A silver lining for bank customers
Despite some dire financial predictions for 2009, good news is in store for savvy consumers — if you have good credit and are proactive at looking for banks' deals and perks.
One example: Low mortgage rates. Mortgage refinances are booming, said David Olson, president of Wholesale Access in Columbia, Md. Mortgage "rates are way down, and some predict they could go as low as 4 percent," he said. But to take advantage of the low rates, consumers must have a Fico credit score higher than 720, he said.
Bank of America, Wells Fargo, Chase and Citigroup are aggressively pushing standard 30-year fixed-rate mortgages through mortgage brokers, Olson said. For about 20 percent to 30 percent of the population with great credit scores, interest rates are becoming historically low in relation to Treasury securities.
"New banks are entering the marketplace," said Melissa Cohn, president of Manhattan Mortgage Corp. in New York. Although there are still a few banks that offer no-documentation loans, she does not see those coming back in a big way. For people with lower credit scores, the Federal Housing Administration is about their only opportunity, she said.However, some banks will grant you a mortgage if you have a really good explanation for your score. Savings institutions often are more willing to listen than banks.
Although lower interest rates are great news on the loan side, they're unattractive to depositors. Nevertheless, expect new bank holding companies, such as Goldman Sachs, to compete for your cash with higher rates, said Ron Shevlin, senior analyst at Aite Group, a Boston financial services research and advisory firm.
Also, consider shopping for high yields online. You can pick up as much as 2 percentage points by shopping targeted promotions, according to Informa Research Services Inc. in Calabasas, Calif. Consider searching at sites such as TheStreet.com, FiLife.com and MSN.com for offers.
Banks are adding free tools to their Web sites to help you manage your money, Shevlin said.
Banks are borrowing interactive features from social networking Web sites, such as Mint.com and Wesabe.com, as well as from often costly financial management software programs.
Unlike mutual fund companies' Web sites which often stress investment asset allocation, bank sites focus on budgeting, cash flow and cutting expenses. "Banks are looking to differentiate themselves from a service perspective, beyond competing on rates," Shevlin said.
Some of the sites will offer concrete tips once you enter a password and input your information. For instance, say you spend $50 monthly for your cell phone. A bank message may indicate that other customers in the bank's network spend 25 percent less.
Expect more banks to let you check account balances and conduct account transfers on your cell phone, Shevlin adds. Stores are hooking up with banks to let you buy a high-ticket item and qualify for a bank loan instantly on your cell phone at the same time.
It could be tougher this year to get car loans at car dealerships, according to Informa Research Services. If you need a home-equity credit line, check for new rate floors, limiting how low your interest rate can go. Expect lower credit limits and stricter guidelines. Plus, watch for an increase in credit card rates and lower credit lines.
The "universal default" feature is likely to reappear on credit cards, the company warns. This means that if you rack up late payments or max out your other credit accounts or loans, you could see a rate hike on an unrelated credit card. But new federal rules, starting July 1, 2010, in many cases should prevent those higher rates from applying to pre-existing balances. See story on new rules.
Free checking accounts may be harder to find. But ask to get bank fees waived in 2009. You might get your checking account fee waived with direct deposit, a minimum number of electronic transfers or by agreeing to get your checking account statements online, according to an informal survey of consumer banking experts at Informa Research.
Also, there is a rumor that persons depositing more than $100,000 might be charged a fee to cover higher FDIC insurance costs, but experts at Informa Research said they'd seen "no examples yet."
Beware of higher charges for transferring credit card balances to another card. Limits on balance-transfer fees are being eliminated. Plus, minimum balance-transfer fees may be increasing.
And, those 0 percent or teaser interest rate offers are going to get shorter, said Stephen Clifford, vice president of Mintel Comperemedia, a Chicago direct-marketing research company.
But, Clifford said, expect additional rewards or points to promote certain behavior. A higher level of credit-card usage, for example, might trigger more bonus rewards.
"Card companies are still mailing out offers," Clifford said, "but they're selective with whom they're mailing the offers to."
Spouses Gail Liberman and Alan Lavine are syndicated columnists. Their latest book is "Quick Steps to Financial Stability" (Que/Penguin). You can contact them at www.moneycouple.com.