Spring 2005FDIC Consumer News2

SPECIAL GUIDE FOR YOUNG ADULTS

Everybody makes mistakeswith their money. Theimportant thing is to keepthem to a minimum. Andone of the best ways toaccomplish that is to learnfrom the mistakes ofothers. Here is our list ofthe top mistakes youngpeople (and even manynot-so-young people)make with their money,and what you can do toavoid these mistakes in thefirst place.

Buying items you don’tneed…and paying extrafor them in interest.Every time you have anurge to do a little “impulsebuying” and you use yourcredit card but you don’tpay in full by the due date,you could be payinginterest on that purchasefor months or years tocome. Spending moneyfor something you reallydon’t need can be a bigwaste of your money. Butyou can make the matterworse, a lot worse, by

putting the purchase on acredit card and payingmonthly interest charges.

Research major purchasesand comparison shopbefore you buy. Askyourself if you really needthe item. Even better, waita day or two, or just a fewhours, to think things overrather than making a quickand costly decision youmay come to regret.

There are good reasons topay for major purchaseswith a credit card, such asextra protections if youhave problems with theitems. But if you charge apurchase with a credit cardinstead of paying by cash,check or debit card (whichautomatically deducts themoney from your bankaccount), be smart abouthow you repay. Forexample, take advantage ofoffers of “zero-percentinterest” on credit cardpurchases for a certainnumber of months (butunderstand when and how

interest charges couldbegin).

And, pay the entirebalance on your creditcard or as much as you canto avoid or minimizeinterest charges, which canadd up significantly.

“If you pay only theminimum amount due onyour credit card, you mayend up paying more ininterest charges than whatthe item cost you to beginwith,” said Janet Kincaid,FDIC Senior ConsumerAffairs Officer. Example: Ifyou pay only theminimum payment due ona $1,000 computer, let’ssay it’s about $20 a month,your total cost at anAnnual Percentage Rate ofmore than 18 percent canbe close to $3,000, and itwill take you nearly 19years to pay it off.

Getting too deeply indebt. Being able toborrow allows us to buyclothes or computers, takea vacation or purchase ahome or a car. But takingon too much debt can be aproblem, and each yearmillions of adults of allages find themselvesstruggling to pay theirloans, credit cards andother bills.

Learn to be a good moneymanager by following thebasic strategies outlined in

this special report. Alsorecognize the warningsigns of a serious debtproblem. These mayinclude borrowing moneyto make payments onloans you already have,deliberately paying billslate, and putting off doctorvisits or other importantactivities because youthink you don’t haveenough money.

If you believe you’reexperiencing debtoverload, take correctivemeasures. For example, tryto pay off your highestinterest-rate loans (usuallyyour credit cards) as soonas possible, even if youhave higher balances onother loans. For newpurchases, instead of usingyour credit card, trypaying with cash, a checkor a debit card.

“There are also reliablecredit counselors you canturn to for help at little orno cost,” added Rita WilesRoss, an FDIC attorney.“Unfortunately, you alsoneed to be aware thatthere are scamsmasquerading as ‘creditrepair clinics’ and othercompanies, such as ‘debtconsolidators,’ that maycharge big fees forunfulfilled promises orservices you can performon your own.”

If at First YouDon’t Succeed…Common Mistakes Young Adults Make with Moneyand How to Avoid Them

A Message to ReadersThe Federal Deposit Insurance Corporation has beenpublishing FDIC Consumer News quarterly since 1993 tohelp people be savvier about and safer with their money.Dealing with personal finances can be overwhelming foranyone, but especially for people just beginning to managemoney on their own. That’s why we’ve published this specialedition. Our goal is to help young adults — including thosejust starting a career or a family and others still in school —take control of their finances.

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Spring 2005

For more guidance onhow to get out of debtsafely or find a reputablecredit counselor, start atthe Federal TradeCommission (FTC) Website at www.ftc.gov/bcp/conline/edcams/credit/coninfo_debt.

Paying bills late orotherwise tarnishingyour reputation.Companies called creditbureaus prepare creditreports for use by lenders,employers, insurancecompanies, landlords andothers who need to knowsomeone’s financialreliability, based largely oneach person’s track recordpaying bills and debts.Credit bureaus, lendersand other companies alsoproduce “credit scores”that attempt to summarizeand evaluate a person’scredit record using a pointsystem.

While one or two latepayments on your loans orother regularcommitments (such as rentor phone bills) over a longperiod may not seriouslydamage your credit record,making a habit of it willcount against you. Overtime you could be chargeda higher interest rate onyour credit card or a loanthat you really want andneed. You could be turneddown for a job or anapartment. It could costyou extra when you applyfor auto insurance. Yourcredit record will also bedamaged by a bankruptcyfiling or a court order topay money as a result of alawsuit.

So, pay your monthly billson time. Also, periodicallyreview your credit reports

from the nation’s threemajor credit bureaus —Equifax, Experian andTransUnion — to makesure their informationaccurately reflects theaccounts you have andyour payment history,especially if you intend toapply for credit forsomething important inthe near future. Forinformation about yourrights to obtain free copiesof your credit report andhave errors corrected, seethe FTC’s fact sheet YourAccess to Free Credit Reportsonline at www.ftc.gov/bcp/conline/pubs/credit/freereports.

Having too many creditcards. Two to four cards(including any fromdepartment stores, oilcompanies and otherretailers) is the rightnumber for most adults.Why not more cards?

The more credit cards youcarry, the more inclinedyou may be to use themfor costly impulse buying.In addition, each card youown — even the ones youdon’t use — representsmoney that you couldborrow up to the card’sspending limit. If youapply for new credit youwill be seen as someonewho, in theory, could getmuch deeper in debt andyou may only qualify for asmaller or costlier loan.

Also be aware that cardcompanies aggressivelymarket their products oncollege campuses, atconcerts, ball games orother events oftenattended by young adults.Their offers may seemtempting and evenharmless — perhaps a free

T-shirt or Frisbee, or 10percent off your firstpurchase if you just fill outan application for a newcard — but you’ve got toconsider the possibleconsequences we’ve justdescribed. “Don’t sign upfor a credit card just to geta great-lookingT-shirt,” Kincaid added.“You may be better offbuying that shirt at thestore for $14.95 and savingyourself the potential costsand troubles from thatextra card.”

Not watching yourexpenses. It’s very easy tooverspend in some areasand take away from otherpriorities, including yourlong-term savings. Oursuggestion is to try anysystem — ranging from acomputer-based budgetprogram to hand-writtennotes — that will help youkeep track of yourspending each month andenable you to set and stickto limits you considerappropriate. “A budgetdoesn’t have to becomplicated, intimidatingor painful — justsomething that works foryou in getting a handle onyour spending,” saidKincaid.

Want some specific ideasfor ways to cut back onspending? A good placeto start is the Web sitefor the “66 Ways toSave” campaign(www.66ways.org).

Not saving for yourfuture. We know it can betough to scrape togetherenough money to pay for aplace to live, a car andother expenses eachmonth. But experts say it’salso important for young

people to save money fortheir long-term goals, too,including perhaps buying ahome, owning a businessor saving for yourretirement (even though itmay be 40 or 50 yearsaway).

Start by “paying yourselffirst.” That means evenbefore you pay your billseach month you shouldput money into savings foryour future. Often thesimplest way is to arrangewith your bank oremployer to automaticallytransfer a certain amount

continued on next page

each month to a savingsaccount or to purchase aU.S. Savings Bond or aninvestment, such as amutual fund that buysstocks and bonds.

Even if you start with just$25 or $50 a month you’llbe significantly closer toyour goal. “The importantthing is to start saving asearly as you can — evensaving for your retirement

If you pay onlythe minimum

payment due on a$1,000 computer,let’s say it’s about

$20 a month,your total cost at

an AnnualPercentage Rate of

more than 18percent can beclose to $3,000,and it will takeyou nearly 19

years to pay it off.

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dispute. Also rememberthat the quickest way to fixa problem usually is towork directly with yourbank or other serviceprovider.

“Many young people don’ttake the time to check theirreceipts or make thenecessary phone calls orwrite letters to correct aproblem,” one banker toldFDIC Consumer News.“Resolving these issues canbe time consuming andexhausting but doing socan add up to hundreds ofdollars.”

Final Thoughts

Even if you are fortunateenough to have parents orother loved ones you canturn to for help or adviceas you start handlingmoney on your own, it’sreally up to you to takecharge of your finances.Doing so can beintimidating for anyone.It’s easy to becomeoverwhelmed or frustrated.And everyone makesmistakes. The importantthing is to take action.

Start small if you need to.Stretch to pay an extra $50a month on your creditcard bill or other debts.Find two or three ways tocut your spending. Put anextra $50 a month into asavings account. Even littlechanges can add up to bigsavings over time.

Also remember that beingfinancially independentdoesn’t mean you’reentirely on your own.There are alwaysgovernment agencies,including the FDIC andthe other organizationslisted on Pages 10 and 11,that can help with yourquestions or problems. �

when that seems light-years away — so you canbenefit from the effect ofcompound interest,” saidDonna Gambrell, a DeputyDirector of the FDIC’sDivision of Supervisionand Consumer Protection.Compound interest refersto when an investmentearns interest, and laterthat combined amountearns more interest, and onand on until a much largersum of money is the resultafter many years.

Banking institutions payinterest on savingsaccounts that they offer.However, bank depositsaren’t the only way to makeyour money grow.“Investments, whichinclude stocks, bonds andmutual funds, can beattractive alternatives tobank deposits because theyoften provide a higher rateof return over long periods,but remember that there isthe potential for atemporary or permanentloss in value,” said JamesWilliams, an FDICConsumer AffairsSpecialist. “Young peopleespecially should do theirresearch and considergetting professional advicebefore putting money intoinvestments.”

Paying too much in fees.Whenever possible, useyour own financialinstitution’s automatedteller machines or theATMs owned by financialinstitutions that don’tcharge fees to non-customers. You can pay $1to $4 in fees if you get cashfrom an ATM that isn’towned by your financialinstitution or isn’t part ofan ATM “network” thatyour bank belongs to. For

more about how to save onATM fees, see the tipsfrom FDIC ConsumerNews online at www.fdic.gov/consumers/consumer/news/cnspr04/simple.html.

Try not to “bounce”checks — that is, writingchecks for more moneythan you have in youraccount, which can triggerfees from your financialinstitution (about $15 to$30 for each check) andfrom merchants. The bestprecaution is to keep yourcheckbook up to date andclosely monitor yourbalance, which is easier todo with online and

Pay off your credit cardbalance each month, ifpossible, so you can avoidor minimize interestcharges. Also send in yourpayment on time to avoidadditional fees. If you don’texpect to pay your creditcard bill in full mostmonths, consider using acard with a low interestrate and a generous “graceperiod” (the number ofdays before the cardcompany starts chargingyou interest on newpurchases).

Not taking responsibilityfor your finances. Do alittle comparison shopping

Wheneverpossible, use your

own financialinstitution’s

automated tellermachines or theATMs owned byinstitutions thatdon’t charge feesto non-customers.

to find accounts that matchyour needs at the rightcost. Be sure to reviewyour bills and bankstatements as soon aspossible after they arrive ormonitor your accountsperiodically online or bytelephone. You want tomake sure there are noerrors, unauthorizedcharges or indications thata thief is using youridentity to commit fraud.

Keep copies of anycontracts or otherdocuments that describeyour bank accounts, so youcan refer to them in a

telephone banking (seePage 7). Remember torecord your debit cardtransactions from ATMsand merchants so that youwill be sure to have enoughmoney in your accountwhen those withdrawals areprocessed by you bank.

Financial institutions alsooffer “overdraft protection”services that can help youavoid the embarrassmentand inconvenience ofhaving a check returned toa merchant. But be carefulbefore signing up becausethese programs come withtheir own costs.

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computer,” addedThompson. “Even if yougo back and delete whatyou typed in, yourpersonal information willremain on the computer’shard-drive and may beretrieved by an identitythief.”

Beware of offers thatseem too good to betrue. Con artists oftenpose as charities orbusiness people offeringjobs, rewards or other“opportunities.” Theyhope that trusting soulswill send cash or checks,provide SSNs or creditcard numbers, or wiremoney from a bankaccount.

Be extremely suspicious ofany offer that involves“easy money” or “quickfixes.” Be careful if you’rebeing pressured to make aquick decision and you’reasked to send money orprovide bank accountinformation before youreceive anything in return.Also beware of anytransaction for which youreceive a cashier’s checkmade out for more moneythan the amount due toyou with a request to wireback the difference — youcould lose a lot of money ifthe check is fraudulent.

To learn more aboutInternet security, gowww.fdic.gov/news/news/press/2004/pr9304a.pdf.To protect against an arrayof scams, go to the FederalTrade Commission’sconsumer informationWeb site at www.ftc.gov/ftc/consumer.htm. �

A big concern today isidentity theft or “IDtheft,” which occurs whenan individual learnssomeone’s Social Securitynumber (SSN), bankaccount information orother details that can beused to go on a buying orborrowing binge. Whilelaw enforcement agencies,financial industryregulators, financialinstitutions and otherorganizations are workingtogether to prevent IDtheft and other financialcrimes, consumers need totake precautions.

Protect your SocialSecurity number, bankaccount and credit cardnumbers, PINs (personalidentification numbers),passwords and otherpersonal information.Never provide thisinformation in response toa phone call, a fax, a letteror an e-mail you’vereceived — no matter howfriendly or official thecircumstances may appear.

Be especially careful withyour SSN. Don’t provide itto any business unlessyou’re convinced it’snecessary and theinformation will beprotected.

Also be aware that friends,family members,roommates and workerswho come into homesmake up a large percentageof identity thieves. Theyoften are in the bestposition to find and useconfidential information.

Guard your mail, whichmay include a credit cardor bank statement, an

envelope containing acheck, documents showingconfidential information,or other items that a thiefcan steal from a mailbox.

Try to use a lockedmailbox or other securelocation for your incomingmail. Pick up your mail assoon as possible. And foroutgoing mail containing acheck or personalinformation, put it in ablue Postal Servicemailbox, hand it to a mailcarrier or take it to thepost office instead ofleaving it in your doorwayor home mailbox.

Keep your financial trash“clean.” Don’t throw awayold ATM or credit cardreceipts, bank statements,tax returns or otherdocuments containingpersonal informationwithout shredding themfirst. ID thieves pickthrough trash bins lookingfor trash they can turn intocash.

Use extra care withpersonal information ona computer or over theInternet. Never providebank, credit card or othersensitive information whenvisiting a Web site thatdoesn’t explain how yourpersonal informationwould be protected,including its use of“encryption” to safelytransmit and store data.

Be on guard againstincoming e-mailsclaiming to be from atrusted source — perhaps abank, another companyyou know or even agovernment agency —asking you to “update” or

“confirm” personalinformation. “Reputableorganizations won’tcontact you to verifyaccount information onlinebecause they already haveit,” said SandraThompson, a DeputyDirector of the FDIC’sDivision of Supervisionand Consumer Protection.

If you get one of thosefraudulent e-mails (they’recalled “phishing” scams),don’t click on any links orattachments because doingso could activate sometypes of spyware or viruses.

Take other precautionswith your personalcomputer. Examples:Install a free or low-cost“firewall” to stop intrudersfrom gaining remote accessto your PC. Download andfrequently update security“patches” offered by youroperating system andsoftware vendors to correctweaknesses that a hackermight exploit. Usesoftware that detects andblocks “spyware,” whichcan record your keystrokesto obtain your credit cardnumber and other personalinformation.

Before selling, donating ordisposing of an oldpersonal computer, usespecial software tocompletely erase files thatcontain financial records,tax returns and otherpersonal information.

“If you use someone else’scomputer, such as acomputer provided byyour school, do not putyour Social Securitynumber or other personalinformation onto the

Financial Fraud and Theft: How to Protect Yourself

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payments on your creditcard may be reported to themajor credit bureaus as asign that you haveproblems handling yourfinances.

And if your credit ratinggets downgraded, your cardcompany could raise theinterest rate on your creditcard, reduce your creditlimit (the maximumamount you can borrow) oreven cancel your card.

Late payment on yourcredit card also can be amark against you the nexttime you apply for anapartment or a job.

5. Protect your creditcard numbers fromthieves. Never provideyour credit cardnumbers — both theaccount numbers andexpiration date on the frontand the security code onthe back — in response toan unsolicited phone call,e-mail or othercommunication you didn’toriginate.

When using your creditcard online make sureyou’re dealing with alegitimate Web site andthat your information willbe encrypted (scrambledfor security purposes)during transmission.

Major credit cardcompanies also are offeringmore protection byproviding “zero-liability”programs that protectconsumers from theunauthorized use of theircard.

In general, only give yourcredit card or card numbersto reputable merchants orother organizations. �

1. Use them carefully.Credit cards offer greatbenefits, especially theability to buy now and paylater. But you’ve got to keepthe debt levels manageable.If you don’t, the costs interms of fees and interest,or the damage to yourcredit record, could besignificant.

2. Choose them carefully.Don’t choose a credit cardjust to get freebies (T-shirtsor sports items) or becausethere’s no annual fee. Lookfor a card that’s best foryour borrowing habits.

Example: If you expect tocarry a balance on your cardfrom month to month,which means you’ll becharged interest, it’s moreimportant to look for a cardwith a low interest rate or agenerous “grace period”(more time before yourpayments are due).

3. Pay as much as you canto avoid or minimizeinterest charges. Ifpossible, pay your bill in fulleach month. Remember,paying only the minimumdue each month meansyou’ll be paying a lot ofinterest for many years, andthose costs could far exceedthe amount of your originalpurchase.

4. Pay on time. You’llavoid a late fee of about $35or more. But moreimportantly, continued late

1. Shop around for agood deal, preferably anaccount without a monthlymaintenance fee.

Banks usually offer severalaccounts to choose fromwith different features,fees, interest rates,opening balancerequirements and so on.

And remember that what’sgood for your parents oryour friends may not bebest for you.

2. Keep your checkbookup to date by recordingall transactions, includingATM withdrawals, bankfees, purchases you makeusing a debit card, and anyother deductions that donot involve writing acheck.

Also promptly compareyour checkbook with yourmonthly statement orreview your accountinformation online or bytelephone.

3. Avoid “overdrawingyour account,” which canhappen if you write acheck or otherwiseattempt to withdraw (bymistake) more money thanyou have in your account.It also is possible tooverdraw your accountusing your debit card at

the ATM or when makinga purchase. Thesetransactions can be costly.(See Page 4 for moreguidance.)

4. Consider Internet(online) banking. Thisservice allows you to makepayments or move moneyfrom one account toanother through yourbank’s Web site instead of(or in addition to) writingand mailing paper checks.This saves on the costs ofpostage and buying paperchecks.

Online banking also allowsyou to monitor youraccount without having towait for a statement in themail.

5. Pay attention to yourbank statements.Immediately report anyerrors or unauthorizedtransactions (to protectyourself from accusationsthat you were negligent inmanaging your account).

Look at your statement assoon as possible after itarrives in the mail ormonitor your accountmore regularly on theInternet or through yourbank’s telephone bankingservice. �

Five Things You Should Know About…Credit Cards Checks and Checking Accounts

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For young adults today, it’shard to imagine lifewithout gadgets and high-tech helpers. We want tomake sure you know aboutsome of the attractiveelectronic banking servicesbeyond ATMs.

Internet banking (onlinebanking) enables you totransfer money betweenyour accounts at the samebank and view accountinformation, deposits aswell as loans, at any time.

Internet bill payingallows you to pay monthlyand one-time bills over theInternet. Some banks offerelectronic bill paymentfree of charge, otherscharge a fee that is usuallyless than what you wouldspend on postage.

Debit cards look likecredit cards but theyautomatically withdrawthe money you want fromyour account. You can usea debit card to get cashfrom an ATM or to payfor purchases.

Direct deposit enablesyour paycheck and certainother payments to betransmitted automaticallyto your bank account.“Direct deposit is free andit’s fast — there’s nowaiting for the check toarrive at home and nowaiting in the teller lines,”said Kathryn Weatherby,an Examination Specialistfor the FDIC.

Telephone bankingallows you to use yourtouch-tone phone toconfirm that a check ordeposit has cleared, getyour latest balance,

transfer money betweenseparate accounts at thesame bank, and obtaindetails about services.

Automatic withdrawalsfrom your bank accountcan be arranged free ofcharge to pay recurringbills (such as phone billsor insurance premiums) orto systematically put acertain amount of moneyinto a savings account, aU.S. Savings Bond, or aninvestment.

“Your banking can be somuch more convenientand easier to monitor andcontrol when you haveaccess to your accounts 24hours a day, seven days aweek, from your home orpractically anywhere else,”added Weatherby.

However, she also stressedthe need to take securityprecautions with yourelectronic transactions andyour computer, such asthose discussed on Pages 5and 6. To learn moreabout electronic bankingand consumer protections,see the Winter 2004/2005FDIC Consumer Newsonline at www.fdic.gov/consumers/consumer/news/cnwin0405. �

High–Tech Banking, 24/7 To Buy or Not to Buy…That is a question many young adults facewhen it comes to a home or a carRenting vs. Buying a Home: Once you start earninga good, steady income you’ll most likely face this decision:Should I buy my own home instead of paying rent tosomeone else?

Most people want to own a home. Homeownership oftenis referred to as “the American dream.” Why is it sospecial? Among the reasons: Real estate often is anexcellent investment, perhaps the number one source ofwealth building for families. Owning your own home alsocan be a great source of pride and stability. Buthomeownership may not be for everyone. It’s a bigfinancial commitment — starting with the initial shock ofyour purchase (including a “down payment” and fees paidto a real estate agent, the lender and others) followed byyears of monthly mortgage payments, real estate taxes,property insurance and maintenance costs (such as lawncare and home improvements).

How can you learn more about renting vs. buying ahome, as well as your rights and your responsibilities as arenter or a homeowner? A good place to start iswww.mymoney.gov, the new Web site for financialinformation from the federal government. Or, go to theWeb site of the U.S. Department of Housing and UrbanDevelopment (HUD) at www.hud.gov, which has answersto common questions from renters and first-timehomebuyers, a calculator you can use online to comparebuying vs. renting a home, and links to homebuyerassistance programs across the country.

Buying vs. Leasing a Car: For many young people, theirfirst big financial commitment will involve getting theirown wheels.

One option is to buy, which may involveborrowing money to pay for it. Before you visit adealership or bid for a car over the Internet, visit ourWeb site for tips from FDIC Consumer News that canhelp you save time and money, perhaps hundreds ofdollars, when it comes to shopping for an auto loan. SeeKicking the Tires on an Auto Loan: Don’t Kick Yourself forPaying Too Much online at www.fdic.gov/consumers/consumer/news/cnsum04/autoloan.html.

Another option is to lease a car, which is similar torenting it for a few years. The Federal Reserve Board haspublished a guide to the differences between buying andleasing a car, including cost considerations and consumerrights. Read Keys to Vehicle Leasing online atwww.federalreserve.gov/pubs/leasing. �

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provided by your school(see Page 5).

Consider a paying job oreven an unpaid internshipat a workplace related to acareer you’re considering.

If possible, set asidemoney into savings andinvestments.

Try to take a class inpersonal finance. Readmoney-related magazineand newspaper articles.

You’re Starting aCareerKeep your credit card andother debts manageable.Maintain a good creditrecord.

Save money for bothshort-term and long-termgoals. Contribute as muchas you can to retirementsavings, which often canbe used for otherpurposes, including a first-time home purchase. Takeadvantage of matchingcontributions that youremployer will put intoyour retirement savings.

Do your best to stick to abudget and control yourspending, especially ifyou’re still paying backstudent loans or workingat an entry-level job.

Although insurancesometimes seems like awaste of money, you onlyneed one accident orcatastrophe to wipe youout financially. Thinkabout disability insurance(to replace lost income ifyou become seriously ill)and health insurance (to

You’re in HighSchoolConsider earning moneyoutside of your home,whether it’s babysitting,lawn mowing, or workingin a movie theater oranother “real” business. Ajob can provide a sense ofaccomplishment andresponsibility. It also canbe a good opportunity tolearn about careers and to“network” withprofessionals.

Learn the concept of“paying yourself first” —that is, automaticallyputting some money intosavings or investmentsbefore you’re tempted tospend it. Start small if youhave to and graduallybuild up.

Consider opening a bankaccount, either on yourown or with a parent orother adult. It’s a goodway to learn aboutmanaging money. You alsomay want to start using adebit card — you can useit to make purchases butyou won’t pay interest orget into debt because themoney is automaticallydeducted from your bankaccount.

Take a personal financeclass or join an investmentclub at school.

If you’re planning to go tocollege, learn about youroptions for saving orborrowing money for whatwill be a major expense(see the next page).

If you (and your parents)are comfortable withgetting a credit card, youshould know that there arecards designed just forteens. One is a credit cardwith a low credit limit thatcan keep you from gettingdeeply in debt. Another isa pre-paid card that comeswith parental controls,including spending limits.

You’re in CollegeRealize that as you paybills and debts on yourown you are building a“credit record” that couldbe important when youapply for a loan or a job inthe future. Pay your billson time…and borrow onlywhat you can repay.

If you decide to get yourown credit card, choosecarefully. Take your time,understand the risks aswell as the rewards and dosome comparisonshopping. Don’t apply fora credit card just becauseyou received an invitationin the mail or a salesperson was offering a freegift on campus.

Protect your SocialSecurity number (SSN),credit card numbers andother personal informationfrom thieves who usesomeone else’s identity tocommit fraud. Examples:Use your SSN asidentification only ifabsolutely necessary andnever provide it to astranger. Safeguard yourpersonal information whenusing the Internet orborrowing a computer

cover big medical bills).Check into low-cost orfree insurance offeredthrough your employer.

You’re Starting aFamilyContinue saving andinvesting money, includingin retirement accounts.

If you don’t already ownyour home do someresearch to see if this is agood option for you. Ahome purchase can beexpensive but it also canbe an excellent investmentand a source of tax breaks.Check out educationalresources for first-timehomebuyers (see Page7).

Make sure you areproperly insured,including life, health,disability and homeowner’s or renter’sinsurance.

Talk with an attorneyabout the legal documentsyou should have to protectyour loved ones if youbecome seriously ill or die.These documents typicallyinclude a will, a “durablepower of attorney” (givingone or more people theauthority to handlepersonal matters if youbecome mentally orphysically incompetent)and a “living will”(specifying the medicalcare you want or don’twant if you becomehopelessly ill and cannotcommunicate yourwishes.) �

Ages and Stages of Money Management: A To-Do ListTo successfully reach your financial goals, a lot depends on what you do and when. Here are justa few ideas young adults can consider at key stages of their life.

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Got a question or acomplaint involving afinancial institution butyou’re not sure about thebest or quickest ways toresolve the matter? Here’sa good game plan.

1. Contact theinstitution directly.Experience has shownthat’s the quickest way toresolve most problems.Also keep your cool. Be asprofessional as possible.

2. Put your complaint inwriting, even if you alsocall the institution. Someconsumer protection lawsrequire that writtencomplaints be filed. Besure to send your letter tothe address that theinstitution recommends forcomplaints and keep acopy of all correspondenceand supporting documents.With phone calls, get thename of the person youspoke to and keep good

notes of your conversation,including the date.

3. Act as soon aspossible. Some lawsrequire consumers toreport a problem within acertain time period to befully protected.

4. If you can’t fix aproblem on your ownyou may contact theinstitution’s governmentregulator for help orguidance. To find out whoregulates a bank or otherdeposit-taking institution,you can write or call theFDIC (see Page 11). Findcontact information andtips for solving problemswith non-bank financialcompanies, such asinsurance companies orbrokerage firms, atwww.consumeraction.gov,which features the federalgovernment’s ConsumerAction Handbook. �

The Right Way to Right A WrongHow to fix a problem with a financial institution

Did You Know…?Web Sites Offer Guidance on Paying for College

College costs keep going up and up. Fortunately, thereare many ways to save for college education, includingtax-advantaged savings plans and U.S. Savings Bonds.There also are options for borrowing money, includingbank loans and a variety of federal government studentloan programs.

For more information on saving and borrowing forcollege costs, including what to consider if you’rehaving difficulty repaying a student loan, some federalgovernment Web sites can help. One is the U.S.Department of Education’s Web site atwww.studentaid.ed.gov, which even includes a calculatoryou can use to determine how much to save to meetcollege expenses and how to maximize your savingsefforts. Another site, www.students.gov, is acomprehensive Web site with information from the U.S.government and other sources on topics such asfinancial aid.

The FDIC Protects Deposits to $100,000

The Federal Deposit Insurance Corporation is anindependent agency of the U.S. government thatprotects depositors from losing money if their insuredbank or savings institution were to fail. Generallyspeaking, your funds in checking and savings accountsand “CDs” (special accounts you’d hold for anywherefrom one month to five years) are fully insured up to$100,000, and sometimes more, under current laws.

“If you or your family has $100,000 or less on deposit ata bank, as is the case with most people, your money iscompletely safe,” said Kathleen Nagle, a supervisor withthe FDIC’s Division of Supervision and ConsumerProtection. To learn more, start at the FDIC’s Web site(www.fdic.gov) or call or write the FDIC (see Page 11).

Some Federal Laws Protecting ConsumersThe Electronic Fund Transfer Act limits a consumer’sliability if there’s been an unauthorized use of an ATMcard, debit card or other electronic banking device.

The Equal Credit Opportunity Act prohibitsdiscrimination against loan applicants based on race, sex,age (provided that the applicant is eligible to enter into abinding contract), marital status, religion, national originor receipt of various types of government assistance.

The Fair Credit Billing Act establishes procedures forcorrecting errors on credit card bills. This law also allowsa card user to dispute a purchase made with a card.

The Truth in Lending Act requires creditors to giveconsumers information about the Annual PercentageRates and other costs of a credit card or loan. This lawalso protects consumers if a credit card is lost or stolen.

The Truth in Savings Act requires disclosures aboutinterest rates and fees and prohibits misleading orinaccurate advertising for checking and savings accounts.

This FDIC Special Guide May Be Reprinted

The FDIC encourages schools, financial institutions,personal finance advisors, consumer groups, the media andanyone else to help make the tips and information in thisspecial edition of FDIC Consumer News widely available toyoung adults.

The newsletter may be reprinted in whole or in partwithout advance permission. In addition, the FDIC offersthis special edition online in a PDF version (atwww.fdic.gov/consumers/consumer/news) that looks justlike the printed newsletter and can easily be reproduced inany quantity. The back page of the PDF version also wasintentionally left blank so that an organization could add itsname, logo, a special message and/or self-mailinginformation.

Spring 2005FDIC Consumer News10

SPECIAL GUIDE FOR YOUNG ADULTS

1. It’s always smart to sendin the minimum paymentdue on a credit card billeach month and stretchout the card payments aslong as possible instead ofpaying the bill in full. Trueor False?

2. Your credit record (yourhistory of paying debts andother bills) can be a factorwhen you apply for a loanor a credit card but cannotaffect non-credit decisions,such as applications forinsurance or an apartment.True or False?

3. While one or two latepayments on bills may notdamage your credit record,making a habit of it willcount against you.True or False?

4. There’s no harm inhaving many differentcredit cards, especiallywhen the card companiesoffer free T-shirts andother special giveaways asincentives. The numberof cards you carry won’taffect your ability to get aloan; what matters is thatyou use the cardsresponsibly. True or False?

5. A debit card may be agood alternative to a creditcard for a young personbecause the money to payfor purchases isautomatically deductedfrom a bank account, thusavoiding interest chargesor debt problems. True orFalse?

6. It makes no sense foryoung adults to put moneyaside for their retirementmany years away. People in

their 20s should focusentirely on meetingmonthly expenses andsaving for short-term goals(such as buying a home orstarting a business) and notstart saving for retirementuntil their 40s at theearliest. True or False?

7. If you receive an e-mailfrom a company you’vedone business with askingyou to update your recordsby re-entering your SocialSecurity number or bankaccount numbers, it’s safeto provide this informationas long as the e-mailexplains the reason for therequest and shows thecompany’s official logo.True or False?

8. The best way to avoid a“bounced” check — that is,a check that gets rejectedby your financialinstitution because you’veoverdrawn your account —is to keep your checkbookup to date and closelymonitor your balance.Institutions do offer“overdraft protection”services but theseprograms come with theirown costs.True or False?

9. All checking accountsare pretty much the samein terms of features, fees,interest rates, openingbalance requirements andso on. True or False?

10. If you or your familyhas $100,000 or less ondeposit at an FDIC-insured bank, and the bankfails, your money iscompletely safe. True orFalse? �

Take Our “Financial Aptitude Test” — the F.A.T.You don’t need a #2 pencil or a calculator to take our quiz, but you do need a good understanding of the informationin this special report to get a good score. Think you’re ready?

1.False (See Page 2)6.False (See Page 3)2.False (See Page 3)7.False (See Page 5)3.True (See Pages 3)8.True (See Page 4)4.False (See Page 3)9.False (See Page 6)5.True (See Page 8)10.True (See Page 9)

Correct Answers

(See correct answers at right.)

How To Learn More

The FDIC offers a variety of assistance to helpconsumers understand how to handle their money andresolve complaints. Start with the consumer informationon the FDIC Web site at www.fdic.gov, where you’llfind consumer brochures and alerts, back issues of ourquarterly FDIC Consumer News, and an interactivefinancial education program called Money Smart thatprovides a basic introduction to bank services. You alsocan get answers to questions by phone or e-mail (seenext page).

FDIC Consumer News provides continuing financialeducation. You can sign up for a free e-mailsubscription. After each new edition is posted to ourWeb site, you’ll get an e-mail telling you about the issueand linking you to any story that interests you. Justfollow the instructions posted at www.fdic.gov/about/subscriptions/index.html.

Other federal government agencies, including thoselisted on the next page and the Federal TradeCommission (www.ftc.gov), publish consumerinformation and have staff, Web sites and otherresources that can help answer your questions onfinancial matters. Another good place to start iswww.mymoney.gov, the federal government’s centralWeb site for information about managing your money.

Other resources include financial institutions (throughtheir staff, brochures and Web sites) and personalfinance classes offered by schools, state and localgovernment agencies and non-profit organizations.These local classes may involve a partnership with thefederal government, such as those that offer the FDIC’sMoney Smart curriculum. Another example is theCooperative Extension System (www.csrees.usda.gov/financialsecurity), a nationwide educational partnershipof more than 3,000 local offices and 100 stateuniversities, and a research and education agency withinthe U.S. Department of Agriculture. �

Spring 2005FDIC Consumer News 11

SPECIAL GUIDE FOR YOUNG ADULTS

The Federal Deposit InsuranceCorporation insures deposits at banks andsavings associations and supervises state-chartered banks that are not members of theFederal Reserve System. The FDIC’s servicesinclude a toll-free consumer assistance line,answers to written questions, andinformational material. Toll-free phone:(877) ASK-FDIC or (877) 275-3342. Thephone line is staffed Monday through Friday,8:00 a.m. to 8:00 p.m., Eastern Time.Recorded information is available 24 hours aday. The toll-free TTY number for thedeaf/hard-of-hearing is (800) 925-4618. HomePage: www.fdic.gov. Mail: 550 17th Street,NW, Washington, DC 20429.

For questions about deposit insurance coverage: Contact the FDIC Divisionof Supervision and Consumer Protection at the address and phone numbersabove or by e-mail using the Customer Assistance Form on the Internet atwww2.fdic.gov/starsmail/index.html. The National Credit Union Administration(listed below) insures deposits at federally insured credit unions.

For other questions, including those about consumer protection laws, orcomplaints involving a specific institution: First attempt to resolve the matterwith the institution. If you still need assistance, write to the institution’s primaryregulator listed on this page. Although the FDIC insures nearly all banks and savingsassociations in the United States, the FDIC may not be the primary regulator of aparticular institution. Other regulators are listed below. To submit a complaint aboutan FDIC-supervised institution, contact the FDIC Division of Supervision andConsumer Protection as listed above. For inquiries involving problems or complaintsrelated to the FDIC, contact the FDIC Office of the Ombudsman at the mailingaddress and phone numbers listed above, by fax to (202) 942-3040, or by e-mail toombudsman@fdic.gov.

The Federal Reserve System supervises state-chartered banks that are members ofthe Federal Reserve System. Phone: (202) 452-3693. Fax: (202) 728-5850.Home Page: www.federalreserve.gov. E-mail: www.federalreserve.gov/feedback.cfm.Mail: Division of Consumer and Community Affairs, 20th Street and ConstitutionAvenue, NW, Mail Stop 801, Washington, DC 20551.

The Office of the Comptroller of the Currency charters and supervises nationalbanks. (The word “National” appears in the name of a national bank, or the initials“N. A.” follow its name.) Phone: (800) 613-6743. Fax: (713) 336-4301. Home Page:www.occ.treas.gov. E-mail: consumer.assistance@occ.treas.gov. Mail: CustomerAssistance Group, 1301 McKinney Street, Suite 3710, Houston, TX 77010.

The Office of Thrift Supervision supervises federally and state-chartered savingsassociations plus federally chartered savings banks. (The names generally identifythem as savings and loan associations, savings associations or savings banks. Federallychartered savings associations have the word “Federal” or the initials “FSB” or “FA”in their names.) Phone: (800) 842-6929 or (202) 906-6237. Home Page:www.ots.treas.gov. E-mail: consumer.complaint@ots.treas.gov. Mail: ConsumerAffairs Office, 1700 G Street, NW, Washington, DC 20552.

The National Credit Union Administration charters and supervises federal creditunions, and insures deposits at federal credit unions and many state credit unions.Phone: (703) 518-6330. Fax: (703) 518-6409. Home Page: www.ncua.gov. E-mail:pacamail@ncua.gov. Mail: Office of Public and Congressional Affairs, 1775 DukeStreet, Alexandria, VA 22314.

Your state government also may offer assistance and publish useful information.Contact your state’s Attorney General’s office, consumer protection office orfinancial institution regulatory agency as listed in your phone book or otherdirectories, or visit your state’s official Web site.

For MoreInformation

Published by the Federal DepositInsurance Corporation

Donald E. Powell, Chairman

Elizabeth Ford, Assistant Director,Office of Public Affairs (OPA)

Jay Rosenstein, Senior Writer-Editor,OPA

Mitchell Crawley, Graphic Design

FDIC Consumer News is producedquarterly by the FDIC Office ofPublic Affairs in cooperation withother Divisions and Offices. It isintended to present information in anontechnical way and is not intendedto be a legal interpretation of FDICregulations and policies. Mention ofa product, service or company doesnot constitute an endorsement.

This newsletter may be reprintedin whole or in part. Please creditFDIC Consumer News.

Send comments, suggestions orquestions to: Jay Rosenstein,Editor, FDIC Consumer News550 17th Street, NW, Room 7100Washington, DC 20429E-mail: jrosenstein@fdic.govFax: (202) 898-3870

Find current and past issues of FDICConsumer News at www.fdic.gov/consumers/consumer/news. Refer tothis same index to locate issues thatare specially formatted for beingreprinted in any quantity.

To receive an e-mail notice abouteach new issue of FDIC ConsumerNews posted on the FDIC Web site,with links to stories, followinstructions posted atwww.fdic.gov/about/subscriptions/index.html.

Consumer information from theFDIC is available at www.fdic.govand from the FDIC PublicInformation Center,801 17th Street, NW, Room 100Washington, DC 20434Toll-free phone: (877) 275-3342 or(202) 416-6940 (Washington area)E-mail: publicinfo@fdic.govFax: (202) 416-2076

FDICConsumer News