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How to Handle Rising Fees From Banks, Utilities and Retailers

If it seems like you’re getting financially squeezed from all directions, that’s no figment of your imagination.

Bank fees on the rise, utility rates are about to increase and even membership fees at places like Costco are going up. Why is all this happening now, and what should you do?

Let’s look at each area separately.

Bank Fees

On the banking front, financial services reform and recent federal regulations capping debit interchange fees mean banks are going to lose tens of billions of dollars in revenues. To make up for those lost dollars, they’re rolling out a range of charges and fees on everything from debit card use to checking accounts.

For example, Citibank just announced that starting in December 2011, it will impose a $20 monthly penalty fee on customers whose account balances fall below $15,000. The move follows other recent fee announcements this year by Bank of America, Wells Fargo, Chase, and a host of other banks too.

3 Ways to Avoid Debit Card Fees and Rising Checking Account Fees

Fortunately, there are at least three ways to escape escalating debit card fees and rising checking account fees.

1. Switch to credit cards.

Credit cards generally haven’t been subjected to the type of fee hikes we’re now seeing with debit cards. But caution: make sure you pay off your balance each month to avoid racking up debt.

Recommendation: Get online and comparison shop for the best credit card deal available. Go to a free site like CardRatings.com, which can help you find a credit card based on your credit rating and spending habits. I like CardRatings because they’ve done all the work for you in terms of analyzing credit card offers – including the good and the bad – and they give you independent evaluations and reviews of everything from travel cards to student credit cards to cash back cards and more.

2. Consider a prepaid card.

With so much upheaval in the banking world, I expect prepaid cards to grow in popularity tremendously over the next year or two.

This is a great option for those who want to store money simply by loading cash – or even their monthly paychecks – onto a prepaid card and using that card to pay bills or to make purchases online and in stores. A prepaid card doesn’t require a credit check or a checking account. And you can use it to keep track of your overall budget and spending.

Recommendation: Check out RushCard.com for a good prepaid Visa RushCard that’s low in fees, offers easy online money-management tools, and gives card users freebies, like a healthcare card that saves you money on medical costs and prescription drugs.

3. Switch banks.

Lots of people fed up with big banks are talking about switching banks. That’s an option, although I think you should evaluate your overall relationship with an institution and think about whether or not you’re being well-served before simply pulling your money out in reaction to one event or one fee.

If you do decide to make a switch, you can change to a local bank, try an Internet bank, or even consider a credit union. If you’re a saver or a retiree on a fixed income, it’s especially important to make your money work hard for you, so you want to find a bank that offers good, FDIC-insured savings accounts and other products like certificates of deposit.

Recommendation: To track down and compare the highest yielding savings accounts and find good deals on CDs, visit MoneyRates.com.

Get a free credit analysis compliments of The Money Coach

Utility Rates

Now let’s talk about utility rates, which are expected to surge in the coming months and years because dozens of utilities nationwide are already seeking state regulators’ permission to issue rate hikes ranging from 2% to more than 20%.

There are three main factors driving the increase in utility rates:

1. Utilities are upgrading their outdated infrastructure and old systems.

2. Utilities face additional government and environmental regulations, requiring utilities to meet clean energy standards and create pollution controls. All of that regulation is costly to comply with.

3. There’s also rising power demands by consumers who are doing everything from logging onto the Internet more often to stepping up use of household appliances and gadgets.

Unfortunately, rising utility costs are ultimately going to get passed onto consumers.

The good news is that you can slash your utility rates by implementing small, but cost-effective, changes around the house.

Unplug appliances like your coffee maker, blender, or toaster when you’re not using them to save 10% on your energy bills. Invest in some fluorescent bulbs, which save money over the long haul compared to high-watt bulbs. And even consider taking more showers instead of baths to shave up to 50% off your hot water costs.

Retail Membership Fees

If you’re a person who likes to shop at discount membership clubs, you should know that after missing Wall Street analysts’ most recent earnings forecasts, Costco announced it is raising its membership fee by 10% to $55 starting November 1, 2011.

BJ’s also implemented a roughly 10% membership hike earlier this year, raising its fee to $50 from $45 in January 2011.

How can you lessen your membership bite?

Split the cost of a club membership with a relative or neighbor.

Make sure you redeem coupons issued by warehouse clubs.

Sure they often have great prices, but Costco and BJ’s aren’t always the best deal in town. Your membership gets more valuable, though, when these retailers sometimes offer coupons to discount higher-priced items. Failing to redeem those coupons for merchandise you’ve bought is leaving money on the table.

Consider buying food and household items elsewhere.

I personally enjoy my Costco and BJ’s memberships, especially since I’ve learned when to use them – and when not to. But if you’re not getting as much value out of your club memberships, or if you’re buying in bulk and wasting food because it spoils before you can eat it, you may be better off simply shopping at a grocery store.

The bottom line is that even though fee increases are increasingly taking a toll on Americans’ budgets, you don’t have to just sit there and take it. You can always make smarter money moves, evaluate your options, or even vote with your wallet and decide to take your business elsewhere.

5 Tips for Investors During Stock Market Volatility

Author: The Money Coach

If the recent stock market volatility has rattled you, it’s time to get a game plan for how you will survive this latest financial crisis.

In mid August 2011, the U.S. stock market lost about 2,000 points in three weeks, wiping out roughly $2 trillion in wealth. Unfortunately, the near-term outlook for stocks isn’t particularly rosy.

Investors are going to have to face a painful truth: It’s ugly and it’s going to get uglier. Obviously there’s a ton of volatility in the stock market right now, but that’s just one headache.

The bigger long-term concern is that there’s just way too much uncertainty in the overall economy right now. Even if the stock market miraculously made a comeback, we’ve got a boatload of other economic issues to contend with:

- in the job market, we still have 14 million Americans out of work and unemployment above 9%

- in the housing market, it’s still a mess with rampant foreclosures and falling prices

- in the currency market, there’s a lot of worries about the dollar losing value against other currencies and about the prospect of the dollar ultimately losing its status as the world’s reserve currency

- in the global market, many traders and analysts are fretting over debt problems in Europe and a general slowdown in international growth

I expect all of these challenges to continue to weigh on the stock market – and the U.S. economy in general – for many months, if not years, to come.

WHAT SHOULD INVESTORS DO?

I wish “experts” would stop telling people – “sit tight,” or “do nothing” – all while just watching people’s investments go up in smoke. It’s crazy!

And placating investors about the market, by telling them about how stocks historically have performed, doesn’t address people’s real life concerns and needs. Besides, many things happening now have no historical precedent whatsoever.

In the month of August 2011 alone, at least four unprecedented things happened:

* the U.S. lost its AAA credit rating, when S&P downgraded America’s status to AA+

* the Dow Jones Industrial Average went completely Dr. Jekyll-Mr. Hyde, logging four consecutive trading days that saw stocks swing up and down by more than 400 points daily

* the Fed guaranteed that it would keep interest rates low for at least two years

* the price of gold shot past $1,800 an ounce, indicating tremendous financial worries among investors

All of this volatility and uncertainty makes the conventional advice to “just ride it out” an especially tough pill to swallow — particularly for folks who hope to retire soon.

Think about it this way: if you were caught in the middle of a 7.0 earthquake, are you going to listen to some fool who tells you “just ride it out”? Of course not!

If you stand there like a deer caught in the headlights, you’re liable to get crushed. The smart move is to take cover; move into a doorway or get under a chair. Don’t panic, of course, but don’t just stand there either.

The same logic applies when dealing with the earthquake we’re all experiencing on Wall Street. It

My advice: I think people should respond to all the craziness on Wall Street. It’s a wake up call for everyone.

Again, don’t panic or act rashly. But you can take these 5 smart steps:

Step 1: Tweak your portfolio if you can’t sleep at night. (Translation: Sell!!!)

Forget about all the experts saying: “stay put” and “don’t sell.” I don’t care how much money you could potentially make in the stock market – or elsewhere. And who cares about long term, historical trends if you’re practically getting an ulcer over the stock market’s wild swings? If an investment is keeping you up at night, you should dump it. It’s not the right choice for you.

Step 2: Focus on asset allocation

Stop worrying about the individual stocks or bonds you own. 90% of your portfolio’s performance is based on having the right balance of investments. So concern yourself with creating the proper mix of investments – and don’t fret over the individual investments themselves. Getting the right asset allocation is all about making sure you’ve got the right percentage of stocks, bonds, cash and other investments in your portfolio.

Step 3: Shift more assets into cash and safer investments if retirement is less than 5 years away

What’s safe in times like these? Examples include Treasuries, municipal bonds and money market accounts/CDs. Nevertheless, even pre-retirees and retirees need to keep a healthy dose of stocks for growth. My recommendation for those age 50+: shoot for 30% to 50% in stocks, depending on your age. But dial back some of the risk in your portfolio if you need to preserve cash for your Golden Years.

The reason you still need at least some stocks is because even the top-yielding 1-year CDs are now paying only about 1.2%. 5-year CDs are yielding 2.4% on the high end. But inflation is running at about 3.6% a year, so these CDs alone won’t even keep up with the cost of living.

Step 4: Educate yourself to make better decisions

Here’s one reality check: I know that when many people see huge moves in the Dow, they think “everyone is selling” or “everyone is buying.” But that’s not really the case. So much of trading on Wall Street nowadays is generated by computerized trading systems. These electronic, high-frequency trading programs account for about half of all trades on a routine trading day. And they make up about 70% of the trading action on a really volatile day. Knowing this can keep you from making impulsive decisions based on emotions, misinformation or assumptions.

Step 5: Get a financial checkup

Take the time (and yes, the money) to get a financial checkup with an investment advisor or financial planner who can look at your unique situation and tell you whether you’re on track to meet your financial goals. Getting a quarterly or annual review of your investment portfolio can also help you know what’s working – and potentially what’s not.

By taking these steps, you can help build a financial fortress around yourself. You obviously can’t control what happens on Wall Street. But you can control how you respond to it.

Hopefully you won’t later regret what you did – or didn’t do – amid these troubling, tumultuous times.

Lynnette Khalfani-Cox, The Money Coach is not a registered investment advisor and the information provided on this web site should be considered educational in nature, but it is not a substitute for legal or professional financial advice. If you believe you need the help of a Certified Financial Planner or other investment counselor, please seek a qualified professional.

S&P downgrades U.S. credit rating for first time. Here is what it means to you

Author: The Money Coach

In a harsh critique of the American political process, Standard & Poor’s announced Friday night that it has downgraded the United States’ credit rating for the first time — an historic move that in one fell swoop simultaneously raised America’s borrowing costs by tens of billions of dollars annually, and promised to result in higher interest rates and borrowing costs for U.S. consumers as well.

What is the definition of a credit rating? A credit rating is an indicator of how likely someone is to repay a debt. That someone could be an individual, a company, a city, a county, a state, or even a country. All these entities have credit ratings. Up until August 5, 2011, the United States had always maintained a top tier AAA credit rating. This means, that any debts owed by the American government were extremely likely to be repaid – and repaid on time. The downgrade by S&P still means the U.S. has a very strong credit rating, but it’s been knocked down a notch to AA+.

Now that S&P has downgraded America’s credit rating, America will have to pay as much as $75 billion to $100 billion on its outstanding debts. Meanwhile, U.S. banks will likely immediately raise interest rates for consumers on everything from auto loans to credit cards to mortgages and student loans.

Read more about the U.S. Debt downgrade.

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Archive for the ‘Economy’ Category

How to Handle Rising Fees From Banks, Utilities and Retailers

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5 Tips for Investors During Stock Market Volatility

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S&P downgrades U.S. credit rating for first time. Here is what it means to you

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