Banks and Credit Card Companies: What This Means For You; How to Know If You're in Financial Trouble
|By Brianna Keilar|
<Show: YOUR BOTTOM LINE>
<Date: July 24, 2010>
<Head: What You Need to Know About Health Care Reform; New Rules For Banks and Credit Card Companies: What This Means For You; How to Know
If You're in Financial Trouble>
<Sect: News; Domestic>
BRIANNA KEILAR, CNN HOST: Nothing is more important than your health. And you don't have to wait until 2014 for health care reform. What you need to know right now.And new rules for all banks and credit card companies. What it means for your money.
Plus, how to know if you're in financial trouble. It's the ultimate test and you may be surprised at the results. The show that saves you money starts right now.
Those of us fortunate enough to have health insurance get it in one of three ways: through our employers, through private insurance markets or Medicare and Medicaid. But with sweeping new health care reform, there's going to be increasing pressure on finding ways to reduce costs. So, what will it all mean for your bottom line?
Andrew Rubin is the vice president of Clinical Affairs and Affiliates at NYU's Langone Medical Center, joining us now.
And it makes you wonder, Andrew, as there is this pressure on insurance companies, they're responding to health care reform, there are these rising costs, what's it going to mean for Americans out there? What kind of different insurance policies might we be getting?
ANDREW RUBEN, NYU LANGONE MEDICAL CENTER: So, you remember we got to step back here and recognize that health care reform was insurance reform, so people can get health care insurance, but also a way to look at how we provide health care and reduce costs. So, the insurance companies are coming up, and employers, are coming up with new products and ways and services of reducing cost to themselves and responding to health care reform.
KEILAR: One of the things I think of with my insurance is how many options do I have with doctors, how many different facilities can I go to. Is that going to be restricted? Should we expect to see that restricted?
RUBIN: So, we have to look back over the past few years, and what's happened is a lot of employers and insurance companies have come up with products that basically passed a lot of cost on to the individual. So, higher co-insurance amounts, higher co-pays, higher deductibles.
Now, we are going to the next generation of plan which is being tried out in large cities around the country where they're coming up with sort of subsets of the physician and hospital market and selling these insurance products to individuals and employers and they're restricting their access, their panel of physicians and hospitals they can choose, but they're going to provide it at a lower cost to employers and individuals. So, it's really the next step in health care insurance offerings.
KEILAR: And can you just run through some of the pros and cons, here? Because we want to know what's going to be different, what might be better, what might not be as good as we're moving forward into this new era?
RUBIN: Sure. Any time, listen, any time you change insurance products you have to look at what's being offered and what we're really talking about is restricting who people can go see within their insurance network. So, right now, if you sign up for any insurance company, you have access to their entire panel of physicians and all of their hospitals that they have relationships with.
Now, we're talking about taking a subset of those people --physicians and hospitals and saying, if you buy this insurance product, you can only go to this subset of people and hospitals, and we'll sell it at a lower price. But the downside to this is you're really restricting choice that people have.
Now, you can continue to choose to go out of network and see whichever physician you want and go to a hospital that may not be in this new network, but you're going to pay a lot more out of network than you're paying now to go out of network.
KEILAR: Andrew Rubin, thanks for joining us.
And there were two other mayor moves in Washington, this week, that affect your bottom line. The financial reform bill signed into law by President Obama guaranteeing greater protection when it comes to your money.
A consumer protection agency will be put in place to oversee and regulate financial products offered to consumers and you'll be able to see your actual credit score if you're denied a loan or offered a sky- high interest rate.
Also, major changes to credit card swipe fees, which we'll talk about later in the program. And a ban on so-called liar loans, which would require better documentation of your finances.
Also, very important, if you're unemployed, more help is headed your way. Congress gave final approval to a bill that extends unemployment benefits to 2-1/2 million jobless Americans ending a seven-week stalemate. And this pushes back the deadline to file for extended unemployment benefits until the end of November.
Well, no more $40 cups of coffee due to overdraft fees. But, it's up to you to do something very specific with your checking account, as soon as possible. We'll explain, next.
KEILAR: Thanks to new rules from the Federal Reserve, overdraft protection is now your choice. So, the question is, should you opt in? John Ulzheimer is the president of consumer education for Credit.com.
And you know John, what's so interesting is before if you didn't have enough money in your account your bank would just cover it, and then they would charge you an overdraft fee, but that's changing. Right?
JOHN ULZHEIMER, CREDIT.COM: That's exactly right and that's, Brianna, that's where all those hilarious stories about $75 ice cream cones came from, because you would pay the overdraft fee, then you'd pay the fee to the merchant for essentially bouncing the chuck, if you will.
Yes, that's right, basically after August 15, every single person has to proactively opt in if they want that overdraft protection, or the alternative is when you swipe your debit or check card if you do not have enough money to cover that transaction in full, then the merchant is essentially going to decline that transaction.
KEILAR: Yeah, and that's so embarrassing. This is called Courtesy Overdraft Protection. Of course, John, banks are saying this is a must, but it costs money. I mean, this is an investment, so do you really need it?
ULZHEIMER: Yeah. And let's quantify that. Banks are going to be losing billions and billions of dollars in these overdraft fees. And look, it's interesting, we actually surveyed this and about half the people we surveyed said that there is a price for embarrassment and they are actually willing to pay that $35 or $40 fee so that the bank or the credit union will cover their, essentially, their bad check as swiped with a debit card.
So, really the question is, is -- are you a diligent enough manager of your checking account so that know you're not going to bounce around at a zero dollar mark and if you are, then you do not need the protection. If you don't want to get embarrassed in front of friends, at the restaurant, at the movie theater, then you need the protection. It's very simple.
KEILAR: Well you know, even sometimes I would say some pretty diligent people end up in this. We have so much on our minds and they make this mistake. So, if you think that you just want -- if you just want to make sure that you avoid that embarrassment, but you don't want to opt in to this courtesy overdraft protection, do you have any options?
ULZHEIMER: Yeah, you can write a check, an actual paper check where this rule does not apply to paper checks and so if you want to still have the protection, write the check and then you're still good to go. But, if you depend on debit or check cards or ATM cards, then you're going to have to proactively opt in because it would now be illegal for a financial institution to stick you with that fee unless you do so.
KEILAR: Definitely something to think about if you want to avoid that embarrassment. And John, stick around to take a look at these statements from the NFCC. Now if any of you out there are answering
yes to two or three of these statements, you may be in financial trouble. But here's the thing -- don't panic because we've got our experts ready to help before you dig yourself into an even deeper financial hole.
Joining our conversation, Gail Cunningham from the National Foundation for Credit Counseling in Dallas.
And you know, John, this quiz is really a wake-up call for people looking at their finances and trying to decide if maybe they're in trouble.
ULZHEIMER: Yeah, absolutely, but look, the litmus test -- we know credit cards are not going away, they're not going away, let's be realistic about credit cards. The litmus test is with regards to whether or not you are in trouble is quite simple in my mind. Are you depending on credit cards as income or are you using them for what they were originally designed for which is to be more efficient with your shopping? And if it's the former, if you're using them to keep up with the Joneses, you may be in trouble.
KEILAR: And Gail, one of the big parts of this survey that you see as a big red flag is if you are hiding finances from your spouse or significant other. So then, the question is how do you deal with that if this is something that you're doing, how do you move past that, talk to your spouse without it becoming World War III?
GAIL CUNNINGHAM, NATIONAL FOUNDATION FOR CREDIT COUNSELING: Well, it usually does become World War III. We call that financial infidelity. You go shopping and before you walk through the front door you've hidden your purchases in the trunk of your car. That is indeed a red flag. People have got to know that they need to be transparent about their spending.
Now when you come in to a marriage, one might be a spender, one might be a saver. It's a very sensitive discussion around money; nonetheless, it needs to happen. You need to sit down, set a date with your spouse, tell them -- at the onset, we're not going to fuss or argue about this but we just need to come clean.
KEILAR: You know, and people should remember that, right? Because it is considered a big issue in a lot of divorces, for sure.
And John, let's talk about the credit crunch and maybe how it is affecting all of us, some interesting numbers recently. Credit card delinquencies fell to an eight-year low. I mean, do you think people have learned some lessons, here?
ULZHEIMER: You know, I think that that is in fact the silver ling or credit crunch. But look, I'll be very, very honest with you. I've been around the credit industry since 1991 and the one thing that is indisputable is that consumers and creditors have very, very short memories and eventually the floodgates will be fully open again.
And the credit card issuers will be aggressively pursuing, not only the people with very, very good credit but also the highly profitable segment of card holder who has very marginal or poor credit. And that population is growing very, very quickly and it's very, very frightening. So, I think that for a short period of time we've learned our lesson, but I don't know that there's going to be any staying power.
KEILAR: Gail, when it comes to credit, the confusing thing is that it's kind of like cholesterol, right? You've got the good and you have the bad credit. And is it really that bad to carry a balance on your credit card?
CUNNINGHAM: Well, I would consider any debt over in the bad debt category if you can't responsibly service that debt obligation. Simply by asking the question, do I have too much debt, signals to me that you're concerned about it. Maybe you're not as good a parent, you're not as good a spouse, you're not as good an employee, you're losing sleep. It's all because that cloud of debt follows you around wherever you go. That's a red flag, another signal that it's time to reach out for help.
KEILAR: But also, John, I mean it's not a cash world anymore. Right? What are some of the benefits of using credit responsibly?
ULZHEIMER: Oh, the benefits are endless, quite frankly. You can sort of carry around gobs of cash. You can now just carry around one or two cards. Good credit means less expensive insurance in many states. Good credit means that you're able to buy a house now versus waiting 20, 30 years to save enough money to do so or never be able to do so.
So, the benefits of credit are significant. But the interesting thing is, it is a self-policing system and the downside to credit abuse is very, very punishing because the bad things on credit reports stay on for a prescribed period of time and that period of time is usually seven to 10 years and you don't want to get yourself into a situation where you're fighting this uphill battle of having bad credit because it is a very, very tough tide to row against.
KEILAR: Yeah, it's self-policing, and for a lot of people it's a slippery slope. So Gail, if someone needs help, they need to get out of their debt or find a plan to work their way out of it, how do they get in touch with the NFCC?
CUNNINGHAM: They can call 1-800-388-2227 and be automatically connected with one of our 850 offices that is close to them.
KEILAR: Great information. Gail Cunningham, John Ulzeimer, thank you so much for joining us.
ULZHEIMER: You bet.
CUNNINGHAM: Thank you.
KEILAR: You can find a link to the full NFCC questionnaire on our Web site at CNN.com/YourBottomLine. And while you're there, you can also e-mail us any of your financial questions or you can check out recent highlights from the show for even more money saving tips.
Well, all of those big sales and deep discounts, they look pretty attractive. Right? I know they do to me, but imagine if you are a teenager. Almost irresistible. So, how to keep the kids from a spending spree, next.
KEILAR: There are plenty of deals to be had out there with retailers slashing prices, offering deep discounts. And while you may be able to hold back, your teen may be lured into going on a spending spree. So, let's teach those kids about money. Here now with some parental advice, Janet Bodnar, editor of Kiplinger's and the author of Raising Money Smart Kids.
And Janet, I mean, if you go to the mall, you're seeing 40 percent, 50 percent discounts. So, what advice do you give to teens, especially if they have some pocket change in their pocket this summer?
JANET BODNAR, KIPLINGER'S PERSONAL FINANCE : Well, I think the most important thing is that they're spending their own money. There's nothing like having that hit come to your own purse, your own pocketbook. So, you always spend unlimited amounts of your parents' money, nut if it's your money on the line of, is that really a good deal or is it not a good deal? Can you get two things at a store where things are on sale versus one more expensive thing at a store where it is not? And those are the kinds of choices and decisions that teenagers need to know how to make.
KEILAR: And when we are budgeting in our household, we're looking at, OK, is this a need or is this a want. So, what do you say to teenagers?
BODNAR: Well, you tell teenagers the same thing. Take an inventory of their closet. You know, what do they got in their closet? How many pairs of jeans, how many pairs of shorts or shoes or that sort of thing? What do you need? Is there something you need for vacation or need for school? If you need new school shoes.
But, OK, you might need new school shoes, but you might want a pair that costs say 200 bucks, but that's a real hit to your paycheck or real hit to your clothing allowance, if that's what you get. And you have to again make those decisions, what do you need versus what do you want. And the wants, you may not be able to afford, even with sale prices.
KEILAR: And the other thing is, they are spending their own money, hopefully, and so they're get agape check maybe for the first time. One thing that I know really surprised me as a teenager was I thought this paycheck was going to be $150 and it's actually $95. So, what do we talk to kids about when we're explaining withholding to them?
BODNAR: You know, kids really think that because they're kids, taxes do not apply to them. They really think this. This is how kids think, they think in very concrete terms. Right? They think $10 an hour, I work 100 hours, just like you said, I'm going to get all this money. And then suddenly the paycheck comes and it's nowhere close to that.
So, you really have to give them the difference between the gross pay and net pay, how much is going to be withheld for income tax. Now, usually with kids the income tax, at least most of it, will get refunded come the spring, but the infamous FICA tax is not going to be refunded and so they kind of need to know -- they do need to know that.
KEILAR: In learning about money, should very this a checking account, a debit card, an ATM card? Where do you say yes and no?
BODNAR: Definitely a checking account. And I think -- and I've just written about this for our Web site, Kiplinger.com, what kids need to know before they go off to college and they real ly ought to have a checking account before they go off to college and you ought to be confident in the fact that they can balance that account, they're not overdraw that account and especially if it's their money that's on the line, they're going to be very cognoscente of this, they're going to pay attention to it.
So, the checking account is really important. If they're too young for a full-fledged debit card, they can have an ATM card which at least gives them access to their money and they can make deposits, they can make withdrawals from their own account. Once they get to be 18, they can have a debit card on their own and I think that's really important, especially when they go off to college, because they can transact business, they can buy things and make purchases, make ATM withdrawals, that sort of thing.
KEILAR: All right, Janet Bodnar, thanks so much, very good tips.
And you hear about all of these tech products, you know, the Kindle, the iPad, the flipcam. But, which ones are really worth your hard-earned money? The man with those answers, next.
KEILAR: It's been the season of gizmos and gadgets, galore. Shiny, fun new toys, claiming, at least, to make your life easier. So, if you're looking to splurge on a new e-book, a camera, maybe a Smartphone, you're going to want to know that it's worth your money, right? Well, Mario Armstrong is a technology contributor for NPR, to tell us that very things.
Mario, thanks for being with us.
MARIO ARMSTRONG, NPR TECHNOLOGY CONTRIBUTOR: Hey, thanks for having me in, Brianna, really appreciate it.
KEILAR: And you know, one of the things that struck me this week was the Amazon.com headline that said that they are selling more Kindle books than hard covers.
ARMSTRONG: I know, that's huge.
KEILAR: Does that make sense, moneywise?
ARMSTRONG: Well, it does make sense moneywise, because there are a couple of things that are happening. No. 1, the devices, the e-readers themselves have come down in a major price war. So, you have the Barnes and Noble Nook, Sony has an e-reader, Amazon Kindle, the iPad, many of these things have been in a price war to come down, so many more consumers are now buying them.
But, you can also get books less expensive when you buy them electronically and there's a much larger inventory that you can shop from. So, I do think that's what's really causing this whole trend of seeing this change.
KEILAR: You know, and you have two examples here, you have the Kindle and you have the iPad, which is kind of more than an e-reader, though. So, I mean, why buy them?
ARMSTRONG: Well, because they're different experiences and different people are looking for different ways to interact with their media, or in this case with their books.
So, on one hand, you have the iPad. This is the top end of the most expensive device, but it's more than just an e-reader. The reason why I brought this in, though, is because reading on this device is beautiful, it's color, it's very easy, it's very easy and light to carry, but you can do more computing tasks with this, as well.
So, if you're a person that wants to do light browsing, send e-mail and applications and also read books, magazines and look at video, then you really do want to look at something like an iPad.
KEILAR: Sort of like having that option that's bigger than your PDA and your handheld.
ARMSTRONG: That's right. That's right. It's a better option than that and I think it's a better option than carrying a netbook or a small laptop with you. However, if you really want a standalone device that just reads books, then you are looking at something like the Kendall or the Barnes and Noble Nook or a Sony e-reader.
Now, the newest Kindle that's out now, their DX, that one is actually free Wi-Fi, which is great, I mean free 3-G, which means now customers don't have to pay an extra monthly fee if they're out and about, because how you get these books onto these devices is by connecting to the Internet and downloading them. So, that's a major, major move that Amazon has made to make it easier on consumers' pocket books.
KEILAR: OK, now let's check out these cameras. These are my favorites. So you've got three options here, let's start with the flipcam.
ARMSTRONG: Yes, it's summertime.
KEILAR: What is it good for?
ARMSTRONG: This is good for that family person that loves to take photos of the kids. This is an HD flipcam, it's called the Slide and the reason why they call it the Slide is because on the back here what happens is after you take a video, you can slide this little flip screen out and actually show this to people.
The speaker sounds pretty loud, so it's a great experience just for viewing right on the spot. Because most of the time, you know, you're looking at someone's little cell phone image and it's too small.
KEILAR: And kids always demand that, now. My 3-year-old nephew says, I want to see it, I want to see it.
ARMSTRONG: Right, right, like right away, right?
KEILAR: Exactly. And the Sony Bloggie, this is obviously for bloggers.
ARMSTRONG: It is primarily based for bloggers, but I'll tell you one of the reasons why I really like it is this little gizmo feature, right here at the top, the swivel of the lens, which means I can point it at you, but then I can also quickly turn it around and point it at me so I can see my perspective and my view on the LCD screen at the same time. So, and the price is really inexpensive. I mean, we're talking $169 for something like this.
KEILAR: That is pretty good and let's say you are taking the kids to the water park, sometimes your options are limited, but there's one that's good for that, right?
ARMSTRONG: You don't want to drop your expensive digital camera at the pool or in the beach, so many of these products now are becoming more ruggedized. And this is my favorite from Kodak, it's called the Play Sports. It can go into 10 feet of water. They encourage you to take this camera into water and shoot video, shoot photos.
So I'm just going to show you that it actually works and drop it in this glass of water. No magic tricks over here, folks, no magic tricks. I'm just going to put the glass of water right here so we can get this and then drop it right in there. Let's see, hope it doesn't -- ah, just got shocked. Just kidding.
KEILAR: Just kidding.
ARMSTRONG: Just kidding, just kidding. As you can see, it's still on, it still works. I've taken this to Virginia Beach and actually played around with it, dropped it in the sand. Give it a really hard test to really see. It's great for those drops that kids may do. So, if you want kids to have a camera, but you're worried about then dropping it or damaging it, this is the route to go. It is only 129.
KEILAR: Wow, very interesting. Mario Armstrong, you make me want to go shopping.
ARMSTRONG: Wisely, though, right? Wisely.
KEILAR: Wisely, armed with information. Thank you so much, Mario.
ARMSTRONG: Thanks for having me.
KEILAR: And you know, no matter what you're looking to buy this weekend, we can show you how to find the absolute lowest price. The how-to, next.
KEILAR: Time now for our Free-for-All. Finding a really good bargain requires just a little bit of work. Dealio.com compares prices on some 30 million products from more than 100,000 merchants. The site provides coupon codes as well as thumbs up, thumbs down reviews to show how many other users have had success saving the money.
Pronto.com and PriceGrabber.com offer prices on more than 70 million products from tens of thousands of consumers. Both sides let you sign up for its e-mail alerts when your favorite brands or products go on sale. But, if you know exactly what you want, you just need a bare-bones comparison site, try Google Product Search, formally Frugal. You'll get tons of results for your search, product reviews, seller ratings and a local shopping option to help you find products at brick and mortar stores near you.
Thanks so much for spending part of your Saturday morning with us and don't forget to tune into YOUR MONEY, this afternoon at 1:00 p.m. Eastern. Ali Velshi examines the Obama effect on the midterm election. But right now, the very latest news from around the nation. CNN SATURDAY continues, right now.