But the biggest drawback for consumers is that it limits banking options for people who make even one mistake. A ChexSystems history functions as a credit report for your checking account, except it only tracks negative information.

For example, if you have a ChexSystems report and you go to open a new deposit account with a bank that uses the company’s database, the bank can deny you the account on the basis of just one infraction. Even if you’re able to open an account and keep it in good standing, the bank can later close it if a ChexSystems report on you comes up.

Of course, smart consumers stay on top of their finances. The good news is that since ChexSystems is a credit reporting agency, consumers are entitled to one free report per year, which you can obtain online. Do they have incorrect information on you? Dispute the entry by following this link.

The secret to wealth building isn’t necessarily stock-market prescience or a brilliant business idea. Everyone starts somewhere, and it’s often just a small decision that snowballs to big rewards. Take one of the following tips and maybe decades from now you’ll remember the day you decided to invest in yourself.

1. Set up automatic transfers to save without the sting. No emergency fund? Not for long. Link a savings account to your checking and set it to automatically deposit $20 every payday. If you get paid every two weeks, in less than two years you’ll have saved $1,000 virtually painlessly (even more if it’s an interest-bearing account). Just remember: No touching!
2. Round up each debt payment. Say today you get a $5,000 car loan at 5 percent, payable over 36 months. Your monthly payment will be $149.85, and you’ll be debt-free in June 2013. Now suppose you round that check up to $200 per month: You’ll get rid of that loan by September 2012 and save more than $100 in interest charges in the process.
3. Get a better interest rate on savings. If your savings account pays peanuts on your money, consider moving it to an online bank. Switching banks over a 1 percent difference in APY may seem like more trouble than it’s worth, but on a $10,000 balance, that ends up being $100 more in your pocket at the end of a year.
4. Trim your housing expenses. If you live in a tri-state area like Washington, D.C., or New York City, you have your pick of which state to live in — which can save you money on a monthly basis if you’re savvy about it. Compare the tax and cost-of-living benefits and drawbacks of each area before you settle down somewhere with a skyrocketing COL.
5. Increase your W-4 allowances. Get a big tax refund this year? Wouldn’t you prefer a fatter paycheck now, rather than waiting until next spring to collect your money back from the government? That’s what we thought. Increase your federal allowances on the W-4 on file at your company and you can put that money to work for you pronto.

The Wall Street Journal

Bank of America Corp. and other banks are preparing new fees on basic banking services as they try to replace revenue lost to regulatory rules, in a push that is expected to spell an end to free checking accounts for many Americans.

Free checking accounts, which have been widely available for more than a decade, have been a boon to middle-class consumers and attracted low-income customers to the banking system for the first time.

Customers will likely be required to pay new monthly maintenance fees on the most basic accounts that don’t generate a lot of activity. To avoid a fee, customers will have to maintain certain account balances or frequently use other banking services, such as credit and debit cards, automated teller machines and online accounts.

It’s an important debate and a key lesson in economics. Banks aren’t going to willingly make less money, so if the feds restrict overdraft fees, the affected banks will then kill free checking to make up the difference. But what happens when lenders can’t make it up elsewhere? If, say, there’s a limit on interest rates, lenders will simply stop offering that credit option rather than taking the loss. It’s already happening: Cap interest rates on short-term loans, and the government is effectively taking away the highest-risk consumers’ access to credit.

In an update on the old saying, the road to (financial) hell is paved with good intentions — and unintended consequences.

If you have a major purchase on the horizon — be it electronics, home furnishings, or a vehicle — now is the time to start considering your options to keep costs low and value high.

1. Know the best time to buy. July is when prices on home wares and furniture reach their annual lowest, as stores mark down goods to attract wedding gift-givers. Shop for a new car at the end of the model year for the best discounts — or at the end of the month, when salespeople are most motivated to make their quotas. A little research can mean big savings.
2. Mull it over. Take your time before you spend big to avoid buyer’s remorse. If your garage already looks like an REI, maybe you don’t need that paddleboard as much as you think you do.
3. Comparison shop to save on taxes. It was news to us that Amazon stocks the full range of laptops and other consumer electronics by all the major brands, from HP to Apple. That could mean more than $100 in savings if you buy online versus going to the mall, where you’d have to pay state sales taxes.
4. Put it on a rewards credit card (with caveats). Getting 1 or 2 percent cash back on a major purchase seems like a no-brainer — unless you’re expecting to carry a balance. Then the interest rate will exceed any rewards you’ve received. In that case, consider paying with cash or negotiating zero percent financing at the store you’re buying from.
5. Determine the value of a warranty. Back to cars again: The conventional wisdom says “always buy used,” because of the steep depreciation value on new cars. But when you buy a new automobile, you benefit from the full warranty — something you may pay a few extra thousand for when considering a certified used vehicle. Crunch your own numbers to see what it’s worth to you.

The article follows the Pemberton family in St. Petersburg, Fla., who have stopped paying their mortgage so they can put their money to more fun use, such as trips to a casino and joyrides in an airboat:

“Instead of the house dragging us down, it’s become a life raft,” said Mr. Pemberton, who stopped paying the mortgage on their house here last summer. “It’s really been a blessing.”

Because of the glut of homes in default in Florida, foreclosure proceedings last an average of 518 days. The Pembertons have yet to be evicted — meaning they will continue to live there rent-free until the bank collects its due.

The people interviewed for the article make the case that the banks should pay the price for the naïve decision to grant them mortgages in the first place, but the justification seems to originate from an ethics-free zone.

And it’s a short-sighted game, to say the least. Once the bank gets around to completing its paperwork, not only will these borrowers lose their homes, but their FICO scores will plummet by up to 280 points. And the foreclosure will stay on their credit reports for 7 years —almost as long as a bankruptcy.

Considering what their credit history means for their future job, housing, and credit prospects, these homeowners need to reconsider whether scamming the bank is worth it in the long run.

Student loans are intended to pay for your education, but I’ve known a few people who took liberties with exactly how they used that money. Here are some of the worst ways you can spend those checks:

1. Getting a degree in the arts or humanities. This is the sad truth: More than 23 percent of humanities students owe more than $30,000 in student loans, but hiring in that sector is down 40 percent since 2008. Make sure that you can find work that utilizes your degree, or else those student loans will be with you for a long, long time.
2. Paying your mortgage. Student loans include stipends to cover your living expenses, but renting is preferable to buying a house and using the student loan to pay your mortgage. If you plan on moving away from the area after school, houses tend to be poor short-term investments. Maintenance costs may pop up unexpectedly, leaving you short. And in general, it’s a bad idea to take on new debt to pay down old.
3. Funding your discretionary purchases. This one almost goes without saying, mostly because it’s illegal to misuse federal loans. Look into part-time work to buy clothes, dine out, or go on vacation. The reason is simple: Stafford loans carry an interest rate of up to 8.25 percent, and private loans can be even steeper. You’d be better off putting such purchases on a low-interest credit card or taking out a personal loan, rather than assuming more education debt than you need.
4. Paying off credit cards. Speaking of consumer debt, should you ever declare bankruptcy, credit-card debt would be forgiven but you’d on the hook for those student loans until death do you part. Don’t exchange unsecured debt for a loan that is with you for life.
5. Not learning how to budget. While you’re getting your degree, you’re also presented with a great opportunity to learn to budget your money on a fixed income. It is a valuable lesson that will serve you long after you leave the ivory tower.

To end on a happy note, congratulations to all the recent grads!

By now you know why a ship-shape credit score is in your best financial interests: It helps you qualify for the lowest interest rates on mortgages and other loans, saves you from having to put down a deposit on utilities, and it may even help you get a job.

What you may not know is how to add points to your FICO score, so here are a few tips to help you get the awesome perks that accompany great credit.

1. Always pay your bills on time. Payment history is the most important part of your credit score. Even one late payment can ding your score. If you have not been making payments on time, now is a good time to start. Get and stay current on your credit-card and utility bills.
2. Reduce your credit utilization ratio. Outstanding debt is the second-most important factor in calculating your credit score. You can figure out what your ratio is by dividing your outstanding balances by the amount of available credit you have; ideally, it should be under 20 percent. Lenders see high credit utilization as a red flag, and spending up to the credit limits on your plastic kills your score. To improve your score, don’t max out any of your cards and pay down the balances quickly.
3. Keep your oldest accounts open. The age of your credit history is another key component of your credit score; ideally, you want the average age of all your accounts to be at least 8 years. If you open too many new accounts in a short period of time, your score will drop. Likewise, closing an older account with a high credit limit could temporarily knock 50 points off your score. If you think you’ll be applying for a loan in the next year, be judicious about opening new accounts.
4. Maintain a good mix of credit. Showing responsibility for car notes, installment loans, and a mortgage in addition to revolving credit shows potential lenders that other banks have deemed you creditworthy. Some types of credit, like payday loans, are not factored into your credit score. This is a less important metric in your overall score, but consider it a reference for future loans.
5. Don’t sweat it if your score is over 750. While it might be personally satisfying to shoot for the moon and go for a perfect 850, once you’re in the “excellent” credit range you’re already qualifying for the best rates. At this stage, you can sit back and enjoy the rewards.

April is not just tax season, it’s also Financial Literacy Month. So now is the perfect time to test your money knowledge on one of our 10 quizzes.

Think you’re an expert on entrepreneurship? How savvy are you on saving? Can you cut it when it comes to credit cards?

Or if you’re really up to the task, take our 20-question quiz that covers a broad spectrum of money topics. You just might learn something new.

You can learn a lot from people like Glenn, who owed $250,000 because of skyrocketing interest rates and frequent late payments, or Marcia, who was always about $7,000 – $10,000 behind because she made a habit of paying only the minimum payment. Here are a few other highlights:

- Beef up on your personal finance knowledge – This is what Econ4U is here for! Check out Money Matters for detailed answers to some of your finance questions or use the Glossary to learn about some of those terms you keep hearing, like debt to income ratios. Or take a quiz to see how much you already know!

-Spend virtually – Make a budget and stick to it. Knowing where your finances will stand at the end of the month, before it even begins is a great way to curb impulse spending. Forcing yourself to shop online can help you buy only what you need – and what you’ve already budgeted for.

- Admit you have a problem – If you are addicted to using plastic, admitting it is the first step to recovery. Programs like Debtors Anonymous can help.

-Find the right lending option – Finding the lending option that works best for you is ultimately the most important thing we can learn from these individuals’ stories.  You can read about different ways to borrow and manage credit here.

Take control of your finances today before they spiral further out of control. Educating yourself and committing to addressing your credit card debt now is a decision you will be proud of later.

Imagine you’re buying a house, and borrowing $200,000 to do it. What is the total cost of the loan? Well 6% of $200,000 is $12,000. But that’s just for the first year. Under a standard payment plan, you’ll end up paying $231,676 in interest – 116% of the original loan amount.

Let’s look at student loans next: The standard interest rate for a PLUS Loan is 8.5% APR. If you borrow $40,000 for college and are on a 20-year repayment plan, you’ll end up paying $43,311 in interest – 108% of the original loan amount.

Do you carry a balance on your credit card? Among American households with credit card debt, the average amount is about $11,000. At a typical 18% APR, if you start paying down your balance with $300 per month, it will take about 4 years, and you’ll pay $5,090 in interest – 46% of the original loan amount.

One more example: two-week “payday” loans usually cost about $15 for every $100 borrowed. So if you get a payday loan for $400, you’ll pay $60 in interest – 15% of the original loan amount.

See the pattern here? Long-term loans generally have lower annual interest rates. But over a few decades, even a low rate can really add up. The best strategy is to pay cash when you can, and only borrow when you need to. And if you have a little spare money at the end of the month, use it to get ahead on your bills and you’ll save big in the long run.

This chart compares the total costs of these different loan types: