Full text of FDIC Consumer News : Spring 2005

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SPECIAL GUIDE FOR YOUNG ADULTS

If at First You
Don’t Succeed…

A Message to Readers

Common Mistakes Young Adults Make with Money
and How to Avoid Them
Everybody makes mistakes
with their money. The
important thing is to keep
them to a minimum. And
one of the best ways to
accomplish that is to learn
from the mistakes of
others. Here is our list of
the top mistakes young
people (and even many
not-so-young people)
make with their money,
and what you can do to
avoid these mistakes in the
first place.
Buying items you don’t
need…and paying extra
for them in interest.
Every time you have an
urge to do a little “impulse
buying” and you use your
credit card but you don’t
pay in full by the due date,
you could be paying
interest on that purchase
for months or years to
come. Spending money
for something you really
don’t need can be a big
waste of your money. But
you can make the matter
worse, a lot worse, by

putting the purchase on a
credit card and paying
monthly interest charges.
Research major purchases
and comparison shop
before you buy. Ask
yourself if you really need
the item. Even better, wait
a day or two, or just a few
hours, to think things over
rather than making a quick
and costly decision you
may come to regret.
There are good reasons to
pay for major purchases
with a credit card, such as
extra protections if you
have problems with the
items. But if you charge a
purchase with a credit card
instead of paying by cash,
check or debit card (which
automatically deducts the
money from your bank
account), be smart about
how you repay. For
example, take advantage of
offers of “zero-percent
interest” on credit card
purchases for a certain
number of months (but
understand when and how

The Federal Deposit Insurance Corporation has been
publishing FDIC Consumer News quarterly since 1993 to
help people be savvier about and safer with their money.
Dealing with personal finances can be overwhelming for
anyone, but especially for people just beginning to manage
money on their own. That’s why we’ve published this special
edition. Our goal is to help young adults — including those
just starting a career or a family and others still in school —
take control of their finances.

interest charges could
begin).
And, pay the entire
balance on your credit
card or as much as you can
to avoid or minimize
interest charges, which can
add up significantly.
“If you pay only the
minimum amount due on
your credit card, you may
end up paying more in
interest charges than what
the item cost you to begin
with,” said Janet Kincaid,
FDIC Senior Consumer
Affairs Officer. Example: If
you pay only the
minimum payment due on
a $1,000 computer, let’s
say it’s about $20 a month,
your total cost at an
Annual Percentage Rate of
more than 18 percent can
be close to $3,000, and it
will take you nearly 19
years to pay it off.
Getting too deeply in
debt. Being able to
borrow allows us to buy
clothes or computers, take
a vacation or purchase a
home or a car. But taking
on too much debt can be a
problem, and each year
millions of adults of all
ages find themselves
struggling to pay their
loans, credit cards and
other bills.
Learn to be a good money
manager by following the
basic strategies outlined in

2

FDIC Consumer News

this special report. Also
recognize the warning
signs of a serious debt
problem. These may
include borrowing money
to make payments on
loans you already have,
deliberately paying bills
late, and putting off doctor
visits or other important
activities because you
think you don’t have
enough money.
If you believe you’re
experiencing debt
overload, take corrective
measures. For example, try
to pay off your highest
interest-rate loans (usually
your credit cards) as soon
as possible, even if you
have higher balances on
other loans. For new
purchases, instead of using
your credit card, try
paying with cash, a check
or a debit card.
“There are also reliable
credit counselors you can
turn to for help at little or
no cost,” added Rita Wiles
Ross, an FDIC attorney.
“Unfortunately, you also
need to be aware that
there are scams
masquerading as ‘credit
repair clinics’ and other
companies, such as ‘debt
consolidators,’ that may
charge big fees for
unfulfilled promises or
services you can perform
on your own.”

Spring 2005

SPECIAL GUIDE FOR YOUNG ADULTS

For more guidance on
how to get out of debt
safely or find a reputable
credit counselor, start at
the Federal Trade
Commission (FTC) Web
site at www.ftc.gov/bcp/
conline/edcams/credit/
coninfo_debt.
Paying bills late or
otherwise tarnishing
your reputation.
Companies called credit
bureaus prepare credit
reports for use by lenders,
employers, insurance
companies, landlords and
others who need to know
someone’s financial
reliability, based largely on
each person’s track record
paying bills and debts.
Credit bureaus, lenders
and other companies also
produce “credit scores”
that attempt to summarize
and evaluate a person’s
credit record using a point
system.
While one or two late
payments on your loans or
other regular
commitments (such as rent
or phone bills) over a long
period may not seriously
damage your credit record,
making a habit of it will
count against you. Over
time you could be charged
a higher interest rate on
your credit card or a loan
that you really want and
need. You could be turned
down for a job or an
apartment. It could cost
you extra when you apply
for auto insurance. Your
credit record will also be
damaged by a bankruptcy
filing or a court order to
pay money as a result of a
lawsuit.
So, pay your monthly bills
on time. Also, periodically
review your credit reports

FDIC Consumer News

from the nation’s three
major credit bureaus —
Equifax, Experian and
TransUnion — to make
sure their information
accurately reflects the
accounts you have and
your payment history,
especially if you intend to
apply for credit for
something important in
the near future. For
information about your
rights to obtain free copies
of your credit report and
have errors corrected, see
the FTC’s fact sheet Your
Access to Free Credit Reports
online at www.ftc.gov/bcp/
conline/pubs/credit/
freereports.
Having too many credit
cards. Two to four cards
(including any from
department stores, oil
companies and other
retailers) is the right
number for most adults.
Why not more cards?
The more credit cards you
carry, the more inclined
you may be to use them
for costly impulse buying.
In addition, each card you
own — even the ones you
don’t use — represents
money that you could
borrow up to the card’s
spending limit. If you
apply for new credit you
will be seen as someone
who, in theory, could get
much deeper in debt and
you may only qualify for a
smaller or costlier loan.
Also be aware that card
companies aggressively
market their products on
college campuses, at
concerts, ball games or
other events often
attended by young adults.
Their offers may seem
tempting and even
harmless — perhaps a free

T-shirt or Frisbee, or 10
percent off your first
purchase if you just fill out
an application for a new
card — but you’ve got to
consider the possible
consequences we’ve just
described. “Don’t sign up
for a credit card just to get
a great-looking
T-shirt,” Kincaid added.
“You may be better off
buying that shirt at the
store for $14.95 and saving
yourself the potential costs
and troubles from that
extra card.”
Not watching your
expenses. It’s very easy to
overspend in some areas
and take away from other
priorities, including your
long-term savings. Our
suggestion is to try any
system — ranging from a
computer-based budget
program to hand-written
notes — that will help you
keep track of your
spending each month and
enable you to set and stick
to limits you consider
appropriate. “A budget
doesn’t have to be
complicated, intimidating
or painful — just
something that works for
you in getting a handle on
your spending,” said
Kincaid.
Want some specific ideas
for ways to cut back on
spending? A good place
to start is the Web site
for the “66 Ways to
Save” campaign
(www.66ways.org).
Not saving for your
future. We know it can be
tough to scrape together
enough money to pay for a
place to live, a car and
other expenses each
month. But experts say it’s
also important for young

Spring 2005

people to save money for
their long-term goals, too,
including perhaps buying a
home, owning a business
or saving for your
retirement (even though it
may be 40 or 50 years
away).
Start by “paying yourself
first.” That means even
before you pay your bills
each month you should
put money into savings for
your future. Often the
simplest way is to arrange
with your bank or
employer to automatically
transfer a certain amount

If you pay only
the minimum
payment due on a
$1,000 computer,
let’s say it’s about
$20 a month,
your total cost at
an Annual
Percentage Rate of
more than 18
percent can be
close to $3,000,
and it will take
you nearly 19
years to pay it off.
each month to a savings
account or to purchase a
U.S. Savings Bond or an
investment, such as a
mutual fund that buys
stocks and bonds.
Even if you start with just
$25 or $50 a month you’ll
be significantly closer to
your goal. “The important
thing is to start saving as
early as you can — even
saving for your retirement
continued on next page

3

SPECIAL GUIDE FOR YOUNG ADULTS

when that seems lightyears away — so you can
benefit from the effect of
compound interest,” said
Donna Gambrell, a Deputy
Director of the FDIC’s
Division of Supervision
and Consumer Protection.
Compound interest refers
to when an investment
earns interest, and later
that combined amount
earns more interest, and on
and on until a much larger
sum of money is the result
after many years.
Banking institutions pay
interest on savings
accounts that they offer.
However, bank deposits
aren’t the only way to make
your money grow.
“Investments, which
include stocks, bonds and
mutual funds, can be
attractive alternatives to
bank deposits because they
often provide a higher rate
of return over long periods,
but remember that there is
the potential for a
temporary or permanent
loss in value,” said James
Williams, an FDIC
Consumer Affairs
Specialist. “Young people
especially should do their
research and consider
getting professional advice
before putting money into
investments.”
Paying too much in fees.
Whenever possible, use
your own financial
institution’s automated
teller machines or the
ATMs owned by financial
institutions that don’t
charge fees to noncustomers. You can pay $1
to $4 in fees if you get cash
from an ATM that isn’t
owned by your financial
institution or isn’t part of
an ATM “network” that
your bank belongs to. For

4

more about how to save on
ATM fees, see the tips
from FDIC Consumer
News online at www.fdic.
gov/consumers/consumer/
news/cnspr04/simple.html.
Try not to “bounce”
checks — that is, writing
checks for more money
than you have in your
account, which can trigger
fees from your financial
institution (about $15 to
$30 for each check) and
from merchants. The best
precaution is to keep your
checkbook up to date and
closely monitor your
balance, which is easier to
do with online and

Pay off your credit card
balance each month, if
possible, so you can avoid
or minimize interest
charges. Also send in your
payment on time to avoid
additional fees. If you don’t
expect to pay your credit
card bill in full most
months, consider using a
card with a low interest
rate and a generous “grace
period” (the number of
days before the card
company starts charging
you interest on new
purchases).
Not taking responsibility
for your finances. Do a
little comparison shopping

Whenever
possible, use your
own financial
institution’s
automated teller
machines or the
ATMs owned by
institutions that
don’t charge fees
to non-customers.
telephone banking (see
Page 7). Remember to
record your debit card
transactions from ATMs
and merchants so that you
will be sure to have enough
money in your account
when those withdrawals are
processed by you bank.
Financial institutions also
offer “overdraft protection”
services that can help you
avoid the embarrassment
and inconvenience of
having a check returned to
a merchant. But be careful
before signing up because
these programs come with
their own costs.

to find accounts that match
your needs at the right
cost. Be sure to review
your bills and bank
statements as soon as
possible after they arrive or
monitor your accounts
periodically online or by
telephone. You want to
make sure there are no
errors, unauthorized
charges or indications that
a thief is using your
identity to commit fraud.
Keep copies of any
contracts or other
documents that describe
your bank accounts, so you
can refer to them in a

FDIC Consumer News

dispute. Also remember
that the quickest way to fix
a problem usually is to
work directly with your
bank or other service
provider.
“Many young people don’t
take the time to check their
receipts or make the
necessary phone calls or
write letters to correct a
problem,” one banker told
FDIC Consumer News.
“Resolving these issues can
be time consuming and
exhausting but doing so
can add up to hundreds of
dollars.”
Final Thoughts
Even if you are fortunate
enough to have parents or
other loved ones you can
turn to for help or advice
as you start handling
money on your own, it’s
really up to you to take
charge of your finances.
Doing so can be
intimidating for anyone.
It’s easy to become
overwhelmed or frustrated.
And everyone makes
mistakes. The important
thing is to take action.
Start small if you need to.
Stretch to pay an extra $50
a month on your credit
card bill or other debts.
Find two or three ways to
cut your spending. Put an
extra $50 a month into a
savings account. Even little
changes can add up to big
savings over time.
Also remember that being
financially independent
doesn’t mean you’re
entirely on your own.
There are always
government agencies,
including the FDIC and
the other organizations
listed on Pages 10 and 11,
that can help with your
questions or problems. 

Spring 2005

SPECIAL GUIDE FOR YOUNG ADULTS

Financial Fraud and Theft: How to Protect Yourself
A big concern today is
identity theft or “ID
theft,” which occurs when
an individual learns
someone’s Social Security
number (SSN), bank
account information or
other details that can be
used to go on a buying or
borrowing binge. While
law enforcement agencies,
financial industry
regulators, financial
institutions and other
organizations are working
together to prevent ID
theft and other financial
crimes, consumers need to
take precautions.
Protect your Social
Security number, bank
account and credit card
numbers, PINs (personal
identification numbers),
passwords and other
personal information.
Never provide this
information in response to
a phone call, a fax, a letter
or an e-mail you’ve
received — no matter how
friendly or official the
circumstances may appear.
Be especially careful with
your SSN. Don’t provide it
to any business unless
you’re convinced it’s
necessary and the
information will be
protected.
Also be aware that friends,
family members,
roommates and workers
who come into homes
make up a large percentage
of identity thieves. They
often are in the best
position to find and use
confidential information.
Guard your mail, which
may include a credit card
or bank statement, an
FDIC Consumer News

envelope containing a
check, documents showing
confidential information,
or other items that a thief
can steal from a mailbox.
Try to use a locked
mailbox or other secure
location for your incoming
mail. Pick up your mail as
soon as possible. And for
outgoing mail containing a
check or personal
information, put it in a
blue Postal Service
mailbox, hand it to a mail
carrier or take it to the
post office instead of
leaving it in your doorway
or home mailbox.
Keep your financial trash
“clean.” Don’t throw away
old ATM or credit card
receipts, bank statements,
tax returns or other
documents containing
personal information
without shredding them
first. ID thieves pick
through trash bins looking
for trash they can turn into
cash.
Use extra care with
personal information on
a computer or over the
Internet. Never provide
bank, credit card or other
sensitive information when
visiting a Web site that
doesn’t explain how your
personal information
would be protected,
including its use of
“encryption” to safely
transmit and store data.
Be on guard against
incoming e-mails
claiming to be from a
trusted source — perhaps a
bank, another company
you know or even a
government agency —
asking you to “update” or

“confirm” personal
information. “Reputable
organizations won’t
contact you to verify
account information online
because they already have
it,” said Sandra
Thompson, a Deputy
Director of the FDIC’s
Division of Supervision
and Consumer Protection.
If you get one of those
fraudulent e-mails (they’re
called “phishing” scams),
don’t click on any links or
attachments because doing
so could activate some
types of spyware or viruses.
Take other precautions
with your personal
computer. Examples:
Install a free or low-cost
“firewall” to stop intruders
from gaining remote access
to your PC. Download and
frequently update security
“patches” offered by your
operating system and
software vendors to correct
weaknesses that a hacker
might exploit. Use
software that detects and
blocks “spyware,” which
can record your keystrokes
to obtain your credit card
number and other personal
information.
Before selling, donating or
disposing of an old
personal computer, use
special software to
completely erase files that
contain financial records,
tax returns and other
personal information.
“If you use someone else’s
computer, such as a
computer provided by
your school, do not put
your Social Security
number or other personal
information onto the
Spring 2005

computer,” added
Thompson. “Even if you
go back and delete what
you typed in, your
personal information will
remain on the computer’s
hard-drive and may be
retrieved by an identity
thief.”
Beware of offers that
seem too good to be
true. Con artists often
pose as charities or
business people offering
jobs, rewards or other
“opportunities.” They
hope that trusting souls
will send cash or checks,
provide SSNs or credit
card numbers, or wire
money from a bank
account.
Be extremely suspicious of
any offer that involves
“easy money” or “quick
fixes.” Be careful if you’re
being pressured to make a
quick decision and you’re
asked to send money or
provide bank account
information before you
receive anything in return.
Also beware of any
transaction for which you
receive a cashier’s check
made out for more money
than the amount due to
you with a request to wire
back the difference — you
could lose a lot of money if
the check is fraudulent.
To learn more about
Internet security, go
www.fdic.gov/news/news/
press/2004/pr9304a.pdf.
To protect against an array
of scams, go to the Federal
Trade Commission’s
consumer information
Web site at www.ftc.gov/
ftc/consumer.htm. 


5

SPECIAL GUIDE FOR YOUNG ADULTS

Five Things You Should Know About…
Credit Cards

1. Use them carefully.
Credit cards offer great
benefits, especially the
ability to buy now and pay
later. But you’ve got to keep
the debt levels manageable.
If you don’t, the costs in
terms of fees and interest,
or the damage to your
credit record, could be
significant.
2. Choose them carefully.
Don’t choose a credit card
just to get freebies (T-shirts
or sports items) or because
there’s no annual fee. Look
for a card that’s best for
your borrowing habits.
Example: If you expect to
carry a balance on your card
from month to month,
which means you’ll be
charged interest, it’s more
important to look for a card
with a low interest rate or a
generous “grace period”
(more time before your
payments are due).
3. Pay as much as you can
to avoid or minimize
interest charges. If
possible, pay your bill in full
each month. Remember,
paying only the minimum
due each month means
you’ll be paying a lot of
interest for many years, and
those costs could far exceed
the amount of your original
purchase.
4. Pay on time. You’ll
avoid a late fee of about $35
or more. But more
importantly, continued late

6

payments on your credit
card may be reported to the
major credit bureaus as a
sign that you have
problems handling your
finances.
And if your credit rating
gets downgraded, your card
company could raise the
interest rate on your credit
card, reduce your credit
limit (the maximum
amount you can borrow) or
even cancel your card.
Late payment on your
credit card also can be a
mark against you the next
time you apply for an
apartment or a job.
5. Protect your credit
card numbers from
thieves. Never provide
your credit card
numbers — both the
account numbers and
expiration date on the front
and the security code on
the back — in response to
an unsolicited phone call,
e-mail or other
communication you didn’t
originate.
When using your credit
card online make sure
you’re dealing with a
legitimate Web site and
that your information will
be encrypted (scrambled
for security purposes)
during transmission.
Major credit card
companies also are offering
more protection by
providing “zero-liability”
programs that protect
consumers from the
unauthorized use of their
card.
In general, only give your
credit card or card numbers
to reputable merchants or
other organizations. 


Checks and Checking Accounts

1. Shop around for a
good deal, preferably an
account without a monthly
maintenance fee.
Banks usually offer several
accounts to choose from
with different features,
fees, interest rates,
opening balance
requirements and so on.
And remember that what’s
good for your parents or
your friends may not be
best for you.
2. Keep your checkbook
up to date by recording
all transactions, including
ATM withdrawals, bank
fees, purchases you make
using a debit card, and any
other deductions that do
not involve writing a
check.
Also promptly compare
your checkbook with your
monthly statement or
review your account
information online or by
telephone.
3. Avoid “overdrawing
your account,” which can
happen if you write a
check or otherwise
attempt to withdraw (by
mistake) more money than
you have in your account.
It also is possible to
overdraw your account
using your debit card at

FDIC Consumer News

the ATM or when making
a purchase. These
transactions can be costly.
(See Page 4 for more
guidance.)
4. Consider Internet
(online) banking. This
service allows you to make
payments or move money
from one account to
another through your
bank’s Web site instead of
(or in addition to) writing
and mailing paper checks.
This saves on the costs of
postage and buying paper
checks.
Online banking also allows
you to monitor your
account without having to
wait for a statement in the
mail.
5. Pay attention to your
bank statements.
Immediately report any
errors or unauthorized
transactions (to protect
yourself from accusations
that you were negligent in
managing your account).
Look at your statement as
soon as possible after it
arrives in the mail or
monitor your account
more regularly on the
Internet or through your
bank’s telephone banking
service. 


Spring 2005

SPECIAL GUIDE FOR YOUNG ADULTS

High–Tech Banking, 24/7
For young adults today, it’s
hard to imagine life
without gadgets and hightech helpers. We want to
make sure you know about
some of the attractive
electronic banking services
beyond ATMs.
Internet banking (online
banking) enables you to
transfer money between
your accounts at the same
bank and view account
information, deposits as
well as loans, at any time.
Internet bill paying
allows you to pay monthly
and one-time bills over the
Internet. Some banks offer
electronic bill payment
free of charge, others
charge a fee that is usually
less than what you would
spend on postage.
Debit cards look like
credit cards but they
automatically withdraw
the money you want from
your account. You can use
a debit card to get cash
from an ATM or to pay
for purchases.
Direct deposit enables
your paycheck and certain
other payments to be
transmitted automatically
to your bank account.
“Direct deposit is free and
it’s fast — there’s no
waiting for the check to
arrive at home and no
waiting in the teller lines,”
said Kathryn Weatherby,
an Examination Specialist
for the FDIC.
Telephone banking
allows you to use your
touch-tone phone to
confirm that a check or
deposit has cleared, get
your latest balance,

FDIC Consumer News

To Buy or Not to Buy…
That is a question many young adults face
when it comes to a home or a car
Renting vs. Buying a Home: Once you start earning
a good, steady income you’ll most likely face this decision:
Should I buy my own home instead of paying rent to
someone else?

transfer money between
separate accounts at the
same bank, and obtain
details about services.
Automatic withdrawals
from your bank account
can be arranged free of
charge to pay recurring
bills (such as phone bills
or insurance premiums) or
to systematically put a
certain amount of money
into a savings account, a
U.S. Savings Bond, or an
investment.
“Your banking can be so
much more convenient
and easier to monitor and
control when you have
access to your accounts 24
hours a day, seven days a
week, from your home or
practically anywhere else,”
added Weatherby.
However, she also stressed
the need to take security
precautions with your
electronic transactions and
your computer, such as
those discussed on Pages 5
and 6. To learn more
about electronic banking
and consumer protections,
see the Winter 2004/2005
FDIC Consumer News
online at www.fdic.gov/
consumers/consumer/
news/cnwin0405. 


Most people want to own a home. Homeownership often
is referred to as “the American dream.” Why is it so
special? Among the reasons: Real estate often is an
excellent investment, perhaps the number one source of
wealth building for families. Owning your own home also
can be a great source of pride and stability. But
homeownership may not be for everyone. It’s a big
financial commitment — starting with the initial shock of
your purchase (including a “down payment” and fees paid
to a real estate agent, the lender and others) followed by
years of monthly mortgage payments, real estate taxes,
property insurance and maintenance costs (such as lawn
care and home improvements).
How can you learn more about renting vs. buying a
home, as well as your rights and your responsibilities as a
renter or a homeowner? A good place to start is
www.mymoney.gov, the new Web site for financial
information from the federal government. Or, go to the
Web site of the U.S. Department of Housing and Urban
Development (HUD) at www.hud.gov, which has answers
to common questions from renters and first-time
homebuyers, a calculator you can use online to compare
buying vs. renting a home, and links to homebuyer
assistance programs across the country.
Buying vs. Leasing a Car: For many young people, their
first big financial commitment will involve getting their
own wheels.
One option is to buy, which may involve
borrowing money to pay for it. Before you visit a
dealership or bid for a car over the Internet, visit our
Web site for tips from FDIC Consumer News that can
help you save time and money, perhaps hundreds of
dollars, when it comes to shopping for an auto loan. See
Kicking the Tires on an Auto Loan: Don’t Kick Yourself for
Paying Too Much online at www.fdic.gov/consumers/
consumer/news/cnsum04/autoloan.html.
Another option is to lease a car, which is similar to
renting it for a few years. The Federal Reserve Board has
published a guide to the differences between buying and
leasing a car, including cost considerations and consumer
rights. Read Keys to Vehicle Leasing online at
www.federalreserve.gov/pubs/leasing. 


Spring 2005

7

SPECIAL GUIDE FOR YOUNG ADULTS

Ages and Stages of Money Management: A To-Do List
To successfully reach your financial goals, a lot depends on what you do and when. Here are just
a few ideas young adults can consider at key stages of their life.
You’re in High
School
Consider earning money
outside of your home,
whether it’s babysitting,
lawn mowing, or working
in a movie theater or
another “real” business. A
job can provide a sense of
accomplishment and
responsibility. It also can
be a good opportunity to
learn about careers and to
“network” with
professionals.
Learn the concept of
“paying yourself first” —
that is, automatically
putting some money into
savings or investments
before you’re tempted to
spend it. Start small if you
have to and gradually
build up.
Consider opening a bank
account, either on your
own or with a parent or
other adult. It’s a good
way to learn about
managing money. You also
may want to start using a
debit card — you can use
it to make purchases but
you won’t pay interest or
get into debt because the
money is automatically
deducted from your bank
account.
Take a personal finance
class or join an investment
club at school.
If you’re planning to go to
college, learn about your
options for saving or
borrowing money for what
will be a major expense
(see the next page).

8

If you (and your parents)
are comfortable with
getting a credit card, you
should know that there are
cards designed just for
teens. One is a credit card
with a low credit limit that
can keep you from getting
deeply in debt. Another is
a pre-paid card that comes
with parental controls,
including spending limits.

You’re in College
Realize that as you pay
bills and debts on your
own you are building a
“credit record” that could
be important when you
apply for a loan or a job in
the future. Pay your bills
on time…and borrow only
what you can repay.
If you decide to get your
own credit card, choose
carefully. Take your time,
understand the risks as
well as the rewards and do
some comparison
shopping. Don’t apply for
a credit card just because
you received an invitation
in the mail or a sales
person was offering a free
gift on campus.
Protect your Social
Security number (SSN),
credit card numbers and
other personal information
from thieves who use
someone else’s identity to
commit fraud. Examples:
Use your SSN as
identification only if
absolutely necessary and
never provide it to a
stranger. Safeguard your
personal information when
using the Internet or
borrowing a computer

provided by your school
(see Page 5).
Consider a paying job or
even an unpaid internship
at a workplace related to a
career you’re considering.

cover big medical bills).
Check into low-cost or
free insurance offered
through your employer.

You’re Starting a
Family

If possible, set aside
money into savings and
investments.

Continue saving and
investing money, including
in retirement accounts.

Try to take a class in
personal finance. Read
money-related magazine
and newspaper articles.

If you don’t already own
your home do some
research to see if this is a
good option for you. A
home purchase can be
expensive but it also can
be an excellent investment
and a source of tax breaks.
Check out educational
resources for first-time
homebuyers (see Page7).

You’re Starting a
Career
Keep your credit card and
other debts manageable.
Maintain a good credit
record.
Save money for both
short-term and long-term
goals. Contribute as much
as you can to retirement
savings, which often can
be used for other
purposes, including a firsttime home purchase. Take
advantage of matching
contributions that your
employer will put into
your retirement savings.
Do your best to stick to a
budget and control your
spending, especially if
you’re still paying back
student loans or working
at an entry-level job.
Although insurance
sometimes seems like a
waste of money, you only
need one accident or
catastrophe to wipe you
out financially. Think
about disability insurance
(to replace lost income if
you become seriously ill)
and health insurance (to

FDIC Consumer News

Make sure you are
properly insured,
including life, health,
disability and home
owner’s or renter’s
insurance.
Talk with an attorney
about the legal documents
you should have to protect
your loved ones if you
become seriously ill or die.
These documents typically
include a will, a “durable
power of attorney” (giving
one or more people the
authority to handle
personal matters if you
become mentally or
physically incompetent)
and a “living will”
(specifying the medical
care you want or don’t
want if you become
hopelessly ill and cannot
communicate your
wishes.) 


Spring 2005

SPECIAL GUIDE FOR YOUNG ADULTS

The Right Way to Right A Wrong

Did You Know…?

How to fix a problem with a financial institution

Web Sites Offer Guidance on Paying for College

Got a question or a
complaint involving a
financial institution but
you’re not sure about the
best or quickest ways to
resolve the matter? Here’s
a good game plan.

College costs keep going up and up. Fortunately, there
are many ways to save for college education, including
tax-advantaged savings plans and U.S. Savings Bonds.
There also are options for borrowing money, including
bank loans and a variety of federal government student
loan programs.

1. Contact the
institution directly.
Experience has shown
that’s the quickest way to
resolve most problems.
Also keep your cool. Be as
professional as possible.
2. Put your complaint in
writing, even if you also
call the institution. Some
consumer protection laws
require that written
complaints be filed. Be
sure to send your letter to
the address that the
institution recommends for
complaints and keep a
copy of all correspondence
and supporting documents.
With phone calls, get the
name of the person you
spoke to and keep good

notes of your conversation,
including the date.
3. Act as soon as
possible. Some laws
require consumers to
report a problem within a
certain time period to be
fully protected.
4. If you can’t fix a
problem on your own
you may contact the
institution’s government
regulator for help or
guidance. To find out who
regulates a bank or other
deposit-taking institution,
you can write or call the
FDIC (see Page 11). Find
contact information and
tips for solving problems
with non-bank financial
companies, such as
insurance companies or
brokerage firms, at
www.consumeraction.gov,
which features the federal
government’s Consumer
Action Handbook. 


Some Federal Laws Protecting Consumers
The Electronic Fund Transfer Act limits a consumer’s
liability if there’s been an unauthorized use of an ATM
card, debit card or other electronic banking device.
The Equal Credit Opportunity Act prohibits
discrimination against loan applicants based on race, sex,
age (provided that the applicant is eligible to enter into a
binding contract), marital status, religion, national origin
or receipt of various types of government assistance.
The Fair Credit Billing Act establishes procedures for
correcting errors on credit card bills. This law also allows
a card user to dispute a purchase made with a card.
The Truth in Lending Act requires creditors to give
consumers information about the Annual Percentage
Rates and other costs of a credit card or loan. This law
also protects consumers if a credit card is lost or stolen.
The Truth in Savings Act requires disclosures about
interest rates and fees and prohibits misleading or
inaccurate advertising for checking and savings accounts.

FDIC Consumer News

For more information on saving and borrowing for
college costs, including what to consider if you’re
having difficulty repaying a student loan, some federal
government Web sites can help. One is the U.S.
Department of Education’s Web site at
www.studentaid.ed.gov, which even includes a calculator
you can use to determine how much to save to meet
college expenses and how to maximize your savings
efforts. Another site, www.students.gov, is a
comprehensive Web site with information from the U.S.
government and other sources on topics such as
financial aid.
The FDIC Protects Deposits to $100,000
The Federal Deposit Insurance Corporation is an
independent agency of the U.S. government that
protects depositors from losing money if their insured
bank or savings institution were to fail. Generally
speaking, your funds in checking and savings accounts
and “CDs” (special accounts you’d hold for anywhere
from one month to five years) are fully insured up to
$100,000, and sometimes more, under current laws.
“If you or your family has $100,000 or less on deposit at
a bank, as is the case with most people, your money is
completely safe,” said Kathleen Nagle, a supervisor with
the FDIC’s Division of Supervision and Consumer
Protection. To learn more, start at the FDIC’s Web site
(www.fdic.gov) or call or write the FDIC (see Page 11).

This FDIC Special Guide May Be Reprinted
The FDIC encourages schools, financial institutions,
personal finance advisors, consumer groups, the media and
anyone else to help make the tips and information in this
special edition of FDIC Consumer News widely available to
young adults.
The newsletter may be reprinted in whole or in part
without advance permission. In addition, the FDIC offers
this special edition online in a PDF version (at
www.fdic.gov/consumers/consumer/news) that looks just
like the printed newsletter and can easily be reproduced in
any quantity. The back page of the PDF version also was
intentionally left blank so that an organization could add its
name, logo, a special message and/or self-mailing
information.
Spring 2005

9

SPECIAL GUIDE FOR YOUNG ADULTS

Take Our “Financial Aptitude Test” — the F.A.T.
You don’t need a #2 pencil or a calculator to take our quiz, but you do need a good understanding of the information
in this special report to get a good score. Think you’re ready?

4. There’s no harm in
having many different
credit cards, especially
when the card companies
offer free T-shirts and
other special giveaways as
incentives. The number
of cards you carry won’t
affect your ability to get a
loan; what matters is that
you use the cards
responsibly. True or False?
5. A debit card may be a
good alternative to a credit
card for a young person
because the money to pay
for purchases is
automatically deducted
from a bank account, thus
avoiding interest charges
or debt problems. True or
False?
6. It makes no sense for
young adults to put money
aside for their retirement
many years away. People in

10

8. The best way to avoid a
“bounced” check — that is,
a check that gets rejected
by your financial
institution because you’ve
overdrawn your account —
is to keep your checkbook
up to date and closely
monitor your balance.
Institutions do offer
“overdraft protection”
services but these
programs come with their
own costs.True or False?
9. All checking accounts
are pretty much the same
in terms of features, fees,
interest rates, opening
balance requirements and
so on. True or False?
10. If you or your family
has $100,000 or less on
deposit at an FDICinsured bank, and the bank
fails, your money is
completely safe. True or
False? 

(See correct answers at right.)

The FDIC offers a variety of assistance to help
consumers understand how to handle their money and
resolve complaints. Start with the consumer information
on the FDIC Web site at www.fdic.gov, where you’ll
find consumer brochures and alerts, back issues of our
quarterly FDIC Consumer News, and an interactive
financial education program called Money Smart that
provides a basic introduction to bank services. You also
can get answers to questions by phone or e-mail (see
next page).
FDIC Consumer News provides continuing financial
education. You can sign up for a free e-mail
subscription. After each new edition is posted to our
Web site, you’ll get an e-mail telling you about the issue
and linking you to any story that interests you. Just
follow the instructions posted at www.fdic.gov/about/
subscriptions/index.html.
Other federal government agencies, including those
listed on the next page and the Federal Trade
Commission (www.ftc.gov), publish consumer
information and have staff, Web sites and other
resources that can help answer your questions on
financial matters. Another good place to start is
www.mymoney.gov, the federal government’s central
Web site for information about managing your money.
Other resources include financial institutions (through
their staff, brochures and Web sites) and personal
finance classes offered by schools, state and local
government agencies and non-profit organizations.
These local classes may involve a partnership with the
federal government, such as those that offer the FDIC’s
Money Smart curriculum. Another example is the
Cooperative Extension System (www.csrees.usda.gov/
financialsecurity), a nationwide educational partnership
of more than 3,000 local offices and 100 state
universities, and a research and education agency within
the U.S. Department of Agriculture. 


Correct Answers
6. False (See Page 3)
7. False (See Page 5)
8. True (See Page 4)
9. False (See Page 6)
10. True (See Page 9)

3. While one or two late
payments on bills may not
damage your credit record,
making a habit of it will
count against you.
True or False?

7. If you receive an e-mail
from a company you’ve
done business with asking
you to update your records
by re-entering your Social
Security number or bank
account numbers, it’s safe
to provide this information
as long as the e-mail
explains the reason for the
request and shows the
company’s official logo.
True or False?

How To Learn More

FDIC Consumer News

False (See Page 2)
False (See Page 3)
True (See Pages 3)
False (See Page 3)
True (See Page 8)

2. Your credit record (your
history of paying debts and
other bills) can be a factor
when you apply for a loan
or a credit card but cannot
affect non-credit decisions,
such as applications for
insurance or an apartment.
True or False?

their 20s should focus
entirely on meeting
monthly expenses and
saving for short-term goals
(such as buying a home or
starting a business) and not
start saving for retirement
until their 40s at the
earliest. True or False?

1.
2.
3.
4.
5.

1. It’s always smart to send
in the minimum payment
due on a credit card bill
each month and stretch
out the card payments as
long as possible instead of
paying the bill in full. True
or False?

Spring 2005

SPECIAL GUIDE FOR YOUNG ADULTS

For More
Information

The Federal Deposit Insurance
Corporation insures deposits at banks and
savings associations and supervises statechartered banks that are not members of the
Federal Reserve System. The FDIC’s services
include a toll-free consumer assistance line,
answers to written questions, and
informational material. Toll-free phone:
(877) ASK-FDIC or (877) 275-3342. The
phone line is staffed Monday through Friday,
8:00 a.m. to 8:00 p.m., Eastern Time.
Recorded information is available 24 hours a
day. The toll-free TTY number for the
deaf/hard-of-hearing is (800) 925-4618. Home
Page: www.fdic.gov. Mail: 550 17th Street,
NW, Washington, DC 20429.

For questions about deposit insurance coverage: Contact the FDIC Division
of Supervision and Consumer Protection at the address and phone numbers
above or by e-mail using the Customer Assistance Form on the Internet at
www2.fdic.gov/starsmail/index.html. The National Credit Union Administration
(listed below) insures deposits at federally insured credit unions.
For other questions, including those about consumer protection laws, or
complaints involving a specific institution: First attempt to resolve the matter
with the institution. If you still need assistance, write to the institution’s primary
regulator listed on this page. Although the FDIC insures nearly all banks and savings
associations in the United States, the FDIC may not be the primary regulator of a
particular institution. Other regulators are listed below. To submit a complaint about
an FDIC-supervised institution, contact the FDIC Division of Supervision and
Consumer Protection as listed above. For inquiries involving problems or complaints
related to the FDIC, contact the FDIC Office of the Ombudsman at the mailing
address and phone numbers listed above, by fax to (202) 942-3040, or by e-mail to
ombudsman@fdic.gov.
The Federal Reserve System supervises state-chartered banks that are members of
the Federal Reserve System. Phone: (202) 452-3693. Fax: (202) 728-5850.
Home Page: www.federalreserve.gov. E-mail: www.federalreserve.gov/feedback.cfm.
Mail: Division of Consumer and Community Affairs, 20th Street and Constitution
Avenue, NW, Mail Stop 801, Washington, DC 20551.
The Office of the Comptroller of the Currency charters and supervises national
banks. (The word “National” appears in the name of a national bank, or the initials
“N. A.” follow its name.) Phone: (800) 613-6743. Fax: (713) 336-4301. Home Page:
www.occ.treas.gov. E-mail: consumer.assistance@occ.treas.gov. Mail: Customer
Assistance Group, 1301 McKinney Street, Suite 3710, Houston, TX 77010.
The Office of Thrift Supervision supervises federally and state-chartered savings
associations plus federally chartered savings banks. (The names generally identify
them as savings and loan associations, savings associations or savings banks. Federally
chartered savings associations have the word “Federal” or the initials “FSB” or “FA”
in their names.) Phone: (800) 842-6929 or (202) 906-6237. Home Page:
www.ots.treas.gov. E-mail: consumer.complaint@ots.treas.gov. Mail: Consumer
Affairs Office, 1700 G Street, NW, Washington, DC 20552.
The National Credit Union Administration charters and supervises federal credit
unions, and insures deposits at federal credit unions and many state credit unions.
Phone: (703) 518-6330. Fax: (703) 518-6409. Home Page: www.ncua.gov. E-mail:
pacamail@ncua.gov. Mail: Office of Public and Congressional Affairs, 1775 Duke
Street, Alexandria, VA 22314.
Your state government also may offer assistance and publish useful information.
Contact your state’s Attorney General’s office, consumer protection office or
financial institution regulatory agency as listed in your phone book or other
directories, or visit your state’s official Web site.

FDIC Consumer News

Spring 2005

FDIC
Consumer News
Published by the Federal Deposit
Insurance Corporation
Donald E. Powell, Chairman
Elizabeth Ford, Assistant Director,
Office of Public Affairs (OPA)
Jay Rosenstein, Senior Writer-Editor,
OPA
Mitchell Crawley, Graphic Design
FDIC Consumer News is produced
quarterly by the FDIC Office of
Public Affairs in cooperation with
other Divisions and Offices. It is
intended to present information in a
nontechnical way and is not intended
to be a legal interpretation of FDIC
regulations and policies. Mention of
a product, service or company does
not constitute an endorsement.
This newsletter may be reprinted
in whole or in part. Please credit
FDIC Consumer News.
Send comments, suggestions or
questions to: Jay Rosenstein,
Editor, FDIC Consumer News
550 17th Street, NW, Room 7100
Washington, DC 20429
E-mail: jrosenstein@fdic.gov
Fax: (202) 898-3870
Find current and past issues of FDIC
Consumer News at www.fdic.gov/
consumers/consumer/news. Refer to
this same index to locate issues that
are specially formatted for being
reprinted in any quantity.
To receive an e-mail notice about
each new issue of FDIC Consumer
News posted on the FDIC Web site,
with links to stories, follow
instructions posted at
www.fdic.gov/about/subscriptions/
index.html.
Consumer information from the
FDIC is available at www.fdic.gov
and from the FDIC Public
Information Center,
801 17th Street, NW, Room 100
Washington, DC 20434
Toll-free phone: (877) 275-3342 or
(202) 416-6940 (Washington area)
E-mail: publicinfo@fdic.gov
Fax: (202) 416-2076

11