Coulee Bank - Coulee Courier E-Newsletter

Coulee Courier - eNews for Coulee Bank Customers

Issue # 33

July 2010

Feds Limit Card Fees to $25

Most credit card penalties will be limited to $25, and fees for customers who don't use their cards will be eliminated under rules released June 8, 2010 by the Federal Reserve. The Fed also ordered a review of all credit card interest rate hikes imposed since January 2009, including most of the record increases that came in the wake of a nationwide cutback on credit. The rules, which implement a final set of changes that Congress passed in May 2009, take effect Aug. 22.

"The Federal Reserve's guidelines issued today are great news for consumers," said Rep. Carolyn Maloney, D-N.Y.,one of the authors of thecredit card laws. The Fed's rules could result in lower interest rates for consumers. Banks will be required to reconsider the reasons for hikes that kicked in over the past 18 months. They would have to reduce rates if the reasons for the increases no longer exist, and regulators will review and enforce such cuts.

Consumers will most immediately notice the new penalty fee limit of $25. Reducing penalty fees was a central provision of the credit card law, but Congress left it to the Fed to determine how to do it.

The Fed leaves room for larger penalty fees to be charged if a consumer has shown a pattern of "repeated" violations or if a card issuer can show that a higher fee reasonably offsets its own costs in dealing with the violation that spurred the penalty.

Other parts of the new rules:

·         Consumers won't have to fear being charged a fee for failing to use their credit cards.
·         Penalty fees can't exceed the dollar amount incurred by the consumer's violation that spurred the fee. For example, if a customer is late making a $20 minimum payment, the fee can't exceed $20. A consumer who exceeds her credit limit by $5 cannot be charged an over-the-limit fee of more than $5.
·         Consumers will no longer face multiple penalty fees, if the violation was based on a single late payment.

The provisions announced by the Fed complement previous rules implementing the 2009 credit card law that are already in effect.

Starting in February, issuers were prohibited from hiking interest rates on existing balances as long as customers paid their bills on time. They also have to notify customers at least 45 days in advance of interest rate increases and most fee changes.

The Fed was tasked with figuring out a way to set penalty fees in a way that's "reasonable and proportional" to the violation that caused the fee.

Consumers scored a win, since these fee caps go beyond what the Fed had suggested earlier this year in a draft. The $25 limit will mean significant savings for consumers who face median penalty fees of $39, according to data collected by the Pew Safe Credit Cards Project.

However, if a cardholder is late or over his credit limit two times within six months, issuers could hike the second penalty fee to $35, or possibly more if the issuer can justify the fee to regulators, according to the Fed rules.

Although the Fed is cracking down on penalty fees, it hasn't addressed the interest rate hikes that are also imposed on consumers who violate the terms of their credit card agreements.

So a consumer who spends more than his credit card limit by $15 may only face a $15 fee. But that consumer could still face a permanent penalty hike on his interest rate, which would apply to any future purchases.

Still, some banking groups have concerns. Financial Services Roundtable's senior lobbyist Scott Talbott warned that the Fed's cap on penalty fees will limit the industry's ability to offset the risk that credit cardholders don't pay their bills.

"The restrictions in the rules the Fed issued will decrease the ability of the credit card industry to price for risk and the net effect will be a decrease in [credit] availability," Talbott said.

Deadline Ahead for Energy Credit

Homeowners have until the end of the year to make improvements that qualify for a federal energy-efficiency tax credit, including insulation upgrades and purchases of heating and air-conditioning equipment.

That isn't to say incentives for home energy efficiency will go away for good. There are efforts under way in Washington to extend the credit, and a separate bill slowly working through Congress would provide similar and possibly bigger breaks.

Plus, there are the numerous local incentives for which homeowners might be eligible, sometimes through utility companies, and the state-run programs for Energy Star appliance rebates, funded by federal dollars but administered locally.

Here's what homeowners need to know about finding some financial help for home energy-efficiency upgrades:

Federal tax credit: Eligible upgrades for a federal tax credit include insulation, windows and doors, roofs, heating, ventilation and air-conditioning systems, water heaters and biomass stoves. The credit is worth 30% of the costs, up to a maximum $1,500 total for all improvements. Installation costs for windows and doors, roofs and insulation aren't eligible, however. To qualify, materials have to meet certain energy-efficiency standards. The improvements must be made to an existing home and it must be the homeowner's principal residence. Rental homes don't qualify.

Separately, a tax credit is also available for more advanced energy improvements, including solar panels and wind turbines. This credit is worth 30% of your costs, with no cap, and doesn't expire until the end of 2016.

These federal tax credits are nonrefundable. That means they reduce your tax bill dollar-for-dollar, but you won't receive any money back if you don't owe any federal income tax. For some of the more advanced energy improvements, the credit can be carried forward to future years. For more information, go to EnergyStar.gov and search for "tax credits."

It's important to make improvements in the proper order to get the most for your money, says Ronnie Kweller, spokeswoman for the Alliance to Save Energy, an advocate for energy-efficiency policies.

"The first thing we recommend: Seal up and properly insulate the house. No matter how efficient your equipment is, if you're sending warmed or cooled air out the window, or cracks around the window, you're not going to be ahead," Ms. Kweller says.

Addressing insulation problems first might save you money on your next project, says Matt Golden, president and founder of Recurve, a San Francisco-based home-performance company. For example, sometimes a smaller furnace is all you need once the building is sealed properly.

Look locally: Despite the emphasis on federal tax credits, many incentives are available at the local level, says Gary Nieman, vice president of government policy initiatives for Owens Corning, a producer of building materials. Utility companies will sometimes offer financial assistance for home-energy audits, for example, and many state and local communities offer help on energy-efficiency upgrades.

To get a handle on what help is available near you, Mr. Golden recommends visiting the Database of State Incentives for Renewables and Efficiency at DSIREusa.org.

States also are handling disbursement of the $300 million stimulus funds for energy-efficient appliances. The program has been popular—in some areas funding has already run out. Visit EnergySavers.gov for a list of state programs.

More to come: Energy-efficiency advocates are lobbying for an extension of the current federal tax credit set to expire at the end of the year. But pending legislation on the proposed "Home Star" program would provide even more help for homeowners and create jobs.

Two types of rebates would be available under that program. Silver Star rebates would offer 50% off on specific improvements including insulation, duct sealing, windows and doors, and water heaters, of up to a combined $3,000 per home.

Gold Star rebates are for more comprehensive work, rewarding homeowners who do an energy audit and implement a full set of measures to reduce energy use; those homeowners could receive up to $8,000 by achieving a certain level of home efficiency, if the Home Star program is approved.

"Home Star is designed first and foremost as a jobs bill," focusing on putting Americans to work retrofitting existing homes, Recurve's Mr. Golden says. But Home Star also would encourage consumers to think about their home's total performance as opposed to a patchwork of purchases to improve efficiency, he adds.

For the foreseeable future, chances are good that something will be offered by the government or utilities to help consumers shoulder the cost of energy-efficiency home improvements, says Mr. Nieman.

Getting a Good Deal on Your Credit Card

Credit cards are like power tools –- they help keep your financial house in order, but if you’re careless, they can do a lot of damage.

First, the benefits of a credit card:

• Credit cards let you use the card company’s money for free. As long you pay your bill in full each time it’s due, you don’t have to make interest payments on things you buy for anywhere from 15 to as many as 50 days after you buy them.
• Credit cards make budgeting brainless. If you put everything on them, you have a record of your spending, which can help you make and trim your personal budget.
• Many credit cards give away cash refunds, free trips or other rewards based on how much you spend.

The downsides, however, are steep:

Credit cards can easily bankrupt you, or at least create massive debt that follows you for years. Card companies make money by lending money to you, then charging interest if you take time to pay them back. You probably don’t think of card companies as banks, but that is basically what they are: A bank that lends you money for about a month and then starts charging you interest if you don’t pay them back, in full, at the end of that month.

Here’s an example: If you charge $1,000 in a month but only pay back $900, the card company will charge you interest on that $100 you can’t pay. If the annual interest rate is 18%, a month’s worth of interest on that $100 will be about $1.50. This doesn’t sound like a lot but it adds up (particularly when you’re carrying a balance of more than $100).

Credit-card companies also require you to pay something every month; you can’t just blow off the bill and let the interest pile up. They call this the minimum payment, and the amount, depends on your credit history and balance.

Still, the longer you take to pay all the money back, the happier the credit-card companies are, since interest keeps building if you keep using the card to buy things each month. Pay any bill even an hour late, however, and they may hit you with a late fee of $30 or more and also raise your interest rate.

Card companies maintain caps, better known as your credit limit, which sets how much you can owe at one time. In the past, companies usually let you spend beyond the limit. Then they charged you with a separate “over the limit” fee for about $30. But now, they can lower your limit, even if you’ve been a responsible customer. Keep a constant eye out for this.

If you get in the hole from a big vacation or over-shopping (it happens), commit to paying off the debt before you begin racking up new charges. You don’t want four-figure (or five- or six-figure) credit-card debt hanging over your head for years.

So you decide to use your bank’s debit card for your everyday uses because of the budgeting issue. That’s great, but unfortunately, you probably still need a credit card. Credit cards are important for your financial life because they help build your credit history and credit score. This means lower interest rates down the road on things like auto loans and mortgages.

How to Choose a Credit Card
Even after you’ve committed to the safe use of plastic, picking the right card can be awfully complicated.

Start with a single question, and be honest: Do you think you’re going to use the credit card to borrow money over several months, or will you pay it off every month?

If you’re going to borrow, pick a card with the lowest annual interest rate and don’t get distracted by offers for cash back or rewards. That’s because most rewards are only worth a penny or two for every dollar you spend. But for every dollar you can’t pay off, you might have to pay 18% annual interest – or 18 cents for every dollar. So that penny or two of rewards won’t reduce the interest by very much.

Picking the best interest rate seems simple, but it isn’t — many card companies now charge a range of interest rates on a single card depending on your credit score. When you apply for a card, the company might charge you 14% or 18% or 22% depending on your credit history.

Even after you have the card, the rate can change for all sorts of reasons. While card companies toss words like “variable rate” and “fixed rate” around to describe their interest rates, it’s best to simply assume that the company can change your rate at any time for any reason.

If you’re going to pay the bill off in full each month, then you want to look for a rewards card that gives you something based on the number of dollars you spend. The interest rate here doesn’t matter, since you’ll be paying your balance off immediately. Cash refunds are simple, and there usually aren’t too many games involved when you call the card company to collect your refund (usually in the form of a check but sometimes a credit on your statement).

Chasing travel rewards, like frequent-flier miles, can be more lucrative, but it isn’t always easy to redeem the things you earn. That’s because airlines control the (small) inventory of free seats, and many, many other people are also collecting miles and trying to use them. Also, some airlines have begun charging customers for redeeming their miles — as much as $250 in some cases — so those free flights can get quite expensive.

Getting a Good Deal on Your Credit Card
The credit-card industry has grown brutally competitive in the last 15 years. In order to keep growing and adding new customers, companies cook up seductive introductory offers. The key to taking advantage of them is minding the fine print and playing by the rules.

Here are a few deals you should pay attention to when shopping for a card:

Balance Transfers — Card companies now offer to literally pay off your debts on your old card and move the debt to a new one.

This phenomenon is entirely real – and totally legitimate. Let’s say you’re paying 15% on your debt with Chase. Capital One then offers you, say, 0% for six months and hopes to reel you in. If you take the company up on its offer, it will pay off your Chase debt and put the same amount of debt on the new Capital One card (which, at least for six months, isn’t charging you any interest on that amount). You’ll probably have to pay a small fee to the new or old company in the process, so before you make a move, figure out how much you’ll save in interest costs and how that compares to the fee.

In the scenario above, Capital One is counting on two things:

• That you’ll miss a payment or pay late during the intro period. Then they have the right to jack up your interest rate.
• That you won’t come close to paying off your debt during the introductory period when the rate is low. That means they can charge a much higher rate once the initial period has expired.

Your goal should never need this sort of deal. Credit-card debt should be small enough to be fleeting. But if you do, then you should try to pay most of the debt by the end of the introductory period. If you can’t, you could always move the debt to yet another card. If you do this often, however, it could hurt your credit score. Also, if you have old accounts that you’re not using anymore, you should keep them open, since your credit score looks better the longer your accounts have been open.

Frequent-Flier Deals
Some cards reward you with frequent-flier miles at a certain airline; other cards allow you to redeem the miles at any airline. The reward program’s value depends on where you want to go and how flexible you can be in your travel plans.

A card linked to a specific airline can offer great value when you’re traveling far away, especially in first class, if you can collect enough miles. The problem is, you can’t always get your first choice of dates, and it helps a lot to plan your trip a year or so in advance. Many people can’t plan that far ahead.

Other cards allow you to redeem points on any airline, but those offers come with all sorts of restrictions. In general, these cards are bad choices for international travel. Also, it may be impossible (or require insane numbers of points) to upgrade to, say, business-class on a flight to Italy. On the other hand, it’s easy enough to get flights in the U.S., as long as you aren’t picky about the airline and the tickets aren’t too expensive.

Beware of cards with come-ons that say “Earn miles on any airline.” A card may issue its own “miles,” but these are not real frequent-flier miles and you can’t, say, combine them with miles that you’ve earned flying or from a different card offered by a different company.

Cards with Annual Fees
Many people refuse to pay annual fees on principle, given how many free cards are out there. Don’t hold too fast to that stance, as some cards with annual fees can be quite lucrative.

Do the math. If you expect to spend $20,000 on a card each year, and you earn 20,000 frequent-flier miles, those are probably worth more than the $60 annual fee you might have to pay. If a card with a low interest rate charges an annual fee, calculate how much you’ll save in interest charges vs. the higher-fee card you currently use.

You can keep negotiating for better deals once you have a card too. Card companies often waive certain penalty fees and lower your interest rate if you call. But also flexibility from card issuers can tighten when the economy goes south.

Remember, it’s a competitive business, and they would just as soon you not ditch them if you’re unhappy about a fee or their rates. They’re likely to waive a late fee at least once a year. They might also lower an interest rate by several percentage points once or twice a year.

Even better, tell them you’re considering a new card and see what they might offer to keep you. Many card issuers have retention specialists now just waiting for you to call. They might throw a big pile of frequent-flier miles your way or waive an annual fee for a year or two if you agree to stick around.

Get the Most with Your Home Repair Dollars

Home maintenance chores can be daunting, especially for newer homeowners who aren't familiar with their home's maintenance needs. When the list of home repair chores, from inspecting the roof to regrouting the bathtub, grows overwhelming -- perhaps because necessary tasks have been put off due to financial pressures -- the question naturally arises: What's most important?

The answer: Maintenance chores that involve safety or water intrusion should be top priority, according to David Tamny, 2010 president of the American Society of Home Inspectors and owner of Professional Property Inspection in Columbus, Ohio.

"One of the most important elements of homeowner maintenance is anything that has to do with drainage or water flow. Gutters or problems with grading and drainage around the structure that can contribute to foundation problems are probably things you don't want to defer," he says.

Stop water intrusion, fix safety hazards
In the safety category, homeowners should prioritize:

Inspecting and repairing broken hand railings or walkway cracks that could lead to a slip-and-fall injury.
Pushing the "test" buttons on electrical outlets to make sure the ground-fault circuits are working.
Installing and testing smoke detectors in sleeping areas and hallways that lead into bedrooms.

Water is so insidious that it's the No. 1 concern of home inspectors at Amerispec of Northeast Florida, according to Charles Gifford, owner of the home inspection company in Jacksonville.

In the water category, homeowners should prioritize:

Cleaning out rain gutters and downspouts.
Repairing stucco cracks.
Using good-quality exterior paints.
Recaulking showers, bathtubs, sinks and toilets to keep water out of the walls and floors.
Repairing and sealing window leaks, which can cause mold and damage the structure of the home.
Cutting back plants that have grown too close to the foundation.

"Vegetation should be trimmed back so rain is running away from the house," Gifford says.

Head's up for a roof inspection
A periodic roof inspection is also a must because undetected leaks can cause myriad costly home repairs. How often a roof should be professionally inspected depends on the age and type of roof and local weather conditions. An older roof exposed to severe weather should be inspected more often than a newer roof in a mild climate.

In any case, homeowners shouldn't wait until they see telltale stains on the ceilings to get the roof checked out. Instead, a roof inspection should be part of the regular home repair routine.

"When you start having damage due to water in the interior (of the home), that's going to devalue the property, and the worse that it gets, the more expensive and tough it will be to fix," Tamny says.

Cool it now: your HVAC system
Next on the to-do list should be the home's heating, ventilation and air-conditioning system, known in the trade by the abbreviation "HVAC," whether that means a furnace, air-conditioning unit, heat pump or other components. These systems should be serviced at least once or twice a year because, again, poor maintenance practices can lead to much more costly repairs.

"A dirty filter can lead to all kinds of problems," Gifford says.

Proactive approach saves money
A proactive approach to home maintenance, rather than the more common I'll-fix-it-when-it-breaks mentality, can help homeowners save money on repair costs. The hard truth is that just about everything in a home requires some sort of maintenance, and it usually makes sense to stay ahead of the inevitable deterioration.

"Your house starts aging from the second the last nail is put in," Tamny says. "It keeps running down and eventually the systems become obsolete and need repair or replacement."

Gifford cites the backyard fence as a classic example of ill-advised deferred maintenance. Fences that are sagging or leaning or have broken slates often can be repaired. But if those signs of neglect are ignored, the fence will experience a "catastrophic failure" and need to be entirely rebuilt, he says.

Do it yourself or hire a pro?
Whether the do-it-yourself option is a viable alternative for home maintenance depends largely on the homeowner's situation. For instance, older homeowners may not be spry enough to climb on the roof and clean out the rain gutters, while younger homeowners may be disinclined to take time away from their careers or family commitments, Tamny says.

For those determined to DIY, simple tasks such as painting a fence or clearing overgrown brush are good places to start. Most homeowners shouldn't attempt electrical repairs due to the risk of electrocution. (Trimming trees near high-powered electrical lines is also extremely dangerous.) Projects that require special equipment such as cleaning air ducts are also ill-suited for the do-it-yourself approach.

One more tip: Few people enjoy house cleaning, but cleanliness can offer important home maintenance benefits, according to the National Association of Home Builders. Removing dirt and dust can prolong the lifespan of major appliances, window treatments, floors, carpets, sinks, bathtubs, cabinets and many other components of a typical home.

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.