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Important Update: Changes in FDIC Deposit Insurance Coverage

The FDIC deposit insurance rules have undergone a series of changes starting in the fall of 2008. As a result, certain previously published information related to FDIC insurance coverage may not reflect the current rules. For details about the changes, visit Changes in FDIC Deposit Insurance Coverage. For more information about FDIC insurance, go to www.fdic.gov/deposit/deposits/index.html or call toll-free 1-877-ASK-FDIC (1-877-275-3342). For the hearing-impaired, the number is 1-800-925-4618.

Winter 2007/2008

A To-Do List for Fine-Tuning Your Finances

Any time is a good time to prioritize your financial goals and begin taking steps to achieve them. Here are suggestions to consider for your financial to-do list.

Woman reviewing her expenses

If you're having problems making loan payments or meeting other financial obligations, get help as soon as possible. Recent news reports have focused on people at risk of losing their homes because they had adjustable-rate mortgages that were resetting at higher, unaffordable monthly payments. But even in the best of economic times, people can have trouble making ends meet, especially after a job loss, divorce or separation, or a death or illness in the family. The most important thing you can do is address the problem.

"A financial crisis doesn't happen overnight," noted Eloy Villafranca, a Community Affairs Officer with the FDIC. "Unfortunately, many times people don't see the warning signs until it's too late and they face the prospect of spending several years getting back on track."

If you answer "yes" to one or more of the following situations, you could be in danger with debt:

  • You will be unable to make your mortgage payment.
  • Your credit cards are close to or over the limit.
  • You can only pay the minimum monthly amount due on your credit cards.
  • You are borrowing money to pay some of your monthly bills.
  • You have started working overtime or a second job just to cover food, housing, and other basic living expenses.

When it comes to a problem paying an existing loan — whether it is a mortgage, a credit card, an auto loan or any other substantial debt — contact your lender as soon as possible, preferably before you miss any payments. "Explain your situation and indicate your interest in continuing to make payments to avoid defaulting on your loan," said Janet Kincaid, Chief of the FDIC's Consumer Response Center. "Lenders would much prefer to work with a borrower on a new repayment plan than have to foreclose or repossess a home or a vehicle."

For help negotiating with a lender or otherwise getting a debt problem under control, consider asking an attorney, accountant or another trusted advisor to refer you to a reliable credit counselor who, at little or no cost, can help you develop a recovery plan. But be very careful to check out the qualifications of a credit counselor before signing an agreement. Some people holding themselves out as counselors may offer questionable or expensive services, and others may be scam artists. For more guidance on where to turn for help if you're having problems paying your mortgage, see the last page of this issue.

Find ways to spend less and save more. Many experts suggest that consumers get a better handle on how much they're spending, and where, by keeping a log of their expenditures for a one-month period. "Do your best to write down every purchase, even all those sodas from the vending machine," explained Villafranca. "You may be surprised to learn how these expenses, even the small ones, can add up." Among the areas he said you may be able to trim back are restaurant meals and premium TV, Internet or phone services you really don't need or use.

Also consider ways to pay less for banking services, added Kincaid. Examples she cited: Pay as much as you can on your credit card each month — pay in full, if possible — to avoid or limit interest charges. Pay your loans and other bills on time to avoid late fees and damage to your credit record. Order a free copy of your credit reports (start at www.AnnualCreditReport.com or call toll-free 1-877-322-8228) and correct inaccuracies that can keep you from getting the best interest rate on a loan or credit card. Whenever possible, use your own bank's automated teller machines to avoid fees charged for using another institution's ATM. Also comparison shop for financial services the way you would for any purchase. For more ideas on how to cut costs, see back issues of FDIC Consumer News at www.fdic.gov/consumernews, including our Summer 2007 special edition called 51 Ways to Save Hundreds on Loans and Credit Cards.

By reducing expenses, including avoiding unnecessary fees, you'll have more money available for savings and investments to support your future needs, including long-term goals such as retirement. Given the inevitable ups and downs in the stock market, it's also important to review your portfolio — your mix among stocks, bonds, mutual funds, savings accounts, CDs (certificates of deposit) and so on — to be sure it's well-diversified. "It's your money, so you've got to be proactive in protecting it," said Kincaid. For ideas about how to rebalance your portfolio as you age, with a special focus on saving for retirement, see our to-do list in the Fall 2005 issue of FDIC Consumer News at the Web site above.

Simplify your financial life. Examples include signing up for direct deposit of your pay and benefit checks and other regular income, having a certain sum automatically transferred each month to a savings or investment account, and exploring banking and bill paying by phone or online. These services can help you save time, reduce stress, lower the fees you pay, and maybe earn a little extra on your savings and investments.

Also consider arranging and updating your financial files to help you and your family locate important documents (such as wills and insurance policies) in an emergency.

Review your insurance coverage. About once a year, make sure you have enough insurance without over-insuring or paying too much. This periodic checkup is especially important if there's been a big change in your life — such as a marriage, a new child or a change in employment — that could result in a need for more health, life or disability insurance (to replace lost income during a serious illness).

"Also look at your homeowners insurance — what it covers, what it doesn't — especially if you've recently added a new room or made other major improvements," Villafranca said. "This is crucial, because if your home gets severely damaged or destroyed, you will be very sorry if you didn't carry enough insurance."

Be on guard against financial fraud. "Con artists are very creative and unscrupulous when it comes to thinking of new ways to steal money," said Michael Benardo, manager of the FDIC's Financial Crimes Section. "Consumers need to understand the warning signs and be on the lookout for fraud involving loans, checks, credit cards, ATMs, the Internet and other bank products and services." Here's what Benardo said are some of the best ways to protect against financial fraud:

  • Review your bank statements to spot unauthorized withdrawals.
  • Get copies of your credit reports (www.AnnualCreditReport.com or call toll-free 1-877-322-8228) and look for loans, credit cards or other accounts that an identity thief may have opened in your name.
  • Be wary of requests to divulge personal information — especially your date of birth, Social Security Number, bank account information and your mother's maiden name — in response to an unsolicited call, letter or e-mail, no matter how official it may look.
  • Before disposing of documents with personal information, use a crosscut shredder that will turn the paper into confetti.
  • Beware of offers or prizes that seem too good to be true — for example, you are told you won a lottery you never entered or a stranger sends you a big check by mistake — and you are pressured to wire money back to cover "fees," "taxes" or some other (fraudulent) purpose.

Stay informed about finances. "Being an educated consumer of financial services is analogous to staying on top of the latest in technology; even if you think you know the basics, things are changing all the time," said Luke W. Reynolds, Chief of the FDIC's Community Affairs Outreach Section. "With so many new options for saving and borrowing money, and so many potential pitfalls to avoid, not keeping up with the changes can adversely affect your pocketbook."

Start with low-cost or no-cost educational services from reliable sources, including the FDIC. Our Web site at www.fdic.gov/quicklinks/consumers.html features consumer brochures, a self-paced online financial education program called "Money Smart," and back issues of FDIC Consumer News. You can also call the FDIC toll-free at 1-877-ASK-FDIC (1-877-275-3342) to get answers to questions about your rights and responsibilities as a bank customer.

Other resources include: the federal government's central Web site for financial education resources at www.mymoney.gov; Web sites from FDIC-insured financial institutions, industry associations, consumer groups, and the news media; and local classes or seminars on personal finance offered by schools, state and local government agencies, and nonprofit organizations.

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Last Updated 2/12/2008