Please, make a run to your bank and withdraw ALL your money!!  Just kidding.  You would think that the government made that announcement on Friday night.  You wouldn’t believe how many people are coming into the bank trying to withdraw all their money.  I have seen people wanting to cash checks for $100,000!  First of all, most branches are lucky if they have that much in the whole branch, and secondly, what are you going to do with it?  Bury it in a coffee can in your back yard?  Put it under a mattress?  What bad ideas!

This is my opinion on what you should do currently: 

• Make sure you are FDIC covered.  If you have more than $100,000 in one bank, add someone as Payable on Death (POD).  That will increase your coverage to $200,000 ($100,000 per depositor).
• DON’T go run and close out your bank accounts.  If everyone closes out their bank accounts, of course the banks are going to fail!  Relax, maybe have a little cash on hand, and ride it out.
• Just because the FDIC has up to 99 years to pay you back, that doesn’t mean it will take that long.  The most it’s taken them to pay people back is two weeks.
• If your bank goes under, chances are they are going to reopen their doors the next day.  It will probably be under a different name, but you’ll be able to conduct business as usual.

If I had a dollar for everyone I’ve talked to about FDIC coverage and the current state of the economy and about banks failing, I would be rich.  I think the media has caused so much hype and they need to calm it down a little bit.  The more people get worried, the worse off we’re all going to be.  Make sure you are insured, have a little cash on hand, and make sure you are living below your means.  You can’t do much more than that.

Are you withdrawing or closing any of your bank accounts?

Posted under Economy

It never ceases to amaze me how much credit card debt some people have. I was reading something the other day that said that 58 percent of Americans say that they rely on credit as a way of making ends meet. As high of a percentage as that is, I was a little surprised that it wasn’t higher. With the rising cost of gas and food prices, I anticipate it will be raised by the end of this year.

Last year, our nation’s collective credit-card debt was $937 billion, having nearly quadrupled in fewer than 20 years. If our nation continues to spend at the same rate, how is anyone going to afford to live? Quadrupling in 20 years is embarrassing. What are people charging? Things they probably don’t need: new furniture, vacations, new electronics, etc. I think credit cards can be so tempting and I sometimes have to hold back from spending when I know I’ve got my credit card. I feel like if I don’t have to record it like I do in my checkbook, then it’s not as bad because I’m not being held accountable. This is why I only use my credit card for gas or for large purchases I may end up returning. I don’t like tying the funds up if I’m not 100% I’m going to be keeping the item.

This year, close to 2.5 million households are likely to go into foreclosure, and more than a million people are expected to file for consumer bankruptcy. I think this is so sad. While these people have made their own money choices, I still feel for them. I can’t even imagine losing my home. I think bankruptcy is the chicken way out; after all, many people make it their priority to cut back and pay off debt. Just look at how many personal finance bloggers there are!

Why do you think our country has gotten into so much credit card debt?  What’s going to happen in the future?

Posted under Credit Cards, Economy

With the current credit crisis happening before our eyes, now is the time to make sure your credit report is in order.  Many banks are taking precautionary measures to ensure a credit crisis like this doesn’t happen again.  They are lowering the loan to value ratio on how much they will lend up to the home’s value; for example, my financial institution used to lend up to 100% loan to value, and now the maximum is 85%.  The are verifying income on a regular basis and requiring pay stubs.  It seems that the rules are being changed and banks are buckling down even more on a daily basis.

Today it was announced that if there’s a joint application, the rate of the loan would be based off the person with the lower credit score.  Hypothetically, if Mr. Money and I applied jointly for a loan and my credit score is 800, which would be an interest rate of 5%, and his credit score is 700, which is an interest rate of 7%, they are going to give us the 7%.  It is really devastating for someone who has horrible credit and has a strong co-signer.  It’s almost not worth having that co signer anymore.

While I understand all the rules and regulations, it’s still hard for me to grasp.  Almost my whole banking career we’ve been very giving with our loans.  As long as you had good credit, a steady income, and would sign on the line, you’d get the loan you wanted.  Not anymore.  We’ve been struggling every month to meet our loan goal.  Thankfully, they did lower it, but even then we’re still struggling.  It just amazes me how fast things can go downhill.

What’s your opinion of all these new rules and regulations for lending?  Do you think they are a good thing?

Posted under Credit Cards, Economy, Loans