Cypriot protesters today. AP Photo/Petros Karadjias

The latest financial crisis to take over the news cycle is a tangled situation in the island nation of Cyprus. Chances are, if you pick up a newspaper or turn on the news over the next couple of days, there’s going to be some talk about the European economy, bank policy, and Cyprus.

In a nutshell, the country, whose banks were closely tied to a lot of Greek debt, are in trouble and need a bailout. There was a proposal on the table until just a few hours ago to raise $13 billion. The Cypriot government had proposed raising $7.5 billion through a one-time tax on all deposits, such that if you have money in the bank, the government will just take a piece of it. People are, of course, protesting this plan.

So the answers to the questions posed in the headlines are, according to New York magazine’s Intelligencer (which offers a cool crib sheet of what all is happening):

It matters because lots of people are scared that the situation in Cyprus will spread — that Cypriots will take their money out of the bank en masse, which will cause people in Italy, Spain, Portugal, and other troubled EU countries to fear for the safety of their deposits as well, and start bank runs in their countries. That could lead to a continentwide financial crisis, and the fallout could hit markets in the U.S.

Dang it Cyprus!

Most people think the international meltdown won’t actually happen. But the government just voted against this plan, so the process of coming up with some sort of solution starts again, according to The New York Times. Cypriot banks as well the European Central Bank and the International Monetary Fund on working on a fix.

Consider yourselves up to date.

AP Photo/Jessie L. Bonner

Many do it every month. They turn to payday loans to carry them through until that check comes. In fact, according to statistics about 5.5 percent of US adults spend $7.4 billion annually at payday lenders. And, the majority are African Americans; 12 percent of African-Americans have taken out payday loans, more than twice the figure for whites, reports U.S. News & World Report.

Consumer groups have warned against using these loans because of the high interest rates. Now comes another warning — stay way from applying for a payday loan online.

As the L.A. Times reports, many are being tricked into doing so. Envelopes containing what appears to be a pre-approved credit card arrives in the mail. The accompanying letter instructs people to go online in order to receive up to $500 in your bank account. In actuality it is a payday loan. Internet payday loans are even more deadly to consumers financially. The interest rates on average are higher.

According to the Consumer Federation of America (CFA) Internet payday loan sites, where loans due by the next payday, can cost up to $30 per $100 borrowed and borrowers typically face annual interest rates (APRs) of 650 percent.

Most often, users don’t realize just how much interest they will have to pay. “Only 38 sites disclosed the annual interest rates for loans prior to customers completing the application process, while 57 sites quoted the finance charge. The most frequently posted APR was 652%, followed by 780%,” states the site.

The loan plus the interest will be automatically withdrawn from your bank account on your next payday.

This process is also a way to get people to disclose sensitive financial information over the Internet. Applications will ask for bank account numbers, Social Security numbers and employer information. The CFA advises consumers never to transmit bank account numbers, Social Security numbers or other personal financial information via the Internet or by fax to unknown companies.

And we say steer clear of payday loans all together.

Image: Photodisc

Data analysis by financial publisher Bankrate.com finds that just 39 percent of “non-interest checking accounts” are free, a decline from 45 percent last year and 76 percent the year before. So not only are there fees, but the increase in the number of accounts that have them has been sharp.

The AP reports: “Among other fees, the average monthly service fee on checking accounts is a record $5.48, up 25 percent from the Bankrate survey a year ago. Also, the average fee charged by an ATM operator to a non-customer rose 4 percent to a record $2.50, Bankrate said.”

Banks say they’re charging the fees because of government regulations that could cost them “billions.” In other words, they’re passing the cost along to customers.

Well, customers are not having it. Nearly three-quarters of people say they would change banks if any additional fees were tacked on to their account. And they’re not lying either. About a year ago, Bank of America tried to charge $5 per month for debit card purchases. But after a customer revolt, they decided not to. Wanting to avoid the PR disaster, other banks who had planned additional charges followed in BofA’s footsteps.

Interestingly, Bankrate.com found that houses making more than $75,000 per year were the ones most likely to switch banks if new fees were proposed. Which just shows why people with money have it; they look after every dollar. If your bank adds a charge for using another bank’s ATM, try not to do that. In some cases, you’re paying a fee for using an ATM at a bank that’s not yours, and then your bank will add another fee. One transaction can cost as much as $5. Do that twice in a week, and that’s the cost of lunch. It sounds silly, but walk an extra block at lunch to save on that fee. It’s good exercise.

Even with the fees, it’s important that households have, at the very least, a checking account at a reputable bank. You’ll recall our story from just a couple of weeks ago, saying that more than a fifth of black families don’t have a bank account. Instead they’re using cash and alternative financial services, like payday loans, to take care of bills and expenses. These alternatives have fees that far outweigh those that the banks are charging. If you have to pay, better to pay the lower price.

Image: Creatas

We hate to be the bearers of so much bad news today, but here it goes: According to the Federal Deposit Insurance Corporation (FDIC), 21.4 percent of black Americans don’t have bank accounts. That means a portion of the black community is using money orders, prepaid debit cards and other financial services to take care of everyday banking needs. Usually, those services come with fees and high interest rates, which add up fast. A recent report showed a high number of people are using payday loans for things like food and utility bills.

“The high fee rates of payday loans combined with their use for everyday needs transforms the loan into a high-interest credit line that leaves users in debt for months. The average user takes out $375 a year and spends $520 in interest,” we reported.

But the FDIC research also found that 29.5 percent of those who don’t have traditional bank accounts don’t use alternative  financial services (AFS) either, indicating that they rely on cash.

“Unbanked and underbanked households value the convenience of transaction AFS and perceive AFS credit to be easier to obtain than bank credit,” the report says.

More than a third of black households — 33.9 percent — have a checking and/or savings account but still use these alternative banking services, falling into the category of “underbanked.”

“The highest unbanked and underbanked rates are found among non-Asian minorities, lower-income households, younger households, and unemployed households,” the FDIC report says.

The research was conducted in partnership with the U.S. Census Bureau and 45,000 houses were polled. Overall, 10 million U.S. households (or 8.2 percent) lack access to traditional banking services. That’s one in 12 households. One in five (24 million households) are underbanked. More than a quarter (29.3 percent) don’t have a savings account, but only 10 percent don’t have a checking account. About two-thirds of all households have both checking and savings accounts.

(H/t AP)

Image: iStockphoto

We got word today that 2012 is going to be a record-breaking year for gas prices. With that in mind, a number of credit unions and community banks in 20 cities are giving away gas and information about how you can dump your big bank and take your business to a smaller alternative.

Among the banks participating are Money One Federal Credit Union, based in College Park, MD with operations across the D.C. region; Pioneer Bank, with branches across upstate New York; Hope Credit Union, which has locations in New Orleans, across Mississippi, Tennessee and Arkansas; and Incommons Bank with locations across Texas. Get a full list of participating banks on The Great Gas Giveaway Facebook page. And The Huffington Post has a list of the gas stations and sellers that are participating. The freebie caps at $20 worth of gas and is available to the first 200 drivers.

Now’s the time to take a closer look at your bank and determine whether another financial institution, even a smaller one, can better fill your needs. As HuffPo says, most people have turned to larger banks because they’re accessible and offer digital services. But big banks have come under fire for raising fees on many basic services, lowering the value of doing business with them. And in some cases, due to the economy, bank consolidation or other factors, they’re actually closing down branches. And some small banks can offer better deals (free checking, for example) for those looking for them.

So you could walk away with a new bank account and a full tank of gas.

(Daily Finance) — 1. Find the right bank or credit union for you.The financial institution that works best for your brother may not be the best one for you, so do your own research. It comes down to a matrix of three things for each customer, says Barrington: services, fees and locations.  Ask yourself: How do I use my bank? Do I use a debit card and ATMs? Do I prefer mobile banking and online transactions, or do I prefer paper checks and statements? Is international access important to me? If you’re moving a checking and savings account together, compare the interest rate earned on the savings account with the service charges on the checking account.

(Daily Finance) — Bank of America will start charging debit-card users $5 a month to pay for purchases. The move comes as the cards increasingly replace cash and as banks look for ways to offset the loss of revenue from a new rule that will limit how much they can collect from merchants.  Paying to use a debit card was unheard of before this year and is still a novel concept for many consumers. But several banks have recently introduced or started testing debit card fees. That’s in addition to the spate of other unwelcome changes checking account customers have seen in the past year. Bank of America will begin charging the fee early next year.  Bank of America’s announcement carries added weight because it is the largest U.S. bank by deposits.

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(New York Times) — Moody’s downgraded two of France’s biggest banks Wednesday and maintained the rating for a third bank under review, highlighting the escalating worries about the European banking system and renewing jitters in the global financial markets.  Mounting worries about the exposure of three leading French banks — Société Générale, Crédit Agricole and BNP Paribas — to Greece and their ability to handle a potential default by Greece on its debt had sent the stocks of all three financial institutions sharply lower in recent days.  On Wednesday, Moody’s downgraded its ratings for Société Générale by one notch to Aa3 and for Crédit Agricole to Aa1, citing their exposure to the Greek economy and the fragile state of bank financing markets. It left BNP Paribas at Aa2, saying the bank had “ an adequate cushion to support its Greek, Portuguese and Irish exposure,” but kept it under review.

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(Huffington Post) — After more than a century of delivering financial resources to underserved communities, black-owned banks are struggling to remain relevant — and solvent — in an economic environment full of pitfalls.  Their traditional customer base — lower and middle class blacks, small business owners and churches — has been disproportionately affected by high unemployment, leaving customers with less money to deposit and, in turn, leaving many of these smaller financial institutions with less capital to reinvest in their communities. As customers have fallen on hard times or fallen behind in their loan repayments or mortgages, home foreclosures have become a nagging issue, hamstringing banks’ portfolios with toxic loans. Meanwhile, many customers with big savings and healthy checking accounts opt for the flexibility of larger banks, which offer more branches and a wider variety of services.  ”This minority bank community is really catching hell,” said Michael Grant, the president of theNational Banker’s Association, an 84-year-old trade group that represents minority-owned banks. “They have survived everything, including world wars and Jim Crow, but this has been one of the most difficult periods of all.”

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(Daily Finance) — A year after the Federal Reserve enacted new rules to rein in abusive bank overdraft practices, fees remain high and some institutions actually have slapped on additional penalties, according toa new survey of the nation’s 14 largest banksby the Consumer Federation of America.  Last year, the Fed prohibited banks from enrolling consumers in overdraft protection programs unless they choose to “opt-in.” Previously, most banks automatically covered payments that exceeded the account balance, charging a fee for each offense, along with additional fees if customers didn’t quickly repay the loan quickly. While the rules have helped, major issues remain, consumer advocates say.