|
Washington, D.C. (OCTOBER, 2007) —The nearly 5,000 members of the Independent Community Bankers of America (ICBA) help millions of Americans in communities throughout the country to become and stay homeowners each year through the personal attention that only a local community bank can offer.
“Talking first to a community banker is a great idea,” said James P. Ghiglieri, Jr. ICBA chairman and president of Alpha Community Bank, Toluca, Ill. “Community bankers want to establish long-term relationships with their customers and take the extra steps necessary to give potential homebuyers the service and attention they need. We are not only interested in helping a homebuyer purchase a home, but in helping them find a mortgage they can live with so they stay in the home as long as they want to.”
In addition to working with a community banker, ICBA offers the following suggestions:
- Know your budget: how much you spend on rent, utilities, entertainment, clothing, food and transportation.
- Organize paperwork: pay stubs, W-2 forms, tax returns, and bank and investment statements.
- Check your credit report and bring it to your community banker. Credit reporting agencies must give you one free report annually.
- Work with your community banker to find out how much you can borrow and which mortgage is right for you.
- Get pre-approved. It helps you shop for a home that fits your budget and shows sellers you are a serious buyer who can close on a home quickly.
- Learn as much as you can about the home buying process. Your community banker can help explain it to you. Look for classes on home buying and home maintenance. There are free online educational tools at www.hud.gov, www.federalreserve.gov/consumers.htm.
- If you are a first time homebuyer, ask if there are special first time homebuyer loan programs available, or grant programs to assist with down payment and closing costs.
- Consumers have a wide variety of mortgages to choose from. Ask your loan officer to carefully explain payment options, rate adjustments and other loan features so that you aren’t surprised by payment increases down the road. Don’t be taken in by promises of low payments and 100 percent financing.
- Always ask for a written good faith estimate to compare the real costs of your mortgage. It will tell you what your interest rate, monthly payment and closing costs will be.
- Visit homes to learn what you are getting for your money and what fits your budget.
About ICBA
The Independent Community Bankers of America, the nation’s voice for community banks, represents the largest constituency of community banks of all sizes and charter types in the nation, and is dedicated exclusively to representing the interests of the community banking industry.
back to top
 The use of ATMs continues to grow at record rates. It's estimated that there are more than 1.5 million machines installed worldwide and new ATMs installed every five minutes.
With millions of successful ATM transactions carried out daily and the ATM being used safely for more than three decades, it should be noted they are susceptible targets of fraud. And, being a part of the electronic world means that the thief doesn't have to be nearby or even in the same country.
In fact, financial security leader Diebold reported in a recent white paper that last year Russian police arrested a group of criminals accused of stealing at least $500,000 from U.S. bank accounts in a cross border ATM scam and those defrauded had never been to Russia. The gang had obtained stolen account information and Personal Identification Numbers (PINs) from organized crime groups in the United States, Canada and France.
It is important to note that most of what is commonly called "ATM Fraud" is actually Debit Card Fraud having much more to do with the compromise of PINs and fraudulent Debit Card use that with the integrity of ATM hardware. (The Global ATM Security Alliance reports that just .0016 percent of all ATM transactions are affected by crime or fraud, worldwide.)
Armed with a card holder's PIN---often obtained through casual observation---a thief can use data from a magnetic stripe to reproduce or clone ATM cards using inexpensive, commercially available equipment---and, could easily empty the targeted bank account within a matter of days.
PULSE EFT Association has put together a check list to follow for card security and personal security.
- Treat your card like cash. Keep it in a safe place.
- Keep your personal identification number (PIN) a secret.
- Do not disclose card information over the phone to anyone. No one needs to know your PIN, not even your financial institution.
- Never disclose information about your card in response to an unsolicited e-mail or request.
- Make certain your Internet shopping sites are secure.
- Protect your card's magnetic stripe. Do not expose your card's magnetic stripe to magnetic objects.
- Report a lost or stolen card at once.
- Carefully review your account statements.
- Observe the ATM surroundings before approaching a walk-up ATM. If anyone or anything appears to be suspicious, cancel your transaction and leave the area at once.
- If an ATM is obstructed from view or poorly lit, go to another ATM. It is a good idea to take along a companion when using an ATM, especially at night.
- Minimize time spent at the ATM by having your card out and ready to use. Do not let anyone see how much money you withdrew, and never count your money at the ATM.
- Never allow a stranger to assist you in conducting an ATM transaction, even if you have trouble or if your card is stuck.
- Stand between the ATM and anyone waiting to use the terminal so that others cannot see your PIN number or transaction amount.
- Look for possible fraudulent devices attached to the ATM. If the ATM looks different or appears to have any alterations or attachments to the card slot or PIN pad, do not use it.
- Keep the doors locked, windows up and engine running at all times when waiting in line.
- Leave enough room between cars to allow for a quick exit should it become necessary.
- Before lowering the window to use a drive-up ATM, observe the entire surrounding area. If anyone or anything appears to be suspicious, cancel your transaction and drive away at once.
- Minimize time spent at the ATM by having your card out and ready to use. Once your transaction is complete, take your money, card and receipt and immediately drive away from the terminal.
- If anyone follows you after you have completed your ATM transaction, go immediately to a crowded, well-lit area and call the police.
This information is provided with the understanding that the association is not engaged in rendering specific legal, accounting, or other professional services. If specific expert assistance is required, the services of a competent, professional person should be sought.
Provided as a public service by the members of the Nebraska Independent Community Bankers.
back to top
 The holidays are over and you realize that you over-extended your already shaky finances. You receive either an e-mail, a letter in the mail, hear a radio ad or see a television commercial offering you a loan, regardless of your credit history, to help you consolidate your bills and get out of debt fast. What do you do?
If you are a savvy consumer, you delete the e-mail, throw the letter in the trash, and turn off the radio or television. You may also see these types of loan offers in the classified sections of the newspaper. Be wary of applying for loans where you call an 800, 877 or 866 area code. Be mindful that just because your local television, radio or newspaper airs or publishes these types of ads does not mean that the company placing the ad is legitimate or trustworthy.
If you investigate further, you'll find that the "free" loan includes an upfront fee, sometimes ranging in the hundreds of dollars. These ads will say that the upfront fees are for processing your loan and credit checks. However, after you pay the fee, chances are you'll either receive nothing or a "credit" card that can only be used for a certain company’s products. This scam is called the "advance-fee loan" scam and it is illegal in the United States.
No legitimate lender would require you to pay fees prior to receiving your loan. This is not to say that a legitimate lender would not charge you fees to get a copy of your credit report or for an appraisal, but these fees would be part of the total loan amount that you receive, or are payable at closing.
Another consideration to keep in mind is that a legitimate lender would never promise you a loan without first carefully reviewing your application and checking your credit report.
There is never a quick credit fix. These unscrupulous scam artists prey on the elderly, the unemployed and those in dire financial straits. If you find yourself a victim of this scam, call the Federal Trade Commission at 1-877-FTC-HELP or file a complaint online. Keep in mind that these scam artists are usually working for an unscrupupous company.
Here's a checklist with some suggestions to help you avoid being victimized:
- If you cannot get a loan through your local community bank or other reputable financial institution, ask a friend or family member to co-sign a loan for you.
- Do not respond to an e-mail offering you a "free" loan as it is probably fraudulent.
Do not agree to pay any fees before you receive your loan. Remember, a legitimate lender will not require upfront fees.
- Do not be tricked into believing that your loan will be guaranteed regardless of your credit history.
- Be sure to get in writing exactly what you have been promised.
- Never give out your bank account information, social security information or credit card information unless you are positive that the originator is legitimate. However, understand that federal law requires regulated financial institutions to notify customers in writing that this information is required at the time of the loan application.
- "If it sounds too good to be true, it most likely is!"
This information is provided with the understanding that the association is not engaged in rendering specific legal, accounting, or other professional services. If specific expert assistance is required, the services of a competent, professional person should be sought.
Provided as a public service by the members of the Nebraska Independent Community Bankers.
back to top
 As we approach the holiday season, your community bankers encourage you to take precautions to ensure your personal safety as well as your financial safety.
Holiday Shopping at the Mall
- Be sure to park as close to the door as possible, especially after dark.
- Park in well-lighted areas and always be aware of your surroundings.
- Make sure your purse is closed at all times. An open handbag is an easy target for someone walking behind you or standing behind you in a line. They could easily reach in and grab your wallet before you even realize it.
- Be sure not to overload yourself with packages. Should an emergency arise, you don’t want to be fumbling with packages and possibly drop your keys.
- Try not to park next to a van, as you could easily be pulled in through the sliding door.
- If shopping alone, walk to your car with authority, purpose and confidence. Have your keys ready and if you have a remote control, unlock your door as you are walking up to it so you can get into your car quickly. After you get into your car, re-lock the doors. Don’t sit in your car with your door open while you are arranging your packages.
ATM Safety
When stopping to make an ATM withdrawal before heading off to the mall, keep these safeguards in mind:
- Make sure your ATM is in a well-lighted area and be aware of your surroundings.
- Try to make your ATM transactions during daylight hours.
- A drive-up ATM is generally safer than a walk-up facility. But if you have an uneasy feeling, drive to another ATM location.
Financial Safeguards
- Try to avoid the last minute crowds by shopping early to avoid impulse buying.
- Ask about refund policies before you buy and save all receipts.
- Set a budget and stick to it. By not overspending, you will avoid the stress of trying to find the financial resources to pay for gifts long after the holidays are over.
- When shopping online, be sure to deal with reputable companies and order only on a secure server.
- Using debit and credit cards when holiday shopping is always safer than carrying around a large amount of cash.
- By deducting the money straight from your bank account with a debit card, you bypass the chance of racking up a big balance on your credit card.
We are always at risk, but should take steps to minimize the chances of bad things happening. Early preparation and planning will allow you to handle and react to emergencies and ensure you a safe and happy holiday season and beyond.
This information is provided with the understanding that the association is not engaged in rendering specific legal, accounting, or other professional services. If specific expert assistance is required, the services of a competent, professional person should be sought.
Provided as a public service by the members of the Nebraska Independent Community Bankers.
back to top
 Although we're still months away from the April 15th tax deadline, here are some tips to help you avoid the last minute heartburn of tax filing season.
Itemized Deductions
Some people automatically take the standardized deduction and overlook some itemized deductions that could save them money.
For example, if you're between jobs, it would be advisable to save receipts relating to looking for a new job, such as phone bills, resume expenses and travel expenses.
Real estate taxes are deductible, so be sure you deduct taxes paid through a mortgage escrow account. And if you recently purchased a house, look at your settlement statement for any taxes for which you reimbursed the seller at the closing - these are deductible.
You can also deduct the software expenses and tax preparation expenses as miscellaneous itemized expenses.
Always have your tax returns from the previous year in front of you when you’re preparing your taxes.
It would be a good idea to review your withholding allowances at least every couple of years. IRS controls how many allowances you can have, but judging from all the taxpayers who receive refunds each year, most taxpayers claim too few deductions rather than too many. If you see it as a way of saving money, there are better ways to accomplish that goal and earn interest on the money. Uncle Sam doesn’t pay interest.
A home equity loan may offer you great tax savings opportunities. Home equity lines of credit have become popular with millions of homeowners.
These loans are secured by your home and often carry lower interest rates than unsecured borrowing, plus you are still able to deduct the interest on your taxes. However, be aware that by securing such a loan with your home, you risk losing your home should you be unable to repay the loan.
There is a tax withholding rule that applies to lump-sum payments from company retirement plans. Whether you receive a lump sum payment when you retire, quit or are laid off, your employer is required to withhold 20% in taxes. This is true even if you intend to roll the money over into an IRA or another pension plan within the allowed 60 days. In order to avoid the withholding trap, simply have your employer roll the funds into an IRA. They will handle the transfer and you will not have to pay taxes.
There are many itemized deductions that may apply to you including: child tax credit, college student and family, loans to family members, income in respect to death of family member, repairs on rental property, stocks and bonds, and your 401K. Also, remember to save all of your receipts from charitable and church donations for additional income tax credit when preparing your return.
If you have any questions about possible deductions, it is best to check with a tax or financial planning advisor to make sure you get the most allowable deductions possible.
This information is provided with the understanding that the association is not engaged in rendering specific legal, accounting, or other professional services. If specific expert assistance is required, the services of a competent, professional person should be sought.
Provided as a public service by the members of the Nebraska Independent Community Bankers.
back to top
 While you may not want to think about the inevitable, it will save your family a lot of difficulty and heartache if you go ahead and have a will drawn up appointing an executor—a person who will be in charge of wrapping up your personal and financial affairs upon your death.
There are two kinds of executors:
Personal executor—spouse, child, other family member or friend.
Professional executor—person or organization that you may not be close to, but who you trust with your estate, such as your attorney or accountant or bank trust officer.
You may also want to appoint an alternate executor in the event that your primary executor is unable to fulfill the responsibilities. Otherwise, the court will appoint someone to fulfill the obligations. Your executor must be of legal age at the time that he or she has to act. You can name your 12-year-old child as executor if you wish, but if something happens to you before the child is of legal age, you will need to have an alternate.
Some of the responsibilities of your executor will include:
- Arranging your funeral
- Obtaining an original copy of your will and filing it with the court for probate
- Taking possession of your estate and making a list of your property
- Paying outstanding debts and taxes
- Notifying beneficiaries
- Distributing property according to your wishes after all debts and taxes have been paid.
The person you choose as your executor must be someone you trust and should be honest, organized and able to communicate well with people. Make sure that you communicate your wishes to your executor and that he or she knows where you keep your records and exactly how you want your property or assets distributed. You may also want to give a copy of your will to your executor with a notation where the original can be found, such as your safe deposit box.
Since there is a great deal of responsibility, be sure you choose someone in whom you have total trust and confidence. If your estate includes business interests, it would probably be preferable to name someone other than your business partner as your executor.
By naming a professional executor, he or she will be able to bring impartiality to the administration of your estate. If you choose more than one executor, be sure to make it clear in your will how differences of opinion will be settled.
Taking care of your estate early will save grief and problems for your family later.
This information is provided with the understanding that the association is not engaged in rendering specific legal, accounting, or other professional services. If specific expert assistance is required, the services of a competent, professional person should be sought.
Provided as a public service by the members of the Nebraska Independent Community Bankers.
back to top
 With banks competing for your business, you now have several choices and opportunities to “shop around” for the bank that offers you the products and services that best suit your lifestyle and financial circumstances.
In today’s fast-paced environment, some people are looking toward financial institutions that exist solely over the Internet and have no presence in your local community. It would be advisable to make sure that you know the web-based financial institution is legitimate and not a scammer. If you decide to bank solely via the Internet, you will have the advantage of added convenience, but will lose:
- Face-to-face contact with a personal banker who can best explain the services and products that meet your needs.
- A personal banker who knows you and would better understand your loan needs.
You also may need to rely on the mail to sign important documents, make deposits or conduct other business.
With a competitive financial market, you probably receive offers every week inviting you to open a new account. For example, XYZ Bank will “give” you a “free” computer or other incentive if you open an account. Before rushing down to take advantage of this “offer”, consider the following:
- Do you really need the “free” gift?
- According to a 2005 report from the FDIC, banks are required by law to report the fair market value of the gift as income. If you receive items in one year with a total value of more than $10, that value will also be reported as income and taxed accordingly.
- Be sure to read the fine print to determine what you could lose if you fail to meet all of the terms of the account offer.
Here are some things to consider when choosing a checking account that is best for you:
- Will you be writing a lot of checks each month? If so, you need to choose an account that doesn’t impose fees on the number of checks you write.
- Do you prefer paying bills online instead of writing and mailing checks each month? If so, make sure your bank provides online banking services.
- Is there a minimum balance requirement and what is the penalty if your account drops below that amount?
- Will your account earn interest?
- What are the bank fees for overdrafts?
- Does the bank have branch locations near to where you live or work?
And always remember the importance of a long-term relationship with your community banker to make sure you receive the best fees, rates and services to meet your financial needs!
This information is provided with the understanding that the association is not engaged in rendering specific legal, accounting, or other professional services. If specific expert assistance is required, the services of a competent, professional person should be sought.
Provided as a public service by the members of the Nebraska Independent Community Bankers.
back to top
 Millions of Americans rent a safe deposit box from their bank. Before renting, you need to make sure you understand how it works.
Most people rent a safe deposit box to store important and valuable items that would be difficult, if not impossible, to replace. The box offers privacy and security for these items rather than keeping them in your home where they are prone to burglary, fire and water damage.
What should go in a safe deposit box?
Experts suggest you keep family records, such as birth, marriage and death certificates, originals of insurance policies, deeds, titles, stocks and bonds in the box. You might want to include other valuables such as expensive jewelry, rare collectibles and medals. Also consider videotaping or taking photos of the contents of your home and keeping them in the safe deposit box should you need to file an insurance claim.
What should not go in a safe deposit box?
There are some items that you may need to access quickly during an emergency situation that you would not want in your safe deposit box, in the event you need these items on a weekend or holiday when the bank is closed or the bank itself is closed due to an emergency. These items might include your "power of attorney", passports, medical directives, and funeral or burial instructions. You might want to keep copies of these items in the box and give the originals to your attorney or a close family member or friend.
Who has access to your box?
Only you, unless you have a co-renter who might include a spouse, child, or close friend Be sure to check state law governing access to safe deposit boxes To access your box, it takes two keys—yours and the bank’s. The bank doesn’t keep a copy of your key, so if it is lost or stolen, it will cost you several hundred dollars to drill the box open. Additionally, unless you have a co-renter or you appoint a "deputy" or "agent" in the presence of a bank employee, you cannot just give your key to a friend or family member and ask them to open the box. The bank will grant access to the box to only valid authorized users.
US banks take every precaution to protect the contents of safe deposit boxes and they are manufactured to be highly resistant to fire, water, flood, earthquakes, hurricanes and other types of disasters. They also utilize highly sophisticated alarms, heat and motion detectors, locks and video cameras. But nothing is 100 percent guaranteed and the contents of your safe deposit box are not protected by federal bank insurance, like your monetary bank deposits. In addition to keeping a list of the contents in the box, you might also consider storing items in Ziploc bags for added protection. Sadly, some lessons were learned in the flooding subsequent to Hurricane Katrina.
You can also check with your insurance agent to see if you can add a "personal articles floater" to your policy to cover replacing valuable jewelry or other tangible items in the unlikely event of loss or damage.
This information is provided with the understanding that the association is not engaged in rendering specific legal, accounting, or other professional services. If specific expert assistance is required, the services of a competent, professional person should be sought.
Provided as a public service by the members of the Nebraska Independent Community Bankers.
back to top
 In the past, Americans looked forward to retirement. They made plans to travel, spend time at the fishing hole and enjoy the grandkids. Now, more and more of us are delaying retirement just to get by.
While this column will offer suggestions for retirement planning, you always need to check with your financial planner or family members to decide which retirement strategies work best for you. Tax consequences can be significant—always do the research or check with an expert.
Social Security Benefits
Should you decide to begin receiving your Social Security benefits before you reach “full retirement” age, your benefits will be reduced permanently from what they would have been at full retirement age.
Additionally, if you take early benefits and continue working, your benefits may be reduced even more until you reach full retirement age.
However, if you wait until your full retirement age to begin collecting your benefits, you can continue to work and still get your full benefits and perhaps even higher benefits, no matter how much you earn.
For help in calculating whether early retirement is best for you, log on to the Social Security webpage at www.socialsecurity.gov and click on “Calculate Your Benefits.”
Pensions and Retirement Accounts
As with your Social Security benefits, you may want to delay tapping into your pension and other retirement accounts. This allows them to continue to grow to cover unexpected medical costs or other expenses. Before making that retirement account withdrawal, check with your financial planner so that you don’t deplete your fund too quickly.
Reduce Debts as Much as Possible
Many senior citizens need credit cards to pay for medical, pharmacy and other expenses. When living on a fixed income, carrying a large credit card balance month to month may become unmanageable, so try to reduce debts as much as possible before you retire.
The rules and regulations governing retirement accounts can be complicated. The FDIC suggests that a year before you plan to retire, make an appointment with a Social Security Claims Administrator to discuss your situation. You will also want to sit down with your workplace personnel department and financial advisor. After you decide on a retirement date, apply for Social Security benefits and other pensions about three months in advance.
And, remember, once you do retire, you don’t want to have to run to the bank to deposit those Social Security benefits and other pension payments. Plan to have them directly deposited into your checking account. It’s safe, secure and affords you more time to spend with the grandchildren.
This information is provided with the understanding that the association is not engaged in rendering specific legal, accounting, or other professional services. If specific expert assistance is required, the services of a competent, professional person should be sought.
Provided as a public service by the members of the Nebraska Independent Community Bankers.
back to top
 Spring is in the air and families across America are cleaning out the garage, dusting the cobwebs from the ceiling and spring cleaning the house.
While you’re at it, why don’t you take some time to spring clean your financial records? Now is a good time to “conquer the clutter” in your financial closet.
No one can tell you how long to keep your financial records. Only you can decide which records and receipts to keep and for how long. However, here are some suggestions that might help you better organize your financial records.
First, you might consider keeping a written list of your checking, savings account and credit card numbers in your safe deposit box for family members in case they should need them should you become incapacitated.
It’s also a good idea to keep a list of creditor names, addresses and phone numbers for easy reference in case of a billing error, or a lost or stolen card. Because of computer hackers and fraud threats, you may not want to keep this information on your personal computer.
You need only to keep credit card receipts, ATM transactions, deposit and debit card receipts until you verify the transaction on your monthly statements and then you can shred them. Always remember that any financial transaction, receipt or account statement should be shredded. NEVER throw them in the trash.
Another suggestion to decrease your paper clutter is to scan some of your financial records and burn them to a CD. That way you still have a copy of your records and can print them as needed.
You also might consider getting a large box and marking it PERMANENT. Items for this box might include:
- Educational records
- Employment records
- Health records
- Retirement and Pension Plan information
- Contents of your safe deposit box
Make another box labeled CURRENT. You should review items in this box every 3-6 years and decide whether to continue keeping or shredding them. Contents might include:
- Cancelled checks
- Bank statements
- Insurance policies
- Home purchase, repair and improvement records
- Warranties
- Income tax records
Once you’ve finished with your financial spring cleaning, there’s just one more thing to do. Make a file for next year’s income tax return. As documents and receipts come in that you will need to file your taxes, toss them in this file. When it’s time to file your taxes, you’ll have everything you need in one place.
Remember, these are suggestions. It’s always a good idea to consult your accountant or attorney if you have questions on what financial records to keep.
Provided as a public service by the members of the Nebraska Independent Community Bankers.
back to top
 During the month of March, the US Treasury and the Federal Reserve Bank will begin circulating the redesigned $10 bill. In an ongoing process to thwart counterfeiters, the federal government will redesign the currency every seven to 10 years.
According to the Bureau of Engraving and Printing, the new $10 bill will be highlighted by images of the Statue of Liberty’s torch and the words “We the People.” The new note will also incorporate easy-to-use security features for people to check their money and subtle background colors in shades of orange, yellow and red. If your wallet has some of the old $10 notes, don’t worry. The old currency will still maintain its full face value.
When you receive your first redesigned $10 bill, note three security features designed to combat counterfeiting.
- Color-Shifting Ink. Tilt your $10 bill to check that the numeral “10” in the lower right-hand corner on the face of the note changes color from copper to green.
- Watermark. Hold the new note up to the light to see if a faint image of Treasury Secretary Alexander Hamilton appears to the right of his larger portrait. This watermark should be visible from both sides of the note. On the redesigned note, the watermark is easy to locate—a blank oval has been incorporated into the design to highlight the watermark’s location.
- Security Thread. Hold the note up to the light and make sure there’s a small strip that repeats “USA TEN” in tiny print. It should run vertically to the right of the portrait.
Improvements in digital technology have greatly increased counterfeiting. According to the Secret Service, one percent of counterfeit bills were produced on digital equipment ten years ago. Today, 56 percent of counterfeit bills are produced using new digital technology.
Constant improvements in security features, aggressive law enforcement and education efforts to inform the retail industry and the general public are being used to stem the tide of counterfeiting of US currency.
Three federal agencies work in tandem when introducing new bills into public circulation. The US Treasury handles the design, printing and production. The Federal Reserve is responsible for making sure that the banks have the actual money for circulation. Lastly, the Secret Service works to enforce anti-counterfeiting laws through public education and ensuring that the banking industry is up to speed on identifying and authenticating bills.
The new $10 note is the latest in the new series of US currency. The new series began with the $20 note in 2003 and continued with the $50 note in 2004. The next currency denomination to be redesigned will be the $100 note.
Provided as a public service by the members of the Nebraska Independent Community Bankers.
back to top
Although new federal legislation affects almost every American household, it has not been widely publicized. Credit card companies are quietly raising your minimum payment from 2% to 4%.
Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, the minimum monthly payment on credit cards must include all of the interest and a portion of the principal each month. Although these guidelines were approved in 2003 by the US Treasury Department, many of the credit card companies are just now beginning to implement them.
The new federal legislation also will require credit card companies to include a warning on monthly credit card statements that informs consumers about the length of time they will be in debt if they make only the minimum payment.
According to an example by one financial publication, if you have a $5000 credit card balance at an interest rate of 13.5% and a minimum payment of 1.67%, it will cost you $9538 in interest and take 41 years to pay off. A higher interest rate of 19.8%, but a minimum payment of 3%, will cost $5858 in interest and take only 21 years to pay off. New payments are required to cover all fees and interest and pay down at least some of the outstanding credit card principal.
The average credit card debt per American household is $10,000. While lower credit card payments have encouraged us to spend, it has also increased our consumer debt. Increased minimum payments will probably force consumers to take a second look at what they can afford and they will probably start carrying less debt.
If you’re one of the many people who live paycheck to paycheck and will find it difficult to afford the increased payment, make every effort not to default on your credit card payment. This will lead to more problems, including calls from debt collectors. Call the credit card company to see if you can negotiate a lower repayment arrangement.
Here are a few other suggestions to help you make those payments:
- Look at how much you are withholding from each paycheck. Many people withhold more from each paycheck so they can receive a nice refund at tax time. It may be that you could withhold less and have more money each month instead of at the end of the year.
- Find ways to curb your spending. Take your lunch to work instead of eating out or perhaps delay buying that new pair of shoes.
- Before filing for bankruptcy, talk to a credit counselor—a requirement for bankruptcy filers under the new law.
- Take all credit cards, except one, out of your wallet and lock them away but be sure to keep payments current on ALL cards.
While this may present an initial hardship, this move will enable you to pay off your credit card debt faster.
Provided as a public service by the members of the Nebraska Independent Community Bankers.
back to top
|
