Christian Finance Blog

Just got an email from FNBO Direct saying that their rate for their online savings account went down to 3.25% from 3.50%. WaMu (JPMorgan Chase) also quietly lowered the online savings rate to 3.00% from 4.00%. ING Direct is at 2.75% (instant $25 bonus for new accounts with at least $250). HSBC Direct is currently at 3.00%.

By now, most of us have heard about the news of the $700 billion bailout signed into law by President Bush on October 3rd, 2008. The bill is designed to bailout the numerous banks throughout the country that were making bad mortgage loans. The government (read: we, the taxpayers) are now going to own $700 billion worth of homes and hopefully sell them later for a profit. How much later is in question.

Do I support the bailout? It doesn’t matter. It has already passed. What I can do is try to analyze the effects of the bailout to you and I. Joe Doughnut. The average American. I definitely don’t like the idea of using taxpayer money to bailout any huge corporation that made bad decisions. They should be allowed to fail. This is a free market capitalist country. I’m afraid America is moving more and more toward socialism and that’s scaring me. But enough of that.

The real question is why does it matter to me personally? After all, this is a personal finance blog. Along with the huge amount of “bad” in the bailout, there some “good” thrown in there as well. For example, the bill increases the FDIC insured limit from $100,000 to $250,000 deposits at all banks and credit unions (that are FDIC insured). That means more protection for you! Hopefully it will get you to save more and spend less, too! This expires December 31, 2009.

Also included in the bill is about the alternative minimum tax. It was expected to hit 20 million taxpayers with an unexpected tax increase this year but it was originally supposed to affect 155 high-income households who owed little or no taxes at the time when it was introduced.

So what does the bailout mean for me? What does it mean for you? It means that I’m doing everything I can to get out of debt and avoid my own “credit crisis”. If I don’t have any debt and a have whole bunch of cash, I won’t have a credit crisis! If I don’t need to borrow, I don’t need credit! What a concept!

As many of you know, I bank at Washington Mutual (WaMu). As many of you also know, WaMu actually failed and the government sold it to JPMorgan Chase for $1.9 billion on Friday. This was the largest bank failure ever in the United States. So what caused the downfall of the nation’s largest bank?

The major reason is the huge amount of subprime (bad) mortgages that WaMu made over a period of time. Subprime mortgages are mortgages made to people with less than stellar credit. These people are most likely not able to afford the mortgages that they were put into. However, the bank could charge a higher interest rate and make more money on them. The problem started when house prices took a dive nationwide. The same people were now underwater with their homes and many walked away because they couldn’t make the payments.

But the bigger problem and the catalyst that caused the failure was the many people who took out all of their money based on fear and false rumors. In the ten day period following the collapse of Lehman Brothers, WaMu customers took out $16.7 billion in deposits. This caused WaMu to not be able to conduct day to day business because of the lack of cash.

I keep repeating this over and over. It is not a time to panic. Fear and worry doesn’t solve any problems. Only action solves problems. No one lost any money when WaMu went down. No one, including everyone with more than $100,000 at the bank, did not lose any money at all. Let me say that again; nobody lost any money, period.

So what does this mean to you?

If you bank at WaMu, you now bank at JPMorgan Chase (technically). In the short term, this means business as usual. You continue to use the same account numbers, branches, checks, debit cards, online banking, ATMs, etc. All JPMorgan Chase ATMs are now available to you fee free. JPMorgan has a nice page explaining everything about your banking after the buyout.

The merger is going to take some time. I would say that within the next 6-9 months, JPMorgan will begin to consolidate and get rid of the Washington Mutual name. I’m going to continue to bank there. I’m not taking out my money. I’ll continue to use the online bill pay and have my paycheck direct deposited there as I always have.

If you don’t bank at WaMu, it just means one less bank to choose from. It means less competition. It probably means higher prices. Higher interest rates on loans and less attractive rates on savings devices. Less competition is never good. But the lesson here is, don’t panic. Your money is safe and sound. Just remember to keep less than $100,000 in any account at any one bank. Unfortunately, I do not have that particular “problem”. God bless!

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The FDIC (Federal Deposit Insurance Corp.) shut down the Columbian Bank of Topeka in Kansas yesterday which had about $752 million in assets and $622 million in deposits.

This is already the ninth bank failure this year. There were $46 million in uninsured deposits by 610 accounts at the bank that exceeded the $100,000 insurance limit.

Now, I don’t write this stuff to scare you. I write this to let you know that you will be covered under the FDIC insurance for any deposits under $100,000 at a FDIC-insured bank. You don’t have to worry.

For more on this subject, check out this and this.

Source: CNN Money, FDIC

Since I blogged about the IndyMac Bank failure a little while ago, there have been several banks to go under with First Priority Bank in Bradenton, Florida being the latest casualty. It was closed last Friday, August 1, 2008 and is being taken over by SunTrust Bank. Two banks were also closed on July 25 bringing the total number of bank failures this year to eight.

This is just another reason to make sure you are covered under the FDIC insurance protection of up to $100,000. You can find more information on the article I wrote earlier on FDIC insurance. This is no time to panic. Your money is safe and there’s nothing to worry about.

Any bank can fail if there is a run on the bank because of the way banks operate to begin with. Banks don’t hold all of their deposits on hand and are only required to hold a certain percentage so if there is a run on the bank, there won’t be enough assets to cover the withdrawals. But there is no reason to take out your money because of FDIC insurance.

Washington Mutual (WaMu) recently upped their online savings interest rate to 3.75% from 3.50%. It’s one of the highest rates going right now and a great place to park that emergency fund. I use WaMu as my main bank because of the numerous branches and ATMs in my area. Here’s my full review of the checking and savings accounts. Just so you know, you have to apply online and open with a checking account to take advantage of this deal. This is not available in the branches.

The latest bank to “bite the dust” is IndyMac Bank in Pasadena, California. Earlier today, the FDIC took over the failed IndyMac Bank. This is already the fifth bank to fail this year alone compared to “only” three in 2007 and none in 2006 or 2005. This is also the second largest bank failure in U.S. history.

So what happens if your bank fails? Well, not a whole lot. The bank usually is taken over by the FDIC (Federal Deposit Insurance Corporation) or the NCUA (National Credit Union Administration) and an announcement is made (notices posted on doors, news information sent out). Usually, another bank will buy the assets (and liabilities) of the failed bank and the branch will be reopened as a branch of the new buyer. When there’s a buyer of the bank, checks will continue to clear, debit and ATM cards will continue to work. This is only applicable to the insured amount ($100,000 per depositor or $200,000 per joint account).

However, if there is no buyer, the checks, debit cards, and ATM cards will not work. Checks will be returned and stamped “bank closed.” Typically, the bank is closed on a Friday and by Monday, checks are mailed out for the insured deposits. You will have almost immediate access to your insured funds. However, any amount that exceeds the FDIC insured deposits becomes a creditor of the failed bank and you may or may not see the money after the assets are sold off by the FDIC. You may not see all of your money.

You likely won’t know that a bank’s about to fail until it has happened. That’s why it’s so important not to exceed the insurance limits at any one bank. So don’t keep more than $100,000 at any one bank. If you stay within the insured limits, you’ll have relatively quick access to your money.

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Source: MarketWatch, Bankrate

HSBC Direct recently bumped up their online savings rate to 3.50% until August 15, 2008.

FNBO Direct also announced today via email that they were bumping their online savings rate to 3.50%. They also increased some of their CD rates. These are great places to park that emergency fund.

You can also earn 3.90% at SmartyPig which is a little different than an online savings account. I just opened an account and should have a full review soon.

Does this signal the end of rate decreases by the Fed? Have we hit the bottom as far as interest rates go? I think so especially since inflation is now on the rise. The Fed will have to increase rates in order to help combat inflation as seen in soaring energy costs and food costs.

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Great news! The Treasury Department said Thursday that the special economic stimulus rebates would be distributed five days earlier than first said. The first round of rebates are expected to be sent starting Monday, April 28 rather than May 2 as previously thought.

About 800,000 tax filers will receive rebates on Monday, Tuesday, and Wednesday. An additional 5 million will be distributed on Friday. The economic stimulus plan signed in February by President Bush will distribute more than $110 billion to 130 million taxpayers.

So what are you going to do with the money? Most people I’ve talked to and read about seem like they aren’t spending it but rather paying down debt and/or boosting their emergency funds and not necessarily the economy. I’m doing the same.

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The IRS will begin to send approximately 130 million tax rebate payments to boost the economy starting on May 2. Most people will receive their rebates by July 11 if tax returns are filed by the April 15th deadline. The IRS takes about two weeks to process a return. Here’s a full schedule for the special rebate payments:

You can use the IRS’s own online calculator to figure out exactly how much of a rebate you’ll get and whether or not you’re eligible.

I’ve written about this special stimulus rebate here and here.

Source: IRS

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Warren Buffett is now the richest man in the world with an estimated $62 billion mostly due to the stock price of Berkshire Hathaway (his company). Mexican Carlos Slim is now at number two with an estimated $60 billion fortune. He was number one for a little while. Bill Gates is now number three with $58 billion. He was the world’s richest man for 13 straight years.

Buffett seems to have been born with an entrepreneurial spirit. The most well-known investor bought his first stock at age 11 and he filed his first tax return at age 13 while delivering newspapers.

What can we learn from Warren Buffett? People with wealth don’t necessarily have to flaunt it. He still lives in the same house he bought in 1958 for $31,500 and drives a Cadillac DTS. He will give away most of his fortune at his death to charity with 83% going to the Bill and Melinda Gates Foundation. He currently gives 5% of his shares in Berkshire Hathaway to charity every year.

The principles of biblical finances applies even to unbelievers. The principle of sowing and reaping applies because it is God’s law. God blesses those who give, but that shouldn’t be the reason we give! We give because we love God.

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Today President Bush is expected to sign the now $170 billion economic stimulus passed by Congress recently. He hopes that this will prevent a recession or lessen the impact. I’m not sure if it will work or not, but it sure will help a whole ton of low to middle income people. I’m not complaining about the free money!

Some changes to this bill from the $150 billion one was that tax breaks for equipment purchases by businesses, payments to disabled veterans and senior citizens were added. That’s where the extra $20 billion came from.

The rebate checks still range from $600 (for individual taxpayers) to $1,200 (for couples) plus $300 tax credit per dependent child under 17. The income cap (AGI - adjusted gross income) is also still at $75,000 for individuals and $150,000 for joint filers. If you don’t owe any income tax but had at least $3,000 in earned income or Social Security benefits you can qualify for $300 per person or $600 per couple. Also, you might be able to receive partial money if you go over the income limits. You will lose 5% over the income limit up to a certain amount.

You must file a federal tax return for the year 2007 to be eligible for the tax rebate even if you are not required to. You can expect the checks to start showing up between May and early July if you meet the April 15th tax deadline!

So what are you going to do with your tax rebate? Just leave a nice comment! I’m going to pay down debt and save some of it!

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The Fed recently cut the federal funds rate (the rate that affects consumer loans such as home equity lines of credit, auto loans, and credit cards) by a half percent after cutting it by three-quarters of a percent on January 22 in an emergency meeting. The federal funds rates now stands at 3% which is the lowest it has been in two years. The discount rate (the rate at which banks borrow from the Fed) was also cut half a percent to 3.5%.

What does this mean to you and me? The rate cuts means lower rates for borrowers but also lower rates for savers. Average 30 year mortgage rates now stand at 5.49% which is also the lowest in two years. If you’re looking to buy a home, it seems like now’s the time to buy with home prices considerably lower than even a couple years ago in some markets. It may also be time to refinance your existing home mortgage if you can save at least one percentage point or more.

You should also see lower rates for your variable credit cards. If you don’t, give your credit card company a quick call and ask them to lower the rate. If they don’t, ask for the retention department and threaten closing your account and transferring balances elsewhere. The retention department has the power to lower the rate for you. Of course, this doesn’t affect you if you pay off your credit balances off each month.

But these rate cuts also mean lower rates for your emergency cash savings in CDs and savings accounts. ING Direct now stands at 3.40% and Electric Orange is at 2.25% for balances up to $49,999 (if you want a free $25 for opening an account, let me know). FNBO Direct (which is where most of my emergency fund now sits) is at a still-great rate of 4.30%. WaMu’s online savings account now stands at 4.25%. HSBC Direct stands at 3.80%. You can check out Bankrate.com for the latest rates. But your emergency fund is not designed to make you money; it’s just there for an emergency and it’s nice to earn a little interest on it. But if you already have your 6 to 9 month emergency fund in place, it may be time to look at longer-term investments in the stock market. I absolutely love Roth IRAs and an index fund within a Roth IRA is perfect for most people! If you have a 401K offered by your employer, it may be time to increase your contributions.

One last thing to remember. Just because the rates are lower doesn’t mean you have to borrow. Remember that the goal is to save more and not spend or borrow more. But at the same time, there may be some opportunities to save some money. God Bless!

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The proposed $150 billion “economic stimulus package” by President Bush is promising rebates of between $300 and $1200 or more to the low and middle class people of the United States to help kickstart the economy by giving money to those who are most likely to spend it. Why don’t you go against the current and actually save it instead of spending it?

Here are the quick facts on the proposed plan:

1. Most single taxpayers will receive a $600 check
2. Dual-income households will receive $1200.
3. For each child (dependent) you will receive $300 each.
4. Workers who made at least $3,000 but didn’t pay taxes will receive $300 ($600 for those married and filing jointly).
5. Income limitations are $75,000 for single taxpayers and $150,000 for couples.
6. Apparently all of this is based on your 2006 tax return.

The legislation has not passed yet, although it most likely will and is being pushed strongly by President Bush. But if and when it does pass, you can expect your rebate checks to come in May or June of this year (2008). Just file your 2007 taxes just like normal.

All I can say is to not act like you’ve already got the money and spend an extra $600 on something you don’t need! I’ll probably get $600 as a single taxpayer and I’ll most likely just boost my emergency savings or pay down debt or both. All I know is that I’m not going to act like I have it and spend it before I get it. It will be a welcome surprise in my budget come May or June!

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Since ING Direct purchased and acquired ShareBuilder on November 19, 2007 for $220 million, everyone was wondering what changes would come about. Well, there’s good news! Not only did they change the color scheme, but the price for real-time trades has gone down to $9.95 per trade rather than the old $15.95. That’s a 35% discount! This price brings ShareBuilder in line with other discount online brokers, but it still does not beat free stock trades with Zecco. Contact me if you want to open a Zecco account for a FREE $25 bonus!

ING Direct is the country’s largest direct bank with assets of $77 billion with about six million customers. I contacted media relations for ING regarding the changes that would come about due to the acquisition but they have not gotten back to me yet. I’m interested to see if there will be more changes since I am a customer for both ShareBuilder and ING Direct. It would be great if there were instant transfers from ING accounts to/from ShareBuilder just like the transfers between Electric Orange (checking) and Orange Savings.

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