Don’t just keep your emergency fund in a piggy bank, in a cookie jar, or under your mattress. Place it in an earning certificate of deposit, a money market account, or a simple savings account. Even if the yield rate on your emergency fund may be lower than the inflation rate, you are at least mitigating the effects of an erosion of the value of your money and what it can buy.

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Do not be taken in by offers of “no monthly fees” checking accounts. You can bet your bottom dollar the bank will make up for this freebie through some other fee.

Take time to shop around for a bank. Scrutinize their fees. Read the fine print. Keep records and study the entries. Avoid the charges that you can do without the next time around. Talk to the bank manager. Choose only the services that you really need.

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On opening an account, you get a free checkbook. Subsequent checkbooks are charged a fee for which some banks collect as much as $15, and this is for the plain checkbooks. The personalized versions (with background scenery, etc) cost much more –an extravagance and a needless expense. The important thing is that the check is filled out completely and correctly.

You want to make a long distance payment and it won’t get there in time if you send it through the mail. So, you send it through a wire transfer –for which the bank again charges you ($10 for a local bank, $15 or more for an international transfer).

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Remember, however, that every time you use your debit card you are charged a fee. The fees vary from institution to institution. Some charge less than a dollar, other charges much more. So, the more often you use your debit card, the more costly this bank service becomes.

How about ATM cards? If you withdraw from the ATM machine at the bank’s premises, you don’t get charged a transaction fee. Outside the bank premises, you are charged as little as a quarter or as much as a couple of dollars (depending on the location).

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Out-of-town or out-of-state checks take as much as a week before the amount is actually entered into your account for withdrawals or writing checks against. If you happen to write a check before the amount is actually in your account, your check will bounce –which, in addition to causing much embrassment, will cause a penalty to be charged against your account and do some damage to your credit standing.

To save you from overdrawn checks, banks offer overdraft protection. Fees for every overdrawn check that the bank honors can be costly (in some banks, as much as $35). In addition, interest is charged on the amount of the overdraft until it is fully covered.

The best thing to do is be aware all the time of how much money you have remaining in your account (this is what the check stubs are for). Also, give an allowance of at least a week before you withdraw or write a check against out-of-town checks you receive.

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If you maintain a small balance, the bank will try to seduce you to put in more money by waiving the monthly fees. But –you have to look out for the fee that it will charge if you go below the minimum balance. Those extra charges can add up to a tidy sum.

I think this is an unfair exchange. You give the bank your money which they give to other bank customers as loans or mortgages –from which they earn hefty interest revenues. In effect, you have lent the bank interest-free money and –in exchange– it earns interest on your money.

Of course, if you need to regularly pay out significant amounts, you have no choice but to maintain a checking account –but look out for your bank balance and the fees you are charged. Scrutinize your bank statements and know the expenses you incur for availing of a bank service.

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This feature of the New Housing Bill can arrest the deterioration. It also opens up opportunities for fixer-uppers. With properties at record low prices, there is good money to be made. Fixer-uppers, however, have to hold the property until the housing market rises from the subprime depth.

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The Bill also authorizes the Treasury to extend an unlimited line of credit to Fannie Mae & Freddie Mac (which already own or back more than $5 trillion in mortgages) and to purchase stocks in these GSEs, if necessary. These will be increasing the debt exposure of Fannie Mae & Freddie Mac. The fervent hope is, with the learnings from the subprime cirsis, better risks will populate the increase.

The fly in the ointment: Fannie Mae & Freddie Mac are backed by taxes –which backing has been increased by the New Housing Bill. If Fannie & Freddie Mac are hit by another financial tsunami, taxpayers will be saddled with the losses.

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The flies in the ointment are:

$7500 is not 10% of the house price in many places in the country

The tax credit has to be repaid 2 years after the purchase. At the tax credit of $7500, the resulting average increase in your tax bill for 15 years will be $500.

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Lenders are encouraged to write down the mortgage by 10% of the property’s value. If the homeowner is able to transfer the mortgage and refinance through a new lender (say, a 30-year fixed mortgage), the resulting payments will be more affordable. This refinanced loan will be insured by the FHA.

The flies in the ointment are:

your current lender has to agree
you can persuade a new lender to take over
only loans arranged between January 2005 and June 2007 are eligible.

To qualify, you have to prove that your current mortgage is beyond your paying capacity and the refinanced loan has become affordable.

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