Category Chapter 5

Sep 6 2014

Six Bank Fees to Avoid

Each year, it seems that banks are reporting ever higher profits.  How do they make so much money?  By charging customers service fees!

Here is a list of six fees that you should avoid:

  1. ATM Fees-It’s important to know where ATM’s are located that are in your network. This will help you avoid a charge to use another bank’s ATM.
  2. Account Fees-Check the fine print. Is there a fee if your balance falls below a certain limit? The limit fees are monthly and can really add up.
  3. Overdraft Fees-Know how much money that you have to spend. Budget wisely and make sure that you have a cushion in your checking account, in case of unexpected expenses.
  4. Fancy Checks-How cute! How much do those Frozen Personalized checks cost? The reality is that the checks and the shipping costs can be very expensive. There are numerous options to acquire cheaper checks (Sam’s club, BJ’s, Costco, Walmart).  One more thing to consider:  checks are used much less frequently today, so, that box of Frozen checks might last a really long time, make sure you like the design.
  5. Credit Reports-You can get a copy of your credit report for free from AnnualCreditReport.com, so, don’t pay for one.
  6. Loan Interest– As an incentive, banks offer a discount by utilizing more than one of their services. You might get a lower rate, if you agree to direct deposit, in exchange for a reduced interest rate on your loan.

Bottom Line: Do your homework when it comes to bank fees.  There are many ways to avoid spending money on unnecessary fees.

For more information:  http://www.wisebread.com/are-you-paying-these-6-unfair-banking-fees

Teaching points:

  • Discuss these six fees with your students. Survey how many have paid at least one of these fees.
  • Have students research at least two local banks and report back on the account fees that each bank charges.

Discussion items:

  1. Do you believe that any one demographic pays more fees than another? Why?
  2. What are some other ways that people can avoid these fees?
Jul 16 2014

Text Message Spam

Spam text messages are not only annoying but also illegal. Many con artists use text messages to obtain your personal information by offering a free gift card or vacation. As a result, you become very vulnerable to identity theft.

To avoid becoming a victim of text message spam, register your number on the Do Not Call List.  Also, never click on links in spam messages, which often carry malware or send you to fake websites.

Never reply to these text messages or give out your personal information.  Report the text spam to your cell phone carrier by forwarding the message to 7726 (SPAM).

You can report unwanted commercial text messages and other complaints related to consumer fraud to the Federal Trade Commission at https://www.ftccomplaintassistant.gov/#crnt&panel1-1

For additional information on text message spam, go to:

http://blog.usa.gov/post/89152807112/protect-yourself-from-text-message-spam

http://www.consumer.ftc.gov/articles/0350-text-message-spam

Teaching Suggestions

  • Have students conduct research to obtain information on various types of scam and frauds.
  • Have students create an in-class presentation or a video communicating actions to take to avoid becoming a victim of consumer fraud.

Discussion Questions 

  1. Why do some people easily become victims of text message spam and other consumer frauds?
  2. Describe various types of frauds and scams.
  3. What actions can be taken to avoid becoming a victim of consumer fraud?

 

Jul 12 2014

Learning about High-Cost Financial Services

Brian Page, a teacher in Reading Ohio, wants his students to understand the drawbacks of check-cashing services, pawnshops, rent-to-own stores, payday loans, and other shadow banking services.  As a result, he scheduled a field trip for his students to visit these sources of high-cost financial services in their community, which are used by many unbanked consumers.

At LoanMax, they observed people getting loans with their auto titles serving as collateral.  One missed payment could lead to repossession of the vehicle. Next, at CheckSmart, students learned about payday lending and tax refund anticipation loans.

At CashAmerica people were making loan payments on money borrowed, which used jewelry, electronics, and sports memorabilia as collateral. Finally, the visit to the Rent-A-Center store demonstrated the exorbitant costs of furniture, appliances, and electronics when using a rent-to-own payment program.

For additional information on teaching about high-cost financial services, go to:

Teaching Suggestions

  • Have students talk with someone who has used one of these high-cost financial services. Obtain information about their experiences.
  • If appropriate, have students visit a high-cost financial service provider to obtain information about their services and fees.
  • Have students create a video presentation with suggestions on how to avoid using costly sources of financial services.

Discussion Questions 

  1. Why are an increasing number of people using high-cost financial services such as pawnshop loans, payday loans, and rent-to-own programs?
  2. What alternatives might used by consumers instead of these high-cost financial services?
  3. What actions might a person take to avoid these high-cost financial services?
Apr 30 2014

Payday Loans

Loans with annual interest rates exceeding 400 percent continue to occur in our society.  Payday loans are often used to bridge a cash-flow shortage between paychecks. Also known as “cash advances” or “check loans,” they are usually expensive, small-dollar loans, of generally $500 or less. They offer quick and easy access to funds for consumers who may not qualify for other credit.

A recent Consumer Financial Protection Bureau (CFPB) study revealed that four out of five payday loans are rolled over or renewed within 14 days. The majority of payday-loan borrowers renew their loans so many times that they end up paying more in fees than the amount of money they originally borrowed.  This study also reported that:

  • only 15 percent of borrowers repay all of their payday debts when due without borrowing again within 14 days.
  • 20 percent default on a loan at some point, and
  • 64 percent renew at least one loan one or more times.

These actions often create exorbitant fees and charges, and keep the consumer in perpetual debt.

For additional information and a complete copy of the payday loan report go to http://files.consumerfinance.gov/f/201403_cfpb_report_payday-lending.pdf

Discussion Questions

  1. Why does the market for payday loans exist?
  2. What actions might be taken to avoid using payday loans?
  3. Recommend actions for people who are caught in the trap of payday loans.

 

Teaching Suggestions

  • Have students visit a payday loan office or an online payday loan provider to gain additional insight into this high-cost financial service.
  • Have students make a short presentation with a summary of actions that might be taken to avoid payday loans.
Apr 23 2014

The Slacker’s Guide to Saving for Retirement

Whether retirement is coming soon or feels far away, it’s something you need to think about.

This article encourages students to make retirement planning a part of their budget and one of their financial goals.   It also points out the benefits of starting early—even if students can contribute only a small amount because of other obligations that include paying off student loans and other debt obligations, paying rent, buying groceries, and establishing an emergency fund.

A very good suggestion included in this article is to start by saving just $25 from each paycheck, and then increase the amount until someone feels they have reached a limit they are comfortable with.

Other suggestions include participating in a 401(k) account at work and using bonuses and salary increases to boost the amount contributed to your retirement account.

For more information, go to

http://finance.yahoo.com/news/slackers-guide-saving-retirement-113005671.html

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Encourage students to develop a long-term financial plan that includes retirement goals.
  • Discuss time value of money examples that show how small dollar amounts invested on a regular basis can help achieve long-term financial goals.
  • Launch a discussion about the different types of retirement accounts.

Discussion Questions

1.  Many people never begin saving or investing because there is never anything left over at the end of the month.  How can you find the money needed to begin saving and investing?

2.  Why should you begin to save for retirement now instead of waiting until later in life?

Apr 2 2014

Can the Government Get Us to Save More for Retirement?

Millions of Americans aren’t saving enough for retirement. Now the President is getting involved and has proposed a new way to help workers save more!

According to a survey by the Employee Benefit Research Institute, 46 percent of American workers had less than $10,000 saved for retirement. The survey also revealed that half of all workers and the majority of part-time workers didn’t receive any retirement benefits from their employer.

To encourage workers to save more, President Obama proposed the “MyRA” plan that allows workers to invest $5,500 a year in government savings bonds that earn 2% to 3% until their balance reaches $15,000. At that point, the money in the account can be rolled over to a private sector Roth IRA, where the money can continue to grow tax-free.

While MyRA accounts are seen as a first step to encourage workers to begin saving, critics argue that the tax-free withdrawals encourage workers to withdraw money before reaching retirement.

For additional statistics on how much Americans save or more information about MyRA accounts, go to http://money.cnn.com/2014/02/11/retirement/retirement-savings/index.html?section=money_pf.

Discussion Questions
1. Many people never begin saving or investing because there is never anything left over at the end of the month. How can you find the money needed to begin saving and investing?
3. Why should you begin to invest money now instead of waiting until later in life?
3. What are the advantages of a MyRA savings plan? of a Roth IRA plan?

Teaching Suggestions
You may want to use the information in this blog post and the original article to discuss
• Why students should develop a long-term financial plan that includes both savings and investments.
• Time Value of Money examples to show how small dollar amounts invested on a regular basic can help achieve long-term financial goals.
• Different types of retirement accounts.