Jill Russo Foster

Tips for Successful Personal Finances

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How safe is a safe deposit box?

I have often told you to use a safe deposit box (SDB) to store copies of your most important paperwork. That way, if something happens to your home, you can deal with the emergency with all your paperwork intact. But people also use SDB’s for items that they consider irreplaceable, like jewelry or stock certificates.  While it’s not necessarily wrong to use an SDB this way, you should be aware of the risks.

Safe deposit boxes are loss resistant, not loss proof. You can lose the contents of your SDB if something happens to the bank itself.  Consider what could happen if your bank is in a fire or flood. SDB’s are typically made of metal. They are not water-proof or heat-proof, which means the contents could melt, be scorched, or water damaged. Store paper documents in a water-tight plastic bag. Keep back-up copies of flash drives or photographs. Metal items, like jewelry or antique coins, should be stored in a hard-plastic container to help prevent melting.

You should also know that you will NOT be reimbursed by FDIC for the value of jewelry or antique coins stored in an SDB. The FDIC only reimburses the cash in your bank account, not personal property.

You will also NOT be reimbursed by your renter’s or homeowner’s policy (unless you have the items insured separately.)

Finally, know that your SDB is a rental. Keep up on payments or the contents will be turned over to your state’s Unclaimed Property department. A safe deposit box is a great resource, if used wisely.

Is My Bank Safe?

Reader Question: With banks failing, is my bank account safe?

Yes, but only if your bank is properly insured. Bank accounts should be in an FDIC insured bank (Federal Deposit Insurance Corp). Credit union accounts should be in an NCSIF insured credit union. (National Credit Union Share Insurance Fund).

The insurance will only cover checking, savings, and CD accounts. It will not cover investment accounts if your bank is also an investment house. For this year, the reimbursement limits have been increased to $250,000 per account holder.  If you keep all your money in one bank, make sure that the balance of all your accounts is under that amount.  If your total is more than $250,000, you should move some of the money to a different bank.

Remember, these limits go back down to $100,000 on January 1, 2010 (unless Congress increases them again), so make sure your money is divided accordingly.

Some of you may be thinking that you’ll never have more than $100,000 in the bank, so you won’t have to worry about it. But, there are circumstances that could make you the temporary holder of a large amount of cash such as a home sale with delayed home purchase, an insurance or legal settlement, or a pending asset distribution after the death of a relative. Even if you only have the money for a few weeks, that’s long enough for a bank to fail, so keep it safe by following these rules.

What is the difference between a debit card and a credit card?

A debit card is a convenient way to make a purchase using your own money. When you use your debit card, you are authorizing the merchant to access the funds in your bank account. This is true even if you sign off on the purchase as though you were using a credit card (instead of using a pin number.) Always track your debit card purchases in a check ledger to avoid overdraft fees. A debit card has limited fraud protection, so know where your card is at all times and check your receipts against your bank statements.

A credit card (as the name implies) is a convenient way to make purchases using a credit company’s money. Every time you make a purchase with a credit card, you’re taking a loan that you will have to pay back – usually with interest. Credit cards are helpful for building credit and for the consumer fraud protection. But, they can be dangerous to your financial health if you use them to purchase items outside of your budget.

Your Money In Interesting Times

Have you ever heard of the old curse: “May you live in interesting times?” For the past ten years or so we’ve been obsessed with the Greatest Generation, a generation made famous by living through two World Wars and the Great Depression. What we loved about them, is that as the going got tough, they got tougher.

What we’re seeing now is hopefully not as bad as what they lived through, but we could still learn a lesson from them. This isn’t a great time for jobs, banks, investments, or mortgages. If you’ve been watching or listening to the news, you know that our country’s financial systems are in bad shape. Our government is working on saving the banks, but you’re probably wondering who’s going to save you?  It’s not like the weather has been that great either in this La Nina year. So how do you keep your money and possessions safe in difficult times? By living carefully.

Banks

The Number 1 thing you must do is keep your hard-earned cash safe. You can do that by keeping your money in an FDIC insured bank. That means if the bank fails, a good portion, if not all, of your money will be refunded. For more information on this please go to my blog and read The FDIC: What You Need to Know.

Once your money is in an FDIC insured bank, then you need to make sure you would get a full refund if the bank fails. If you have over $100,000 in a bank, you need to talk to your banker. You may find that you need to move money into different accounts and maybe into multiple banks. Check out www.myFDICinsurance.gov for more information.

Home Disasters

If you were located in an area devastated by a hurricane, floods, or fire, and you had to evacuate your home, how would you access your money?

First, make sure that your income is direct deposited. It might be a while before you can get your paycheck by mail or pick it up at your company.

Second, make sure you have an ATM card. If you had to temporarily relocate to another area, you might not be able to cash your payroll check. You could possibly deposit it another bank, but taking money against it is something that not all banks will allow you to do if they don’t have a relationship with your employer themselves (or with you.) If you have an ATM card, there will be a machine somewhere that you can access. You might have to pay a fee if it’s not your bank, but at least you will be able to get cash for food, gas, and lodgings.

Mortgages

It’s going to be a lot harder to get a mortgage from now on. The best thing you can do for yourself if you need to refinance or want to get a mortgage is to protect your credit score. Read my article Fico Has Something to Say About You for more information on how a bad credit score can affect your chances to get a mortgage. Check your credit report 3 times per year, pay your bills on time and don’t over extend yourself.

Investments

I wouldn’t dream of advising you on investments. All investments are a gamble, with some bets beings safer than others. At this point, I’m not sure which investments are really the safest. We’ll have to wait and see.

I hope this helps you plan for interesting times. As always, the best thing you can do for yourself is plan ahead, take care of your credit, and choose your bank carefully.

How to Choose a Bank

How do you know if your bank is right for you? If you have been a subscriber to Quick Tips, then you know the first questions that must be answered: Is the bank an FDIC member and FDIC insured? The answer should be “yes.”

What other questions should you ask?

Location. Does the bank have branches or ATM machines that are close to your home, work, favorite stores, or activities? Remember that most banks charge a fee for using another bank’s ATM machines. You’ll also want to deposit any checks or cash quickly. Choose someplace close where it’s easy to make your transactions.

Fees. Do they charge you to have an account? If so, is there something you can do to lessen the fee or avoid it all together? Some banks waive their fees if you agree to direct deposit your paychecks, keep a minimum balance in your account, or have more than one linked account. You should be able to avoid any bank fees.

How to avoid bank fees. Banks have to make money to stay in business. One way they do this is by lending out money and charging interest. The other way is by charging fees.

You should be able to avoid fees with good record keeping. Keep your minimum balance and never use more money than you actually have (overdraft).

Every bank charges for overdrafts. It’s not only inconvenient for them, it’s actually illegal if you do it on purpose.

Keep accurate records with either a paper checkbook register, computer software, or handheld device. Your goal is to never have these fees charged to you.

The Bank Gave My Money Away

Do you ever get the feeling that you have lost some money? We’ve all lost money out of our wallets, our purses, behind our dressers, or under car seats. But, did you know that you can lose money in the bank?

If you have a bank account that has not had any activity for three to five years, your bank has to turn the money over to the state. The same is true for payroll checks that haven’t been cashed, and for safety deposit boxes that haven’t been visited.

How do you avoid losing your money like this? Make a deposit or withdrawal on each and every bank account at least once per year (either online or at the physical branch). Interest going into a bank account is not considered activity. Deposit and/or cash your payroll and gift checks quickly before you have a chance to lose or forget about them.  Use traveler’s checks as soon as possible. If you have a deposit box, visit it at least once a year.

Keep your contact information up to date. Make sure that you update your address on each and every bank account, so the bank can send you important notices and you have a reminder that your accounts exist.

Do you want to see if you have any unclaimed money? Go to www.unclaimed.org and look under all the states that you have lived in. You may find that it is worth the trip.

The FDIC: What You Need to Know

Did you see the gentleman on the news a few weeks ago who had $236,000 on deposit with Indy Mac Bank? He almost lost more than half of his money even though his bank was insured by the FDIC. That’s because the FDIC only insures deposit holder funds for up to $100,000.

Lucky for him, the FDIC in Indy Mac’s case was paying an additional fifty cents on the dollar, so he got another $68,000 back. The bad news is that he lost $68,000. That’s a lot of money to lose.

If you want to protect your savings and deposits, the best way is to understand how the FDIC works and make it work to your advantage.

  • First make sure the bank you chose is FDIC insured. To verify that your bank is safe, call 877-275-3342. If your bank isn’t FDIC insured, move your accounts to a bank that is FDIC insured.
  • The FDIC insures each account holder up to $100,000. Take a look at these examples to see how to protect your money:

Jane Smith
Checking Account $25,000.00
Savings Account $50,000.00
CD $50,000.00
Total Amount at Bank: $125,000.00

* Jane is only insured up to $100,000.00. She would lose $25,000.00 if her bank failed.

Greg and Sally Jones
Mutual Checking Account $15,000.00
Greg’s Savings Account $75,000.00
Sally’s Saving Account $30,000.00
Total Amount at Bank: $120.000.00

* Greg and Sally are insured up to $200,000.00. They are two different account holders. If they had a mutual savings account instead of two separate accounts, they would lose $20,000.00

Here are some other things that you need to be aware of:

  • The FDIC insures $100,000 per account holder per bank, not per bank branch. Yes, some people have made that mistake. The branches aren’t separately owned. If you deposit money in the Springfield Bank – Centerville Branch and then open a new deposit account at the Springfield Bank – Mall Branch, that’s still the same bank, and the FDIC considers it to be all one pile of money. The same applies if you open one account at Springfield Bank – Online and one at a physical branch. If you have more than $100,000 to lose, use two or more separate banks.
  • If you have a small business that uses your personal social security number as the tax identification number (i.e. Mary Brown, D/B/A Mary Brown Personal Chef) then that balance is part of your $100,000.
  • If your bank is taken over by the FDIC, chances are that another bank will buy the accounts of the failed bank. When that happens, you have six months grace period under FDIC to reorganize your accounts if needed.

You work hard for your money, so keep it as safe as possible. Don’t lose money that you could have easily protected.

What is the FDIC?

What Happens Now?

With all the news about banks failing. and concerns about the accuracy of the FDIC Watch List (and its secrecy), you may be wondering how to protect your money? Banks are supposed to be the safest place to store your money, right?

These questions are only new to today’s younger generation. Your grandparents and great-grandparents remember when bank failures were all too common.

Following the stock market crash of 1929, thousands of banks failed. In fact, bank failures in the past led thousands of people to store their savings at home. People would take their extra cash and bury it in the back yard, stuff it behind walls, and inside of mattresses. Unfortunately, this led to a lot of lost and stolen cash (not to mention the cash destroyed and lost forever by house fires and floods).

The Federal Deposit Insurance Company (FDIC) was started in 1933 to help people trust banks again. With the FDIC in place, people could deposit their savings in the bank knowing that at least a portion of their savings would be returned if their bank failed. That’s right, the FDIC is an insurance company for banks! Just like you might be reimbursed a portion of your car’s value in the event of a crash, the FDIC will reimburse a portion of your cash if your bank fails.

Next week, we’ll talk about how to find out if your bank is FDIC insured, how much money they will reimburse you, and how you can make the FDIC work to your advantage.