Coulee Bank - Coulee Courier E-Newsletter

Coulee Courier - eNews for Coulee Bank Customers

Issue # 30

April 2010

8 Steps to Reducing Credit Card Debt

In times of economic uncertainty, it's even more important to put yourself in a solid financial position. One good way to do that is to dig out of credit card debt.

Liz Weston, author of "Easy Money: How to Simplify Your Finances and Get What You Want out of Life," says tighter lending standards make it even more important for people to bring down their credit card balances. "Many credit avenues are being shut off," she says. "Some people are finding their credit limits getting lower and interest rates getting higher."

A structured, disciplined approach can help you get out of credit card debt whether your balance is $3,000 or $30,000. Follow these eight tips to get your balance out of the red as quickly as possible.

1. Take stock. Before you start reducing your credit card debt, know where you stand, says Cate Williams, vice president of financial literacy for Money Management International, a large, national credit counseling firm. "A lot of people will say they've got a certain amount of debt -- $9,000, let's say -- when in reality, it's $11,000 or $14,000." You'll never hit your target if you don't know where it is, so be brutally honest with yourself.

Action plan: Write down the debt -- and the interest rate -- on every card you have.

2. Improve your rates. The quickest way to save big on your credit card bills is to negotiate a lower interest rate. If you can shave off even a percentage point or two, you can save hundreds as you pay off your debt. A simple phone call and a polite request may be all it takes. While your credit score will play a large role in whether or not you get a rate cut, it's not the only factor. "Every lender has their own approach to this issue," says Weston. "It never hurts to give it a shot."

Action plan: Call up each credit card company and request lower interest rates. Want to try? We have tips. If you're successful, write down your new interest rates.

3. Track your costs. Write down all your regular, committed expenses (mortgage, utilities, insurance, car payments, minimum credit card payments, phone, gym, cable, etc.), and track other variable expenses such as restaurant meals, entertainment and travel. This will serve as the foundation to your budget.

Action plan: Study up to a year's worth of credit card bills and bank statements to get an accurate sense of your monthly spending, and keep tracking your expenses with a notebook or financial software.

4. Create a budget. It's time to take an ax to some of those expenses. The key is to be realistic: You'll have to make some sacrifices, but you don't need to live on bread and water. "Cutting back can be more effective than cutting out," says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, a leading accrediting agency for credit counseling firms. "It's hard to adjust your lifestyle too dramatically, and often, little adjustments can add up to big savings." Cutting out a single pizza dinner each week, ratcheting down your gold-plated cable plan and changing your thermostat by a few degrees can give you the jump start you need. Be sure to give yourself a bit of breathing room in your budget in case an unexpected expense pops up.

Action plan: Write down three ways you can cut back immediately, and cancel or downgrade some services. Divide your monthly discretionary budget into weekly allotments so you'll have a better handle on whether you're staying on track.

5. Choose your payoff strategy. There are two common credit card payoff strategies. The first is to plow all your extra cash into the highest-interest card while paying the minimums on the others -- which is the fastest way, overall, to lower your debt. Once the first card is paid off, you have even more extra cash, and should apply it to the card with the next-highest rate, and so on, creating a debt payoff snowball effect. A second strategy is to pay off your card with the lowest balance first while continuing to pay the minimums on the others. Though this is not the most cost-effective way to banish your debt, it's the fastest way to eliminate debt on a single card, and it can be a psychological boost to eliminate a bill for good.

Action Plan: Choose your strategy, then rank cards in the order you'll pay them off.

6. Stash your plastic. In 2000, MIT researchers took two groups of students and dangled scarce Boston Celtic tickets in front of them. One group was required to pay cash; the other was asked to pay by credit card. The credit card crowd was willing to pay more than twice as much, their research found. "I've seen people save 20 percent when they begin paying with cash," Cunningham says. "They become more contemplative of their purchases."

Action plan: Store your credit cards where you won't have easy access to them -- but don't cancel them. Plan to pay in cash whenever possible.

7. Find your motivation and support. Create concrete goals to stay focused. Maybe getting rid of debt will allow you to save for a down payment on a house, go on a dream vacation or stop worrying about every bill that hits your mailbox. Weston recommends finding a community to swap stories, successes, and challenges. "A forum where you can feel supported -- where you can say ‘I'm so tired of trying to save money' can be really helpful," she says. "Sometimes it can feel really dumb, but it's nice to be with people who are trying to do that same thing you are." There are hundreds of personal finance bloggers and forums where you pull up a virtual chair.

Action plan: Write down your goals and keep them in your wallet or purse. If you get tempted to overspend, take a look at them to remind yourself of the bigger picture.

8. Track your progress. While you don't want to spend every day fretting over your bills, keep an eye on your spending. "Revisit your progress every few months," recommends Williams. "You don't want this to consume your life. It took you awhile to get into debt, and it's going to take you awhile to get out of it."

Action plan: Put reminders in your calendar to check up on your finances. Keep the page with your starting balances, and compare them to check your progress.

Making Home Equity Work for You

How you treat this asset depends on your financial goals and needs. Do the math before you take any major step.

If you're like most Americans, your home is your most valuable asset and your mortgage payment is almost certainly your largest monthly payment. With so much money tied up in one item, it's important to understand the role your home plays in your overall financial picture.

Is it smart to take out a home equity loan for home improvements? Is it wise to tap equity for higher education expenses? Should you scrimp to make extra payments to principal each month?

The home equity equation has become more complex in recent times, due to deteriorating conditions in the housing market. Although homes in some regions of the country are seeing modest price appreciation, many homes have fallen in value. In the year through September 2008, the national median price for housing declined 9 percent, from $210,500 to $191,600, according to the National Association of Realtors. Naturally, under these conditions lenders have retreated from heavily marketing home equity loans.

However, such loans are still available. Getting a loan in this new housing landscape depends on several factors, including your particular financial situation, tighter credit issuing standards and the less lofty real estate appraisals, says John Pallaria, a Certified Financial Planner and adjunct professor in Boston University's CFP Program. Here Pallaria takes a look at possible uses of home equity.

Heading to retirement

"You always want to be debt-free going into retirement," Pallaria says. As a homeowner, any equity you have in your home is similar to money in the bank and can only help you when you retire. That said; think about these three things before funneling money into your home:

1. Pay down loans with highest interest rates first. While it's important to look for the highest rate of return when investing, when repaying debt, work to eliminate your highest rates first. Pallaria recommends paying off all credit cards on which you carry a balance. Once you pay them off, use your funds to pay the principal off on other types of loans, such as car loans.

2. Fully fund 401(k)s. Always take advantage of employer matching contributions. In fact, Pallaria recommends maxing out your retirement plan before funneling extra money into building home equity. "Leading up to retirement, fully funding your employer-sponsored retirement plans and any IRAs would be an important consideration," he says. For 2008, IRS rules allow you to contribute up to $15,500 per year to your 401(k) account -- $20,500 if you're over 50 years old and making catch-up contributions.

3. Defer prioritizing home equity if home values are depreciating. If the market in your area is sliding, Pallaria suggests you exercise caution and put less emphasis on tapping home equity. Many people count on the equity in their home to help sustain them in retirement, but a house is not always the high-yield investment it first appears to be.

"If home values have gone down and now you're tapping into the equity, a) how much are you borrowing and, b) while in retirement do you have other sources to pay back that loan? I think that's a very important component here."

Building home equity

Looking forward to the mortgage-burning party but finding it tough to set aside extra funds? Follow these tried-and-true strategies to pay off your mortgage faster and to build home equity:

Raises. Set aside a portion or the full amount of any raise you receive for paying down mortgage or equity loans.
Extra payment. Send an extra payment to your lender at the beginning of month. Or apply any money left in your checking account at the end of the month to your loan's principal.
Shift funds. If you've been paying down credit cards, shift the money to your mortgage payment after you pay off your cards. You're already used to paying out that money anyway.

Home equity loan or line of credit?
Home equity loans and lines of credit remain popular for those who qualify. Stacy Johnson of Money Talks explains what these loans do and whether you should consider them.

Need a loan?

If you know you need to borrow, home equity loans can be an excellent way to satisfy cash flow needs, says Pallaria, who considers their tax deductibility an important part of the equation. But he also cautions that it's important to weigh all your options carefully.

Further, lenders are clamping down on credit and underwriting standards, so even if you have a decent amount of equity built up, you're likely to find it tough to get a home equity loan if you don't fit today's mold of eligible borrowers.

"I think people certainly need to have credit scores north of 700 or maybe even north of 750 these days to really be able to secure a home equity loan, because having equity is one side of the story, being able to pay it back is the other," he says.

Weighing your options
When borrowing, if you have the option of withdrawing money from an investment portfolio, getting a personal loan or dipping into your home equity, compare the net rates of return first. With a home equity loan tax deduction, a 7% loan might only cost 5%. If you expect your investment portfolio to return better than 5%, it might be better to the leave that money untouched.

Beware of taking withdrawals from tax-favorable retirement accounts, since that may result in tax consequences, plus the possibility of stiff penalties for early withdrawals.

If you decide to go with a home equity loan, make sure to file the long Form 1040 at tax time. "For folks who aren't itemizing, they're basically missing out on a deduction," Pallaria says.

Ready to remodel

Although home improvements generally increase the value of your home, the return isn't always dollar-for-dollar. However, some improvements are consistent winners. "Statistics show that kitchens and baths have the best return on the dollar that is spent renovating those items," Pallaria says. His advice is to keep in mind that not everybody has the same taste. The next owner may not want to pay for your koi pond or a garage that's been transformed into a dance studio.

To maximize resale potential, any renovations should be conservative, says Pallaria. "If they're going to renovate a basement or make more living space, being on the conservative side of how it's built, how it's structured and how it's decorated is going to be important to people that may be prospective buyers of the house."

Keep an eye on the bottom line and weigh decisions in terms of livability. The benefit of borrowing equity for home improvement as compared to other loans is the tax advantage available to anyone who itemizes his or her returns.

Buying a car

Although home equity borrowing to purchase a vehicle usually provides the luxury of lower car payments, Pallaria points out that this turns a five-year auto loan into a 15-year home equity loan.

"I would say if you're considering using a home equity loan to buy a car, it's not necessarily a bad thing, but stretching it out longer than you need to isn't the best use of that strategy."

He adds that it's best to make the repayment schedule "apples to apples." In other words, if you're going to purchase a car using a home equity loan, try to time your payments so the car is paid off within 60 months or less. Of course, the interest on a home equity loan is generally tax deductible if you itemize.

Home equity loans and lines of credit remain popular for those who qualify. Stacy Johnson of Money Talks explains what these loans do and whether you should consider them.

Financing an education

Many people use home equity loans to pay for education expenses. However, Pallaria says that college 529 plans are by far the best way to save for your child's college education. Not only do earnings grow tax free, but the distributions are tax-exempt when used for qualified educational expenses. Plus grandparents, aunts and even the child can contribute.

Students who are unable to take advantage of a college 529 plan may want to consider federal student loans, or as a last resort, a loan through the private sector. Pallaria cautions that interest rates on private student loans can be high. With interest rates on home equity loans climbing, it's important to consider the consequences of borrowing with both types of loans.

"You need to look at what the interest rate environment is: Is it going to change? What's the payback period? Are equity rates up or down?" The good news -- interest on both types of loans is tax deductible within certain guidelines.

10 Ways to Stop Identity Theft Cold

Americans are facing an attack on their personal and financial privacy unlike that seen by any prior generation.

Shielding your private financial information with no risk of a breakdown may be impossible these days. But it’s critical to understand how your privacy can be compromised and the consequences of such a breach -- and take a few simple steps to, if nothing else, better the odds in your favor.

Identity theft booming
This rather broad term takes in any number of privacy crimes, including theft of a Social Security number, a credit or debit card, or even the pilfering of phone calling cards.

The numbers associated with identity theft are beginning to add up fast. A recent General Accounting Office report estimates that as many as 750,000 Americans are victims of identity theft every year. And that number may be low, as many people choose not to report the crime or, for that matter, even know they’ve been victimized.

Officials say much of identity theft still comes down to hands-on mischief -- things like Dumpster diving, in which criminals sift through trash to find a credit-card statement or solicitation that someone didn’t tear up, and 'shoulder surfing', where criminals try to spot calling card and personal identification numbers, and more commonly, mail theft.

Knowing which tricks thieves prefer remains an unquantifiable mystery. Eighty percent of the victims who call us say they have no idea how it happened, says Joanna Crane, program manager of the Federal Trade Commission’s Identity Theft Program.

Officials also acknowledge that the Internet has opened new avenues for theft. If nothing else, the Web allows thieves to send stolen data to most any worldwide location.

How it can happen
One popular scam involves fake mortgage brokers who dangle super low rates if the applicant is quick to provide personal data. Another uses e-mails in which the sender poses as an Internet service provider asking for information: Even though people are told that ISPs will never ask for your Social Security number, one scam was just shut down after 70,000 people responded to their e-mails, notes Crane.

More recently, criminals use email to link consumers to phony Web sites that ask users to "confirm" their account information by entering it into an official-looking online form. (For more on this newest wrinkle in identity theft, see "'Phishing' scams: How to avoid getting hooked.")

Then, there's the infamous skimmer. A skimmer is about the size of a credit card, says Ellen Moriwaki, a senior product manager at CyberSource, a payment processing and risk management concern. And a criminal buys off a waiter in a restaurant. When you give him your credit card, he rings it up but also runs it through the skimmer, which collects your credit card information. In exchange for $50 a card, a waiter can gather as many as 100 credit cards a night.

A Social Security card can also reap long-term fraudulent benefits. Virgil Gardaya, a corporate vice president with the credit bureau Equifax, notes that a stolen wallet containing a Social Security card lets a criminal quickly set up dummy bank and savings accounts. The very presence of the account may prompt the bank to give the criminal a credit card. From there, the con artist may waste little time maxing out the card, or take a bit more time and build up the card's buying power. That can mean fraudulent purchases as pricey as cars and boats.

When I moved five years ago, I was alerted that two new accounts had been opened up under my name, adds Gardaya. They actually had statements being delivered to two different addresses.

Simple ways to protect yourself
There’s no ironclad protection that guarantees that you’ll never fall victim to some form of identity theft. But there are steps you can take to protect yourself, many of which are rather simple:

1. Destroy private records and statements. Tear up -- or, if you prefer, shred -- credit card statements, solicitations and other documents that contain private financial information.

2. Secure your mail. Empty your mailbox quickly, lock it or get a P.O. Box so criminals don’t have a chance to snatch credit card pitches. Never mail outgoing bill payments and checks from home. They can be stolen from your mailbox and the payee's name erased with solvents. Mail them from the post office or another secure location.

3. Safeguard your Social Security number. Never carry your card with you, or any other card that may have your number, like a health insurance card. And don’t put your number on your checks. It's the primary target for identity thieves because it gives them access to your credit report and bank accounts. (For more on protecting your Social Security number, see "Safeguard your Social Security number.")

4. Don't leave a paper trail. Never leave ATM, credit card or gas station receipts behind.

5. Never let your credit card out of your sight. Worried about credit card skimming? Always keep an eye on your card or, when that's not possible, pay with cash.

6. Know who you're dealing with. Whenever anyone contacts you asking for private identity or financial information, make no response other than to find out who they are, what company they represent and the reason for the call. If you think the request is legitimate, contact the company yourself and confirm what you were told before revealing any of your personal data.

7. Take your name off marketers' hit lists. In addition to the national Do-Not-Call registry (1-888-382-1222), you can also cut down on junk mail and opt out of credit card solicitations. For details, see Liz Weston's article, "Free at last from telemarketing invasions."

8. Be more defensive with personal information. Ask salespeople and others if information such as a Social Security or driver’s license number is absolutely necessary. Ask anyone who does require your Social Security number -- for instance, your insurance company -- what their privacy policy is and whether you can arrange for the organization not to share your information with anyone else.

9. Monitor your credit report. Obtain and thoroughly review your credit report (now available for free at Annualcreditreport.com or by calling 877-322-8228) at least once a year to look for suspicious activity. If you spot something, alert your card company or the creditor immediately. You may also want to subscribe to a credit protection service, like Experian's CreditCheck, which alerts you any time a change takes place with your credit report.

10. Review your credit card statements carefully. Make sure you recognize the merchants, locations and purchases listed before paying the bill. If you don't need or use department-store or bank-issued credit cards, consider closing the accounts. For more on when and how to close credit card accounts, see "Cancel a credit card -- the right way."

If something goes wrong
Again, protecting yourself from identity theft is no sure thing. But there is plenty you can do if you uncover some wrongdoing:

First, contact the fraud departments of each of the three major credit bureaus. Tell them that you're an identity theft victim. Request that a "fraud alert" be placed in your file, along with a victim's statement asking that creditors call you before opening any new accounts or changing your existing accounts.

Equifax
To report fraud: 1-800-525-6285
and write: P.O. Box 740241, Atlanta, GA 30374-0241

Experian
To report fraud: 1-888-EXPERIAN (397-3742)
and write: P.O. Box 9532, Allen, TX 75013

TransUnion
To report fraud: 1-800-680-7289
and write: Fraud Victim Assistance Division, P.O. Box 6790, Fullerton, CA 92634

Contact the creditors for any accounts that have been tampered with or opened fraudulently. Speak with someone in the security or fraud department of each creditor, and follow up with a letter.
File a report with your local police or the police in the community where the identity theft took place. Get a copy of the police report in case the bank, credit-card company or others need proof of the crime.
Keep records of everything involved in your efforts to clear up fraud, including copies of written correspondence and records of telephone calls.

Coulee Bank is Walking for a Cure

Over 50 employees and their family prepare for the April event

The American Cancer Society Walk/Run program is a fundraising event dedicated to raising awareness of cancer in the local community. Please take a moment to view this short video message about the American Cancer Society Walk/Run program.

When you participate in an American Cancer Society Walk/Run event, you are helping create a world with less cancer and more birthdays – where cancer never steals a year from anyone else’s life. The American Cancer Society is working to save lives and create a world with less cancer and more birthdays by helping people stay well and get well, by finding cures, and by fighting back. The American Cancer Society wishes to thank all Walk/Run participants, together we are creating a world with more birthdays – a world where cancer can’t claim another year of anyone’s life.

Interested in participating or supporting this event? It’s not too late!

American Cancer Society 5K Family Run/Walk Presented By:
UnitedHealthcare
2700 Midwest Drive Onalaska, WI
Sunday, April 18, 2010
Registration: 9:30-12:00, Start: Noon

On October 3, 2008, FDIC deposit insurance temporarily increased from $100,000 to $250,000 per depositor through December 31, 2013. For more information please contact Coulee Bank or visit www.fdic.gov.

Beginning July 1, 2010 Coulee Bank will no longer participate in the FDIC’s Transaction Account Guarantee Program. Thus, after June 30, 2010, funds held in non-interest bearing transaction accounts will no longer be guaranteed in full under the Transaction Account Guarantee Program, but will be insured up to $250,000 under the FDIC’s general deposit insurance rules.