Tuesday, October 11, 2011
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Unless you live in a cave, you've likely already heard of the $5 monthly fee Bank of America has begun charging certain debit card customers. According to the mega-bank, customers will only be charged a fee those months when their debit card is used at a retailer and not at an ATM, which carry their own fee. The bank will begin assessing the fee early next year.
Small solace to the millions of consumers who switched to using debit cards versus credit cards when rates skyrocketed prior to implementation of the Credit Card Reform Act.
Bank of America is not alone. Wells Fargo & Co. will begin testing a $3 fee for certain debit card users in select states on October 14th before they decide whether or not to roll it out nationwide. J. P. Morgan Chase has been doing the same since February. SunTrust Banks began charging the same $5 fee to new customers choosing certain types of accounts in June and will extend to all customers in November. Regions Financial Corp. already charges $4 for debit card use for certain accounts.
Citigroup chose to raise fees on certain checking accounts rather than assess a debit card fee.
Did you notice every fee description here is prefaced with "certain" customers or account types? These charges are not assessed across the board. Each bank has its own criteria to exempt customers from this charge; usually by maintaining a stated account balance, having a direct deposit into the account or using it for the bank's bill pay product. In other words, those who hold more profitable accounts.
The new fees were not unexpected. In fact, banks have been calculating ways to offset losses caused by the Durbin Amendment to the Dodd Frank Wall Street Reform and Consumer Protection Act. We covered this in the August 30, 2011 edition of GCFlash. Read it online for more details.
Banks warned Mr. Durbin that reducing merchant fees for card transactions would not reduce their cost. It would merely shift that cost to the cardholder. This is exactly what we see happening.
Big banks are keeping these new fees low in hopes customers will bear them rather than suffer the inconvenience of changing to a new institution. Frequent travelers may consider $60 a reasonable annual fee to pay for the ability to find a branch or ATM in whatever town you find yourself.
Others may prefer the personal service and fee structure that a community bank or credit union has to offer. Community banks carry the same $250,000 FDIC coverage as their big brothers. They're regulated by the identical federal mandates, while under more scrutiny as their size allows auditors to delve deeper into areas they only have time to scratch the surface of with big banks.
Credit unions are self-governed by a board of directors selected by each union from among themselves. Members are shareholders. Funds deposited, called shares, are insured by the National Credit Union Administration for some institutions. Others are covered by a state insurance plan. Check this out further before joining a credit union.
Fees in the banking world are always changing, especially as new regulation is enacted. There may come a day when these smaller institutions decide to assess fees of their own.
But they also hold advantages of their own. You just might enjoy the friendly, personal service you receive if you decide to make the switch. And save a little money in the process.
Switching banks isn't really as hard as you might think. Follow five easy steps and the move should be seamless. Our switch kit provides all the help you need in making the move to GCF Bank. Find it online.
Energy Independence Day
You may not be familiar with the Energy Independence and Security Act of 2007, but you'll soon have to comply with its provisions.
The bill was designed "to move the United States toward greater energy independence and security, to increase the production of clean renewable fuels, to protect consumers..." and various other green terminology.
You probably already struggle with some of the mandates of this bill. While the move to ethanol fuels was already underway before its passage, this bill calls for increased production of biofuels and dictates how much must be derived from non-cornstarch products. This means sugar, cellulose, etc.
We've covered the effects of ethanol blends in marine and small engines in previous issues of GCFlash. One of the most comprehensive pieces can be found here for those of you who want more information.
A word to the wise... as the summer lawn care season winds down, run all of the gasoline out of your equipment before packing away for the winter. Once your engine dies, choke it and run again until it quits a second time. This drains all remaining gas from your carburetor, preventing it from damaging your system. You can't leave this blend sitting in your mower all winter like you could with straight gasoline.
The EPA has approved raising the ethanol percentage in our fuel to 15 percent. This is only safe to use in 2001 or newer model-year vehicles marked "flex-fuel." It will be illegal to use in older vehicles or outdoor power equipment.
But that won't stop the confusion. A separate pump containing the higher blend will be marked, yet consumers may not notice it. Chrysler, General Motors and Toyota quickly announced they would not honor warranties on older cars running on E15. Their fuel systems are not designed for it.
Ethanol is not the only mandate in this Act that may sound better on paper than in reality.
Beginning in 2012, right around the corner, the incandescent light bulbs we all grew up with will be phased out. The first to go will be the 100 watt bulb. Manufacturing and importing of this bulb will be banned. The 75 watt bulb will be history in 2013. Say goodbye to the 64 and 40 watt versions in 2014.
Those less than 40 watts or more than 150 watts are exempt, as well as specialty bulbs like appliance bulbs, colored lights, stage lighting and 3-way bulbs.
In their place, we'll find compact fluorescent lamps (CFL) and halogen lamps. Both use less energy than current incandescent bulbs and last much longer. Both are already on the market.
Most common will be the CFL type. Yet it may not be the most popular option. While this bulb is cooler to operate, it carries much baggage.
One of the largest manufacturers of CFL bulbs is in China. With lingering, high unemployment numbers, people won't be happy when domestic manufacturing grinds to a halt and product is imported from a foreign source.
CFL bulbs contain mercury. Not a problem when installed in a lamp base. Big problem if you drop it. Disposal is also a problem when the bulb reaches the end of its life cycle.
It takes time for CFLs to turn on, they're not instantly activated once you flip a switch. Colors don't appear as vibrant in a room illuminated by a CFL. The light has been described as cold, flat and dull.
They can't be used with dimmer switches, or in enclosed fixtures. They can trigger Lupus and migraine symptoms.
This bill has other key provisions aside from product mandates. Automakers are required to boost gas mileage to 35 mpg across their entire fleet by 2020. This includes passenger vehicles and light trucks.
Energy Star products must be used for all lighting in Federal buildings. Modernization of the electricity grid and small business energy programs were also addressed.
The bill mandates taxpayer funding of research and development of solar, geothermal, marine and hydrokinetic energy technologies. Creation of a training program for green jobs and initiatives for highway, sea and railroad infrastructure are also included.
As we progress deeper into the 21st century, our energy dependence may become nothing more than a history lesson for future generations. And that far outweighs any challenges we face in reaching that goal.
Ramblings on China
A headline caught my eye in today's issue of The Wall Street Journal, a very credible publication. The headline read "China Props up Bank Shares." The author was not referring to U.S. bank shares, but Chinese bank shares. The accompanying article argues that the Chinese economic miracle is heavily dependent upon government data and statistics, and investors have begun to question their validity. In the process of developing western style capital markets, the Chinese have shunned the necessary openness related to economic data. This is not good for investors. So much so, that some investors have begun to sell their Chinese financial holdings causing sharp reductions in prices. Some analysts believe the astounding economic boom that China has experienced has been accompanied by a larger than reported share of bad loans. But without disclosure, there is no way for investors to either validate or refute this claim. The article goes on to mention other cracks in the Chinese miracle, but the main theme is that not even the Chinese are immune to the worldwide financial meltdown.
Some perspective... Despite what can only be called impressive economic growth, China remains a VERY poor country. For example, Purchasing Power Parity (PPP) is a common measure of wealth, and equates roughly to all the goods a country produces divided by its total population. This is a rough index of "living standard." China is 94th in the world, while the U.S. is 6th. The U.S. economy is still more than 3 times larger than the Chinese economy, despite the fact that China has a population more than four times greater than the U.S. The U.S. Economy is the second largest in the world, only slightly smaller than the European Union, which is the aggregate of 27 countries combined. The average wage for city dwellers in China has risen to as much as $10,000 per year, however a rural worker in China makes less than $300 per month. A typical factory worker earns just 80 cents per hour.
But the Chinese are quickly moving in the right direction. During the last decade, the Chinese have wisely adopted a market based capitalistic economy which has fostered unprecedented economic growth. However, these growth rates, although impressive, must be considered in the context of a country that started from such a very low baseline. Stated differently, China's planned economy of the previous decades produced such wretchedly poor conditions that the current state of affairs is likely viewed as great prosperity by its citizens, indeed the rest of the world. As it should be. But there are chinks in the armor. Despite the economic liberalization, China has not, to any significant extent, liberalized its political system. The Chinese Government's persistent resistance to the free flow of economic information and data, coupled with the lack of independent verification, makes it inevitable the Chinese will face increasing investor skepticism. It seems almost inevitable that investors will be victim of inaccurate disclosures, damaging the credibility of all government supplied data. Unless resolved, a major disruption is almost certain to occur - a crisis of confidence.
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