On July 1, new Federal rules will require banks to ask customers to opt in for overdraft coverage; that line of credit that kicks in when account holders make purchases that exceed their available checking and debit account balances.  To lure customers to their programs, some banks are trimming their overdraft fees.  Currently, such fees average $34 per debit transaction or ATM withdrawal.  However, under the new law, if account holders don’t opt in, banks won’t be able to cover their charges when their account balance falls short.  The charge will simply be declined, and the customer won’t be charged an overdraft fee.   For those of you, however, that want to retain your overdraft protection, but for a small price tag, there are a few simple ways to cut your overdraft charges.

The first is to carry multiple cards.  If you always have 1 or 2 back-up cards and cash on you at all times, you will should never run into a situation where you don’t have the funds to pay for something.  If you are someone who tends to carry borderline balances, this may be a good option for you.

One of the easiest ways to avoid overdraft fees is also probably the most obvious:  balance your checkbook.  Now that account information and statements are available online, it is simple to check your account weekly and review the transactions and balance.  Again, if you are someone who operates on a borderline balance, check your account daily and make a budget for yourself.  Make sure you know exactly what you are spending and that it matches up with what you actually have to spend.

Another easy way to avoid hefty fees, consider linking your checking account to either a savings account or a credit card.  There may be a small fee to do this, usually $5 to $10 if you end up dipping into another account.  The downside is that linked accounts with credit cards carry the potential for getting hit with interest charges.  If, however, you are someone who pays off your balance each month, this can a good option.

I’m sure, like everyone else, you receive at least one or two credit card offers per week in the mail.  Usually I just shred them and call it a day, but sometimes we all consider getting that second card.   When reading the offers though, you have to be very careful.  There are a few things you need to keep your eye out for.  The first is the annual percentage rate, or APR.  This is the fee (finance charge) you will be charged if you don’t pay your bill in full every month.  Some cards will waive this fee for six, or sometimes even 12 months as part of their introductory offer.  What they won’t list is that the average going rate for all credit cards, which is about 13% at the moment, so you don’t have any context for whether the offered interest rate is a fair deal.

Second, you need to make sure that you are aware of the balance calculation method.  This is how credit card issuers determine the balance on your card, upon which it charges interest.  Most use average daily balances; but what they neglect to tell you is that this is the most advantageous method for the company because new purchases immediately become part of the debt.   Cards that use the “adjusted balance” method are the best deal.  Interest is based on the balance at the beginning of the billing cycle.

Also, make sure you pay attention to their “grace period”.  This is the amount of time you have past your due date to make a payment before you’re hit with finance charges and late fees.  If a card offers one, by law it must be at least 21 days long.  What they won’t tell you is that if the due date falls on a weekend or holiday, you have until 5 p.m. the next business day to pay and avoid a late fee.

Finally, look out for buzzwords like “annual,” “activation,” “acceptance,” “participation,” “monthly maintenance” and/or “account set-up” preceding the word “fee”.  This simply means that you will be paying to own the card. These charges are deducted from the credit line.  What this means is that if a card has a $400 limit and a $100 fee, your available credit is $300.  I would not recommend these cards unless absolutely necessary.

There are some tantalizing possibilities that the financial overhaul bill could mean for you.  Merchants may decide to offer more discounts to people who pay cash.  You could also get a free credit score every time a lender or landlord penalizes you with a lousy interest rate or rejects your application because your score is not up to par.  Many mortgage prepayment penalties would also go away.

A possible problem for consumers is that a last-minute Senate addition could lower the fees that merchants pay to process debit card transactions.  This could mean that banks will lose revenue and they may try to make up for it by adding fees to checking accounts or cutting back on rewards programs.  Retailers say that once card costs fall, they will hire more workers and hold the line on prices.

None of this will be clear until there is a final bill.  It may take years to determine if this bill will actually put money in your pocket or keep your wallet from being taken advantage of.   But the basic outline is clear, so here are the areas to watch as a final bill emerges:

Debit and Credit Cards – I’m sure you have seen the signs that prohibit credit card use unless you are spending a specified minimum at many establishments.  It might surprise you to know that these signs are actually not allowed.  But, the new bill would allow such minimums.  Stores would also be able to offer discounts based on what card a customer was using.  The bill also specifies that cash discounts are acceptable, as are lower prices for people who use debit cards.

Mortgages – First, mortgage lenders would face restrictions on when they can charge borrowers a penalty for paying off their loan before the term of the mortgage is up.  They wouldn’t be able to charge pre-payment penalties at all for mortgages that have balloon payments or for those that allow people to make low enough payments that the mortgage balance rises instead of falls.  For more standard plain vanilla mortgages, pre-payment penalties would only be allowed in the first three years.  Second, the bill forbids anyone who sets up mortgages for customers from accepting compensation that would vary depending on the loan type.  And finally, the bill requires banks to consider applicants’ income, assets and credit history before making a loan.

Credit Score Availability – If you have any sort of adverse action taken against you, such as not getting the apartment you wanted, not getting a loan, or even not getting the best interest rate on a credit card, the person who took the adverse action will now be required to give you your score at no cost.

Its easy for our emotions to take over and force us, or rather convince us to make irrational decisions.  Our money is not exempt from these decisions.  But, you have to remember, from here on out, that you need to only use logic when it comes to finances.  Some people can make a go of it on their own, others employ the assistance of a financial adviser.  One of the biggest mistakes people make is coming to the conclusion that because its on sale, its a good deal.  If you are going stereo shopping and you see two marked at $400, but one is $300 off, which would you buy?  If you use your logic and reasoning, you would buy the one that got a better rating from consumer reports; but if you react like most people, you buy the one that is on sale because its a bargain.  In fact, research has found that people who wouldn’t normally spend that kind of money on a stereo before will buy the discounted stereo based on the fact that it is discounted.  The reality is, $400 is $400, and if you normally wouldn’t spend that kind of money on a stereo in the first place, you shouldn’t do it now.  Before you splurge, evaluate whether the product is worth that in enjoyment.  Also, consider how often you will use the product and if there is a cheaper product of similar quality out there.

The number of people who have money in savings accounts, earning less than 2% I might add, while carrying credit card debt, usually with interest rates above 12%, is mind boggling.  People tend to use what is called “mental accounting” and compartmentalize their funds.  Often people have the money to pay off their entire debt, but choose not to do so because they are afraid to dip into their savings.  The reality is, you are not earning enough interest on your money in savings to justify not paying off your debt.  You are losing money everyday in interest.  If you have the money to pay off your credit card debt and still pay your bills, do it. Worse case scenario, if there is an emergency, use your now zero balance credit cards to help and then pay them off as soon as you can.

Finally, people have begun hoarding money again as a result of the economic climate.  People are so afraid of running out of money, they don’t enjoy the money they have.  If you are legitimately worried about running out of money, you should sit down with a financial planner and work out the math.  Make sure you consider worst case investment scenarios, not just the averages.  That should make you more comfortable about weathering a bad patch in the future.  Then, if you still have more than enough, make a plan that will allow you to enjoy your wealth by either spending the excess or giving it away.  Money, after all, is a means to an end, not the end.  You save it to make you and the people you love calm, comfortable, and happy.  Enjoy it!

No one likes to read the fine print in credit card agreements, but you could be missing out on the perks.  Years ago, credit card companies started introducing “bargains” to customers to try and offset the hefty annual fees they were charging.  Over the years, these benefits have slowly been advertised less and less, thus falling by the wayside and people forget about them.  Today, with the economy the way that it is, there is renewed interest in trying to draw in a new customer base and make them aware of the benefits their card has to offer, as opposed to another.  So how do you figure out what your cards offer to you?  Call each of your credit cards and ask for a list of benefits.

Some of the perks you may be entitled to include first crack at concert tickets, rental car coverage, guaranteed returns, cell phone replacement insurance, trip cancellation coverage, cash without an ATM, emergency travel assistance, help with car shopping, and roadside assistance.  Some of these can be very useful on a regular basis.  For example, if you buy something at a store and they refuse to take it back, many credit cards will allow a 90 return and guarantee your money back.  These things can become very important when budgeting, especially if you are doubling up on certain coverages.  Make sure you read all the fine print to clearly understand your benefits and figure out what your card covers and if you need that same coverage additionally elsewhere.