I only have basic accounts there (no investment accounts), and am not out looking for credit. Fortunately my only debt is a fixed rate mortgage, with about 10 years left. I’m thinking about retirement being around the corner, though, and wonder if I’m being naive about all this not affecting me.

How would Citi of BA going under affect people like me?

The good news is that you’re not being naive about the effects. In fact, since your money is in regular accounts, it is FDIC insured for up to $250,000 per account. That changes back to $100,000 at the end of the year — assuming the new insurance level isn’t extended. So, your money is safe — even if your bank isn’t. Of course, that doesn’t mean it will be a snap to get it if the bank fails. You will have to wait in line to claim your account, and then likely wait for a check from the government, if your bank fails and goes into receivership. For the 19 biggest banks, that isn’t very likely to happen. The government will probably do everything in their power to keep these large banks from folding.

If you have you Billpay and automatic withdrawals on your account, they should still be in effect. Additionally, direct deposit will still work. If the bank is bought by another bank (as is usually the case), you might have to make new arrangements for these services — or you may not, depending on how the merger works out. If you are concerned, you can set up back up measures at another bank. Your approved tax advantaged accounts are separately insured for up to $250,000 as well.

If you are an investor in an institution that fails, the story is different. You could potentially lose a great deal — or all — of your investment as the stock plummets to $0 a share. If you are bought out, it is usually for only a fraction of what you have invested.

image source: Wikimedia Commons

Post from: EveryJoe

What Happens When a Big Bank Fails?

Will populism force Congress to take a serious look at credit card reform?

Populist outrage has been strong lately. The “regular” folks are sick of the “fat cats” having all the rules rigged in their favor. And Congress may have to listen. Politicians are worried that maybe — just maybe — their constituents are mad enough to vote them out of office if they keep catering to the lobbyists and the interests of the already rich. The most recent credit card reform bill might just be the way for Congress to show “we the people” that they are serious. Here are some of the highlights of the bill (which just barely squeaked through a Senate committee):

• Keep credit card issuers from making unilateral changes to the contract.
• No marketing to youth under the age of 18.
• No more fees for over the phone payments.
• No raising interest and fees due to changes in credit score or changes with other credit card companies.
• No credit card for those under 21 — unless the person can pass a financial literacy test or if the person gets a co-signer.
• No more fees for inactivity on gift cards.

Some of these measures are rather tough, and it is unlikely that the bill would pass with all of them in. The credit card reform bill might have to be amended and compromised on if it is to pass. Otherwise consumers will just have to wait until next year, when the Fed rules take effect, for some measure of protection.

If you are interested, you can contact your elected representatives and share your opinion of the credit card reform bill.

What do you think of the proposed rules for credit card issuers?

image source: Channel R via Wikimedia Commons

Post from: EveryJoe

Will Congress Force Credit Card Reform?

“Would you like to 15% today?”

“Uh, no thanks.”

“It’s 15%!”

“Thanks, that’s okay.”

It was pretty apparent that she was trying. Normally I only have to say “no” once. At any rate, I didn’t bite. Save 15% on an order of $30? That’s $4.50. Besides, I’m the Kohl’s email list. I get 15% and 20% offers all the time. I don’t need a credit card to save that money. Anyway, here are the reasons that giving in to department store credit cards may not be the best plan:

1. Your credit will be checked. That means a ding against you and a possibly lower interest rate. If you apply for multpile department store credit cards, you will see an even bigger impact.
2. Department store credit cards aren’t as “favorable” as major bank cards. A Kohl’s or Target charge card just doesn’t look as good or factor as favorably as a card from Capital One or Bank of America.
3. Do you really want to give out personal information in line? Bible Money Matters makes this point — and it’s a good one. Do you want to give your Social Security Number and other information in a public place?

Department store credit cards also normally charge higher rates of interest and do not have rewards programs. Essentially, you are using such a credit card to get a one-off savings. It might be worth it if you are getting something big, but I’d rather use my cash back rewards card for something that big and then pay off the balance the next month.

How do you feel about department store credit cards?

image source: Kohl’s Web site

Post from: EveryJoe

Avoid Department Store Credit Cards