Before you consider purchasing a CD from your bank or brokerage firm, make sure you fully understand all of its terms. Carefully read the disclosure statements, including any fine print.
And don't be dazzled by high yields. Ask questions -- and demand answers -- before you invest. These tips from the FDIC can help you assess what features make sense for you:
Find out when the CD matures. As simple as this sounds, many investors fail to confirm the maturity dates for their CDs and are later shocked to learn that they've tied up their money for five, 10, even 20 years. Before you purchase a CD, ask to see the maturity date in writing.
For brokered CDs, identify the issuer. Because federal deposit insurance is limited to a total aggregate amount of $100,000 for each depositor in each bank or thrift institution, it is very important that you know which bank or thrift issued your CD. In other words, find out where the deposit broker plans to deposit your money. Also be sure to ask what recordkeeping procedures the deposit broker has in place to assure your CD will have federal deposit insurance.
Investigate any call features. Callable CDs give the issuing bank the right to terminate the CD after a set period of time, but do not give you that same right. If the bank calls or redeems your CD, you should receive the full amount of your original deposit plus any unpaid accrued interest.
Understand the difference between call features and maturity. Don't assume that a federally insured one-year noncallable CD matures in one year. If you have any doubt, ask the sales representative at your bank or brokerage firm to explain the CD's call features and confirm when it matures.
Confirm the interest rate you'll receive and how you'll be paid. You should receive a disclosure document that tells you the interest rate on your CD and whether the rate is fixed or variable. Ask how often the bank pays interest -- for example, monthly or semiannually. And confirm how you'll be paid -- by check or an electronic transfer of funds.
Ask whether the interest rate ever changes. If you're considering investing in a variable-rate CD, make sure you understand when and how the rate can change. Some variable-rate CDs feature a multistep or bonus rate structure in which interest rates increase or decrease over time according to a preset schedule. Other variable-rate CDs pay interest rates that track the performance of a specified market index, such as the S&P 500 or the Dow Jones Industrial Average.
Research penalties for early withdrawal. Find out how much you'll have to pay if you cash in your CD before maturity.
Ask whether your broker can sell your CD. Some brokered CDs are issued in the name of the custodian or deposit brokers. In some cases, the deposit broker may advertise that the CD does not have a prepayment penalty for early withdrawal. In those cases, the deposit broker will instead try to resell the CD for you if you want to redeem it before maturity. If interest rates have fallen since you purchased your CD and demand is high, you may be able to sell the CD for a profit. But if interest rates have risen, there may be less demand for your lower-yielding CD and you may have to sell the CD at a discount and lose some of your original deposit.
Find out about any additional features. For example, some CDs offer a death benefit that allows a CD owner's heirs to redeem the CD without penalty when the owner dies.
I wish I were someone else
The U.S. government recommends the following guidelines to prevent identity theft:
1. Protect your Social Security number, credit card numbers, account passwords and other personal information. Never divulge this information unless you initiate the contact with a person or company you know and trust. A con artist can use these details, and a few more, such as your mother's maiden name, to withdraw money from your bank account or order new credit cards or checks in your name.
Use common sense, and be suspicious when things don't seem right. If you get an unsolicited offer that sounds too good to be true and asks for bank account numbers and other personal information before you receive anything in return, this is likely a scam. Likewise, if a caller claims to represent your financial institution, the police department or some other organization and asks you to "verify" (reveal) confidential information, hang up fast and consider reporting the incident
Real bankers and government investigators don't make these kinds of calls. The Social Security Administration says that consumer complaints about the alleged misuse of SSNs are rising dramatically, from about 8,000 in 1997 to more than 30,000 in 1999.
2. Minimize the damage in case your wallet is lost or stolen. Don't carry around more checks, credit cards or other bank items than you expect to need. Limit the number of credit cards you carry by canceling the ones you don't use. Don't carry your Social Security number in your wallet or have it printed on your checks. Pick passwords and PINs (Personal Identification Numbers) that will be tough for someone else to figure out -- don't use your birth date or home address. Don't keep this information on or near your checkbook, ATM card or debit card.
3. Protect your incoming and outgoing mail. Those envelopes may contain checks, credit card applications and other items that can be very valuable to a fraud artist. How can you keep mail out of the wrong hands? Among the simplest solutions: Promptly remove mail from your mailbox after it has been delivered. If you're going to be away on vacation, have your mail held at your post office or ask someone you trust to collect it. Deposit outgoing mail, especially something containing personal financial information or checks, in the Postal Service's blue collection boxes, hand it to a mail carrier or take it to a post office instead of leaving it in your home mailbox.
4. Keep thieves from turning your trash into their cash. Thieves known as dumpster divers pick through garbage looking for credit card applications and receipts, canceled checks, bank statements, expired charge cards and other documents or information they can use to counterfeit or order new checks or credit cards. Before putting these items in the garbage, tear them up as best you can or use a shredder.
5. Practice home security. Safely store extra checks and credit cards, documents that list your Social Security number and similar valuable items. Be extra careful if you have housemates or let workers into your home. Don't advertise to burglars that you're away. Put lights on timers, temporarily stop delivery of your newspaper and ask a neighbor to pick up items that may arrive unexpectedly at your home.
6. Pay attention to your bank account statements and credit card bills. Contact your financial institution immediately if there's a discrepancy in your records or if you notice something suspicious, such as a missing payment or an unauthorized withdrawal. While federal and state laws may limit your losses if you're victimized by a bank fraud or theft, sometimes your protections are stronger if you report the problem quickly and in writing.
Also, contact your institution if a bank statement or credit card bill doesn't arrive on time because that could be a sign someone has stolen account information and changed your mailing address in order to run up big bills in your name from another location.
7. Review your credit report approximately once a year. Your credit report (prepared by a credit bureau) will include identifying information (such as your name, address, Social Security Number and date of birth) as well as details about credit cards and loans in your name and how bills are being paid. Make sure the report is accurate, and that includes monitoring it for unauthorized bank accounts, credit cards and purchases. Also look for anything suspicious in the section of your credit report that lists who has received a copy of your credit history.
A credit card's grace period refers to the number of days before the card company starts charging you interest on new purchases. Many consumers think that with practically every card, all their purchases are interest-free for at least 25 days regardless of the previous balance.
"But, the fact of the matter is, it's getting harder to find a credit card that offers that kind of free ride on finance charges," says Janet Kincaid, a credit card specialist with the FDIC in Kansas City.
Some cards still offer a "full" grace period, 25 days or more of interest-free purchases, even if you're paying interest on an outstanding balance from the previous month. However, with the typical credit card nowadays, if you carry over as little as a penny from the previous month's balance you can expect to be charged interest immediately on new purchases. And, if you have a card with no grace period, you always pay interest on new purchases from the day you make the purchase, even if you pay your bill in full.
Oh well, there goes retirement
If you are an administrator of an employee benefit plan -- perhaps a 401(k), pension or profit-sharing plan for a corporation, small business or professional office -- you may have a special reason to be concerned about a bank or savings institution's financial condition.
By law, if the institution meets the capital levels specified in the FDIC's deposit insurance rules -- and most do -- each employee's share in these accounts at any one institution is covered for up to $100,000, even if the total account itself equals much more than that amount. But, if the institution doesn't have enough capital (as defined by the institution's primary federal regulator) and it later is closed by the government, those retirement funds will qualify for much less insurance coverage --up to $100,000 in total, not $100,000 for each person in the plan.
Ice cubes for Eskimos
Here are some marketing tips offered by the Online Womens Business Center in partnership with the U.S. Small Business Administration:
- Stay alert to trends that might impact your target market, product or promotion strategy. Read market research studies about your profession, industry, product, target market groups, etc.
- Collect competitors' ads and literature; study them for information about strategy, product features and benefits.
- Ask clients why they hired you and solicit suggestions for improvement.
- Ask former clients why they left you.
- Join a list-serve (e-mail list) related to your profession. Subscribe to an Internet Usenet newsgroup or a list-serve that serves your target market.
- Take clients to a ball game, a show or another special event -- or just send them two tickets with a note.
- Hold a seminar at your office for clients and prospects.
- Send handwritten thank-you notes. Send birthday cards and appropriate seasonal greetings.
- Photocopy interesting articles and send them to clients and prospects with a hand-written "FYI" note and your business card.
- Send a book of interest or other appropriate business gift to a client with a handwritten note.
- Create an area on your Web site specifically for your customers.
A recent telephone survey, conducted by Roper Starch, found that employees want to balance competing work and family responsibilities.
Fifty-one percent said they would stay at their current job rather than switch if their employer offered flexible working hours. Also, 62 percent said they prefer a boss who understands when they need to leave work for personal reasons to one who could help them grow professionally.
Perhaps most surprisingly, 51 percent of employees prefer a job that offers flexible hours over one that offers an opportunity for advancement.
The desire for flexibility does not translate into a lack of dedication. The survey found that the majority of employees, 64 percent, describe themselves as ambitious when it comes to work and career, and 61 percent agree that to get ahead at work you must put in 110 percent. And 58 percent feel that it is within their control to make sure their personal lives do not interfere with work.
What -- other than money -- makes people happy at work? The survey found the following:
- Liking the team they work with, 71 percent;
- Pleasant work environment, 68 percent;
- Work place is an easy commute, 68 percent;
- Challenging work, 65 percent;
- Job security, 65 percent;
- Ability to work independently, 59 percent;
- Opportunity for advancement, 55 percent.
Let's form a relationship
A recent study by Activemedia has found that business-to-business sites are primarily used to enhance market share and business relationships rather than generate profit from consumers. B2B models try to sell products and services, and provide information, yet 77 percent see offline contact as the best way for arranging sales.
Half of European Web sites are B2B, compared with a third in the US, and a quarter of Asia-Pacific sites. European sites are showing a strong tendency to target other online businesses rather than directly generate profit from consumers.
I prefer standing in line, thanks
TowerGroup conducted a recent study that revealed banks are lagging in the Internet arena.
- Today, there are some 10,000 FDIC-insured depository institutions within the U.S. The majority (approximately 7,800) have yet to establish online financial services. Among the top 100 U.S. bank holding companies, 40 percent of their Internet sites are still at the "brochureware" stage.
- TowerGroup believes that the number of U.S. banks offering Internet-based services will double over the next two years.
- Spending by U.S. banks on Internet technology is projected to grow to more than $2 billion within the next five years (compound annual growth rate of 31 percent).
- TowerGroup projects that by 2003, 12 million U.S. households will be utilizing Electronic Bill Presentment and Payment.
- TowerGroup projects that by 2010, 40 percent of all bills will be presented to consumers and businesses via the Internet. This equals more than 11 billion bills -- a dramatic increase from the 10 million sent online in 1999.
- Close to 90 percent of institutions polled by TowerGroup regarded Internet banking as either "essential" or "important" to their businesses, with nearly 70 percent giving these same ratings to the issue of "Electronic Bill Presentment and Payment" (EBPP).
- The single most common objective for U.S. banks offering online banking was "customer retention" (a 92 percent response rate). Next (at 84 percent) was "customer acquisition."