Now's the Time to Catch Up with
Financial Homework
by Robert K. Heady
Bank Rate Monitor
The
next couple of months are a perfect time to get your personal financial
life in order. Why? Because later you're going to be hit all at once by
Thanksgiving and Christmas holidays, plus the Y2K problem, which may screw
up your computer and everything on it.
Look
at it as "fall fixing"the opposite of "spring cleaning".
Use
early November to do catch-up work on filing bills and monthly statements,
reviewing all contracts and leases such as for your car and house, or apartment.
You'll need these records in case of Y2K snafus.
Get
rid of high-rate debt by switching to cheaper loans, starting with any credit
card that charges 18 percent or more. Find low-rate credit card deals listed
in newspaper rate tables, in Money and Your Money magazines,
and on the Internet at www.bankrate.com or www.cardtrak.com. Current best
credit card deals appear below.
Call
the card issuer and learn the exact procedure for closing an account. Don't
mail the instructions with your payment. Use a separate envelope, and be
sure to keep copies of all correspondence! Two weeks after closing the account,
call the issuer and see if the account really has been closed. The way card
outfits have been ripping off and scamming consumers lately, one can't be
too careful.
It
is critical that, regardless of how good or bad your credit history, you
obtain a copy of your credit report once a year. Reason: The report may
be loaded with errors that are not your fault, but which must be corrected.
By law, you can enter up to 100 words of your choosing to dispute anything
on your record. This will help you obtain future loans.
A
copy of your report will typically cost you $8 from any of the three major
credit bureaus: Equifax at (800) 685-1111, or www. equifax.com; Experian
(formerly TRW) at (800) 682-7654, or www. experian.com; or Trans Union
Corp. at (800) 888-4213, or www. tuc.com
Shop
for a better checking account. You want a 100 percent free one, with
no monthly service charge, a low minimum balance requirement and an overdraft
privilege. While you're at it, ask five or six banks for their fee disclosure
schedule, which lists all their nasty nickel-and-dime fees, and compare
the deals. Banks are required to give you this document.
If you own
a home and can only afford to make bare-bones minimum payments on big, high-rate
credit card balances, consider taking out a home equity line of credit or
home equity loan to pay off the cards in full. The rate will be cheaper,
say, 8.5 percent vs. up to 23 percent that card monsters charge. But be
warned: If you can't repay the home equity loan, the bank could take your
house. Also, studies show that many people who pay off their credit cards
this way fall right back into the habit of using too much plastic.Put
your lazy money to work. Old-fashioned bank passbook accounts yielding 1
percent to 2 percent are senseless and useless. Instead, shop for out-of-state
Money Market Accounts paying 5.25 percent or better. Once a month, use one
of the three monthly checks you're permitted with an MMA to transfer enough
cash to your local checking account to pay household bills. If you don't
think you'll need all your MMA funds for a future emergency, sock part of
the money away in a six-month or one-year CD yielding 6 percent or higher.If
you plan to buy a new car, arrange your financing through a bank or, better
still, a credit unionunless you're getting one of those 0 percent or 1.9
percent manufacturer-financed offers. Be aware that the auto dealer will
want to handle the loan for you himself. Why? He typically marks up the
bank's interest rate by 1 or 2 percent, which comes out of your pocket.Refinance
your existing mortgage even though rates have ticked up in the past year
and lately have been wobbling. Use this simple math to figure if it's worthwhile:
shop five lenders who seem to offer low rates and points. Ask each one to
tell you, in dollars and cents, the total refinance cost including all fees
and charges. Take that cost and divide it by the amount you'll save each
month with your new, lower payment. That'll tell you how many months it
will take you to break even on the refi.Editor's
Note: Robert K. Heady is the founding
publisher of Bank Rate Monitor and is the co-author of the book, "The
Complete Idiot's Guide to Managing Your Money." You can write to him
in care of The Bull & Bear Financial Report. Or send E-mail to jrnl8888@aol.com.