TIME Saving & Spending

This 1 Mistake Could Cost You Hundreds of Dollars

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Read the fine print—or pay

Everybody hates bank fees, but what’s even more worse is not knowing when or why you’re getting dinged with those charges.

In a new study, the website WalletHub.com finds the average checking account has 30 different fees that can ding you, and banks aren’t always transparent about the details. “Some banks disclose their fees only after a customer has opened an account,” the site warns. “Others disclose their fees in inconspicuous sections of their websites.”

In particular, those $35 overdraft fees that can be triggered by buying something as small as a cup of coffee can really pack a wallop, yet many of us don’t bother paying attention to the fine print that spells out the details of how financial institutions process transactions. We should, though — a new interactive tool from the Pew Charitable Trusts shows how seemingly insignificant differences in transaction-processing practices can make the difference between having enough money in your account to tide you over until your next payday or getting socked with more than $100 in fees.

Pew looks at three different variables: Letting people overdraw their balances when they make purchases or ATM withdrawals versus declining these attempts, processing transactions in the order they happen versus in order of highest-to-lowest dollar amount and offering a $5 “grace period” threshold before an overdraft fee kicks in versus no threshold.

In a trio of scenarios, Pew follows three hypothetical customers in a scenario many Americans are all too familiar with: navigating the demands of daily expenses with less than $200 until the next paycheck comes. In each case, everything is identical for the variable under scrutiny.

The differences are huge. For instance, a customer whose bank processes transactions in the order they happen winds up getting hit with a single $35 fee — while her alter ego who banks with an institution that practices high-to-low transaction ordering gets nailed for FOUR $35 fees when conducting the exact same transactions.

The other two examples show a similar disparity. For many of us, the difference between ending the month 10 bucks in the black versus more than $80 in the red is huge, especially if our spending habits are such that this happens frequently.

Consumer advocates criticize banks for their overdraft practices, pointing out that the customers who pay the bulk of these charges tend to be younger, minority customers who are poorer to begin with and often don’t have the financial education to know a raw deal when they see one. Fewer than 10 percent of bank customers are responsible for three-quarters of overdraft charges, according to the Consumer Financial Protection Bureau. “[This] is especially pertinent as the CFPB continues to study overdraft and will release new rules based on these studies in 2015,” Pew says.

The CFPB says it’s still looking at how these fees impact bank customers. “We need to determine whether current overdraft practices are causing the kind of consumer harm that the federal consumer protection laws are designed to prevent,” CFPB director Richard Cordray said in a statement last month, saying the agency’s most recent research “compound[s] our concerns” about whether overdraft practices leave vulnerable customers at risk.

Until the CFPB acts, it’s buyer-beware out there, so don’t forget to read the fine print.

TIME Money

Bank of America To Pay Record $16.65 Billion Fine

Bank Of America Reports Loss Due 6 Billion Dollar Legal Charge
Spencer Platt—Getty Images

$7 billion of it will go to consumers faced with financial hardship

Updated: 10:14 a.m.

The Justice Department announced Thursday that Bank of America will pay a record $16.65 billion fine to settle allegations that it knowingly sold toxic mortgages to investors.

The sum represents the largest settlement between the government and a private corporation in the United States’ history, coming at the end of a long controversy surrounding the bank’s role in the recent financial crisis. In issuing bad subprime loans, some observers say, the bank helped fuel a housing bubble that would ultimately burst in late 2007, devastating the national and global economy.

“We are here to announce a historic step forward in our ongoing effort to protect the American people from financial fraud – and to hold accountable those whose actions threatened the integrity of our financial markets and undermined the stability of our economy,” Attorney General Eric Holder said at a news conference announcing the settlement.

Since the end of the financial crisis, the bank has incurred more than $60 billion in losses and legal settlements. Of the latest settlement, $7 billion will go to consumers faced with financial hardship. In turn, the bank largely exonerates itself from further federal scrutiny.

However, not all is forgotten. The New York Times reports that federal prosecutors are preparing a new case against Angelo Mozilo, the former chairman and chief executive officer of Countrywide Financial, which Bank of America acquired in mid-2008. As the country’s largest lender of mortgages, Countrywide Financial purportedly played a large role in distributing toxic loans. Mozilo has already paid the Securities and Exchange Commission a record $67.5 million settlement.

TIME How-To

3 Apps That Actually Pay You Money

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Fronto

“Earn extra money simply by doing the things you do every day!”

Let’s be honest: You have good reason to be skeptical of “free money” claims. But there really are a small handful of legitimate advertising-powered smartphone apps that offer you money in exchange for being able to advertise to you.

That’s right, the following three apps won’t save you money — they’ll actually pay you money. None of them will make you a millionaire, but they could put an extra $20 or more in your pocket each and every month. And that’s not too bad just for playing around with your smartphone, right?

Fronto

Would you subject yourself to extra advertising if it meant more money in your pocket? If the concept seems appealing to you, check out the Android app Fronto.

Fronto works by placing ads and curated links to content on your smartphone’s lock screen. Every time you interact with this content, you earn points. Unlock your phone while an advertisement is being shown, for example, and you might earn 20 points. Download an app that Fronto suggests for you, and you might earn 100 or more. Fronto also doles out points for referring friends.

Points do take a while to accumulate, especially if you don’t take Fronto up on any of its special offers. But that’s okay – here, it’s worth the effort. Every 25,000 points can be exchanged for $10 in cold, hard cash, payable directly to your PayPal account.

You can download the free Fronto app on Google Play.

Perk

Want to take your earnings beyond the lock screen? Then check out Perk, a series of apps, browsers, search tools and more that converts virtually everything you do on your phone into points, redeemable for cash.

There are a lot of different apps in the Perk universe: Perk Shopping, Perk Search, Perk Screen, Perk Browser, Perk TV and Perk Pop Quiz. Each offers a function along with a small reward for using it. Search using Perk and you’ll get a few points. Watch an ad on Perk TV and you’ll get a few more. Buy something on 1-800-Flowers and other similar retailers via the Perk Shopping app and you’ll earn a ton.

Like with Fronto, Perk points can be redeemed for cash via PayPal. You’ll get the most bang for your points by redeeming them for gift cards instead. Minimum payouts with Perk are $5.

You can find out more about and download the Perk family of apps at Perk.com.

Shopkick

shopkick
Shopkick

Walking around your local mall may be a good way to get a little extra exercise, but it can also be a way to get a little bit of extra money, too. That’s the idea behind Shopkick, an app that rewards you simply for visiting stores.

When you open the Shopkick app at your local mall (or really, whenever), you can see a list of nearby stores that are willing to offer you “kicks” (points) just for walking through the doors. Most of the stores tempting you with points are the type you might walk into anyway, like Walmart, Macy’s, Target or Crate & Barrel. Once you’re in the store, the app might offer you a few challenges (e.g., find and scan a certain item) to earn bonus points. You can even link a credit card to the app to earn points for completing a purchase in-store.

You can rack up enough points to get a reward in a single trip, given the right mall. The minimum reward with Shopkick is a $2 Target gift card, yours for redeeming just 500 points.

You can get the free Shopkick app for iOS via the Apple App Store and for Android via Google Play.

This article was written by Fox Van Allen and originally appeared on Techlicious.

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TIME Virtual Currency

How Bitcoins Could Put Your Finances at Risk

Virtual currencies could cause you to lose "real" money, according to a new report

+ READ ARTICLE

The Consumer Finance Protection Bureau released a report Monday concluding that virtual currencies, such as Bitcoin, offer less protection than regular currencies and can be vulnerable to outrageous mark-ups, online scams and hackers.

In addition to publishing the report, the bureau has also added a virtual currency section to their complaint page where people who have run into problems with Bitcoin or other similar currencies can register their issues.

According to Bitcoin.com, there are more than 13 million units of virtual currency around the world.

TIME Earnings

U.S. Banks Have Reached Near-Record Profit Levels, Study Says

U.S. Stocks Fluctuate Amid Deal Activity After S&P 500 Record
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, June 9, 2014. Bloomberg—Bloomberg via Getty Images

In the second quarter of 2014, banks had the second-highest profit levels in 23 years

Six years after the financial crisis, profits at U.S. banks have reached near-record levels, according to a new study.

Income at U.S. banks reached $40.24 billion in the quarter of 2014 that ended June 30, according to research firm SNL Financial. That’s the second-highest quarterly level for the banking industry since SNL began collecting banking profitability data in 1991.

“The second quarter was an inflection point in the profitability story for banks,” SunTrust analyst Eric Wasserstrom told the Wall Street Journal. “The bad is starting to bottom out, the good is starting to gain momentum.”

The only more profitable period for American banks was during the first three months of 2013, when net income reached $40.36 billion. The third most profitable period was at the end of the real estate and mortgage boom during the last quarter of 2006, when banks made $40.21 billion.

 

TIME Security

The Government Is Trying To Explain Bitcoin to Normal People

US Government Issues Bitcoin Warning
A customer purchases bitcoins from the BMEX bitcoin exchange's Robocoin-branded ATM in Tokyo, Japan, on Wednesday, June 18, 2014. Bloomberg via Getty Images

Stepping into the Bitcoin market is like "stepping into the Wild West"

An independent government agency issued an exhaustive warning Monday about the risks of virtual currencies like bitcoin in an attempt to explain cryptocurrencies to the uninitiated.

The 6-page walkthrough from the U.S. Consumer Financial Protection Bureau outlined several of bitcoin’s potential dangers, including vulnerability to hackers, limited security, excessive costs and scams. It also announced a system that accepts virtual currency complaints. Though virtual currencies have become increasingly integrated into society, with states, companies, political organizations and even schools approving their use, the Internal Revenue Service has not granted it legal tender status in any U.S. jurisdiction.

“Virtual currencies are not backed by any government or central bank, and at this point consumers are stepping into the Wild West when they engage in the market,” CFPB Director Richard Cordray said in the statement.

Bitcoin risks, the CFPB said, include hackers who steal users’ private keys—the password to your digital wallet—using viruses and other malware. Unlike banks or credit unions, in which deposits are protected by federal agencies in case of failure, bitcoin isn’t insured by any government agency. If you lose your bitcoin stash, then “you are own your own,” the CFPB warns, and “there is no other party to help you.” Some digital wallet companies promise reimbursements for fraudulent transactions, but if there’s a widespread fraud event, it would probably be hard for most of these firms to come through on that promise. So what’s a bitcoin user to do?

“Read your agreement with your wallet provider carefully,” the report states. “Really, read your agreement with your wallet provider carefully.”

The report also tries to clarify bitcoin ATMs, which the CFPB points out don’t actually spew out bitcoin. Rather, the ATMs allow you to insert cash to be transferred into bitcoin to be moved into your digital wallet. The ATMs’ transaction fees may run as high as 7% and exchange fees $50 more than what you’d get elsewhere — and perhaps even more given bitcoin’s high volatility, the warning said.

The CFPB additionally warned customers of scams enticing users to invest bitcoin on the promise of high interest rates and no risk. In actuality, their bitcoin may be funneled into something else entirely, like someone’s food, shopping and gambling habits. The U.S. Securities and Exchange Commission previously warned of these so-called Ponzi schemes involving virtual currencies, and noted that such “fraudsters are not beyond the reach of the SEC just because they use bitcoin or another virtual currency.” And while the SEC’s authority provides some comfort, there’s generally few safeguards for average folks who step into the so-called Wild West without their guns and bugles.

Moral of the story? Using bitcoin may have its benefits, but don’t let it be your fool’s gold. Because “if it’s too good to be true,” the report said, “it just may be.”

 

TIME Money

Bank of America Reported Close To Record DOJ Settlement

Paying up for their role in the housing crisis

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Bank of America may pay $16 billion to $17 billion to the Department of Justice as a settlement for their role in the housing crisis, according to media reports.

That would be the highest payment to the DOJ for mortgage securities fraud to date, exceeding the $13 billion settlement that J.P. Morgan Chase negotiated in November.

Bank of America issued the most mortgage securities of any large bank on Wall Street in the years leading up to the financial crisis. According to the Wall Street Journal, of the $965 billion in mortgage securities that the bank issued between 2004 and 2008, $245 billion in securities have defaulted or become delinquent.

 

TIME Spending & Saving

Why You Have to Start Paying Down Your Credit Cards Right Now

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Steven Puetzer—Getty Images

Federal Reserve meetings aren’t high on most people’s list of interesting things, but if you have a credit card and carry a balance, you should probably start paying attention to what America’s top money policymakers are talking about, because it’s going to affect your monthly bill.

During last week’s Federal Open Markets Committee meeting, analysts were listening closely to tease out a sense of when the central bank will raise interest rates — always an endeavor that’s one part math, one part reading tea leaves.

A rate hike might not come right away: CNN points out that Fed chair Janet Yellen wants to see higher wages along with lower unemployment. Although unemployment is ticking down, wages are stuck in a rut.

“There are no such signs evident yet, but we expect that to be the big story in the second half of this year,” Capital Economics chief U.S. economist Paul Ashworth tells CNN.

But a hike might come sooner than expected, CNBC argues, if either the labor market gets better faster or if Fed members get spooked about inflation. “I think pressure is really growing to do something in January,” Peter Boockvar, chief market analyst at the Lindsey Group, tells CNBC. .

Bottom line: It’ll probably happen sometime next year. This means you have, at maximum, maybe a year and a half before your credit card bills jump.

The reason why is because most of us these days have variable credit card interest rates, with our APRs tied to the prime rate. The prime rate is the Federal Funds rate plus 3%, and today, prime is a mere 3.25%. Then the card issuers tack on a percentage they determine, and we swipe away.

Banks dropped fixed interest rates en masse in advance of the CARD Act kicking in a few years ago because the law prohibits them from hiking fixed rates on existing balances except with a few exceptions. Banks wanted to be able to raise what they charge us when interest rates rise, so they switched over to variable rates.

After the Fed makes its move, rate increases will happen quickly. “Within a few months after the prime rate eventually starts going up, card holders will also likely see their APRs going up,” says John Ulzheimer, president of consumer education at CreditSesame.com.

Ulzheimer says it’s most likely issuers will adopt a straight pass-through of any hike in the prime rate; in other words, if the rate goes up by 0.5%, your APR will, too. And credit card companies aren’t required by law to give you a 45-day heads-up that a jump in your interest rate is coming.

Obviously, the bigger your balance, the more this will affect your monthly payment, so it’s a good idea to start chipping away at that debt now.

TIME Retail

This Company Wants to Kill Your Supermarket

Aisle at supermarket with shopper and shopping cart
Aisle at supermarket with shopper and shopping cart Diana Angstadt—FlickrVision

Farmigo, a small farm-delivered food service, has an audacious dream

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This post is in partnership with Fortune, which offers the latest business and finance news. Read the article below originally published at Fortune.com.

Benzi Ronen thinks that the supermarkets’ time is up. And his company is just the thing to speed up its demise.

“Our goal is to make the supermarket obsolete from a fresh perspective,” Ronen says.

Farmigo, his five-year-old 30-employee startup, sells produce and other products like milk and cheese purchased directly from farmers for 10%-20% less than equivalent grocery store items. He does it by shrinking the supply chain, essentially taking out the middleman. Users place an order online; the order is fulfilled by a farmer who transports it to a centralized packing hub; and then Farmigo delivers it to community drop-off points for the customer to pick up. This all happens within 48 hours.

“We don’t have a retail store,” Benzi explains. “We get rid of all of that. We source just in time.” That means there’s no waste and produce is brought directly from harvest.

Other sellers, such as Fresh Direct, also cut out the physical store. But Ronen argues that they’re just an extension of the supermarket model, with similar warehouses that keep a huge inventory on hand. By contrast, Farmigo’s hubs are filled exclusively with product that’s just been delivered by farmers and is going out for delivery.

“Our entire food system is based on economies of scale,” he explains, adding that it has contributed to the hub-and-spoke distribution model in which food travels hundreds of miles and can sit on shelves for weeks. “You don’t get fresh in supermarkets, and you also have waste,” he says.

For the rest of the story, please go to Fortune.com.

 

TIME Money

If Women Had Their Own Currency, Here’s What It Would Be Worth

Photo Illustration by Alexander Ho for TIME

Don't spend your $0.77 all at once

After a little girl asked President Obama why there aren’t any women on U.S. currency, he said Wednesday that adding some female faces to our cash sounded like a “pretty good idea.” Almost immediately, all of our fantasies came alive on the web. What would, let’s say, Ruth Bader Ginsburg look like on a $20 bill? Where would we spend our Beyoncé $10 bill first? Will our grandmas give us a Susan B. Anthony $5 bill on our birthdays and tell us not to spend it all at once?

But then we remembered: because of the wage gap, a dollar for a woman is not the same as a dollar for a man. Although the true extent of the gender pay gap is widely disputed even among feminists, President Obama said in the 2014 State of the Union that women make only 77¢ for every dollar a man makes.

So here’s what U.S. currency would really look like, with women’s faces and women’s wages:

A Harriet Tubman $20 would only be worth $15.40.

Photo Illustration by Alexander Ho for TIME

A Sandra Day O’Connor $10 would only be worth $7.70.

Photo Illustration by Alexander Ho for TIME

A Rosa Parks $5 would only be worth $3.85.

Photo Illustration by Alexander Ho for TIME

A Gloria Steinem $1 would only be worth $0.77.

Photo Illustration by Alexander Ho for TIME

That just shrunk your 401(k).

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