Spring 2014

More Ways to
Save at the Bank
Ideas for ...

g Adding to Savings and Investments

g Checking Out a Checking Account

g Keeping Mortgage Costs Down

g Refinancing Different Kinds of Loans

ALSO INSIDE
Tips for Safe Shopping,
Buying and Paying
Simple Ways to Protect
Yourself
Person-to-Person (P2P)
Payments Online
More About Data Breaches

F E D E R A L

D E P O S I T

I N S U R A N C E

C O R P O R A T I O N

MO RE WAYS TO SAVE AT T HE BANK

Saving and Investing for Your Future:

Questions to Ask Yourself Now
Finding money to put into savings
can seem difficult, but there are some
strategies that can make it easier. Start
by asking yourself these questions.
Do I have savings goals? Knowing how
much you want to save and why can
help you stick to a plan.
For example, if you have a young child,
ask yourself if you plan to help pay for
college. Research indicates that children
who have a college savings fund are
more likely to go to college than those
who dont. Start by looking at 529
plans sponsored by your state (typically
with cost and tax benefits for residents)
and compare them to other 529 plan
options. Learn more about college
planning at www.studentaid.ed.gov/
prepare-for-college.
How can I spend less? Review how
much you spent in the last month and
consider ways to cut back. Start by
reviewing recurring expenses even
small ones and determine what you
might be able to cut out, downgrade,
or find a better deal on elsewhere, said
Luke W. Reynolds, Chief of the FDICs
Outreach and Program Development
Section.
Also try to pay less in interest. For
example, if you have multiple loans, pay
off the ones with the highest interest
rates first. And, regularly reviewing
your credit report and correcting
errors (see the back page) can result
in considerable savings on loans and
insurance policies. For more about
saving money on loans, see the articles
on Pages 3 and 4.
Do I have an emergency savings fund?
Financial experts generally recommend
that you have at least six months of
living expenses in a federally insured
product, such as a savings account or a
certificate of deposit (CD). The idea is
to help you withstand a major reduction
in income, such as from a job loss, or to
pay for a major, unexpected home or car
repair. To build your rainy day fund,
consider a combination of regular,
automated deposits and any windfalls
you receive, perhaps from a tax refund
or a bonus at work.
2

Am I saving money on a regular basis?

Automatic transfers into savings on a
set schedule can help you save money
before you spend it, said Bobbie Gray,
an FDIC Supervisory Community
Affairs Specialist.
How much investment risk am I
willing to take? Investments such as
stocks, bonds and mutual funds can
produce higher returns than bank
deposits over many years, but you
could also lose some or all of that
money. (Remember, nondeposit
investments are not insured by the
FDIC against loss.)
In general, the longer you plan to keep
money invested and the greater your
tolerance for volatility, the more likely
these investments can help you reach
your targets.
Am I saving enough for retirement?
For many, the answer is no even
when they think it is yes. Options
to save include workplace retirement
plans, Individual Retirement Accounts
(IRAs) offered by many banks and
investment companies, and the U.S.
Treasury Departments new myRA
(MyRetirement Account) program.

Checking Accounts:
More Questions to Ask
Various reports suggest that its
getting harder to find free or low-cost
checking accounts. To help you get
the best deal on an account that meets
your needs, consider these questions.
What do I need most from a checking
account? Make a list of the services
you need so you can select a checking
account thats a good fit, said Luke
W. Reynolds, Chief of the FDICs
Outreach and Program Development
Section.

The myRA account is a simple, safe and

affordable retirement savings program
that is backed by the U.S. government.
Savers can open an account with as little
as $25, there are no fees, the account
will earn interest at a variable rate,
and the investment is protected so the
account balance will never go down. To
learn more about myRA, go to www.
treasurydirect.gov/readysavegrow/
start_saving/myra.htm.

Which banks should I consider for a

checking account? First, make sure
your current bank or prospective banks
are FDIC-insured, so your deposits are
protected if the institution fails. Next,
consider whether you prefer to bank in
person, which means you might want
a bank with branches close by, or if a
distant bank with online services and a
convenient network of free ATMs will
meet your needs.

Many working people can save

considerably on their taxes through
qualified retirement savings. And, if
your employer offers a retirement
savings program of any kind, find out
whether it will match your investment
contributions, and then dont lose out
on any matches, Reynolds added.

Far-away banks may advertise high

interest rates or low fees, but dont
overlook banks in your community,
including smaller banks, said
Bobbie Gray, an FDIC Supervisory
Community Affairs Specialist. Just
because a local bank doesnt advertise
online doesnt mean it may not be
offering free or low-cost checking.

To learn more about ways to save, see

resources from more than 20 federal
agencies, including the FDIC, at
www.mymoney.gov. Q
FDIC Consumer News

How can I compare the costs of

different banks checking accounts?
Review each banks disclosures of fees
Spring 2014

M O R E WAY S T O S AVE AT THE BANK

and services, and then focus on the

costs you expect to incur. Also compare
the products and features a bank offers
on its Web site to what it offers when
you call or visit a branch; its possible
that a special offer may be available
through certain branches only and not
online, or vice versa.
What can I do to get a better deal?
Having your paycheck or other income
directly deposited into the account
may help you qualify for a more
attractive account. Some banks also
offer a significantly higher interest rate
up to a certain balance, often provided
you also meet other conditions, such
as using a debit card a set number of
times or receiving your statements
electronically.
In addition, banks may offer cash or
another one-time bonus for opening a
new account. Still, you need to decide
which account is right for you for the
years ahead based on how you plan to
use it, Reynolds advised. Be realistic
about whether a special offer is going
to consistently change the way you
normally handle your finances.
Similarly, banks want to develop
lending relationships with their deposit
customers and some may offer a break
on checking account fees if you get
a new credit card or refinance a loan
with them. But if you already have
several credit cards and you want to
get one more just to save on checking
fees, Gray said, ask yourself if you
can still closely monitor all your
accounts to quickly catch a billing
error or a change in account terms that
could cost you money.
Am I interested in using new,
high-tech ways to save money on
my checking account? Text messages
or e-mail alerts about your account
reaching a low balance that you set (say
$100) can help you curtail spending
or add funds to avoid overdraft fees.
Or, you may be able to save on gas and
stamps by using a smartphone or ATM
to deposit checks or pay bills.
How will the bank handle transactions
that would put my account balance
in the negative? Under federal rules,
you must have previously opted in
(agreed) to an overdraft program
FDIC Consumer News

before a bank can charge you a fee for

approving an everyday (one-time)
debit card transaction that would
exceed your account balance.
Ask your bank how it treats
transactions that you do not have
enough money in your account to
cover, Reynolds said. If you have
already opted in, you can change your
election if you want to avoid the risk
of costly fees for these transactions.
You may also consider linking your
checking account to a savings account
to automatically cover an overdraft for
a smaller fee.
Also remember that the easiest way
to avoid overdraft fees is to keep an
up-to-date record of how much money
is in your checking account, including

recurring automatic payments, and

know your balance before using your
debit card or writing a check.
Would it be better to receive
statements electronically or in the
mail? Either way, to limit your
potential losses in the event of
a problem, such as a fraudulent
transaction, promptly review your
statements and report errors.
What should I do before moving my
checking account? Consider keeping
your old account open until you are
sure that any electronic deposits or
withdrawals have been processed and
all the checks you wrote have cleared.
For more ideas for saving money
on a checking account, go to www.
mymoney.gov. Q

Saving Money on a Mortgage, From Start to Finish

For many consumers, their mortgage
is their biggest expense. Here are tips
for prospective borrowers as well
as current homeowners on ways to
save money on a mortgage.
Prospective Homeowners
Comparison shop for your loan and
dont be afraid to try to negotiate
the interest rate as well as the
fees. Start by getting quotes from
different lenders based on the Annual
Percentage Rate (APR), which factors
in the interest rate as well as certain
other finance charges you have to pay
to obtain your mortgage. Those costs
include points paid to the lender
(each point equals one percent of the
loan amount), fees paid to mortgage
brokers, and certain other charges
expressed as a yearly rate.
However, not all closing costs are
included in the APR. Common
examples include fees for a property
appraisal (typically paid to an
independent contractor hired by the
lender) and a title search (which can
discover potential claims that others
may make regarding the property,
such as for unpaid home repairs or real
estate taxes).
Because closing costs that are not
included in the APR can vary widely,
Spring 2014

consider comparing both the APR

and the total dollar amount you would
need to pay at closing, advised Luke
W. Reynolds, Chief of the FDICs
Outreach and Program Development
Section.
Understand which third-party
settlement services you can shop for.
Although lenders may require you to
purchase certain services from a specific
company (often the case with property
appraisals), you may be able to use
any company that meets the lenders
approval for other services. And while
some settlement services may be
relatively inexpensive, others can be
hundreds or thousands of dollars.
Consider comparing the prices of
several companies as far in advance
of the closing as possible, Reynolds
said. Thats so your lender has time to
review and make arrangements with the
company you want to use.
In particular, he said, carefully research
your options for title insurance, which
can protect the homebuyer from losses
due to a flawed title search and other
related claims. Title insurance prices
can vary considerably, Reynolds added.
Also be aware that there are different
levels of title insurance protection.
Compare the insurance packages from
continued on the next page

MO RE WAY S TO S AV E AT T HE BANK

several companies and choose the

coverage you want.
For guidance on how to shop for title
insurance and avoid potential pitfalls,
see tips from the National Association
of Insurance Commissioners at www.
naic.org/documents/consumer_alert_
title_insurance.htm.
Finally, if you are buying a new
home directly from a builder, dont
automatically assume that you need
to or should purchase your
loan-related products from the builders
preferred providers. Buyers often
believe that they will get the best deals
from the builders settlement companies
and lender, but the only way to be sure
is by comparison shopping, said Ron
Jauregui, an FDIC Community Affairs
Specialist.
Current Homeowners
Determine whether you can save
money by refinancing into a new,
fixed-rate mortgage. Start by
contacting your loan servicer (the
company that collects your loan
payments) to see if you can refinance
your mortgage, preferably at little
or no cost. Options may include
the federal governments Home
Affordable Refinance Program (www.
makinghomeaffordable.gov), which is
for borrowers who are not behind on
their mortgage payments but could
have trouble refinancing because the
value of their home has declined.
Keep in mind that a lender may offer
to add closing costs to the balance of
your new loan so that you dont have to
pay them upfront, but it means youll
be paying more money in interest,
Reynolds noted.
Regardless of how you refinance, look
for a new loan that you would pay off
at approximately the same time as your
current mortgage. A longer-term
mortgage might lower your payments,
but you could pay considerably more in
interest, Reynolds noted.
He also suggested checking with a
housing counseling agency approved
by HUD, the U.S. Department of
Housing and Urban Development
(1-800-569-4287 or www.hud.gov/
offices/hsg/sfh/hcc/hcs.cfm), or an
4

attorney before you refinance to

make sure you wont lose any legal
protections tied to your current
mortgage. These safeguards could be
especially useful if, in the future, you
face the loss of your home because
of payment problems. They include,
for example, legal defenses against
you being held responsible for the
difference between the amount your
home sells at a foreclosure auction and
the balance of your loan.
Instead of refinancing, consider
paying off your existing mortgage
faster. You may be able to save tens
of thousands of dollars in interest
depending on the amount of your
loan and the interest rate by paying
a little extra toward your mortgage.
For example, on a $100,000, 30-year
mortgage with a 5 percent rate, sending
in an extra $30 a month could pay
off your loan more than three years
ahead of schedule and save you more
than $12,000 in interest. Ask your
lender about different ways to pay off
your mortgage early without paying
additional fees or having to refinance.
Don't overpay for homeowner
(hazard) insurance and property
taxes. Being underinsured can be a
costly mistake, but that doesnt mean
you cant save money. For example,
having the same insurer cover your
home and your car may earn you
a discount. Consider the rates that
insurers offer you directly as well
as what independent agents (who
represent several different companies)
can obtain. For more money-saving
strategies, go to your state insurance
commissioners Web site (start at www.
naic.org/state_web_map).
Also, review your property tax
statement to make sure it accurately
reflects the size and characteristics
of your property. Find out if you are
paying the lower tax rate that may be
available for owner-occupants.
If you are having trouble making
your mortgage payments, dont
wait to seek help. Contact your
loan servicer or a HUD-approved
counselor, ideally before you miss a
payment. And, if youre having trouble
getting assistance from your servicer,
FDIC Consumer News

new federal rules require your servicer

to be more responsive to various
customer complaints, including
providing accurate information to
mortgage customers wanting to avoid
foreclosure on their home, noted
Sandra Barker, an FDIC Senior Policy
Analyst.
If your mortgage servicer is not
responding to your request for
assistance, you can file a complaint with
the CFPB at consumerfinance.gov/
complaint.
For information about recent mortgage
rule changes to protect consumers from
risky mortgages and help borrowers
better manage a home loan, see the Fall
2013 FDIC Consumer News (www.
fdic.gov/consumers/consumer/news/
cnfall13/mortgage_rules.html). And
stay tuned for information on rule
changes coming August 1, 2015, which
will require key information about
mortgage costs to be disclosed to loan
applicants.
To learn more about home ownership
and mortgages in general, go to www.
mymoney.gov and consumerfinance.
gov/mortgage. Q

Refinancing Loans:
Not Just for Mortgages
Most people know they can refinance
a mortgage that is, replace an
existing loan with a new one that may
offer better terms. But did you know
you also can refinance personal loans,
including auto loans, credit cards and
student loans?
Refinancing a personal loan may
save you money, especially if you get
a lower interest rate, a lower monthly
payment or other benefits, noted
Susan Boenau, Chief of the FDICs
Consumer Affairs Section. However,
refinancing does not always equate to
saving money or better terms.
Here are ways to see if refinancing
makes sense for you.
Think about your goals. For
example, if you want to simplify your
life by consolidating multiple credit
card accounts, most card lenders
continued on the back page

Spring 2014

S A FE S H O P P I N G , B U Y I NG AND PAY ING

Safe Shopping, Buying and Paying: How to Protect Your Money

Criminals often try to steal money or
commit fraud by targeting consumers
as they are buying and paying for things
or by obtaining valuable personal
information from previous purchases.
We have compiled simple ways to help
you be as safe as possible.
When Shopping in Person
Provide only the information that
you are comfortable giving. Be
careful about sharing your Social
Security number with a merchant. A
retailer may legitimately ask for your
Social Security number and other
personal information if you are applying
for store credit, but that information
is not needed for an ordinary sales
transaction, said Michael Benardo,
Chief of the FDICs Cyber Fraud and
Financial Crimes Section. Giving
personal information to a retailer when
youre using a credit card is a voluntary
decision. If you say no, the worst that
can happen is that youll have to take
your business elsewhere.
The Social Security Administration
suggests that you ask why your
number is needed, how it will be used
and what will happen if you refuse. The
answers to these questions can help
you decide if you want to give out your
Social Security number.
Never flash your cash. When
paying with dollar bills, keep large
amounts of money concealed. You dont
want to attract the attention of a thief.
Only carry the checks, credit cards,
debit/ATM cards or cash that you
plan to use. The more you take along,
the more you risk having lost or stolen.
Consider limiting the number of credit
cards you own by canceling the ones
you rarely use, but weigh the benefits of
doing so against the possible lowering
of your credit score, which could
increase your future cost of credit. And
keep your Social Security card in a safe
place and not in your wallet.
When Shopping Online
Create strong PIN numbers and
passwords and keep them secret.
Numbers, letters and symbols can be
combined to form a password that is
FDIC Consumer News

tough for someone else to figure out.

Dont write the PIN numbers in your
wallet or use your birthdate or address,
which can easily be determined if your
wallet is stolen. While using the same
password or PIN for several accounts
can be tempting, doing so can put you
at risk that a criminal who obtains one
password or PIN can log in to other
accounts.
Protect your computer. Install
software that protects against malware
(malicious software that can steal
personal information, such as passwords
or account numbers youve typed).
Also use a firewall program to prevent
unauthorized access to your PC.
Protection options vary, and some are
free. Once youve installed the software,
set it to automatically update.
Be careful where and how you
connect to the Internet. Whether
you are shopping, banking or otherwise
conducting financial transactions online,
only access the Internet using a secure
connection. A public computer, such
as at an Internet caf, hotel business
center, school computer lab, or public
library is not necessarily secure. You
never know if there is security software
on these types of computers or if it is
up-to-date, said Amber Holmes, a
Financial Crimes Information Specialist
with the FDIC. They also may be
infected with malware that may capture
your credit or debit card numbers as
you type them.
Also, dont use your own computer
(including a tablet or smartphone) for
shopping or banking if you are unsure
about the wireless connection, as is the
case with many free Wi-Fi networks at
public hotspots, like coffee shops. It
can be relatively easy for fraudsters to
intercept the Internet traffic in these
locations, Holmes explained.
In addition to a secure connection,
you can have greater confidence that
a Web site is authentic and that it
encrypts (scrambles) your information
during transmission by looking for a
padlock symbol on the page and a Web
address that starts with https://. To
learn about additional safety features,
start with your Web browsers user
Spring 2014

instructions. These precautions are not

totally foolproof, as evidenced by the
recent news about the Heartbleed
Internet flaw, but they may still provide
your best protection. And, be aware that
the FDIC and other regulators directed
financial institutions to review their
security systems and make any needed
upgrades as soon as the Heartbleed
vulnerability became known.
Be suspicious of unsolicited e-mail
offers that ask you to click on a link
or download an attachment. Its
easy for criminals to copy a reputable
company or organizations logo into a
fake e-mail. By complying with what
appears to be a simple request, you
may be installing malware. Your safest
strategy is to ignore unsolicited requests
for personal information, no matter
how legitimate they may appear.
Take additional precautions with
your tablet or smartphone before
conducting online transactions.
Consider opting for automatic updates
for your devices operating system
and apps (applications) when they
become available to help reduce your
vulnerability to software problems. Use
a password or other security feature to
restrict access in case your device is lost
or stolen. And, beware of unsolicited
offers and downloads that come via
text message, e-mail or through social
networking sites and apps.
To learn more about safe shopping
and paying, including key points to
remember when using debit, credit
or prepaid cards (the latter may not
provide the full range of federal
consumer protections that apply to the
other cards), see previous articles in
FDIC Consumer News at www.fdic.
gov/consumernews. And, watch the
FDICs multimedia presentation Dont
Be an Online Victim at www.fdic.gov/
consumers/consumer/guard/index.html.
For ways to protect yourself from data
breaches, see the next page. Q
5

SA FE SHOP PING, BUYIN G AND PAYI NG

Person-to-Person (P2P) Payments Online: What to Know Before You Click and Send That Money
When it comes time to pay the
babysitter or reimburse a friend for
lunch, most people use cash or write
checks. But an increasing number of
others instead turn to their computer or
smartphone to make a person-to-person
or P2P payment.
P2P payments can be convenient, but
there are potential costs and risks,
in areas such as the privacy of your
personal information. FDIC Consumer
News first introduced readers to P2P
payments in 2011, and now we are
offering our latest suggestions.
How a P2P service works: Banks and
other companies offer different P2P
payment services. Most share certain
features: You establish an online account
and designate one or more payment
sources (such as your checking account,
credit card or prepaid card) that youll
use to pay people. To send money to
someone, youll provide the recipients
information in many cases, his or
her e-mail address. To get money from
someone, you may need to provide
your bank account information or
other details to the senders P2P service
provider.
P2P payments may be convenient
for both the sender and the recipient
but if you or your recipient will have
to jump through a lot of hoops to use
it, that promise of convenience can
suddenly fade, said Elizabeth Khalil, a
Senior Policy Analyst at the FDIC.
Fees: There are numerous possibilities.
Is there a fee to sign up? A fee to send
money? A fee to receive money? Is
there a single, fixed transaction fee for a
service or is it calculated as a percentage
of the transaction amount?
Shop around to find a service with
costs that seem reasonable, Khalil
recommended. And if you are the
recipient and the fee to receive money
seems high, dont be shy about telling
the sender you would prefer to be paid
another way.
Privacy: Be aware of the services
privacy practices and how your
information and that of your
recipients will be used. If you decide
6

to use the service, set all available

privacy settings to your preferences.
Some services may, for example, share
certain aspects of your transaction
activity with other users, such as your
social media friends. If you dont
want that to happen, evaluate whether
the services privacy settings allow you
to turn off that feature. Because a P2P
service providers privacy practices can
change, periodically check its policies
and your privacy settings to ensure they
still are set in the way you want.
Funds availability: Know when the
money you send will be charged to
your credit card or deducted from
your account. Also be clear on when
that money will be available to the
recipient. It may be quick to make a
P2P payment, but that doesnt mean
the recipient can access the funds right
away, said Khalil. When money is
available can vary depending on which
P2P service youre using.
Your rights and dispute resolution:
Know what the services user agreement
says about resolving errors and disputes.
For example, what will happen if the
service pays the wrong person or the
wrong amount? And, what if you caused
the error by mistyping the recipients
e-mail address or the amount you
wanted to send? That can easily happen,
especially when youre typing on a small
mobile phone.
If the payment is drawn from your
checking or savings account, or a
credit card, you will have rights under
federal law to have the error resolved,
said Richard Schwartz, Counsel in
the FDICs Legal Division. But if
the payment comes from somewhere
else, like funds you have on hold in

an account with the payment service

provider, you might not have the
same legal protections. Instead, you
might have to rely on the services own
policies or perhaps state laws applicable
to money transfers. In any case, find
out what the service providers user
agreement says will happen if something
goes wrong.
Bank or nonbank: If youre interested
in using P2P payments, ask your bank
whether it offers the service. And if your
bank doesnt, try other banks, Khalil
said. While a number of non-bank
companies also offer P2P payments,
there can be benefits to working with
a bank, such as the opportunity to
maintain a financial relationship and
obtain other products and services at
reasonable rates. another potential
benefit is that funds held in your bank
account are FDIC-insured, which may
not be the case with a nonbank P2P
account. Q

More About How to Protect Yourself From Data Breaches

In previous editions of FDIC
Consumer News, we have discussed
what you should know about data
breaches, in which customers credit
or debit card information was stolen
by cyber thieves who hacked into a
businesss computer systems. Because
of ongoing media attention and
FDIC Consumer News

consumer concerns, we have decided

to remind you about our previous tips
and add some new ones.
While there isnt really anything
consumers can do to prevent a breach,
you can be on the lookout for signs
that something like this has occurred,
said Jeff Kopchik, a Senior Policy
Spring 2014

S A FE S H O P P I N G , B U Y I NG AND PAY ING

Analyst with the FDIC. And, if you

receive formal notice from your bank
or a retailer that your credit or debit
card information was stolen as a result
of a breach, there are steps you can
take to protect yourself.
How can you avoid losing money due
to a security breach?
Review your bank and credit card
statements regularly to look for
suspicious transactions. If you have
online access to your bank and credit
card accounts, it is a good idea to
check them regularly, perhaps weekly,
for transactions that arent yours.
Contact your bank or credit card issuer
immediately to report a problem.
Debit card users in particular should
promptly report a lost card or an
unauthorized transaction. Unlike the
federal protections for credit cards
that cap losses from fraudulent charges
at $50, your liability limit for a debit
card could be up to $500, or more, if
you dont notify your bank within two
business days after discovering the loss
or theft.
Periodically review your credit
reports to make sure someone
hasnt obtained credit in your name.
By law, you can request a free copy
of your credit report from each of
the three major consumer reporting
agencies (also known as credit bureaus)
once every 12 months. Because their
reports may differ, consider spreading
out your requests during the year.
To order a free report, go to www.
AnnualCreditReport.com or call
toll-free 1-877-322-8228.
If you find an unfamiliar account
on your credit report, call the fraud
department at the consumer reporting
agency that produced it. If that account
turns out to be fraudulent, consider
asking for a fraud alert to be placed
in your file at the three main credit
bureaus. The alert tells lenders and
other users of credit reports that you
have been a victim of fraud and that
they should verify any new accounts
being opened in your name or changes
to your existing accounts.
What if you place a fraud alert in
your credit files and then you apply
FDIC Consumer News

somewhere for a new credit card,

mortgage or other loan? Expect
that the lender will call you for a
confirmation. However, be aware that
the fraud alert also may slow down the
process of obtaining that new credit
while the lender verifies your identity.
An additional but more serious step
is to place a credit freeze on your
credit report, which means that the
credit bureaus cannot provide your
credit report to lenders who request it.
That, in turn, may prevent criminals
from obtaining credit in your name,
but it also will stop you from getting
new credit until you lift the freeze.
Pay attention to notices from
your retailer or your bank about
a security breach. In the event of a
large-scale breach, you may receive
notice that your credit card is being
replaced with one that has a new
account number.
Also, the retailer may offer you free
credit-monitoring services, usually for
up to one year. This service provides
an excellent way to see if a cyber thief
is using the stolen information to apply
for new credit cards or loans in your
name, Kopchik said. And if you are
not offered free credit monitoring,
you may want to consider buying
it at your own expense. Note: A
credit-monitoring service can be costly,
so research the options thoroughly
and understand that you can monitor
your own credit reports for free, as
previously described.
Be on guard against scams offering
help after a data breach. Be
very careful about responding to an
unsolicited e-mail promoting credit
monitoring services, since many of
these offers are fraudulent. If youre
interested in credit monitoring
and its not being offered for free
by your retailer or bank, do your
own independent research to find a
reputable service.
For additional information about
data breaches and protecting yourself,
see an advisory from the Consumer
Financial Protection Bureau at
http://files.consumerfinance.gov/
f/201401_cfpb_consumer- advisory_
card-security.pdf. Q
Spring 2014

FDIC
Consumer News
Published by the Federal Deposit
Insurance Corporation
Martin J. Gruenberg, Chairman
Andrew Gray, Deputy to the Chairman
for Communications
Elizabeth Ford, Assistant Director,
Office of Communications (OCOM)
Jay Rosenstein, Senior Writer-Editor, OCOM
Mitchell Crawley, Graphic Design
FDIC Consumer News is produced
quarterly by the FDIC Office of
Communications in cooperation with
other Divisions and Offices. It is
intended to present information in a
nontechnical way and is not intended to
be a legal interpretation of FDIC or other
government regulations and policies.
Due to periodic changes in statutes and
agency rules, always check the FDIC Web
site www.fdic.gov for up-to-date
information. Mention of a product,
service or company does not constitute
an endorsement. This publication may be
reprinted in whole or in part. Please credit
FDIC Consumer News.
Send your story ideas, comments,
and other suggestions or questions to:
Jay Rosenstein, Editor, FDIC Consumer
News, 550 17th Street, NW, Washington,
DC 20429, e-mail [email protected].
Find current and past issues at
www.fdic.gov/consumernews or request
paper copies by contacting the FDIC
Public Information Center. Call toll-free
1-877-ASK-FDIC (1-877-275-3342) or
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For More Help or Information

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toll-free at 1-877-ASK-FDIC
(1-877-275-3342)

Refinancing
continued from Page 4
allow you to transfer balances from
other accounts for a fee. Once
you determine what you want to
accomplish, you can make a better
decision about whether refinancing is
right for you, Boenau added.
Understand potential pitfalls. While
you may be able to take advantage
of promotional offers, such as
introductory zero-percent interest or
low Annual Percentage Rates (APRs),
by transferring a balance and closing
a credit card account, you also may
have a higher APR than what you were
originally paying when the promotional
rate ends.
Closing a credit card account also
reduces your available credit and may
adversely affect your credit score,
which lenders often use to determine
your interest rate. To avoid a reduction
in your credit score, consider keeping
cards you have managed well for a long
time.
A balance transfer also may result in
your account having multiple interest
rates (such as one for your purchase
balance and one for your transfer
balance), so know how your payments
will be classified. For instance, if you

only pay the minimum required each

month, a creditor can generally apply
that payment any way it chooses. This
includes applying your minimum
payment to lower-rate balances first,
which means higher-rate balances will
keep accruing higher interest costs.
Depending on the circumstances, a
large balance transfer also may trigger
fees for going over your credit limit
until you can bring the balance down.
Other examples include the following:
You may be assessed a prepayment
penalty if you refinance a loan before it
matures.
If you trade in a car loan for a new
one with a longer repayment period,
perhaps for five or more years, you
may get lower monthly payments
but you might not save money in the
long run. Youll likely end up paying
more in total interest, plus your cars
resale value may fall below what you
owe on the loan, noted Frances Tam,
an FDIC Senior Consumer Affairs
Specialist. Then when you want to sell
or trade in your car, you may have to
put in additional money to pay off the
loan.
While multiple federal student
loans may be consolidated (combined
into one loan with a single monthly

payment), individual federal loans

generally can only be refinanced (paid
off and replaced with a new loan)
through a private lender, and that could
result in the loss of important federal
benefits. Understand the benefits
you may be giving up, such as loan
forgiveness for entering public service
and income-based repayment options,
before refinancing a federal student
loan, warned Heather St. Germain,
an FDIC Senior Consumer Affairs
Specialist.
If your credit score is low,
consider waiting to refinance until
you can raise it. You can protect
yourself by ordering a free copy of
your credit report from each of the
three major credit bureaus (visit
www. AnnualCreditReport.com or
call toll-free 1-877-322-8228) and
correcting inaccurate information.
Also remember that, for purposes of
improving your credit score, the most
important things are to be financially
responsible and to correct any errors in
your credit reports.
For more tips on improving your credit
report and score, see our article in
the Fall 2011 FDIC Consumer News
(www.fdic.gov/consumers/consumer/
news/cnfall11/credit.html). Q