Fine Print Alert: August 1, 2014

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Updated on Friday, August 1, 2014

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In our weekly Fine Print Alert newsletter we call out any sneaky changes or less than favorable strategies employed by financial institutions.  We also wrap up MagnifyMoney news as well as share our favorite reads from the week.

Fine Print Alert

The Good

Students and their families are borrowing less to pay for college, according to an annual survey by Sallie Mae.

“On average, college students and their parents borrowed 22% of total college costs in the 2013-2014 school year, compared to 27% two years ago.” – CNN Money

It may seem trivial, but when it comes to paying down debt, every percent counts! We’re glad to see some decreases in the amount families are borrowing to fund a college education.

The not so good

Story One:

We hate overdraft fees. This week the Washington Post ran a story that appeared to be a small victory when it comes to overdraft fees,  “A new report from research firm Moebs Services found that 52 percent of banks with assets of more than $50 billion have what’s known as a “de minimis” balance, a threshold for overdraft. If you overdraw your account by $6 at a bank with a $8 de minimis, you won’t get hit with a fee.” – Washington Post

However, the banks have only eliminated the absolute worst of their overdraft practices and can still be charging consumers $35 to borrow $6 or $8 for a single day.  This is simply a spin-doctor type telling of banks’ outrageous overdraft fees. While you may not be spending $35 for a latte, you could still be spending $35 for an $8 subway sandwich. That seems like a “de minimis” change to us at MagnifyMoney.

In fact, the CFPB just released their own study about overdraft fees and found a majority of debit card transactions, which caused an average of $34 in overdraft fees, were on a transaction of $24 and are paid back within three days of the overdraft.

“If a consumer were to get a loan on those terms, that would equate to an annual percentage rate of over 17,000 percent,’’ the agency’s director, Richard Cordray said in a call with reporters on Thursday afternoon. – The New York Times

We know banks can do better and if overdrafts are a problem for you, consider looking into Internet-only banks with much smaller fees, better overdraft protection or no overdraft fees at all!

Story Two:

CNN Money ran a story early this week about Steve and Darnelle Mason struggling to pay their daughter’s $100,000 student loan bill after she suddenly died of liver failure. The story overviews the troubling fact that Mr. Mason co-signed for the private student loans with his daughter, so after her death he was assumed the responsibility for the loan which he now owes $200,000 due to interest and late penalites. CNN reporter Blake Ellis points out if the loans had been federal, “Mason could have had the loans discharged or at least received some sort of financial assistance. But since they are private loans, he has little to no recourse.”

Mr. and Mrs. Mason also took in their daughter’s three children, but were under immense financial pressure to raise them and pay off the loans on Mr. Mason’s pastor salary. The couple considered filing bankruptcy, but student loans aren’t discharged in the case of bankruptcy.

In a happy twist, readers of the CNN Money story reached out to the Mason family offering financial support.

Read the original story here.

The Unfortunate

Barclays no longer offers their 24-month balance transfer card at 0 percent with a 4 percent fee.

You can still find plenty of other balance transfer offers on our balance transfer comparison table.

MagnifyMoney News

MagnifyMoney co-founders, Nick and Brian, traveled with Professor Zimbardo to Poland to present our findings of time perspective and the link to financial health at the annual International Conference on Time Perspective. Read more about their presentation here.

The team is looking to continue our work conducting financial seminars and one-on-one sessions similar to our trip down to Chattanooga, TN in June. If you are interested in having us come visit send an email to [email protected].

MagnifyMoney around the web

Our favorite personal finance stories this week

Kick off your Friday with these great personal finance stories:

Millennials, Stop Putting Your Money in the Mattress – “Consider, for example, the fact that if we leave our money in the mattress, so to speak, the value of that money will be eroded by inflation. In other words, if you leave your money in cash where it’s earning 1% of interest or less in a savings account, the rate of inflation will outpace the rate of interest earned. And that means you’re money will be worth less than it was the day you earned it and stuck it in the bank.” Read Kali’s advice to investing-shy millennials on Common Sense Millennial.

The Surprising Link Between Birth Order and Financial Behavior – “As I read through this study, I expected to learn specifics about money behaviors based on birth order. Instead, I was surprised to find that the respondents were more or less positional based on their level of comparison with their siblings.” Only-child Shannon reports on people’s relationship to money based on your birth order and sibling dynamics for ReadyForZero.

Yes, You Can Save Too Much For Retirement – “Saving too much for retirement comes down to a simple issue: saving for retirement involves using accounts like IRAs and 401ks that are tax deferred until you reach retirement age.  According to the IRS, that age is currently 59 1/2, or you will face a 10% penalty on anything you withdraw.  So, you need to be careful how much you put into these accounts depending on your goals.” Robert breaks down how to avoid over-saving for retirement on The College Investor.

How to Decide Whether a Frugal Habit is Worth Your Time – “Frugality is great. But some frugal habits save so little, they take more time than they’re worth. So how do you decide which habits are worthwhile and which aren’t?” LifeHacker’s Kristin Wong gives the simple answer to avoid wasting time (and money) on certain frugal habits.

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