Personal Banking E-Newsletter - December 2010

A Retirement Reality Check

If you have already retired or if you can count the number of years until retirement on your fingers then please heed this friendly warning: Unless you're already making the most of your current retirement planning strategies, then it may be difficult to lay the groundwork for a financially secure future.

Don't just take my word for it, though. Look at the numbers: The median income in households of Americans who are at least 65 years old is under $25,000, whereas the median household income for Americans under 65 is more than double that amount.*

Is your portfolio on a course that's destined to lead to a retirement income shortfall? Consider these strategies that can help improve your long-term outlook.

During Your Working Years?

Determine an appropriate time frame for applying for Social Security benefits. If you plan to apply before your so-called "full retirement age," then you can expect to receive lower monthly benefits. Delaying your application could increase your benefits. Detailed information about your specific situation is available in the Social Security Statement mailed to you each year about three months before your birthday. Contact Social Security at least three months before retirement to apply for benefits.

When You Reach Retirement?

Make arrangements for your retirement account distribution strategies. If you participate in a workplace retirement plan, contact your employer's human resources office to learn what withdrawal options are available to you. Once you have that information handy, you'll need to decide whether to begin withdrawing money from your taxable accounts first or from tax-deferred accounts first.

Keep in mind that the IRS requires most retirement savers to begin taking withdrawals known as required minimum distributions (RMDs) from employer-sponsored retirement accounts and traditional IRAs after reaching age 70½. If you don't take your RMDs, you could be forced to pay substantial tax penalties. RMD rules recently became less complex, but it's still important that you understand them and implement an appropriate distribution strategy.

All Retirement Investors?

Review your post-retirement medical insurance needs. For example, you might want to think about purchasing coverage to supplement Medicare benefits.

If you have made all eligible contributions to other qualified plans, then you may also want to consider funding an annuity now in order to receive a guaranteed income stream later in life.**

Your retirement security is very important. A smart first step to keeping your retirement strategies on track is to contact a qualified financial professional.

*Source: AARP, August 2005.

**Fixed annuities are long-term, tax-deferred investment vehicles designed for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Withdrawals made prior to age 59½ are subject to 10% IRS penalty tax and surrender charges apply. Guarantees are based on the claims paying ability of the issuing insurance company.

© 2010 Standard & Poor's Financial Communications. All rights reserved.

Securities and Insurance products offered through LPL Financial and its affiliates, Member FINRA/SIPC

• Not FDIC insured • No bank guarantee • May lose value • Not a deposit • Not insured by any Federal Government Agency

5 Holiday Shopping Traps

How to shop smarter this year

If you haven't started your holiday shopping in earnest yet, you're probably about to. And you know that finding the right gift at the right price can be challenging, especially when deep discounts and door buster sales abound.

The latest issue of Consumer Reports highlights five traps holiday shoppers can avoid. "Knowing how to navigate sales, comparison shop, and cut through salespeople jargon is half the battle to stress-free holiday shopping," said Tod Marks, senior editor at CR. "Shoppers need to take precautionary measures before purchasing gifts to make sure they are getting the right product, for the right price, with no strings attached."

The traps

Deep discount come-ons. Doorbuster sales promise big savings, and not just on Black Friday or Cyber Monday, when shoppers go online. Consumer Reports found an electric percolator "on sale" at Kohl's stores and for $61.99, a discount from the regular $69.99. But those prices are higher than the $59.99 manufacturer's suggested retail price. Retailers, especially discount stores, commonly sell below MSRP. Using a Web search, CR found better deals. The best price was $30.03 plus $8.21 shipping at

  • What to do? Comparison shop before buying and don't worry about missing a sale. It's likely that another one will come around before the season ends.

    Gift card gotchyas. New federal rules for gift cards limit issuers' ability to charge certain fees and impose expiration dates. Inactivity and service fees can be charged only if a card hasn't been used for at least one year. But issuers can still charge fees to buy cards, as they do for the bank-issued variety, those that bear a credit card logo. For example, expect to pay $3 to $7 for an American Express gift card. Also, gift cards are not protected if an issuer goes bankrupt. If that's the case, the card could be worthless.
    Beyond that, many people never get around to spending their gift cards. A quarter of people surveyed by the magazine in October 2009 who received gift cards the previous year said they hadn't redeemed their almost one-year-old cards.
  • What to do? Give cash or check. Cash never expires or loses its value, and is good anywhere. If the check is never cashed, the money stays in your bank account.

    Extended-warranty pitches. Salespeople push service plans because retailers keep 50% or more of what they charge for them, but they are notoriously bad deals. Some repairs are already covered by the standard warranty that comes automatically with the product. Consumer Reports' data show that products seldom break within the extended-warranty window of coverage. When items do break, the repairs, on average, cost about the same as the warranty.
  • What to do? Some credit cards automatically extend the manufacturer's warranty on anything purchased with them, so check the card's website. Even if the warranty has expired, check with the retailer or manufacturer, which might choose or be legally obligated to repair and make good on a product that prematurely fails or otherwise shows signs of a defect.

    Return-policy limitations. Some retailers relax their return policies during the holiday season, but don't count on it and always learn the rules before buying. Some companies have different return policies for in-store, online, or mail-order purchases.
  • What to do? Keep the receipt and let the recipient know the return policy. If the store provides a special gift receipt, include that with your gift.

    Restocking fees. Many items, especially electronics and special orders, are subject to restocking fees that range from 10% to 25% if they are not returned in a factory-sealed box.
  • What to do? Don't open the package unless you're sure you want the item inside. Items such as computer software, music CDs, and movie DVDs generally aren't returnable if the seal is broken. If a fee is charged, try to negotiate a partial refund, but never pay a fee if the item is defective.

Holiday tipping

Speaking of holiday gifts, how much should you plan to tip your housekeeper, child care provider, or hairdresser this holiday season? The Consumer Reports National Research Center conducted a nationally representative survey early this year, when memories of holiday tips were fresh, to find out.

Despite the recession, respondents who did tip spent at about the same rate as in years past. The highest median tip was $35, for the category of cleaning people, with a few service providers receiving thank-yous as high as $500.

If you plan on offering gifts of thanks this holiday season, you might want to consider these tips from CR:

  • Give cash equal to the value of one session or a week's wage to self-employed or lower-wage earners.
  • Gift cards can be useful for tipping mail carriers. They aren't supposed to accept cash, but can accept gift cards valued at $20 or less that can't be exchanged for cash. Otherwise, you might want to avoid gift cards because of their fees.
  • Be sure that food gifts won't trigger an allergic reaction or violate dietary restrictions.
  • If you're keeping to a tight budget and can't afford to tip this year, consider writing a heartfelt note of thanks instead.

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Understanding Your Credit Report

Your credit history is important to a lot of people: mortgage lenders, banks, utility companies, prospective employers, and more. So it's especially important that you understand your credit report and the companies that compile that information, credit bureaus. Below is a list of frequently asked questions to help understand your credit report.

Q: What is a credit report?

A: A credit report is a record of your credit history that includes information about:

  • Your identity. Your name, address, full or partial Social Security number, date of birth, and possibly employment information.
  • Your existing credit. Information about credit that you have, such as your credit card accounts, mortgages, car loans, and student loans. It may also include the terms of your credit, how much you owe your creditors, and your history of making payments.
  • Your public record. Information about any court judgments against you, any tax liens against your property, or whether you have filed for bankruptcy.
  • Inquiries about you. A list of companies or persons who recently requested a copy of your report.

Q: Why is a credit report important?

A: Your credit report is important because lenders, insurers, employers, and others may obtain your credit report from credit bureaus to assess how you manage financial responsibilities. For example:

  • Lenders may use your credit report information to decide whether you can get a loan and the terms you get for a loan (for example, the interest rate they will charge you).
  • Insurance companies may use the information to decide whether you can get insurance and to set the rates you will pay.
  • Employers may use your credit report, if you give them permission to do so, to decide whether to hire you.
  • Telephone and utility companies may use information in your credit report to decide whether to provide services to you.
  • Landlords may use the information to determine whether to rent an apartment to you.

Q: Who collects and reports credit information about me?

A: There are three major credit bureaus, Equifax, Experian, and TransUnion, which gather and maintain the information about you that is included in your credit report. The credit bureaus then provide this information in the form of a credit report to companies or persons that request it, such as lenders from whom you are seeking credit.

Q: Where do credit bureaus get their information?

A: Credit bureaus get information from your creditors, such as a bank, credit card issuer, or auto finance company. They also get information about you from public records, such as property or court records. Each credit bureau gets its information from different sources, so the information in one credit bureau's report may not be the same as the information in another credit bureau's report.

Q: How can I get a free copy of my credit report?

A: You can get one free credit report every twelve months from each of the nationwide credit bureaus, Equifax, Experian, and TransUnion by:

  1. Visiting or
  2. Calling (877) 322-8228.

You will need to provide certain information to access your report, such as your name, address, Social Security number, and date of birth.

You can order one, two, or all three reports at the same time, or you can request these reports at various times throughout the year. The option you choose will depend on the goal of your review. A report generated by one of the three major credit bureaus may not contain all of the information pertaining to your credit history. Therefore, if you want a complete view of your credit record at a particular moment, you should examine your report from each bureau at the same time. However, if you wish to detect errors and monitor changes in your credit profile over time, you may wish to review a single credit report every four months.

Q: Who else is allowed to see my credit report?

A: Because credit reports contain sensitive personal information, access to them is limited. Credit bureaus can provide credit reports only to

  • lenders from whom you are seeking credit;
  • lenders that have granted you credit;
  • telephone, cell phone, and utility companies that may provide services to you;
  • your employer or prospective employer, but only if you agree;
  • insurance companies that have issued or may issue an insurance policy for you;
  • government agencies reviewing your financial status for government benefits; and
  • anyone else with a legitimate business need for the information, such as a potential landlord or a bank at which you are opening a checking account.
  • Credit bureaus also furnish reports if required by court orders or federal grand jury subpoenas. Upon your written request, they will also issue your report to a third party.

Q: Does the credit bureau decide whether to grant me credit?

A: No, credit bureaus do not make credit decisions. They provide credit reports to lenders who decide whether to grant you credit.

Q: How long does negative information, such as late payments, stay on my credit report?

A: Generally, negative credit information stays on your credit report for seven years. If you have filed for personal bankruptcy, that fact stays on your report for ten years. Information about a lawsuit or an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer. Information about criminal convictions may stay on your credit report indefinitely.

Q: What can I do if I am denied credit, insurance, or employment because of something in my credit report? What can I do if I receive less favorable credit terms than other consumers because of something in my credit report?

A: If you are denied credit, insurance, or employment, or some other adverse action is taken against you, such as lowering your credit limit on credit card account, because of information in your credit report, the lender, insurance company, or employer must notify you and provide you with the name, address, and phone number of the credit bureau that provided the credit report used to make the decision. You can get a free credit report from this credit bureau if you request it within sixty days after receiving the notice. This free report is in addition to your annual free report.

In addition, lenders may use a credit report to set the terms of credit they offer you. If a lender offers you terms less favorable (for example, a higher rate) than the terms offered to consumers with better credit histories based on the information in your credit report, the lender may give you a notice with information about the credit bureau that provided the credit report used to make the decision. Again, you can get a free credit report (in addition to your annual free report) from this credit bureau if you request it within sixty days after receiving the notice.

If you receive one of these notices, it's a good idea to get your free credit report and review the information in it right away.

Q: I've been receiving unsolicited credit offers. Why? Can I opt-out of receiving these offers?

A: Credit bureaus may sell consumers' information, including names, addresses, and credit information, to creditors or insurers, who may then offer credit or insurance to you. You can have your name and address removed from these lists by opting-out of the listing. This will reduce the number of unsolicited offers you receive.

To opt-out, call 888-5-OPTOUT (888-567-8688) or visit You will need to provide certain information in order to opt-out, such as your name, address, Social Security number, and date of birth.

You have the ability to opt-out of receiving offers either for five years or permanently. If you want to opt-out permanently, you will need to fill-out, sign, and mail-in a form. The form is available by either calling the toll-free number or visiting the website.

You can reverse your opt-out decision at any time to start receiving offers of credit and insurance again by calling the toll-free phone number or visiting the website.

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How-to Improve Your Credit Score

5 basic steps to bring your score up

  1. Get copies of your credit report, and then make sure information is correct.
    Go to This is the only authorized online source for a free credit report. Under federal law, you can get a free report from each of the three national credit reporting companies every twelve months.

    You can also call 877-322-8228 or complete the Annual Credit Report Request Form and mail it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
  2. Pay your bills on time.
    One of the most important things you can do to improve your credit score is pay your bills by the due date. You can set up automatic payments from your bank account to help you pay on time, but be sure you have enough money in your account to avoid overdraft fees.
  3. Understand how your credit score is determined.
    Your credit score is usually based on the answers to these questions:

    Do you pay your bills on time? The answer to this question is very important. If you have paid bills late, have had an account referred to a collection agency, or have ever declared bankruptcy, this history will show up in your credit report.

    What is your outstanding debt? Many scoring models compare the amount of debt you have and your credit limits. If the amount you owe is close to your credit limit, it is likely to have a negative effect on your score.

    How long is your credit history? A short credit history may have a negative effect on your score, but a short history can be offset by other factors, such as timely payments and low balances.

    Have you applied for new credit recently? If you have applied for too many new accounts recently, that may negatively affect your score. However, if you request a copy of your own credit report, or if creditors are monitoring your account or looking at credit reports to make prescreened credit offers, these inquiries about your credit history are not counted as applications for credit.

    How many and what types of credit accounts do you have? Many credit-scoring models consider the number and type of credit accounts you have. A mix of installment loans and credit cards may improve your score. However, too many finance company accounts or credit cards might hurt your score.

    To learn more about credit scoring, see the Federal Trade Commission's website, Facts for Consumers.
  4. Learn the legal steps to take to improve your credit report.
    The Federal Trade Commission's “Building a Better Credit Report” has information on correcting errors in your report, tips on dealing with debt, avoiding scams, and more.
  5. Beware of credit-repair scams.
    Sometimes doing it yourself is the best way to repair your credit. The Federal Trade Commission's "Credit Repair: How to Help Yourself" explains how you can improve your creditworthiness and lists legitimate resources for low-cost or no-cost help.

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A Buyers’ Guide to Gift Cards: 5 Questions to Ask

5 questions to ask yourself before you purchase

Want to save money on gift card buying? Ask yourself some key questions; do a bit of homework and your extra effort can mean extra cash in your pocket.

Americans spend about $25 billion on gift cards each year, but too often, they don't put much thought into buying them. They'll snag a half-dozen cards at the gift card mall in their local grocery store without thinking about whether they might be able to get it cheaper somewhere else. That's a mistake.

If you treat buying a gift card the same way you treat buying an HD television or a refrigerator, carefully considering which one best fits your needs and then shopping around diligently for the best deal, you can steer clear of unnecessary fees and other costs and get the biggest bang for your gift card buck.

To get started, ask yourself the following questions:

  1. Should I buy a gift card that can be used anywhere?
    People love general-purpose gift cards. These cards that bear the logo of Visa or another credit card payment network, are as good as cash because you're not limited to a single retailer or store like you are with retailer-specific gift cards. You can use them anywhere you can use that network's credit card.

    The problem is they're also more costly. Purchase fees for Visa, MasterCard and American Express gift cards can add an extra $3 to $7 to your cost.

    Solution: If you know your friend or relative loves Target, for example, consider a Target gift card. If they just bought an iPod, get a gift card for the iTunes store. It'll limit their choices, but you can save yourself money while still being confident that the recipient will enjoy the gift.
  2. Do I have to pay full price for the card?
    In anticipation of another slow holiday, many retailers have not only dropped purchase and shipping fees for gift cards; they're selling them at a discount. Want a Macy's card? You can spend about $42 to get a $50 Macy's gift card from "That kind of discounting on gift cards has never existed before," says Daniel Horne, a professor of marketing at Providence College. "You'll see a lot of it this year because the market has become much more competitive. Gift card sales were slow last year and retailers are getting creative with incentives."

    Solution: Before you buy that card at the grocery store's gift card mall, do a little Googling to see if you can find it cheaper online.
  3. Can I replace the card if I lose it?
    If a card is lost or stolen, it can often be reactivated with the remaining balance if the recipient can show proof of purchase. If you don't have proof, you're probably out of luck. Fees for reactivation vary. Some retailers offer it free, but it can cost $15 to replace a lost Visa gift card.

    Solution: Stash all of your gift card receipts in one drawer or envelope so you'll know where they are, and then don't throw them out until well after the holidays.
  4. Do I have to have the actual plastic card?
    Sending a gift card via e-mail saves time and shipping fees. It also provides an electronic copy in case a card is lost or stolen. Virtual gift cards (or "e-cards") are starting to take off. Most retailers, Barnes & Noble, Urban Outfitters and Target, to name a few, offer them for online purchases only. Customers who want to shop in their stores have to wait a few business days to receive a plastic version in the mail. That usually requires a shipping fee, though Urban Outfitters ships gift cards free.

    This holiday season, several chains are offering virtual gift cards that you can use either online or in-store. At the Web sites of JCPenney, Sears, Nordstrom and Nieman Marcus, for example, you can order a gift card that will appear within hours via e-mail, with a link the recipient can click to start spending online and a PDF attachment they can print out and take to the mall. Most retailers promise to e-mail the virtual card within a certain number of hours. Nordstrom, for instance, promises a card within four hours of credit approval.

    A major benefit of virtual cards is immediacy. Last-minute shoppers are no longer obligated to wait for a gift card to arrive in the mail or pay for expedited shipping. They can purchase and e-mail their gift within 24 hours, or print it out and slip it into a greeting card.

    Solution: Check out retailers' Web sites to see if they offer virtual gift cards, but be sure to read their rules as well.
  5. Can I save the recipient some money, too?
    Fees can nickel and dime the life out of a gift card. To avoid this and do your loved one a favor, look for information on expiration dates and dormancy fees, small amounts of money subtracted from the value of a gift card after an extended period of inactivity, under "terms and conditions." Most major retailers have waived such fees on their own gift cards, but American Express and Discover are the only options for a general purpose card that will hold its value indefinitely.

    Discover's gift cards don't expire but do feature a "valid-through" date. When the "valid-through" date passes, the card can no longer be used. However, Discover will replace the card for free if you give them a call, and no funds will be lost.

    American Express' policies are more straightforward. AmEx waived after-purchase fees on Sept. 30, 2009, which means your nephew can drop his American Express gift card behind the dresser, find it in 2015, and still be able to spend the full $50 value of the card. American Express charges $4 to $7 to buy a gift card, and they do not expire.

    AmEx's policy moves are indicative of the changing landscape of the gift card business. The Credit CARD Act of 2009, landmark credit card industry reforms passed in May of 2009, also addresses gift cards, setting limitations on gift card dormancy fees, expiration dates and other terms. Among the changes set and enacted in August 2010 are the following:

    Dormancy fees can't be imposed unless the card has been inactive for at least 12 months. After that, only one such fee could be charged each month, and the issuer's policy on dormancy fees must be clearly disclosed.

    Disclosures about all dormancy fees and other service charges must include the amount of such costs and the frequency of their application. The disclosures must be made before the consumer buys a gift card "regardless of whether the certificate or card is purchased in person, over the Internet or by telephone."

    Gift cards can't expire for at least five years after they were last loaded with money.

    Many issuers have begun to tweak their terms in response to the Credit CARD Act, but many haven't. That means that offers can vary a great deal from issuer to issuer or store to store.

    Solution: Scour the fine print and steer clear of too-high dormancy fees and too-soon expiration dates. The recipient of your gift card will thank you.

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