If Credit Unions Are Better, Why Don't More People Use Them?
You've probably read it somewhere — credit unions are better than banks. That's what Consumer Reports, Bankrate.com, and Money magazine say. Credit unions are owned by members. They are not for profit. They pay higher interest rates on checking accounts, savings accounts and CDs. They charge lower interest rates on credit cards, car loans and home loans. They also charge lower fees for overdrafts and late payments. They have more friendly customer service. Credit Unions have NCUA insurance just like FDIC insurance for bank deposits. What's not to like them? It begs for a question:
If credit unions are better than banks, why don't more people use them?
Debt Collector, Universal Default and Home Sales Data
Here are some interesting articles I found last week.
Debt Collection Done From India Appeals to U.S. Agencies (New York Times) – It shouldn't be a surprise. When you call customer service, you talk to someone in India. When they send you to debt collection, they call you from India. I wonder if people can pretend they don't understand what they are being asked.
Credit the cardholder (Atlanta Journal-Constitution, via Payments News) – Consider this. Suppose you lent money to someone. You heard from other people that your borrower started paying late or stopped paying those other people. Are you concerned you may be next? Should you not be able to raise your borrower's interest rate or cut their credit line?
Tracking NAR Spin (The Big Picture) – Nice chart of home sales data with corresponding quotes from the National Association of Realtors. Note the chart shows the number of homes sold, not the average selling price.
Never Pay a Late Fee Again
Ranking above overdraft or NSF fees from the banks, late fees from credit card companies are probably the most hated fees. Even finance blogger and business executive Shadox who is usually on top of these things is sometimes caught by a late fee. If you ask them nicely, as in Shadox's case, the credit card companies will sometimes reverse the late fee. It would be much nicer if you don't have to spend the time begging them. I wrote previously about how to avoid overdraft or NSF fees from the banks. This time I'm going to share a few tips about how to avoid the late fees from credit card companies.
1. Use a card that doesn't charge a late fee. Not all cards charge a late fee. Some cards actually advertise it as a feature which distinguishes themselves from other cards. If you hate late fees, use one of those cards that don't charge a late fee. If other cards begin to see that they are losing customers because of late fees, they may stop charging late fees too. Clear from American Express is a card that doesn't charge late fees or over the limit fees. I don't personally use this method because I have a better approach. Read on.
2. Reduce the number of cards you use. The fewer accounts, the fewer payments and due dates to worry about. I have only 3 cards: one for business travel, one for gas, groceries and drug store, and one for everything else.
Not Too Thrilled About 1.2% I Bonds
A reader asked a few weeks ago if I'd write something about the Series I Savings Bonds (or "I Bonds" in short). I was thinking of doing it but I now see Jonathan at My Money Blog already did a very good job on this topic. There is also a long thread on the Bogleheads forum about it.
If you are not familiar with I Bonds, please read:
Links: Overdraft, ETF Conversion, Junk Mail and a Quiz
Here are some articles I found interesting this week:
Consumers Want Informed Choice on Overdraft Fees and Banking Options (pdf, via Payments News) – A survey from Center for Responsible Lending found that most consumers want debit card purchases declined if they would result in overdraft fees. Rather than begging the banks, there are better ways to do it. See my previous post How To Avoid Overdraft/NSF Fees. The interesting tidbit from the survey is that when the consumers were asked about what they'd prefer when their $5 purchase is about to trigger a $34 overdraft fee, 20%(!) of the people said they would rather pay the fee and continue with their purchase (Table 5 on page 4). When the purchase amount goes up to $40, even among people who have been stung with an overdraft fee recently, 25% of them would choose to pay the fee again.
Review of VEIEX to VWO ETF conversion at VBS (indexfundfan @ indextown) – IndexFundFan wrote in detail how to convert a Vanguard mutual fund to an ETF. If you are not familiar with ETF conversion, also read Should I convert VEIEX to VWO ETF? and Is it worthwhile to pay the ETF conversion fee? by the same author.
Stop All Junk Mail (The Sun's Financial Diary) – Take you name off mailing lists. Save the environment and save those companies some money too.
A Business That Punishes Its Largest Customers
Here's a Jeopardy question.
A financial service charges no fee if you have less than $100,000 with them. If your account has $100,000 or more, they charge you $100 a year account maintenance fee. If you create multiple accounts, each with less than $100,000, then you will pay no fee for all your accounts.
The answer: What is Legacy Treasury Direct?
"Legacy Treasury Direct is a program in which investors buy Treasury bills, Treasury notes, and Treasury Inflation-Protected Securities (TIPS) directly from the U.S. Treasury, without a broker.
Mortgage Refinance Documents: OMG What Did I Sign?
I closed my mortgage refinance last month. I often hear the media saying that people who signed up for an adjustable rate mortgage (ARM) didn't know their interest rate can adjust. Well, make no more excuses. I'm going to list all the documents I signed at closing and explain what they mean. This way anybody can look up in Google and be prepared before they go into closing.
Before I continue, let me say these documents are what I signed for my loan. The required documents may vary depending on the lender and the laws and customs of the state where you live.
1. Promissory Note. This is your promise to pay. The note clearly spells out your loan terms, including
TFB's Stumbles: Week Ending April 11, 2008
Here are some food for thought for this week:
My Very Own Risk-Based Repricing Experience (Credit Slips) – A law professor wrote about his experience with disputing a billing error on his credit card.
And It All Comes Down to This … (Wall Street Journal) – After writing more than 1,000 columns, Jonathan Clements is leaving WSJ. He distilled his advice down to eight simple suggestions. No surprises.
Lenders Swamped By Foreclosures Let Homeowners Stay (Bloomberg) – Borrowers who don't pay their mortgage get to live rent-free for six months. That's a sweet deal.
RSU Sell To Cover Deconstructed
Ever since I wrote Restricted Stock Units (RSU) Sales and Tax Reporting, I received many questions. They all relate to sell-to-cover, which is the default, and often the only option people have for their restricted stock units (RSU). I must have not been crystal clear in my previous post. Otherwise I would not have received so many questions. I thought of a better way to explain it. So hopefully it is clear this time. For background on RSUs and tax withholding, please also read my previous post Restricted Stock Units (RSU) Tax Withholding Choices.
Let's use this hypothetical example.
Mortgage Interest and Property Tax Deduction for Homeowners Who Don't Itemize
The New York Times reported that Senate Democrats and Republicans reached a tentative deal on the new housing bill. Among the various provisions is a federal income tax deduction for property tax paid by taxpayers who don't itemize deductions. Single taxpayers get a $500 deduction. Married taxpayers filing a joint return get $1,000. [Update: This has become law for 2008 and 2009. See follow-up post $500 Or $1,000 Property Tax Deduction for People Who Don’t Itemize Deductions.] Presidential candidate senator Barack Obama also proposed a "universal mortgage credit" which gives a refundable tax credit to taxpayers who pay mortgage interest but don't itemize deductions.
The rationale behind these proposals is that the mortgage interest deduction and the property tax deduction benefit only the well-off. They say people who don't itemize their deductions don't get those deductions. From Obama's Tax Fairness Plan:
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