Talk about headaches. Having to come up $75 billion in new capital is a stress test in itself for the banks deemed to be in the worst shape by the Federal Reserve. Compared with that, resolving issues you’re having with your own bank seems like a walk in the park. Still, dealing with financial institutions nowadays can be a major source of irritation. Ask these questions to determine how well your bank is serving you — and learn what to do to lower your own stress level:

Are my deposits safe?

As long as your bank is insured by the Federal Deposit Insurance Corp., your money is guaranteed — up to $250,000 per depositor. That’s the case even if you have an account with Bank of America, which tops the bad-bank list and needs to raise $34 billion in capital. Call 877-275-3342 to verify that your bank is covered by the FDIC, which is backed by the full faith and credit of the U.S. government. The $250,000 limit was scheduled to revert to the previous $100,000 limit after December 31, 2009, but Congress just passed a bill that extends it to 2013.

FDIC insurance covers checking accounts, savings accounts, money-market accounts, certificates of deposit and retirement accounts. You can insure substantially more than $250,000 if you arrange ownership of the accounts properly. Use the FDIC’s Electronic Deposit Insurance estimator to figure out if the total amount of your deposits is covered.

Credit-union deposits up to $250,000 are protected by the National Credit Union Share Insurance Fund. The National Credit Union Administration, the government agency that oversees credit unions, provides a calculator to help you determine whether the funds deposited in your credit union are insured.

Are my savings earning enough interest?

The average interest rate on bank money-market deposit accounts is a paltry 0.40%. But you can earn significantly more by switching to a high-paying account with an online bank, such as Ally Bank (formerly known as GMAC Bank), in Utah. If you know you won’t need your money for a while, you can earn 2.20% with a six-month certificate of deposit at Corus Bank, in Illinois, or 2.8% with a 12-month CD at Ally Bank.

Will my bank lend me money?

Most lenders have tightened their standards, but money is available if you spiff up your credit. Today you’ll probably need a credit score of about 730 to qualify for the best rates on a mortgage.

If you can’t come up with 20% for a down payment, you may have to pay a higher interest rate or additional closing fees. Check with your local community bank or credit union — they’re advertising their willingness to make loans and may be able to offer you a better deal than the mega-banks.

If you’re applying for a loan, prepare in advance by checking your credit report. The 2009 Consumer Financial Literacy Survey by the National Foundation for Credit Counseling showed that 144 million people had not ordered a copy of their credit report in the past year.

You can order a free credit report from each of the three credit bureaus at www.annualcreditreport.com. For an additional $7.95, you can get your FICO credit score with your Equifax report. At www.myfico.com, you can see how your credit score affects your monthly payment for a home mortgage or car loan.

Am I being hit with more fees for ordinary transactions?

Financially shaky banks need to raise cash however they can. But that doesn’t mean you have to pay up. Open an account at a bank with a large ATM network so that it’s easy to find a convenient ATM and avoid the $4 fee you must pay whenever you use another bank’s ATM. Or switch to a credit union — such as Navy Federal Credit Union — that participates in a surcharge-free ATM network. Online banks, such as UFBDirect.com, don’t charge ATM fees and will reimburse you up to $4.50 a month for ATM charges from other banks.

Overdraft fees generated $17.5 billion in income for banks in 2007, according to the Center for Responsible Lending. You can limit your share if you link your checking account to a savings account so that the bank transfers your funds from one account to the other. You’ll be charged a transfer fee (typically $5) rather than an overdraft fee ($ 25 to $27 is the median at community banks and credit unions, $33 at mega-banks).

Has the bank raised the rate on my credit card?

You’re not alone. Banks that have to firm up their balance sheets are raising interest rates, lowering credit limits or canceling cards outright for customers they deem to be too risky.

If your card issuer changes the terms and conditions of your credit-card agreement, call the toll-free number on the card and ask to have the changes rescinded. If a lower credit limit means that you are using more than half of your available credit, try to pay down your balance as quickly as possible so that your credit score doesn’t drop. You can reject the new terms, but closing the account will affect your credit score, especially if you have used the card for a long time.

If you decide the new rate is onerous and want to close the account, look for a low-rate balance-transfer offer at www.lowcards.com or www.billshrink.com. Most 0% balance-transfer offers come with a fee of 3% of the amount you transfer. One exception is Pulaski Bank, which has no fee for its six-month offer. The card, which carries a fixed interest rate of 6.5%, does have a $35 annual fee. But that’s a small price to pay for its low interest rate.
Copyrighted, Kiplinger Washington Editors, Inc.

1. How to Dig Yourself Out of Debt and Save

You’re living paycheck to paycheck and it’s causing a lot of stress. Bills and credit card payments are eating up most of your income. You know you need to rid yourself of debt and save some cash — a cushion of three to six months’ living expenses to use in case of emergency. And you’d like to begin investing on a regular basis to build some financial security.

But how can you get ahead with the bills you already have, not to mention the unexpected ones that seem to crop up automatically whenever you have a little extra cash? Chances are, you find it difficult to do anything because you don’t know where to start.

Relax. A lot of people are in your situation. What you need to do is face up to the matters at hand and set up a plan of action. The time to do that is right now. With a little self-discipline and some faith in yourself, your financial picture can potentially change for the better in about six months.

2. Paying Debt and Saving

What should you do first? Reduce your debt or start saving? The following three-part strategy may help you control your cash flow, pay off your debt, and encourage saving so you can handle the unexpected expenses that may have gotten you into debt in the first place. In time, you’ll be ready to invest. But first you have to know what you owe and what you’re spending.

3. Tracking Spending

The steps outlined in the box below will help you determine how much cash you have to pay off your debt.

Next, you’ll want to keep track of your typical expenses for one month or so, to find out where your money is going. Also figure your unexpected expenses for a year’s time — auto and home repairs, gifts, vacations, etc. — and divide that number by 12. You may want to use one of the personal finance software programs available to track your spending. Once you have a record of your spending, compare your monthly outlay to your monthly income. If you have a surplus, this is the amount you can apply each month to paying down debt and building savings. If you have a shortfall, you’ll need to cut expenses.

4. How to Build Savings

A key to establishing good saving habits is to make saving even easier than spending. Here are some tips.

• Ask your bank about linking your savings and checking accounts via an ATM card. Set up three savings accounts with goals attached to them. One may be labeled “cushion” for emergency cash, a second for “expenses” for unexpected bills, and a third for “investments.” Carry your card only when you really need it to make transactions, and withdraw only what you need for one week. Then you won’t be tempted to take out cash for impulse purchases.
• Whenever you’re paid, put only what you need to live on for one month (or two weeks, if you get paid every two weeks) into your checking account. (If you put more into checking, you’ll probably spend it.)
• If you can, put money equalling one month’s expenses into your expenses account for unexpected bills. The idea is to build at least a small stash so you’re less likely to use your credit card if your car needs a new tire.
• Begin building your emergency cushion by depositing a portion of each paycheck into your “cushion” savings account. If your goal is to have three months’ living expenses, you could reach your goal in 30 months by saving 10% of each month’s pay or in 15 months by saving 20%.
• Put whatever is left into your “investments” account, including found money such as birthday and holiday checks, bonuses, or money made from a garage sale. If you get a raise, put the difference into this account on a regular basis.
• If your bank can’t link your checking and savings accounts, or if you find it hard to control your spending when access to your savings is easy, ask your employer about direct deposit. You can have money taken from your paycheck and placed in a savings account automatically.

5. How to Reduce Debt

Paying off debt is easier once you stop using your cards.

• Pay off your highest interest credit card debt first, making sure you avoid the “minimum balance trap.” Because credit card companies make their money from interest payments, they purposely set those payments low so it will take you years to pay off the balance. Paying just a little more than the minimum can make a big difference.
• For example, assume you have a balance of $5,000 at an interest rate of 15% and you make the minimum monthly payments of 2.5% of the balance or $25, whichever is greater. It would take you 183 months to pay off the debt and cost you $4,395 in interest. However, if you were to pay an extra $150 each month, you would pay only $845 in interest over 27 months. This is a hypothetical example for illustrative purposes only.
• Consolidate your debt by transferring outstanding balances to lower-rate cards. These days, the competition between credit card issuers is so intense that you can often negotiate your interest rate. If you don’t want to transfer your balances, chances are that your current credit card company will match the interest rate of a competitor. Just be aware that some of the low rates available these days are “teaser rates,” which only apply during the first 6 to 12 months you have the card.
• Cancel your old cards so you won’t be tempted to use them again. The most you need is two. And leave them at home unless you really need them.
• Set up a realistic payment timetable and stick with it. If you need to readjust your timetable, do so. If you have trouble, talk to a professional. The counselors at the nonprofit National Foundation for Credit Counseling can develop a more structured plan for you, if needed. To find their nearest location, call 1-800-388-2227, or log on to www.nfcc.org.

6. Put Time on Your Side

You may not be able to solve your debt problem overnight, but you can solve it over time. Not only will a combined debt reduction and saving strategy begin to lighten the load now, it will help you feel better about your future.

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