CD Rates on Steroids (and With Some Risk, Of Course)

by Odysseas Papadimitriou on January 23, 2013

corporate bondIt can be difficult to find an investment vehicle that gives you a safe, yet lucrative return on your deposit these days.  Rates on savings accounts, Money Market Accounts (MMAs), and Certificates of Deposit (CDs) have remained low since the Great Recession began; the stock market is doing its best Yo-Yo impression; and commodities like gold have left many scratching their heads.

That’s why private-label corporate bonds – more commonly known as floating-rate demand notes – might seem so attractive.

AIG Shareholders Give U.S. Taxpayers the Middle Finger (And Other Unbelievably True Stories from the Week in News)

by John Kiernan on January 9, 2013

AIG shareholder suitHold on – is this the news, a dream, or some sort of Oscar Wilde-type satire?  That’s along the lines of what I was thinking last night while watching Anderson Cooper and Erin Burnett report a pair of stories seemingly straight out of The Twilight Zone or Ripley’s Believe it or Not.

I mean, could AIG actually be SUING the U.S. government (as well as you, me, and every other taxpayer by extension)?  Are U.S. politics really so flawed that rape is actually LEGAL in California if the victim is single and the perpetrator impersonates her boyfriend?

Could Consumer Dispute Resolution Have a Class Problem, Not an Arbitration Issue?

by John Kiernan on December 5, 2012

supreme courtHow can we fix arbitration?  That’s the question we posed last week after The Pew Charitable Trusts released a study that revealed how disturbingly prevalent mandatory arbitration clauses are in the fine print of checking account agreements.  The thing is, after exploring the issue a bit further and talking to some of the country’s foremost experts on arbitration and consumer disputes, a new question arose:  Is the arbitration process actually broken?

Don’t worry if you’re a little lost right now because a bit of background is certainly in order.

Are Banks Making You Sign Away Your Rights?

by John Kiernan on November 27, 2012

signing away rightsPrepare to be astonished:  Banks aren’t the most consumer-friendly businesses out there.  I know, I know, you’re flabbergasted, right?  After the excessive fees, bait-and-switch pricing, lawsuits, and sketchy customer service issues we’ve seen over the years, that news must come as an absolute shock.

At the risk of surprising you into cardiac arrest (or, you know, killing you with sarcasm), allow me to fill you in on some new research that adds another contentious chapter to the financial institution-consumer saga and will likely fuel distrust of big banks even further.  The Pew Charitable Trusts today released a study on the dispute resolution policies employed by the nation’s largest banks and credit unions, aptly titled “Banking on Arbitration:  Big Banks, Consumers, and Checking Account Dispute Resolution.”

Consumers are Being Scored on More than Just Their Credit

by Odysseas Papadimitriou on November 14, 2012

big brotherFor starters, let me just say that if you’re a bit of a conspiracy theorist or have been known to be paranoid, you might want to stop reading right now.  They’re watching you, after all.

Who are they, you ask?

Is the Housing Market On Its Way Back?

by John Kiernan on October 31, 2012

mortgage recoveryAmidst all of Hurricane Sandy’s destruction, there is actually some good news when it comes to the housing market.  Foreclosures are down in more than 60% of the nation’s largest cities, according to RealtyTrac, and experts are pointing to that as a sign of stabilization in the housing market.

Not only did foreclosure rates fall by more than 25% in major cities such as San Francisco, Detroit, and Los Angeles during the third quarter of the year, but they actually dipped below 2007 levels for 58% of the country’s major metropolitan areas.  That’s undoubtedly good news for the economy in general and those of us who work in fields tied to the housing market, but things aren’t quite so peachy everywhere.

Finally, Debt Collectors are Being Held Accountable

by Odysseas Papadimitriou on October 24, 2012

debt collectionThe tables, it seems, have turned.  We as consumers are all too familiar with being the subjects of debt collection efforts, and now it’s the debt collectors’ turn to face some scrutiny.  Not only has the controversial Patient Protection and Affordable Care Act (better known as Obamacare) implemented some new rules that require hospitals to curb unfair collection practices against patients if they want to receive their federal tax exemption, but the Consumer Financial Protection Bureau (CFPB) also published a rule yesterday giving itself the ability to oversee the nation’s largest debt collectors.

Roughly 30 million Americans have debt subject to collections, according to the CFPB, which estimates the average amount owed to be around $1,500.  These statistics are worrisome both because they speak to our country’s obsession with overspending and in light of the negative repercussions of severely delinquent debt.  You see, in addition to the inconvenience and stress of having debt collectors pester you, your debt burden will grow as interest continues to accrue, you’ll incur more and more credit score damage as delinquency increases, and you could eventually default and even get sued.  To complicate matters, debt collectors are notorious for misleading consumers, overstepping the law, and making mistakes that cost people like you and me a lot of money.

What is Reverse Redlining (And is Morgan Stanley Guilty of It)?

by John Kiernan on October 17, 2012

What do you call a card-carrying member of the American Civil Liberties Union (ACLU) who shows up at your door?  Well, if you’re a Morgan Stanley executive, you might not call him anything given the shock of hearing the words, “You’ve been served.”

morgan stanleyThe renowned advocacy group filed suit against the investment giant in New York district court on Monday on behalf of five Detroit residents, alleging that Morgan Stanley violated federal civil rights laws by engaging in a process known as reverse redlining.

Could Your Wish Actually Be Your Bank’s Command?

by John Kiernan on October 3, 2012

checking accountsEver think that those studies and recommendations you always see research firms coming out with don’t have much of an actual influence? Well, you’re wrong, and the way the Pew Charitable Trusts is changing how banks disclose checking account terms and conditions is a prime example of why.

Banks, as we all know too well, have long buried the true cost of their financial products in fine print.  However, it wasn’t until Pew conducted a study on the checking accounts offered by the nation’s 10 largest banks and found them hard to compare given that half boasted at least 97 pages of disclosures that any changes were made.

Does the US Aid Foreign Tax Evaders?

by Odysseas Papadimitriou on September 26, 2012

internal revenue serviceThe financial upheaval of the last few years, a growing national debt, and the recent crackdown on Americans using offshore accounts to evade taxes, have all brought more and more scrutiny to the issue of international banking secrecy of late.  But while this has naturally resulted in growing frustration over the stubbornness of tax havens like Switzerland, Luxembourg, and Bermuda, one important question remains:  Are we hypocrites?

Could the United States be withholding information about bank accounts held by foreign nationals from their own governments – the exact thing we rail against other nations for doing?  Are we therefore party to tax evasion in nations around the world?

Next Man (Or Woman) Up: New Fed Chairman Will Face Long, Hard Road

by John Kiernan on August 29, 2012

federal reserve sealA couple of things occurred to me while watching coverage of the Republican National Convention this week (I’m an Independent, if you’re wondering): 1) What would Will McEvoy make of all this? and 2) The impending election season means forthcoming political turnover, and that could have a significant effect on our finances.

Quickly, I answered that first question for myself (he’d probably yell at everybody) and moved on to my second notion. Soon thereafter I realized that elected officials aren’t the only ones that will have some measure of control over our wallets in the near future. I mean, has anyone thought about the role Ben Bernanke’s successor will play in shaping financial policy as the next chairman of the Federal Reserve, an appointed position.

Do You Know Your Mortgage Credit Score?

by John Kiernan on August 22, 2012

mortgage approvalThere’s a new credit score in town, ladies and gentleman, and it’s just for mortgages. The score is formally called the FICO Mortgage Score Powered by CoreLogic, which brings to mind the mouthful of a name change the Anaheim Angels underwent in 2005 when they became the Los Angeles Angels of Anaheim, but that’s a whole other story.

This new score is said to better predict mortgage applicant risk and is obviously looking to capitalize on the recent memory of the housing crisis and the ensuing Great Recession. It supposedly does so by incorporating information that is not typically included in credit scores, such as rent and utility payments and certain public records.

Checking Accounts for Students & Seniors: Are They Worth It?

by John Kiernan on August 15, 2012

checking accountsWhat’s one thing that young people and the elderly have in common? Some of our more immature readers might answer “diapers,” but if the folks over at the Pew Charitable Trusts had a chance to respond, they’d probably say “bank accounts.” That’s right, certain bank accounts are specifically targeted to students and seniors, and while they’re supposedly tailored to the unique needs of these consumer demographics, a pair of recent Pew studies can help shed some light on whether they’re actually valuable or not.

 

Should Small Business Owners be Worried About Their Money in December 2012?

by John Kiernan on July 18, 2012

FDICThe countdown to December and the date that could alter our future is on. Have you started thinking about what you’ll do if the prognosticators are right? Do you have contingency plans? Will you remove your money from the neighborhood bank? After all, the impending elimination of Federal Deposit Insurance Corporation (FDIC) insurance on small business bank accounts is no joke (raise your hand if you thought I was talking about the Mayan prediction that the world will end on 12/12/12).

The fate of FDIC insurance on business accounts has certainly garnered less mainstream attention than the latest, greatest doomsday prediction, but with the more than 27 million small businesses in the United States employing half of all private sector employees, according to the U.S. Small Business Administration, it’s certainly significant nonetheless.

It’s Time to Bring Shadow Banking into the Light

by John Kiernan on July 11, 2012

shadow bankingThey exist in the shadows, operating outside the law and making monumental moves with the fate of society resting in their hands. They are thrust into the headlines only during times of trouble, yet are unquestionably a major part of history. Their importance must not be overlooked by politicians and regulators any longer. No, I’m not referring to the Illuminati, Batman, or even the CIA, but rather the entities that comprise the so-called shadow banking system, which played a significant role in causing the Great Recession and are finally on Washington’s radar.

For those of you who don’t know, the shadow banking system is the collection of financial institutions and investment vehicles that are not subject to the same laws and regulations as traditional banks and bank accounts given that they do not allow you to make deposits. It includes hedge funds, money market funds, and many securities. It’s also common for investment banks to engage in shadow banking practices in order to keep certain transactions off their balance sheets and therefore hidden from regulators and investors alike.

What to Do if You Lose Your Wallet

by Odysseas Papadimitriou on June 21, 2012

lost walletWait, where is it? Back pocket? Nope. Purse? Not there either. Even a quick sweep of the house comes up empty. You’ve lost your wallet, and the panic is starting to set in. As your mind races through all of the places where you could have left it, you wonder what to do if you can’t find it. That’s a very good question, and one which we should all know the answer to (especially the ADD folks among us)!

When you lose your wallet, it’s not just a folded piece of leather that you’re missing, but also your IDs, debit card, credit card(s), gift cards, cash, health insurance information, family photos, and maybe even your Social Security card. The ramifications of your loss are therefore many, and to be safe you unfortunately have to operate under the assumption that it’s been stolen. That necessitates a sort of lost wallet triage.

Forget Your ATM Card? No Biggie, As Long as You’ve Got Your Phone

by Odysseas Papadimitriou on June 13, 2012

Mobile ATM WithdrawalsAnother layer has been added to the relationship between personal finance and smartphones: Pretty soon, you’ll be able to withdraw cash from ATMs without ever inserting a card.

NCR, a Georgia-based ATM manufacturer, announced on June 11 that it has developed a new service that will allow consumers to make withdrawals via a cell phone application. But don’t worry, you won’t run the risk of “butt-dialing” your local ATM and having your hard-earned money spill out into the streets. The so-called NCR Mobile Cash Withdrawal service requires that you use your phone to log into your mobile banking account in order to authenticate your identity and then scan a barcode on the ATM’s screen to complete a transaction.

Get Screwed During Foreclosure? Time is Running Out to Get Even

by Odysseas Papadimitriou on May 30, 2012

independent foreclosure review programIf your home was foreclosed upon during the Great Recession, not only do you have company – there were 6.6 million foreclosures in 2009 and 2010 alone, according to RealtyTrac – but you may also be entitled to compensation under a government program that will run through July 31 (that’s only two months away, so get a move on!).

The Federal Reserve and the Office of the Comptroller of the Currency are requiring that 27 major lenders let independent consultants review foreclosures that were initiated, pending, or completed between January 1, 2009 and December 31, 2010 because (surprise, surprise) these lenders didn’t always do things by the book.

Are Austria & Luxembourg Hurting American Taxpayers?

by Odysseas Papadimitriou on May 23, 2012

austria and luxembourg tax evasionHow do you say “wrench” in German, French, and Luxembourgish because those are the primary languages spoken in Austria and Luxembourg, and a wrench is exactly what these two nations recently threw in European Union plans to increase national budgets by cracking down on tax evaders.

Tax evasion has long been problematic in the EU and around the world due to a combination of the EU’s lack of authority to tax its member states and the secret banking policies that allow foreign nationals to anonymously stash cash in countries like Switzerland with no questions asked. To compensate, the EU in 2005 enacted a law that requires all EU members and a number of non-EU countries to withhold taxes on the interest gleaned from foreign nationals’ savings accounts and then distribute the funds to the account holders’ respective governments. Most countries are also required to share information identifying the individuals behind the accounts, but there are a few notable exceptions, including Switzerland, Austria, and Luxembourg.

It's Their Fee Party, and Prepaid Card Issuers Will Charge If They Want To

by John Kiernan on April 25, 2012

prepaid card feesThere’s no doubt that prepaid cards are growing in popularity. Only 11% of consumers used them just two years ago, and not only has the number since grown to 15%, but we’re also seeing big-time celebrities like Lil Wayne, Suze Orman, and George Lopez sign up as endorsers, highlighting the growing mainstream appeal of these products. While some of the best prepaid cards can be cheaper to use than a checking account for certain folks, reaching this conclusion can also be quite difficult. In short, prepaid card fees are out of control, and the problem needs to be fixed.

I’m not talking about the cost of these fees, but rather their sheer number and lack of a consistent naming convention. Prepaid card issuers are known for both charging what seems like a million different fees and calling them by different names in order to hide the true cost of their products.

Do You Know What Your Bank is Charging For?

by John Kiernan on April 4, 2012

When you were in school, did you ever have one of those dreams where you slept through an exam or woke up one day to find that you’d been registered for a class all semester, yet had done none of the work and were bound to fail? Well, the personal finance equivalent recently befell me, only it wasn’t a dream.

I discovered that for 18 months my bank had been charging me interest for a checking account overdraft I was unaware of, and as a result, I had already paid more than $150 in interest. Now, it’s important to note that I am not writing this because I have an axe to grind (the charges were eventually waived), but rather to enlighten others who may fall victim to the same sneaky practices.

Occupy Wall Street & Credit Score Reform

by Odysseas Papadimitriou on March 21, 2012

Credit Score ReformYes, the whole Occupy Wall Street thing seems to be losing a bit of steam, but did you hear about the changes the organization’s Alternative Banking Group proposed we make to our nation’s credit reporting system? They want a major overhaul, one that shifts credit scoring duties to the federal government, and they have issued a list of 10 recommendations for how this should be brought about. I’ll give you the highlights: full transparency is needed in regard to how credit scores are calculated, consumers should have free and unlimited access to their credit reports, conflicts of interest related to credit scoring bodies should be eliminated, and we should make sure that credit reporting practices are not somehow racist, sexist, etc. So, do they have a point?

Certainly, the credit scoring system needs to be fixed, but not necessarily in the manner recommended by the Occupy Wall Street Alternative Banking Group. You see, the group is dead on when it says that the new Regulation V (Fair Credit Reporting Act) is inadequate in that it merely transfers the authority to regulate the collection and use of consumer credit reporting data between federal agencies (from several different agencies to the Consumer Financial Protection Bureau). However, the Occupiers are off-base in suggesting that we centralize credit scoring and make the underlying formulas public. This would only make it easier for people to game the system, which would make existing credit scores less useful to banks and lead more of them to create their own proprietary scores that consumers would have no way of accessing.

BP Makes a Mess of Its Credit Card

by John Kiernan on March 7, 2012

We all know the old saying, “If it aint broke, don’t fix it.” Well, everyone except BP, which appears to have gotten this idiom backwards because they seem unable to stop breaking good things. First the Gulf of Mexico and now the BP Credit Card, which used to be one of the very best gas credit cards before changes to the offer effective March 3 turned it into one of the worst.

Of course, BP should not be alone in shouldering the blame, as Chase – the issuer of this once-great co-branded credit card – is also complicit in its downfall. Regardless of who exactly is to blame, what is now abundantly clear is that BP is losing a significant strategic advantage over its competition. The credit card bearing its name is no longer a draw, but is instead an example of everything that is wrong with corporate rewards programs.

Do You Have to Pay Taxes on Your Rewards?

by John Kiernan on February 8, 2012

Initial rewards bonuses have been all the rage in the personal finance world ever since economic recovery began following the worst of the Great Recession a couple of years ago. Banks across the country have been using bonus cash, points or miles – given in return for account opening or spending a certain amount in the first few months – to lure some of the best consumers into using their products and services. The benefits of this strategy were obvious: banks got a more consistent customer base and consumers got hundreds of dollars in free money to play with. But with tax season rolling around, the rage inspired by these initial bonuses has been less about popularity and more about actual anger. You see, as it turns out, things like airline miles, hotel points and cash back could actually be taxable!

Uh, what? That’s right, as first reported by the LA Times’ David Lazarus, Citibank has been sending 1099 forms to customers who took the company up on promotional deals offering thousands of American Airlines rewards points in return for opening a checking or savings account. Since Citi values these points at 2.5 cents each (despite the fact that they’re only worth 1-2 cents through redemption), consumers who opened a new bank account thinking they’d get a couple free flights are instead being handed bills of up to around $262.50 payable to good ole’ Uncle Sam. Exactly how much you owe the IRS depends on how many points you were given and what tax bracket you’re in, but perhaps even more concerning is what Citibank’s tax surprise means for rewards in general. Are all rewards taxable, even those tied to rewards credit cards? Or is it limited to account opening throw-ins? If so, how significant must a gift be to be taxed?

U.S. Sanctions on Iran Underscore Need for New International Banking Regulations

by John Kiernan on December 27, 2011

In a recent article about the negative effect Swiss banking secrecy and hypocrisy have on the rest of the world, we suggested the creation of a revamped banking community, in which member nations would share information about bank accounts held by foreign nationals with their respective governments and member banks would require that identifiable individuals be behind every account (even corporate accounts). These rules – defiance of which would result in economic ostracism – would help prevent tax evasion, money laundering, drug trafficking, and other criminal activities. In formulating this idea, we did not specifically consider the effect such a system could have in curbing terrorism, but recent sanctions levied by United States against Iran as well as banking institutions doing business with the country have indeed made this utility clear.

The U.S., together with Britain and Canada, announced on Monday Nov. 22, 2011, new sanctions against Iran – targeted to the country’s petrochemical sector and organizations with terrorist ties – that are designed to put increased pressure on the Iranian economy and thereby limit nuclear development as well as funding and training for terrorist groups around the world. The Obama administration hopes that by designating Iran as a “primary money-laundering concern,” companies will break off ties with Iran in order to remain in good standing with countries like the U.S. that are opposed to its practices.

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