FDIC Consumer News - Taking Control of Your Finances

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If at First You
A Message to Readers
Don’t Succeed…
The Federal Deposit Insurance Corporation has been
publishing FDIC Consumer News quarterly since 1993 to
help people be savvier about and safer with their money.
Common Mistakes Young Adults Make with Money
Dealing with personal finances can be overwhelming for
and How to Avoid Them
anyone, but especially for people just beginning to manage
money on their own. That’s why we’ve published this special
Everybody makes mistakes
putting the purchase on a
edition. Our goal is to help young adults — including those
with their money. The
credit card and paying
just starting a career or a family and others still in school —
important thing is to keep
monthly interest charges.
take control of their finances.
them to a minimum. And
Research major purchases
one of the best ways to
and comparison shop
accomplish that is to learn
interest charges could
this special report. Also
before you buy. Ask
from the mistakes of
recognize the warning
yourself if you really need
others. Here is our list of
signs of a serious debt
the item. Even better, wait
And, pay the entire
the top mistakes young
problem. These may
a day or two, or just a few
balance on your credit
people (and even many
include borrowing money
hours, to think things over
card or as much as you can
not-so-young people)
to make payments on
rather than making a quick
to avoid or minimize
make with their money,
loans you already have,
and costly decision you
interest charges, which can
and what you can do to
deliberately paying bills
may come to regret.
add up significantly.
avoid these mistakes in the
late, and putting off doctor
first place.
There are good reasons to
“If you pay only the
visits or other important
pay for major purchases
minimum amount due on
activities because you
Buying items you don’t
with a credit card, such as
your credit card, you may
think you don’t have
need…and paying extra
extra protections if you
end up paying more in
enough money.
for them in interest.
have problems with the
interest charges than what
Every time you have an
If you believe you’re
items. But if you charge a
the item cost you to begin
urge to do a little “impulse
experiencing debt
purchase with a credit card
with,” said Janet Kincaid,
buying” and you use your
overload, take corrective
instead of paying by cash,
FDIC Senior Consumer
credit card but you don’t
measures. For example, try
check or debit card (which
Affairs Officer. Example: If
pay in full by the due date,
to pay off your highest
automatically deducts the
you pay only the
you could be paying
interest-rate loans (usually
money from your bank
minimum payment due on
interest on that purchase
your credit cards) as soon
account), be smart about
a $1,000 computer, let’s
for months or years to
as possible, even if you
how you repay. For
say it’s about $20 a month,
come. Spending money
have higher balances on
example, take advantage of
your total cost at an
for something you really
other loans. For new
offers of “zero-percent
Annual Percentage Rate of
don’t need can be a big
purchases, instead of using
interest” on credit card
more than 18 percent can
waste of your money. But
your credit card, try
purchases for a certain
be close to $3,000, and it
you can make the matter
paying with cash, a check
number of months (but
will take you nearly 19
worse, a lot worse, by
or a debit card.
understand when and how
years to pay it off.
“There are also reliable
Getting too deeply in
credit counselors you can
debt. Being able to
turn to for help at little or
borrow allows us to buy
no cost,” added Rita Wiles
clothes or computers, take
Ross, an FDIC attorney.
a vacation or purchase a
“Unfortunately, you also
home or a car. But taking
need to be aware that
on too much debt can be a
there are scams
problem, and each year
masquerading as ‘credit
millions of adults of all
repair clinics’ and other
ages find themselves
companies, such as ‘debt
struggling to pay their
consolidators,’ that may
loans, credit cards and
charge big fees for
other bills.
unfulfilled promises or
Learn to be a good money
services you can perform
manager by following the
on your own.”
basic strategies outlined in
FDIC Consumer News
Spring 2005

For more guidance on
from the nation’s three
T-shirt or Frisbee, or 10
people to save money for
how to get out of debt
major credit bureaus —
percent off your first
their long-term goals, too,
safely or find a reputable
Equifax, Experian and
purchase if you just fill out
including perhaps buying a
credit counselor, start at
TransUnion — to make
an application for a new
home, owning a business
the Federal Trade
sure their information
card — but you’ve got to
or saving for your
Commission (FTC) Web
accurately reflects the
consider the possible
retirement (even though it
site at www.ftc.gov/bcp/
accounts you have and
consequences we’ve just
may be 40 or 50 years
your payment history,
described. “Don’t sign up
especially if you intend to
for a credit card just to get
Start by “paying yourself
apply for credit for
a great-looking
Paying bills late or
first.” That means even
something important in
T-shirt,” Kincaid added.
otherwise tarnishing
before you pay your bills
the near future. For
“You may be better off
your reputation.
each month you should
information about your
buying that shirt at the
Companies called credit
put money into savings for
rights to obtain free copies
store for $14.95 and saving
bureaus prepare credit
your future. Often the
of your credit report and
yourself the potential costs
reports for use by lenders,
simplest way is to arrange
have errors corrected, see
and troubles from that
employers, insurance
with your bank or
the FTC’s fact sheet Your
extra card.”
companies, landlords and
employer to automatically
Access to Free Credit Reports
others who need to know
Not watching your
transfer a certain amount
online at www.ftc.gov/bcp/
someone’s financial
expenses. It’s very easy to
reliability, based largely on
overspend in some areas
each person’s track record
and take away from other
If you pay only
paying bills and debts.
Having too many credit
priorities, including your
Credit bureaus, lenders
cards. Two to four cards
long-term savings. Our
the minimum
and other companies also
(including any from
suggestion is to try any
payment due on a
produce “credit scores”
department stores, oil
system — ranging from a
$1,000 computer,
that attempt to summarize
companies and other
computer-based budget
and evaluate a person’s
retailers) is the right
program to hand-written
let’s say it’s about
credit record using a point
number for most adults.
notes — that will help you
$20 a month,
Why not more cards?
keep track of your
your total cost at
spending each month and
While one or two late
The more credit cards you
enable you to set and stick
an Annual
payments on your loans or
carry, the more inclined
to limits you consider
Percentage Rate of
other regular
you may be to use them
appropriate. “A budget
commitments (such as rent
for costly impulse buying.
more than 18
doesn’t have to be
or phone bills) over a long
In addition, each card you
complicated, intimidating
percent can be
period may not seriously
own — even the ones you
or painful — just
close to $3,000,
damage your credit record,
don’t use — represents
something that works for
making a habit of it will
money that you could
and it will take
you in getting a handle on
count against you. Over
borrow up to the card’s
your spending,” said
you nearly 19
time you could be charged
spending limit. If you
years to pay it off.
a higher interest rate on
apply for new credit you
your credit card or a loan
will be seen as someone
Want some specific ideas
that you really want and
who, in theory, could get
for ways to cut back on
each month to a savings
need. You could be turned
much deeper in debt and
spending? A good place
account or to purchase a
down for a job or an
you may only qualify for a
to start is the Web site
U.S. Savings Bond or an
apartment. It could cost
smaller or costlier loan.
for the “66 Ways to
investment, such as a
you extra when you apply
Save” campaign
mutual fund that buys
Also be aware that card
for auto insurance. Your
stocks and bonds.
companies aggressively
credit record will also be
market their products on
Not saving for your
Even if you start with just
damaged by a bankruptcy
college campuses, at
future. We know it can be
$25 or $50 a month you’ll
filing or a court order to
concerts, ball games or
tough to scrape together
be significantly closer to
pay money as a result of a
other events often
enough money to pay for a
your goal. “The important
attended by young adults.
place to live, a car and
thing is to start saving as
So, pay your monthly bills
Their offers may seem
other expenses each
early as you can — even
on time. Also, periodically
tempting and even
month. But experts say it’s
saving for your retirement
review your credit reports
harmless — perhaps a free
also important for young
continued on next page
FDIC Consumer News
Spring 2005

when that seems light-
more about how to save on
Pay off your credit card
dispute. Also remember
years away — so you can
ATM fees, see the tips
balance each month, if
that the quickest way to fix
benefit from the effect of
from FDIC Consumer
possible, so you can avoid
a problem usually is to
compound interest,” said
News online at www.fdic.
or minimize interest
work directly with your
Donna Gambrell, a Deputy
charges. Also send in your
bank or other service
Director of the FDIC’s
payment on time to avoid
Division of Supervision
additional fees. If you don’t
Try not to “bounce”
“Many young people don’t
and Consumer Protection.
expect to pay your credit
checks — that is, writing
take the time to check their
Compound interest refers
card bill in full most
checks for more money
receipts or make the
to when an investment
months, consider using a
than you have in your
necessary phone calls or
earns interest, and later
card with a low interest
account, which can trigger
write letters to correct a
that combined amount
rate and a generous “grace
fees from your financial
problem,” one banker told
earns more interest, and on
period” (the number of
institution (about $15 to
FDIC Consumer News.
and on until a much larger
days before the card
$30 for each check) and
“Resolving these issues can
sum of money is the result
company starts charging
from merchants. The best
be time consuming and
after many years.
you interest on new
precaution is to keep your
exhausting but doing so
Banking institutions pay
checkbook up to date and
can add up to hundreds of
interest on savings
closely monitor your
Not taking responsibility
accounts that they offer.
balance, which is easier to
for your finances. Do a
Final Thoughts
However, bank deposits
do with online and
little comparison shopping
aren’t the only way to make
Even if you are fortunate
your money grow.
enough to have parents or
“Investments, which
other loved ones you can
include stocks, bonds and
possible, use your
turn to for help or advice
mutual funds, can be
own financial
as you start handling
attractive alternatives to
money on your own, it’s
bank deposits because they
really up to you to take
often provide a higher rate
automated teller
charge of your finances.
of return over long periods,
machines or the
Doing so can be
but remember that there is
intimidating for anyone.
ATMs owned by
the potential for a
It’s easy to become
temporary or permanent
institutions that
overwhelmed or frustrated.
loss in value,” said James
don’t charge fees
And everyone makes
Williams, an FDIC
mistakes. The important
to non-customers.
Consumer Affairs
thing is to take action.
Specialist. “Young people
Start small if you need to.
especially should do their
telephone banking (see
to find accounts that match
Stretch to pay an extra $50
research and consider
Page 7). Remember to
your needs at the right
a month on your credit
getting professional advice
record your debit card
cost. Be sure to review
card bill or other debts.
before putting money into
transactions from ATMs
your bills and bank
Find two or three ways to
and merchants so that you
statements as soon as
cut your spending. Put an
Paying too much in fees.
will be sure to have enough
possible after they arrive or
extra $50 a month into a
Whenever possible, use
money in your account
monitor your accounts
savings account. Even little
your own financial
when those withdrawals are
periodically online or by
changes can add up to big
institution’s automated
processed by you bank.
telephone. You want to
savings over time.
teller machines or the
make sure there are no
Financial institutions also
Also remember that being
ATMs owned by financial
errors, unauthorized
offer “overdraft protection”
financially independent
institutions that don’t
charges or indications that
services that can help you
doesn’t mean you’re
charge fees to non-
a thief is using your
avoid the embarrassment
entirely on your own.
customers. You can pay $1
identity to commit fraud.
and inconvenience of
There are always
to $4 in fees if you get cash
having a check returned to
Keep copies of any
government agencies,
from an ATM that isn’t
a merchant. But be careful
contracts or other
including the FDIC and
owned by your financial
before signing up because
documents that describe
the other organizations
institution or isn’t part of
these programs come with
your bank accounts, so you
listed on Pages 10 and 11,
an ATM “network” that
their own costs.
can refer to them in a
that can help with your
your bank belongs to. For
questions or problems.
FDIC Consumer News
Spring 2005

Financial Fraud and Theft: How to Protect Yourself
A big concern today is
envelope containing a
“confirm” personal
computer,” added
identity theft or “ID
check, documents showing
information. “Reputable
Thompson. “Even if you
theft,” which occurs when
confidential information,
organizations won’t
go back and delete what
an individual learns
or other items that a thief
contact you to verify
you typed in, your
someone’s Social Security
can steal from a mailbox.
account information online
personal information will
number (SSN), bank
because they already have
remain on the computer’s
Try to use a locked
account information or
it,” said Sandra
hard-drive and may be
mailbox or other secure
other details that can be
Thompson, a Deputy
retrieved by an identity
location for your incoming
used to go on a buying or
Director of the FDIC’s
mail. Pick up your mail as
borrowing binge. While
Division of Supervision
soon as possible. And for
Beware of offers that
law enforcement agencies,
and Consumer Protection.
outgoing mail containing a
seem too good to be
financial industry
check or personal
If you get one of those
true. Con artists often
regulators, financial
information, put it in a
fraudulent e-mails (they’re
pose as charities or
institutions and other
blue Postal Service
called “phishing” scams),
business people offering
organizations are working
mailbox, hand it to a mail
don’t click on any links or
jobs, rewards or other
together to prevent ID
carrier or take it to the
attachments because doing
“opportunities.” They
theft and other financial
post office instead of
so could activate some
hope that trusting souls
crimes, consumers need to
leaving it in your doorway
types of spyware or viruses.
will send cash or checks,
take precautions.
or home mailbox.
provide SSNs or credit
Take other precautions
Protect your Social
card numbers, or wire
Keep your financial trash
with your personal
Security number, bank
money from a bank
“clean.” Don’t throw away
computer. Examples:
account and credit card
old ATM or credit card
Install a free or low-cost
numbers, PINs (personal
receipts, bank statements,
“firewall” to stop intruders
Be extremely suspicious of
identification numbers),
tax returns or other
from gaining remote access
any offer that involves
passwords and other
documents containing
to your PC. Download and
“easy money” or “quick
personal information.
personal information
frequently update security
fixes.” Be careful if you’re
Never provide this
without shredding them
“patches” offered by your
being pressured to make a
information in response to
first. ID thieves pick
operating system and
quick decision and you’re
a phone call, a fax, a letter
through trash bins looking
software vendors to correct
asked to send money or
or an e-mail you’ve
for trash they can turn into
weaknesses that a hacker
provide bank account
received — no matter how
might exploit. Use
information before you
friendly or official the
software that detects and
receive anything in return.
circumstances may appear.
Use extra care with
blocks “spyware,” which
Also beware of any
personal information on
Be especially careful with
can record your keystrokes
transaction for which you
a computer or over the
your SSN. Don’t provide it
to obtain your credit card
receive a cashier’s check
Internet. Never provide
to any business unless
number and other personal
made out for more money
bank, credit card or other
you’re convinced it’s
than the amount due to
sensitive information when
necessary and the
you with a request to wire
visiting a Web site that
Before selling, donating or
information will be
back the difference — you
doesn’t explain how your
disposing of an old
could lose a lot of money if
personal information
personal computer, use
the check is fraudulent.
Also be aware that friends,
would be protected,
special software to
family members,
including its use of
completely erase files that
To learn more about
roommates and workers
“encryption” to safely
contain financial records,
Internet security, go
who come into homes
transmit and store data.
tax returns and other
make up a large percentage
personal information.
Be on guard against
of identity thieves. They
To protect against an array
incoming e-mails
“If you use someone else’s
often are in the best
of scams, go to the Federal
claiming to be from a
computer, such as a
position to find and use
Trade Commission’s
trusted source — perhaps a
computer provided by
confidential information.
consumer information
bank, another company
your school, do not put
Web site at www.ftc.gov/
Guard your mail, which
you know or even a
your Social Security
may include a credit card
government agency —
number or other personal
or bank statement, an
asking you to “update” or
information onto the
FDIC Consumer News
Spring 2005

Five Things You Should Know About…
payments on your credit
Credit Cards
Checks and Checking Accounts
card may be reported to the
major credit bureaus as a
sign that you have
problems handling your
And if your credit rating
gets downgraded, your card
company could raise the
1. Use them carefully.
interest rate on your credit
Credit cards offer great
card, reduce your credit
benefits, especially the
limit (the maximum
1. Shop around for a
the ATM or when making
ability to buy now and pay
amount you can borrow) or
good deal, preferably an
a purchase. These
later. But you’ve got to keep
even cancel your card.
the debt levels manageable.
account without a monthly
transactions can be costly.
Late payment on your
If you don’t, the costs in
maintenance fee.
(See Page 4 for more
credit card also can be a
terms of fees and interest,
mark against you the next
Banks usually offer several
or the damage to your
time you apply for an
accounts to choose from
4. Consider Internet
credit record, could be
apartment or a job.
with different features,
(online) banking. This
fees, interest rates,
service allows you to make
5. Protect your credit
2. Choose them carefully.
opening balance
payments or move money
card numbers from
Don’t choose a credit card
requirements and so on.
from one account to
thieves. Never provide
just to get freebies (T-shirts
another through your
your credit card
or sports items) or because
And remember that what’s
numbers — both the
bank’s Web site instead of
there’s no annual fee. Look
good for your parents or
account numbers and
(or in addition to) writing
for a card that’s best for
your friends may not be
expiration date on the front
and mailing paper checks.
your borrowing habits.
best for you.
and the security code on
This saves on the costs of
the back — in response to
postage and buying paper
Example: If you expect to
2. Keep your checkbook
an unsolicited phone call,
carry a balance on your card
up to date by recording
e-mail or other
from month to month,
all transactions, including
communication you didn’t
Online banking also allows
which means you’ll be
ATM withdrawals, bank
you to monitor your
charged interest, it’s more
fees, purchases you make
account without having to
When using your credit
important to look for a card
using a debit card, and any
wait for a statement in the
card online make sure
with a low interest rate or a
other deductions that do
you’re dealing with a
generous “grace period”
not involve writing a
legitimate Web site and
(more time before your
5. Pay attention to your
that your information will
payments are due).
bank statements.
be encrypted (scrambled
Also promptly compare
Immediately report any
for security purposes)
3. Pay as much as you can
your checkbook with your
errors or unauthorized
during transmission.
to avoid or minimize
monthly statement or
transactions (to protect
interest charges. If
Major credit card
review your account
yourself from accusations
possible, pay your bill in full
companies also are offering
information online or by
that you were negligent in
more protection by
each month. Remember,
managing your account).
providing “zero-liability”
paying only the minimum
3. Avoid “overdrawing
programs that protect
due each month means
Look at your statement as
your account,” which can
consumers from the
you’ll be paying a lot of
soon as possible after it
unauthorized use of their
happen if you write a
interest for many years, and
arrives in the mail or
check or otherwise
those costs could far exceed
monitor your account
attempt to withdraw (by
the amount of your original
In general, only give your
more regularly on the
mistake) more money than
credit card or card numbers
Internet or through your
you have in your account.
to reputable merchants or
bank’s telephone banking
4. Pay on time. You’ll
It also is possible to
other organizations.
avoid a late fee of about $35
overdraw your account
or more. But more
using your debit card at
importantly, continued late
FDIC Consumer News
Spring 2005

High–Tech Banking, 24/7
To Buy or Not to Buy…
For young adults today, it’s
That is a question many young adults face
hard to imagine life
without gadgets and high-
when it comes to a home or a car
tech helpers. We want to
Renting vs. Buying a Home: Once you start earning
make sure you know about
a good, steady income you’ll most likely face this decision:
some of the attractive
Should I buy my own home instead of paying rent to
electronic banking services
someone else?
beyond ATMs.
Most people want to own a home. Homeownership often
Internet banking (online
is referred to as “the American dream.” Why is it so
banking) enables you to
special? Among the reasons: Real estate often is an
transfer money between
excellent investment, perhaps the number one source of
your accounts at the same
wealth building for families. Owning your own home also
bank and view account
can be a great source of pride and stability. But
information, deposits as
transfer money between
homeownership may not be for everyone. It’s a big
well as loans, at any time.
separate accounts at the
financial commitment — starting with the initial shock of
Internet bill paying
same bank, and obtain
your purchase (including a “down payment” and fees paid
allows you to pay monthly
details about services.
to a real estate agent, the lender and others) followed by
and one-time bills over the
years of monthly mortgage payments, real estate taxes,
Automatic withdrawals
Internet. Some banks offer
property insurance and maintenance costs (such as lawn
from your bank account
electronic bill payment
care and home improvements).
can be arranged free of
free of charge, others
charge to pay recurring
How can you learn more about renting vs. buying a
charge a fee that is usually
bills (such as phone bills
home, as well as your rights and your responsibilities as a
less than what you would
or insurance premiums) or
renter or a homeowner? A good place to start is
spend on postage.
to systematically put a
www.mymoney.gov, the new Web site for financial
Debit cards look like
certain amount of money
information from the federal government. Or, go to the
credit cards but they
into a savings account, a
Web site of the U.S. Department of Housing and Urban
automatically withdraw
U.S. Savings Bond, or an
Development (HUD) at www.hud.gov, which has answers
the money you want from
to common questions from renters and first-time
your account. You can use
homebuyers, a calculator you can use online to compare
“Your banking can be so
a debit card to get cash
buying vs. renting a home, and links to homebuyer
much more convenient
from an ATM or to pay
assistance programs across the country.
and easier to monitor and
for purchases.
control when you have
Buying vs. Leasing a Car: For many young people, their
Direct deposit enables
access to your accounts 24
first big financial commitment will involve getting their
your paycheck and certain
hours a day, seven days a
own wheels.
other payments to be
week, from your home or
One option is to buy, which may involve
transmitted automatically
practically anywhere else,”
borrowing money to pay for it. Before you visit a
to your bank account.
added Weatherby.
dealership or bid for a car over the Internet, visit our
“Direct deposit is free and
However, she also stressed
Web site for tips from FDIC Consumer News that can
it’s fast — there’s no
the need to take security
help you save time and money, perhaps hundreds of
waiting for the check to
precautions with your
dollars, when it comes to shopping for an auto loan. See
arrive at home and no
electronic transactions and
Kicking the Tires on an Auto Loan: Don’t Kick Yourself for
waiting in the teller lines,”
your computer, such as
Paying Too Much online at www.fdic.gov/consumers/
said Kathryn Weatherby,
those discussed on Pages 5
an Examination Specialist
and 6. To learn more
for the FDIC.
Another option is to lease a car, which is similar to
about electronic banking
renting it for a few years. The Federal Reserve Board has
Telephone banking
and consumer protections,
published a guide to the differences between buying and
allows you to use your
see the Winter 2004/2005
leasing a car, including cost considerations and consumer
touch-tone phone to
FDIC Consumer News
rights. Read Keys to Vehicle Leasing online at
confirm that a check or
online at www.fdic.gov/
deposit has cleared, get
your latest balance,
FDIC Consumer News
Spring 2005

Ages and Stages of Money Management: A To-Do List
To successfully reach your financial goals, a lot depends on what you do and when. Here are just
a few ideas young adults can consider at key stages of their life.

You’re in High
If you (and your parents)
provided by your school
cover big medical bills).
are comfortable with
(see Page 5).
Check into low-cost or
getting a credit card, you
free insurance offered
Consider earning money
Consider a paying job or
should know that there are
through your employer.
outside of your home,
even an unpaid internship
cards designed just for
whether it’s babysitting,
at a workplace related to a
You’re Starting a
teens. One is a credit card
lawn mowing, or working
career you’re considering.
with a low credit limit that
in a movie theater or
can keep you from getting
If possible, set aside
Continue saving and
another “real” business. A
deeply in debt. Another is
money into savings and
investing money, including
job can provide a sense of
a pre-paid card that comes
in retirement accounts.
accomplishment and
with parental controls,
responsibility. It also can
Try to take a class in
including spending limits.
If you don’t already own
be a good opportunity to
personal finance. Read
your home do some
learn about careers and to
You’re in College
money-related magazine
research to see if this is a
“network” with
and newspaper articles.
good option for you. A
Realize that as you pay
home purchase can be
bills and debts on your
You’re Starting a
expensive but it also can
Learn the concept of
own you are building a
be an excellent investment
“paying yourself first” —
“credit record” that could
Keep your credit card and
and a source of tax breaks.
that is, automatically
be important when you
other debts manageable.
Check out educational
putting some money into
apply for a loan or a job in
Maintain a good credit
resources for first-time
savings or investments
the future. Pay your bills
homebuyers (see Page7).
before you’re tempted to
on time…and borrow only
spend it. Start small if you
what you can repay.
Save money for both
Make sure you are
have to and gradually
short-term and long-term
properly insured,
If you decide to get your
build up.
goals. Contribute as much
including life, health,
own credit card, choose
as you can to retirement
disability and home
Consider opening a bank
carefully. Take your time,
savings, which often can
owner’s or renter’s
account, either on your
understand the risks as
be used for other
own or with a parent or
well as the rewards and do
purposes, including a first-
other adult. It’s a good
some comparison
Talk with an attorney
time home purchase. Take
way to learn about
shopping. Don’t apply for
about the legal documents
advantage of matching
managing money. You also
a credit card just because
you should have to protect
contributions that your
may want to start using a
you received an invitation
your loved ones if you
employer will put into
debit card — you can use
in the mail or a sales
become seriously ill or die.
your retirement savings.
it to make purchases but
person was offering a free
These documents typically
you won’t pay interest or
gift on campus.
Do your best to stick to a
include a will, a “durable
get into debt because the
budget and control your
power of attorney” (giving
Protect your Social
money is automatically
spending, especially if
one or more people the
Security number (SSN),
deducted from your bank
you’re still paying back
authority to handle
credit card numbers and
student loans or working
personal matters if you
other personal information
at an entry-level job.
become mentally or
Take a personal finance
from thieves who use
physically incompetent)
class or join an investment
someone else’s identity to
Although insurance
and a “living will”
club at school.
commit fraud. Examples:
sometimes seems like a
(specifying the medical
Use your SSN as
waste of money, you only
If you’re planning to go to
care you want or don’t
identification only if
need one accident or
college, learn about your
want if you become
absolutely necessary and
catastrophe to wipe you
options for saving or
hopelessly ill and cannot
never provide it to a
out financially. Think
borrowing money for what
communicate your
stranger. Safeguard your
about disability insurance
will be a major expense
personal information when
(to replace lost income if
(see the next page).
using the Internet or
you become seriously ill)
borrowing a computer
and health insurance (to
FDIC Consumer News
Spring 2005

The Right Way to Right A Wrong
Did You Know…?
How to fix a problem with a financial institution
Web Sites Offer Guidance on Paying for College
Got a question or a
notes of your conversation,
College costs keep going up and up. Fortunately, there
complaint involving a
including the date.
are many ways to save for college education, including
financial institution but
tax-advantaged savings plans and U.S. Savings Bonds.
3. Act as soon as
you’re not sure about the
There also are options for borrowing money, including
possible. Some laws
best or quickest ways to
bank loans and a variety of federal government student
require consumers to
resolve the matter? Here’s
loan programs.
report a problem within a
a good game plan.
certain time period to be
For more information on saving and borrowing for
1. Contact the
fully protected.
college costs, including what to consider if you’re
institution directly.
having difficulty repaying a student loan, some federal
4. If you can’t fix a
Experience has shown
government Web sites can help. One is the U.S.
problem on your own
that’s the quickest way to
Department of Education’s Web site at
you may contact the
resolve most problems.
www.studentaid.ed.gov, which even includes a calculator
institution’s government
Also keep your cool. Be as
you can use to determine how much to save to meet
regulator for help or
professional as possible.
college expenses and how to maximize your savings
guidance. To find out who
efforts. Another site, www.students.gov, is a
2. Put your complaint in
regulates a bank or other
comprehensive Web site with information from the U.S.
writing, even if you also
deposit-taking institution,
government and other sources on topics such as
call the institution. Some
you can write or call the
financial aid.
consumer protection laws
FDIC (see Page 11). Find
require that written
contact information and
The FDIC Protects Deposits to $100,000
complaints be filed. Be
tips for solving problems
The Federal Deposit Insurance Corporation is an
sure to send your letter to
with non-bank financial
independent agency of the U.S. government that
the address that the
companies, such as
protects depositors from losing money if their insured
institution recommends for
insurance companies or
bank or savings institution were to fail. Generally
complaints and keep a
brokerage firms, at
speaking, your funds in checking and savings accounts
copy of all correspondence
and “CDs” (special accounts you’d hold for anywhere
and supporting documents.
which features the federal
from one month to five years) are fully insured up to
With phone calls, get the
government’s Consumer
$100,000, and sometimes more, under current laws.
name of the person you
Action Handbook.
spoke to and keep good
“If you or your family has $100,000 or less on deposit at
a bank, as is the case with most people, your money is
completely safe,” said Kathleen Nagle, a supervisor with
Some Federal Laws Protecting Consumers
the FDIC’s Division of Supervision and Consumer
The Electronic Fund Transfer Act limits a consumer’s
Protection. To learn more, start at the FDIC’s Web site
liability if there’s been an unauthorized use of an ATM
(www.fdic.gov) or call or write the FDIC (see Page 11).
card, debit card or other electronic banking device.
The Equal Credit Opportunity Act prohibits
discrimination against loan applicants based on race, sex,
This FDIC Special Guide May Be Reprinted
age (provided that the applicant is eligible to enter into a
binding contract), marital status, religion, national origin
The FDIC encourages schools, financial institutions,
or receipt of various types of government assistance.
personal finance advisors, consumer groups, the media and
anyone else to help make the tips and information in this
The Fair Credit Billing Act establishes procedures for
special edition of FDIC Consumer News widely available to
correcting errors on credit card bills. This law also allows
young adults.
a card user to dispute a purchase made with a card.
The newsletter may be reprinted in whole or in part
The Truth in Lending Act requires creditors to give
without advance permission. In addition, the FDIC offers
consumers information about the Annual Percentage
this special edition online in a PDF version (at
Rates and other costs of a credit card or loan. This law
www.fdic.gov/consumers/consumer/news) that looks just
also protects consumers if a credit card is lost or stolen.
like the printed newsletter and can easily be reproduced in
The Truth in Savings Act requires disclosures about
any quantity. The back page of the PDF version also was
interest rates and fees and prohibits misleading or
intentionally left blank so that an organization could add its
inaccurate advertising for checking and savings accounts.
name, logo, a special message and/or self-mailing
FDIC Consumer News
Spring 2005

Take Our “Financial Aptitude Test” — the F.A.T.
You don’t need a #2 pencil or a calculator to take our quiz, but you do need a good understanding of the information
in this special report to get a good score. Think you’re ready?

1. It’s always smart to send
their 20s should focus
How To Learn More
in the minimum payment
entirely on meeting
due on a credit card bill
monthly expenses and
each month and stretch
saving for short-term goals
The FDIC offers a variety of assistance to help
out the card payments as
(such as buying a home or
consumers understand how to handle their money and
long as possible instead of
starting a business) and not
resolve complaints. Start with the consumer information
paying the bill in full. True
start saving for retirement
on the FDIC Web site at www.fdic.gov, where you’ll
or False?
until their 40s at the
find consumer brochures and alerts, back issues of our
earliest. True or False?
quarterly FDIC Consumer News, and an interactive
2. Your credit record (your
financial education program called Money Smart that
history of paying debts and
7. If you receive an e-mail
provides a basic introduction to bank services. You also
other bills) can be a factor
from a company you’ve
can get answers to questions by phone or e-mail (see
when you apply for a loan
done business with asking
next page).
or a credit card but cannot
you to update your records
affect non-credit decisions,
by re-entering your Social
FDIC Consumer News provides continuing financial
such as applications for
Security number or bank
education. You can sign up for a free e-mail
insurance or an apartment.
account numbers, it’s safe
subscription. After each new edition is posted to our
True or False?
to provide this information
Web site, you’ll get an e-mail telling you about the issue
as long as the e-mail
and linking you to any story that interests you. Just
3. While one or two late
explains the reason for the
follow the instructions posted at www.fdic.gov/about/
payments on bills may not
request and shows the
damage your credit record,
company’s official logo.
making a habit of it will
Other federal government agencies, including those
True or False?
count against you.
listed on the next page and the Federal Trade
True or False?
8. The best way to avoid a
Commission (www.ftc.gov), publish consumer
“bounced” check — that is,
information and have staff, Web sites and other
4. There’s no harm in
a check that gets rejected
resources that can help answer your questions on
having many different
by your financial
financial matters. Another good place to start is
credit cards, especially
institution because you’ve
www.mymoney.gov, the federal government’s central
when the card companies
overdrawn your account —
Web site for information about managing your money.
offer free T-shirts and
is to keep your checkbook
other special giveaways as
Other resources include financial institutions (through
up to date and closely
incentives. The number
their staff, brochures and Web sites) and personal
monitor your balance.
of cards you carry won’t
finance classes offered by schools, state and local
Institutions do offer
affect your ability to get a
government agencies and non-profit organizations.
“overdraft protection”
loan; what matters is that
These local classes may involve a partnership with the
services but these
you use the cards
federal government, such as those that offer the FDIC’s
programs come with their
responsibly. True or False?
Money Smart curriculum. Another example is the
own costs.True or False?
Cooperative Extension System (www.csrees.usda.gov/
5. A debit card may be a
9. All checking accounts
financialsecurity), a nationwide educational partnership
good alternative to a credit
are pretty much the same
of more than 3,000 local offices and 100 state
card for a young person
in terms of features, fees,
universities, and a research and education agency within
because the money to pay
interest rates, opening
the U.S. Department of Agriculture.
for purchases is
balance requirements and
automatically deducted
so on. True or False?
from a bank account, thus
Correct Answers
avoiding interest charges
10. If you or your family
or debt problems. True or
has $100,000 or less on
rue (See Page 9)
rue (See Page 8)
deposit at an FDIC-
False (See Page 6)
False (See Page 3)
insured bank, and the bank
6. It makes no sense for
rue (See Page 4)
. 8
rue (See Pages 3)
fails, your money is
young adults to put money
completely safe. True or
False (See Page 5)
. 7
False (See Page 3)
aside for their retirement
False (See Page 3)
False (See Page 2)
many years away. People in
(See correct answers at right.)
FDIC Consumer News
Spring 2005