ID thieves more likely to target companies than consumers

Today’s identity thieves seem to be heeding the advice of 1930s bank robber Willie Sutton. Asked why he robbed banks, Sutton famously replied, “Because that’s where the money is.” 

So it is with many identity thieves, according to a new study by the Center for Identity Management and Information Protection at Utica College in New York. Its sample of U.S. Secret Service cases found that contrary to the conventional image of identity theft targets as unlucky individuals, the largest category of victims (37 percent) were banks, credit unions, credit card companies, and other financial-services providers. Retail businesses accounted for another 21 percent of victims, with individuals representing 34 percent.

Of course, these statistics will be of little comfort if you fall prey to an identity thief. Here is Consumer Reports’ latest advice on ways to protect yourself. 

'Security' stymies overseas Americans who want credit reports

Americans who live abroad are likely to be mucho frustrated if they request the free credit reports they are entitled to by law. That's according to an investigation by Consumer Reports WebWatch.

WebWatch says the official Web site for requesting free reports, AnnualCreditReport.com, is denying access to anyone with a foreign Internet Service Provider, due to security concerns. Affected are Americans working or retired overseas, including military personnel. WebWatch's report provides more details, along with addresses for anyone wishing to request their reports by conventional mail.

Tips on selling your home in a slow market

If a for-sale sign is planted on your front lawn, it’s likely no surprise to you that home sales are slow. Sales of existing homes plunged 8.0 percent in September from the previous month, and stood at 19.1 percent below sales in September 2006, according to the latest figures from the National Association of Realtors. The national median price for existing homes of all types was $211,700 in September, down 4.2 percent from the $220,900 median a year earlier.

At the end of September, there were 4.40 million existing homes on the market, which NAR says represents at 10.5 month supply at the current sales pace. In a dismal market like this, what does it take to clinch a sale? Real estate experts say that sellers need to set a realistic price and be prepared for some hardball negotiating.

Consumer Reports Money Adviser offers the following tips to help your home stand apart from all the others on the market:

• Pick the right broker.  Look for agents who are listing, marketing, and selling in your area even if the market is slow. Visit potential brokers’ open houses to make sure they greet people, and show the home at its best, including details like removing pets.
• Know the real prices. To negotiate effectively you need to know if if deals in your area tend to include sweeteners. A house may sell for $400,000, but if the owner gave a 3 percent credit for deck repair and a new furnace, that’s a $12,000 reduction. Your real-estate agent should revise your deal to reflect what’s happening in your local market.
• Use staging to enhance your home’s appeal. A professional home stager can make over your home to de-emphasize your taste and make it more appealing to a broad range of buyers. A two-hour consultation can run around $300. Find staging pros in your area at www.stagedhomes.com or www.homestagingresource.com.
• Keep your MLS listing current. If it’s December and the picture of your house on the Multiple Listing Service shows your hydrangeas in full bloom, it’s a dead give away that your home has been on the market for awhile–and potential buyers may look elsewhere.

Calif. wildfires underscore need to review insurance coverage

The loss this week of more than a thousand homes to wildfires in Southern California brings into sharp focus the importance for all homeowners to have proper insurance coverage. Many of the homes affected by this week’s fires are likely to be compensated to some degree by homeowners insurance. Any home that still has a mortgage must also have homeowners insurance, and fire is a covered peril under the typical policy.

But many homeowners may find belatedly that their policies won’t pay as much as they had anticipated. Guaranteed replacement-cost coverage, which promises to finance the rebuilding of your home no matter what the cost, is either too expensive or impossible for many consumers to buy today. Some homeowners also forget to add coverage when they make additions to their homes; their original insurance may not cover the cost of rebuilding that additional space.

That’s why it’s important to review your policy regularly to make sure your policy is keeping up with the increasing cost of replacing or rebuilding your home. Click here for our advice on protecting your home and belongings.

Another peril for California homeowners who’ve lost their homes is the specter of being denied insurance for the next home they build. That happened to a number of Californians following the last major fire in San Diego in 2003. In response, Consumers Union, parent organization of Consumer Reports, this week urged California Insurance commissioner Steve Poizner to prevent insurers from refusing to issue or renew homeowners insurance policies based on claims from this fire and other natural disasters.

In addition, Consumers Union offers some useful information, including a resource list and some claims-filing recommendations, for California homeowners who’ve experienced a loss. For others, this concise guide will help you to prepare yourself for a natural disaster.—Tobie Stanger

Graduate college with less debt

    With the cost of a year at a four-year private university averaging over $30,000, it’s no surprise that many families have to borrow funds to finance their children’s educations. The latest data from the College Board show an average indebtedness of $19,500 among 2003-04 bachelor degree recipients who borrowed to finance their education. And 23 percent of borrowers from private colleges and 14 percent of those at public 4-year colleges graduated owing $30,000 or more.
    A growing portion of educational debt is owed to private lenders. The College Board reports that the proportion of education debt borrowed from banks and other private lenders, as opposed to the federal government, climbed to 20 percent of all educational borrowing in 2005-06, up from 4 percent in 1995-96. Private loans often carry higher interest rates than federal loans, and they aren’t always presented in the same format, so it can be hard for students and their families to make comparisons.
    Consumers Union, publisher of Consumer Reports, offers the following advice to students and their families seeking the lowest-cost way to finance their college education:

1. Find the lowest cost source of funds. Maximize use of scholarships, grants, savings and work-study earnings, which you don’t have to repay. Starting in your senior year of high school and every year you are in college, complete the Free Application for Federal Stuent Aid to determine your eligibility for federal and state grants and work study.

2. Determine how much you need to borrow. Use the estimated annual direct and indirect costs (books, transportation, health insurance) provided by your college financial-aid office. Borrow only what you think you’ll need to meet these costs, even if you are eligible for more.

3. Take out federal loans after you’ve utilized grants and scholarships. They are the best loan sources. The most common federal loan has a fixed interest rate of 6.8 percent. All students are eligible for federal loans. Go to http://studentaid.ed.gov to learn about the three types.

4. Don’t use private loans unless federal loans aren’t enough. Private loans cost more and have variable interest rates with no cap on the upper limit. Make sure you know whether you are borrowing a federal or private loan. The terms of private loans can vary considerably. Consumers Union offers a free worksheet to help students compare financial-aid offers from several sources, including federal and private loans.

5. Avoid using your credit card to finance your education. Credit cards are the most expensive source of funds.—Tobie Stanger

Self-serving survey of the week

And the winner is: The Guardian Life Insurance Company of America for its just-released “Consumer Attitudes: Whole Life Insurance & Retirement.”

We’ve become accustomed to surveys used to position various financial companies and their products as the answer to Americans’ retirement needs. A lot of money is currently up for grabs, after all. But even we were impressed by the big insurer’s attempt to hoist whole life insurance onto that pedestal.

Yes, whole life insurance, the kind derided for decades by consumer advocates as an overpriced, oversold blend of life insurance and an investment account.

The ancient advice to “buy term and invest the rest” still holds for the huge majority of people, in our view. Term insurance, you’ll recall, is the kind that simply pays off if you die--and it tends to be far cheaper than whole life when people most need it.

Indeed, many people won’t need life insurance at all when they reach retirement age. Unless you still have children or others dependent on you for support, there’s little reason to keep buying life insurance. (If you’re of retirement age and happen to have a whole-life policy you’ve been paying premiums on for years, deciding whether to keep it is another issue.)

Among other things, Guardian says its “research shows that 80 percent of individuals and families owning a whole life insurance policy believe they will have enough money to live comfortably during retirement, compared with 60 percent who do not own whole life insurance.”

Maybe so. But people who believe they own the Brooklyn bridge probably feel much the same. Plus, if they’re looking for a way to keep active in retirement, they can always set up a toll booth.

—Greg Daugherty

PS: Those who agree or disagree, vehemently or otherwise, are invited to comment below. You don’t have to leave your name but please indicate any affiliations, so other readers will know where you’re coming from.

Greg Daugherty’s “Retirement Guy” column is a monthly feature of the Consumer Reports Money Adviser newsletter.

Savings: Where to get high yields now

The Fed’s decision to cut rates in September gave a shot of adrenaline to the stock market, yet it also made it tougher on savers to earn a high rate of interest. In the aftermath of the cut many banks slashed their yields on CDs lasting a year or less and on high-yield savings accounts by half a percent or more. At least for the time being, it’s going to be harder to earn 5 percent on your savings. 

But if you’re out hunting for high yields there are still some to be found. Here’s a round-up of the best places to stash some cash:

Savings and Money Market Accounts. Big online savings banks like HSBC, ING, and Emigrant have dropped their rates. Yet at this writing, Capital One and Citibank are still offering 5 percent APYs. Zions Bank is paying 5.3 percent on deposits of $1,000 or more and 5.56 percent on deposits of $50,000.

CDs. Most experts expect savings rates to head lower in the near future, so if you’re trying to lock in 5 percent. look to a certificate of deposit. And if the Fed cuts rates again you’ll be glad you did. Advanta Bank,  Capital One, Centennial Bank, E*Trade, and Nexity Bank are all offering 5 percent or above on one-year CDs. Right now yields are pretty similar among 6 month, one-year, and five-year CDs, so you can choose depending on your time horizon. 

Shopping safe
To compare rates on CDs and high-yield savings accounts go to Bankrate.com.  The more money you deposit, the higher the rate of interest you may get. But as the recent bankruptcy of NetBank shows, you shouldn’t put more than the FDIC-insured $100,000 into any one Internet bank account.

That bankruptcy also underscored that you should check the financial strength of the bank before depositing your money. Bankrate.com and TheStreet.com both assign ratings to banks for financial health. All the banks mentioned above have three or more stars from Bankrate.com. Though you can often get higher yields from low-rated or un-rated banks, a couple extra basis points of interest aren’t worth the hassle of chasing down your money if the bank folds. —Chris Fichera

Protect your child from ID theft?

FamilySecure, a new credit-monitoring and fraud-alert service introduced by the credit-reporting company Experian last week, purports to address a growing problem: identity theft involving kids younger than 18. For $19.95 a month, Experian says it can help.

Experian says many kids find after they turn 18 that someone has stolen their Social Security number and used it to run up bad debts. The resulting credit reports can make it difficult for the victims to get credit themselves.

Jay Foley, executive director of the Identity Theft Resource Center, based in San Diego, agrees that child ID theft is a real problem. He estimates that more than half of such cases involve adult family members who use children’s Social Security numbers to open accounts after ruining their own credit.

To put the risk in perspective, the Consumer Reports Money Adviser newsletter recently noted that just 19 percent of Americans who were told their personal information was compromised reported that the breaches led to credit-card charges, bank account losses, or other ID fraud.

What’s more, many of the protections that credit-monitoring services offer are things you can do yourself, at little or no cost.

FamilySecure does add a new twist to Experian’s traditional credit-monitoring and fraud alert services: a guarantee to pay up to $2 million in expenses related to cleaning up your or your children’s ID-theft mess, including stolen funds, legal expenses, loan application fees, and telephone costs. An Experian spokesperson tells us that a parent or guardian can enroll an unlimited number of children for the one $19.95 monthly fee.

While that may provide some peace of mind, it’s far from inexpensive. A parent enrolling a 1-year-old in FamilySecure would pay more than $4,000 for the service by the time the child turned 18, assuming the annual price never goes up. Parents may have other, perhaps better, uses for that money. —Tobie Stanger

Avoid debit card traps

There are two ways to use a debit card—entering a personal ID number or signing a sales slip like when using a credit card. Which way should you go?

Your bank likes when you sign. That’s because it charges merchants lots more to process signature-based transactions. But signing puts you at greater risk of identity theft and, under federal law, your liability for fraudulent charges on a debit card can be greater than for a credit card.

When you sign, the payment is processed through a credit-card network and the actual withdrawal from your account occurs later, usually within a couple of days. Some hotels, gas stations, and other retailers will put a hold on funds in your checking account during that time. The hold can be more than the amount of your purchase. If you’re running a low balance in your checking account, this can lead to multiple overdrafts—and penalty fees.

We suggest you forgo using a debit card all together for purchases such as rental cars and hotel bills and use a credit card instead. And if you pay off your credit card bill each month, consider using that card for most other purchases as well.  This way your cash will continue earning money in an interest-bearing account until the bill is due.

For more on how those convenient debit cards can hit you in your wallet, see “The Dark Secrets of Debit.” —Andrea Rock

Last chance to get around the ‘kiddie tax’

Tax changes that take effect next year will close a major loophole used by many families to cut taxes while saving money to pay for a child’s education. Age limits on the “kiddie tax,” which taxes children’s unearned income above $1,700 at their parents’ rate, have been extended up to age 24 for certain adult children. It includes full-time students whose unearned income does not provide more than half of their support. Last year, Congress raised the limit from age 14 to 18.

This latest change means there’s little tax incentive now to keep funds in a child’s name. So if you have college-age children or grandchildren who have assets with untaxed appreciation in custodial accounts in their name, you have one last chance to take advantage of the old rules. Suggest to your child that he or she sell the assets and use that money for education or another major expense before the end of the year. For 2007 only, any unearned income over $850 that a dependent child between 18 and 24 has will be taxed at their tax rate, which is likely to be lower than that of their parents. For more on strategies for college savings in the wake of these rule changes, see “Kiddie tax age limits are raised to 24.” —Tobie Stanger