated home values and distressed neighborhoods that we are witnessing today.
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