For years, the FDIC has insured bank accounts up to $100,000.
In light of the recent banking crisis and consumer fears, the FDIC insured banks up to $250,000 per account. The move was aimed at increasing American confidence in the banking system. It appears to have worked. However, the higher FDIC coverage limits were temporary.
FDIC Insured Banks $250,000 Coverage Limits Extended
When first implemented, the increased insurance limits on FDIC savings accounts and other FDIC insured accounts at most banks, was set to expire at the end of 2009. However, to avoid a rush of customers restructuring (withdrawing) money from various FDIC insured banks, in order to get back under the $100,000 limit, President Obama signed a law passed by Congress that extends the higher FDIC coverage until December 31, 2013.
However, the law does NOT include most retirement accounts including IRAs. So, those IRA CDs, or IRA Certificates of Deposit are NOT insured to $250,000 like your regular bank savings accounts or checking accounts.
To get higher government insurance amounts on retirement accounts, move them to an investment account, or brokerage account. Even a discount online brokerage account is good.
While investment accounts with brokers are not FDIC insured, they are insured by a similar quasi-governmental entity called SPIC. (What is SPIC? – SPIC Defined) Unlike the FDIC, the SPIC already insured the amount of cash in an SPIC insured brokerage account up to $500,000 per customer. However, there is a catch. Cash, and cash equivalent, claims are limited to $100,000. So, to take advantage of the higher limits, you’ll need to have your IRA invested in something other than money market funds and CDs.
If you are worried about the safety of your IRA principal, but still want the higher SPIC insurance ceiling, look for low-risk investments to use in your brokerage account.
But, before you run out and make any changes, make sure that you understand FDIC Insurance Limit Coverage first.
The Internet is a treasure trove of useful information, but it can also be a swamp of deceptive or unhelpful websites as well. Internet sites that list great deals on products and services are a good way to help save money during the recession. However, you need to find real deal listing websites and not just websites that offer regular prices and normal sales with commission-based links. That makes those websites money, not you.
A real hot deals website will have deals from all over, not just certain stores and shopping sites. Coupon codes and free shipping codes will be included for free on deal postings without having to register or being directed to another site.
Also, most of the best deals websites have a forum where users can post comments and discuss the deals. The forums are a great way to see just how good a deal is, whether you find it on that site or somewhere else. Deal site users are savage and they will quickly point out the flaws in any deal that looks good, but has a catch.
As an added bonus, some of the most honest, hard hitting reviews on the Internet can be found in these forums. Don’t look for reviews, just look for commentary on the deals. If there is a great price on a TV, you can be sure that there are plenty of users weighing in on whether or not it is worth the money, even at the discounted price.
Here are some great deals websites that I’ve been using over the last few years that always seem to come through with the best hot deals out there.
Top 4 Hot Deals Websites
- Slickdeals.net – Only the best deals make the front page, but there are hundreds posted each day in the forums. Users can vote thumbs up or down to help rank deals.
- Gottadeal.com
- DealNews.com
- Woot.com – Woot only offers one deal a day, so it can be hit or miss whether there is anything you want. But, for the 2 seconds it takes to check every day, you will find some of the best deals online. They do offer a lot of refurbished products, though, so make sure you read the whole description and decide is refurbished worth it.
Do you have other hot deal websites that you use to save money?
New credit card laws passed by Congress in 2009 are going into effect. What you need to know about credit card laws and how they have changed won’t be a big difference from what things were before. Credit Card companies testified in front of Congress that they would stop using their very worst tricks. That, plus a multi-million dollar lobbying campaign made sure that the new credit card laws did not require sweeping changes to the credit companies typically sneaky and underhanded business practices.
How do these new credit card laws affect smart credit card users who take advantage of good credit card rewards programs to earn points or miles?
One of the major rule changes states that when the credit card issuer decides to unilaterally change the terms of your contract, they have to give you 45-days advance notice. If the new terms are not acceptable to you, you can opt out.
There is a catch. In order to opt out, you must cancel your card, and close your account. Then, you have to pay off the whole remaining balance within a certain number of days. Oh, yeah, and that doesn’t apply to variable rate cards.
If you pay off your credit cards every month, then this is no big deal, because you could always pay off your card account and cancel it before you were charged any interest anyway.
If you carry a big balance on your credit card, then this doesn’t really help you anyway, unless you can figure out how to pay off that credit card account in 90 days. If you could do that, you probably wouldn’t have the large balance in the first place.
Basically, the only people this really helps are people who have small to medium sized balances on their credit cards, and people who can take advantage of balance transfers to other credit accounts. Of course, in that case, it was always possible to do that and then cancel the card anyway.
In other words, you have to be just as sharp and aware of credit card companies tricks.
Credit Card Rules Change Used to Hide Bad Company Behavior
As we’ve come to expect from banks and credit card companies, many credit card issuers are taking advantage of all the noise around the new credit card rules to make a few not-so-favorable changes to their credit card terms as well.
American Express recently notified some customers that their rates were going up. The new rates are a variable rate equal to PRIME plus a certain percentage. Some card holders report getting new terms of PRIME RATE plus 12% or so. With the Fed holding rates at all time lows (nearly zero percent) that means that the interest rate on these American Express cards will be around 15%.
That doesn’t sound too bad. Except for two things, first, now that these customers have variable rate cards instead of fixed rate cards, the helpful rules no longer apply because different rules apply to variable rate accounts than credit card accounts with fixed rates.
Second, watch out as the economy recovers and the Fed starts to raise interest rates back to more normal levels. PRIME interest rates of 4% are just a 1% raise in the Federal Reserve target interest rate away. Putting the Fed Funds rate back at a still very low 3% means a PRIME rate around 6% and the American Express card interest rate rises to 18% pretty quickly.
Be careful out there. Remember always take advantage of reward credit card programs. Use these various credit card rewards points to offset the expenses and inconveniences of always having to watch your back to make sure the credit card companies are sticking a knife in it.
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If you are like a lot of people, chances are that it has been a while since you have shopped around for car insurance. Just checking some Internet auto insurance quotes doesn’t count either. This little oversight could be costing you a lot of money.
Why You Should Shop Around For Auto Insurance Every Year or Two
Most people think that the advice to shop around for car insurance is based on their being a company out there that is more competitive and just flat out has cheaper rates, that isn’t really true.
While it is possible that another car insurance company has cheaper car insurance rates for you, the real reason that you should check every 12 to 18 months for new car insurance quotes is actually different.
It can be hard to find accurate, non-biased, information on auto insurance on the Internet. Your best bet is InsureUOnline.org (notice that it is ORG, not COM). InsureUonline is the consumer education website from the National Association of Insurance Commissioners, the group that represents the Insurance Commissioner from all 50 states. Unlike most other insurance websites you will find, they are not affiliated with any insurance company, and do not make money by selling insurance or selling leads to insurance companies.
Car insurance, like all forms of insurance, is based upon pooling risk. The ides is that for any group of like people, there is an amount that can be collected from each member of the group that would add up to cover the collective losses of the whole group.
For example, assume that there are 1,000 people in a group. In a given year, 5 of them have accidents. Those damages and other payouts (like medical expenses) for those 5 accidents total up to $100,000. Given that scenario, if you charged each person $100, then you could cover the annual car accident costs of the group. If you charged $150, then you could cover the group, and make a $50,000 profit. Not bad, right?
Of course, it isn’t this simple. What if there is a bad year and there are 20 accidents? Or, what if it is a normal number of accidents, but one accident is really bad and costs $500,000?
The trick is, that the larger the group (sample, statistically speaking), the less variable the outcome. In other words, while those worries are probably a pretty big deal with 1,000 people, they become much less significant with 100,000 people, and even less significant with 1,000,000 people.
Furthermore, the more alike the group is, the smaller the variables are likely to be. That is why auto insurance companies charge you different rates depending upon who you are, they are breaking you out into groups of people who are the most like you and dividing the risk over the entire group.
All you have to do to make money as an insurance company is get large enough groups of drivers paying premiums to even out those unusual cases that arise, and then charge them the right amount of money. Of course, this is the tricky part.
Charge too much money, and not enough people will buy your brand of car insurance which means your groups will be too small. Charge too little money, and no matter how many customers you have, their premiums won’t add up to enough to cover all the expenses.
Car Insurance Companies Re-Rate and Change Rates Every Few Years
This is where shopping around for auto insurance comes in.
Every so often (typically 12 to 36 months), car insurance companies will look at their “experience”, that is how much money each group is costing them, and adjust their rates up or down accordingly. Auto insurance companies often do this on a state by state basis, because insurance is regulated at the state level. That means that the rules for how they are allowed to divide out the insured groups, as well as the rules for changing people’s auto insurance premiums, are different in each state.
If you live in California, for example, and the car insurance company has lost less money there than they expected to, they would likely lower their auto insurance premiums. If, on the other hand, you live in Texas, for example, and the insurance guys lost more money there than they expected, they might raise their rates in Texas.
So, how does this save you money on your auto insurance premiums?
Because, the insurance companies don’t do all 50 states every year, and they don’t use the same schedule or rotation. That means that State Farm might have re-done its numbers (and its rates) for Oregon in 2008, and Washington in 2009. Allstate, on the other hand, might have done Oregon and Washington together in 2007. They are scheduled to do Oregon and Washington again in 2010.
Since all car insurance companies are likely to have the same experience in each state that means that if things were better in Oregon in 2008 than in 2007, then all of the auto insurers will be lowering their rates for Oregon. The catch is that, in our example, State Farm lowered them in 2008, while Allstate won’t lower them until 2010.
If, on the other hand, Washington was terrible in 2009, then State Farm will be raising its rates in Washington, while Allstate will still have their lower rates in place until at least 2010.
This is why you should shop around for car insurance every year. If you can’t make yourself do it every year, then at least do it every two years.
Another reason to shop around is that each insurer builds different groups and different costs which they also adjust periodically. If Geico decided to charge bad drivers $100 more than the base rate (there is no such thing, but for example purposes, just go with it) and good drivers $100 less than the base rate, while Amica decided to charge bad drivers $50 more than the base and good drivers $50 less, then a good driver would get a better deal at Geico, while a bad driver would get a better deal at Amica.
Depending upon how that works out for the insurers, they might switch up their models and who gets a better deal where, could flip.
What it all comes down to, is that you can potentially save a lot of money on car insurance just by checking around every year or two.
If you haven’t done it in a while, make three or four calls, the results might shock you.
State Insurance Regulator – Insurance Commissioner
For specific consumer information and info on insurance laws and regulations in your state, visit your state’s website. This website has a link to all 50 states’ insurance commissioner or insurance regulation agency.
Look for data to help save you work on researching car insurance.
In the State of Colorado, for example, insurance regulation falls under DORA, Department of Regulatory Agencies. Keep your eyes peeled and you find this official report of Private Passenger Automobile Premiums in Colorado based on where you live and type of Driver. Don’t forget to run this report yourself. There are 4 different driver types (younger, older, male, female) and rates change depending upon which city you live in.
You’ll notice right away that some auto insurers are much more expensive for under 25-year old males, while some are better bargains for over 60-year old drivers. Use these real data sample premiums to thin down the list to the companies that look like they do the best deals with the kind of driver that you are, and make some calls.
I fired off a quick post yesterday about the “news” that Goldman Sach’s Abby Joseph Cohen declared the recession over. If you missed it, I made the point that an arrow pointing up painted on a wall had just as accurate of a track record as Ms. Cohen did over the past decade or so. For some reason, Cohen has a set of groupies, or fan boys, or whatever that always like to remind people of when she was “right” and, of course, always forget about when she was wrong.
The truth is that Abby Joseph Cohen has never been “right”. If your answer to a yes/no question is always the same, you aren’t getting the questions right. You are just happening upon the questions that were written with a yes answer. That isn’t intelligence or ability, that’s statistics.
Still, so as to avoid anyone showing up and (publicly, so far, it’s only messages) saying that I have forgotten about all the really great “calls” she has made, I offer the following factual data as proof that any upward pointing arrow would have made, and lost, investors just as much money as Abby Joseph Cohen over the last 10 years.
1990s – The Internet Bubble – Cohen first came to prominence in the late 1990s by continuously predicting the stock market would move higher and higher. When other analysts were “wrong” by noticing that the ever higher values being obtained by stocks were unsustainable and calling for caution or even slow growth, Cohen was always there to be “right” by saying HIGHER, HIGHER. (Just like the arrow.) For those of you who want to call someone thinking that the prices and valuations of the late Internet Bubble were not only reasonable, but that they should be even higher, then you may consider her tenure during the bubble successful. The rest of us will consider her to have been the Chief Jester of the stock markets most comically irrational and irresponsible phase since the run-up to the Great Depression.
2000 – The Internet Bubble Pops – In perhaps the least honest case of “spin” on Wall Street prior to the shenanigans of 2007, 2008, 2009, Cohen and her supporters like to claim that she called the pop of the Internet bubble by issuing a March 2000 call to lighten exposure to equities. That so-called call or “right move” made in March 2000 was to cut her recommended allocation from 70% stocks to 65% stocks!
Holy, freaking, whoopee-doo, Batman!
How much money do you think it saved you to shift your investments from 70% to 65% stocks right before the market tanked? This tiny adjustment of just 5% less stocks would be the only “right” call Cohen would make for the next 3 years. Put it this way, if you kept listening to Cohen, by the time she was “right” again (incidentally, the exact same time the arrow would be right again) you had probably lost all of your money.
What is worse, is that the whole thing is a lie when it comes to calling 2000 right. In the very same research note where Cohen advised clients to make the enormous leap from 70% to 65% she did not change her end-of-year estimate for the S&P 500 which was 1,575.
When the NASDAQ fell 575 points (13.6%), Cohen, who was at the White House, said she was “enthusiastic about the outlook for stock prices.” Oops. Have you ever notice has she doesn’t mention that in those interviews when she claims to have gotten 2000 right?
If that wasn’t enough, in November, 2000, Cohen stated that she thought the S&P 500 was undervalued on a 12-month view.
In other words, for all the spin you want to use, Cohen was WRONG on 2000, just like arrow.
By very early 2001, she was back again calling for a bang-up year in the markets moving that famous “great call” allocation back to 70% equities from 65%. Do you think an investor saved more money by going from 70% to 65% for the 12 months between March 2000 and March 2001 than they lost by going back to 70% from March 2001 through the end of 2002?
She wouldn’t be right again until 2003, calling for an up year and more investment in the stock market every single year like a broken record. In 2001, she called for 1,650 S&P 500; it was 1,148. In 2002, she called for S&P 500 to end at 1,425; it was 880.
2003 - Right again, just like the arrow. A broken clock is right twice a day. How about an analyst who predicts the market will go up every year? If you still had any money left after listening to Cohen over the last 3 years, you got some of that back in 03.
Anyone want to do the math? Don’t bother, the amounts you lost in 00, 01, 02 would have not come anywhere near being offset by the money you would have made on your much reduced nest egg.
You can use Google to find every prediction for next handful of years. I’ll give you a hint, she predicted an up market for every single one of those years too. So, just like the arrow, she was “right” during those years.
But, here comes the laugh riot that should remind you that the Magic 8 Ball Cohen uses is defective.
12/04/07 – CNBC — Abby Joseph Cohen, chief investment strategist at Goldman Sachs, says the U.S. economy will rebound in mid-2008, but the next few months will be bumpy.
2008 - Cohen predicts (surprise) an up market for the year, projecting an end-of-year S&P 500 of 1,675 for 2008.
You might remember 2008 as the year of the great stock market crash thanks to the real estate bubble bursting and taking down the banking and financial sectors with it.
Nice call.
