Ask Liz Weston

The corpse of health care reform wasn’t even cold before we got a letter from our insurer telling us our premiums were about to increase 40%, to $1,026 a month.

This is for a policy that has a $5,000-per-person deductible ($10,000 family). Eight years ago, when we first secured coverage, the premium was less than $250 a month.

We’re not alone. Our insurer, Anthem, is jacking rates on thousands of its policyholders, as this Los Angeles Times article attests. California’s insurance commissioner says he’s “very concerned.” I’ll bet.

Anthem is blaming this on rising health care costs. Insurance agents are saying Anthem’s trying to rid itself of less profitable policies.

Anthem does offer policies with even less coverage that might save us some money on monthly premiums, but we’d have to go through underwriting again—and our insurance agent doubts we’d pass.

Why is that, you might ask? Do we have cancer, diabetes, heart disease?

No. Neither of us is overweight. We don’t drink or smoke, we exercise regularly and we’re in excellent health.

But I’m over 40, and my husband is over 50, and we each take a prescription medication. Mine’s for an underactive thyroid. My husband’s cholesterol is a little high.

That’s it. But that’s enough to prevent us from getting new insurance.

There is nothing about this situation that isn’t insane.

I don’t believe insurance should cover every sniffle and check-up. I was fine with paying most of our family’s health care costs out of pocket, as long as we had protection against catastrophic expenses. But I also expect insurance companies to hold up their end. When they cherry-pick their customers, drop those who are sick and jam through eye-popping rate increases, they aren’t providing insurance in any real sense of the word. They’re not pooling risk; they’re evading it.

The good news is that we can afford this increase, and probably a few more to come. Others can’t. One of my friends got a notice that her premium is going up to $500, and she can’t pay it. She, like many of Anthem’s other customers, will be going bare.

Kathy Kristof writes in this thoughtful column that the reason health care reform is dead is that Congress doesn’t understand what insurance should really do.

So instead of getting what we needed—coverage that’s available, affordable and there when you need it—we got squat.

UPDATE: The Los Angeles Times is reporting that the Obama Administration has called on Anthem to justify these huge price increases. Health and Human Services Secretary Kathleen Sebelius, who used to head the National Association of Insurance Commissions, wrote that Sebelius said that Anthem’s “strong financial position” made the increases “even more difficult to understand”:

These extraordinary increases are up to 15 times faster than inflation and threaten to make healthcare unaffordable for hundreds of thousands of Californians, many of whom are already struggling to make ends meet in a difficult economy.

Credit card rates are going back to the future.

Instead of a wide range of rates based on the borrower’s risk profile, credit card companies will move to toward a single-rate system for all their customers, Discover CEO David Nelms told the Salt Lake City Tribune recently.

The Credit Card Accountability, Responsibility and Disclosure Act will benefit some people and hurt others, said Nelms, who was in Utah visiting the company’s largest call center operation Tuesday, in West Valley. For those with good credit, “the ultra-low rates of the past 10 years aren’t going to be available anymore.”

That’s how credit card rates used to work, back in the days before credit scoring. One rate, usually around 18%, for all customers–and folks with bad credit need not apply at all.

In February 2008, I warned that “The credit card party is officially over” as rising defaults and the credit crunch led issuers to start raising rates and lowering credit limits. That trend only accelerated after credit card reform passed. Balance transfer offers have gotten much less generous and rewards programs are about to suffer, as well. (I’ll be writing about that next week for MSN Money.)

All told, it’s a good time to get that credit card debt paid off. If you still have a low rate after Feb. 22, when the last of the CARD Act reforms kick in, you should be able to keep it unless you’re late paying by 60 days. Otherwise, you might want to consider locking in a lower rate with a personal loan from a credit union. With good credit, you could get a three-year loan with a fixed rate around 10%.

Balance transfer fees used to be a minor annoyance: typically less than 3% and generally capped at $50 to $75. Now they’re as high as 5% of the transferred balance, with no caps, and issuers may well continue to boost them in their never-ending quest for profits to replace what they lost to credit card reform.

Bill Hardekopf of LowCards.com recently did a round-up of current balance transfer fees by issuer, and here’s what he found:

Chase: 5%
Discover: 5%
Bank of America: 4%
Citi: 3%
American Express: 3%
Capital One: most do not have balance transfer fee, but the Platinum
Prestige card charges 3%

As before, you have to do the math to make sure a balance transfer makes sense, since the fees will offset and could outweigh any interest rate savings. Hardekopf advises that if you need longer than a year to pay off your debt, you should consider a card with a low on-going rate rather than one with an ultra-low teaser rate that will expire.

Hardekopf’s additional advice:

You must pay on time, every time. If you have a late payment, your
introductory period will likely end and you will be assessed the APR
on the transferred balance.

There is no grace period with balance transfers. Interest charges begin at
the time the check is issued to your credit card institution.

You can’t transfer your balance to another card with the same issuer.

It takes about four weeks for the balance to be transferred. Continue to
make all required payments until you confirm that the balance transfers were
made. Multiple balance transfers will process in the order they are
requested on the application.

The new issuer pays the amount of the balance directly to the old issuer
and the amount you owe them will be reduced by the amount you transferred.
The available credit on your new account will be reduced, as if you had made
a purchase.

Transferring a balance does not automatically close your old account. If
you want to close the account, contact the issuer directly.

Issuers have the right to decline balance transfer requests or transfer
less than you requested.

Tax fraud and tax-related identity theft isn’t exactly rampant–there were 50,000 complaints in 2006, compared to nearly 10 million cases of identity theft total. But it does appear to be on the rise, and the last thing you want after the hassle of preparing your return is to find out your refund has been swiped by some bad guy.

Janice Chaffin, head of Symantec’s Norton Business Unit, offers these tax season safety tips:

1. Carefully select your tax prep provider or software.
Visit the IRS Web site for approved software partners that support online filing. If you use a tax prep provider, don’t just go with someone who promises big refunds. Ask if friends have used him/her before.

2. When ready to eFile, make sure your Internet connection is safe.
When you are using an online tax prep service, look for indications that the connection is encrypted (you should see the address change to “https” and a lock symbol appear in the browser frame). Don’t prepare or file taxes on a shared, insecure connection like the open Wi-Fi network in your neighborhood coffee shop.

3. Turn off (or remove) any peer-to-peer file sharing services.
If you use peer-to-peer services (like LimeWire, Kazaa, BitTorrent), you can inadvertently allow a criminal anywhere in the world to find your tax file record (usually a pdf file) on your computer, revealing all your personal information. It is best not to use these services, during tax season or any other time of the year.

4. Encrypt and secure any pdf copies of the return on your computer
In your My Documents view, right-click a file name to select “Encrypt.” Print out a copy and put in a safe location in your home. Back up or store additional copies to save someplace else.

5. Make sure your Internet security software is on and up-to-date.
Symantec advises all computer users to keep their security software updated; keep their computer systems clean and continue to use general best practices for staying safe online. Find more information on how to prevent criminals from invading your computer here.

If you’re tempted to feel sorry for credit card companies, what with all the new restrictions kicking in Feb. 22, read on.

Capital One was recently sued by West Virginia’s attorney general for a variety of alleged misdeeds, including sending customers a debt repayment plan disguised as an offer of new credit. (Hat tip to Bill Hardekopf at LowCards.com for bringing the suit to my attention.)

Capital One sent the solicitations to people whose balances had already been charged off as bad debt, West Virginia Attorney General Darrell McGraw alleged in his complaint. Although it looked like a new credit card offer, what Capital One was really offering was $1 of new credit in exchange for the customer agreeing to have the charged-off balance transferred to the new card, McGraw said.

The agreement allowed Capital One to charge interest, late fees and over-the-limit fees on debt that otherwise would have been beyond its reach, the complaint alleges. The agreement also allowed Capital One to re-age the debt, restarting the statute of limitations.

According to a Legal Newsline article by Nick Rees:

“Capital One’s practice of offering nominal extension of credit, if and only if, the consumer agreed to pay off a debt too old to be sued on is tantamount to loan sharking,” McGraw said.

The complaint alleges Capital One also:

• issued multiple low-limit credit cards, each charging exorbitant fees, rather than raising credit limits on consumers’ existing accounts
• unconscionably imposed over-the-limit fees on consumers’ accounts
• sold services to consumers who could not benefit from the services
• billed and attempted to collect for credit card accounts that were never activated.

I’ve made a big fuss about the difference between fair play and foul play, and how often credit card companies crossed the line. But this little scheme may have crossed another line: the one between foul play and pure evil.

Debt settlement is the real Wild West–lots of bad guys and no sheriff in sight. Even the companies that aren’t outright scams might charge you thousands of dollars and not resolve your debt problems.

Federal regulation may be on its way, but until then (and probably even afterward), it’s buyer beware.

Here are three signs that indicate you’re dealing with one of the bad guys:

• They refer to a “new law” or “federal bailout package” that allows consumers to cut their debt “legally.” There’s no such animal.
• They say or imply you can settle debt without affecting your credit. Debt settlement trashes your credit scores.
• They use “as seen on CNN” or other media outlets, but when you click on the link it simply brings you to another debt settlement advertisement.

Anyone who is considering debt settlement should first talk to an experienced bankruptcy attorney about his or her options. If you truly can’t pay your bills, you may be better off getting them erased through bankruptcy than throwing money at debt settlement.

For more, read:

Debt settlement: a costly escape

When debt settlement makes sense

Damned by debt consolidation: settlement could be a trap

Earlier this week I told you how to shop for new bank (or credit union); a week before, I’d written about why you might want to.

As promised, here’s what to do after you’ve made the decision to jump ship.

1. Make a list. Review your transactions for the last few months and list all the automatic and recurring payments being made out of your current account. Don’t forget to include any automatic payments that occur less often, such as quarterly, biannual or annual payments.
2. Open your new accounts. If you open your accounts with a check, there will typically be a holding period before you can access your funds. Also, ask about getting true overdraft protection, which links your checking account to a savings account, credit card or line of credit.
3. Set up online access. Familiarize yourself with the new bank’s system and add the accounts to any personal finance software or site you use (Quicken, Mint, Yodlee, etc.) If you use online bill pay, you can start adding payees to the new bank’s system.
4. Switch any direct deposits. You’ll typically need to contact your employer’s human resources department and fill out a form with your new bank’s routing number and your account number.
5. Transfer any automatic or recurring payments. If you were making payments from your old bank’s bill pay system, set up the payments on the new bank’s system. If the automatic debits are coming from billers, contact those companies and give them your new bank’s information. (You may be able to do this on the billing companies’ Web sites.)
6. Monitor both accounts for a few weeks. Check in frequently to both banks to catch any messed-up or missing payments.
7. Shut down the old accounts. Contact your old bank and ask how it wants you to proceed. Ask that any remaining balances in your accounts be mailed to you or transferred to the new bank. Cut up debit cards and checks associated with the old account.

Public radio’s Marketplace Money has asked me to help field listener questions about their money.  In this segment, Tess Vigeland and I talk about ways to cope with credit card debt, and what a dad needs to know about his adult son’s debt.

CLICK HERE to listen to the latest show.

Too many people stick with a bank that they hate because they don’t know there are better options—and because they dread the hassle of switching their money.

In this post, I’ll cover how to shop for a new bank or credit union. In this post, I write about ways to make the switch as painless as possible.

The best fit for you will depend on how you use banking services and your priorities.

Start by looking at your transactions for the last three months or so. What was the lowest balance in your checking and savings accounts over that time? If you constantly run on fumes or close to it, you’ll want accounts with low minimum balance requirements or that waive minimums when you arrange direct deposit of your paycheck. (My credit union requires a $1 minimum for its basic checking account. Big banks may require a $500 to $1,000 minimum balance to avoid a fee unless you have direct deposit.)

Cast a wide net. Don’t limit your search to name-brand banks. Community banks and credit unions can be good options as well. Move Your Money can help you find top-rated community banks by ZIP code, while Find a Credit Union and CULookup offer similar services for CUs. Community banks are covered by the FDIC insurance that applies to bigger banks, and most credit unions are covered by the National Credit Union Share Insurance Fund, which like the FDIC is backed by the full faith and credit of the U.S. government.

Check your target institution’s Web site for the closest branches and ATMs. You can always get extra cash at a grocery store with a debit card, but most people like to have a fee-free ATM and a branch or two close to where they live or work. Credit unions usually belong to the Co-Op Network, giving you access to more than 28,000 fee-free ATMs across the country.

Also check interest rates for checking and savings account. Getting any interest on your checking at big banks typically requires a huge balance ($10,000 and up), but some community banks offer decent rates on so-called rewards checking accounts. Get all the details before you sign up, since a certain number of transactions and a minimum balance are typically required.

Savings account rates vary as well. My big-bank savings account offers a fraction of 1%, while my credit union currently offers a 7% return on the first $500 deposited.

Test their customer service. Don’t just check them out on the Web. Call and talk to a human to ask questions, so you can see how you’re treated. Then, before you commit, visit a branch and ask some of the same questions again in person. What an institution promises and what it actually delivers in customer service can be worlds apart, and there’s nothing like face-to-face contact to help you decide.

What to ask (and make sure to write down the answers so you can compare your options):

• What are the minimum balance requirements (if any) for each account? What monthly fee will I pay if my account goes below the minimum or if there is no fee-free minimum?
• Do you reimburse for transactions made at other banks’ ATMs? If so, how many fee-free transactions can I make each month?
• Do you charge to talk to a teller? If so, how much?
• Do you offer online bill pay for free? Is there a limit on the number of bills I can pay?
• Do you charge for paper statements? If so, how much?
• What do you charge for transfers to outside accounts?
• Do you offer overdraft protection? How much does it cost? (What you want is true overdraft, which links your checking account to a savings account, line of credit or credit card in case a transaction exceeds your available balance. Don’t settle for “courtesy overdraft” or “bounce protection,” which can cost you a fortune in bounced-transaction fees.)
• If you use Quicken, QuickBooks or other personal finance software, ask about fees for those services.
• If you frequently send money out of the country, find out how much is charged for that service.

Next up: How to say goodbye.

W-2s and other tax documents are starting to arrive in the mail, signaling the beginning of the U.S. tax season for individual taxpayers.

Oh, yay.

Not only are taxes a pain to confront, but they’re easy to get wrong. Here are five big mistakes to avoid:

Failing to file. Every year, I hear from people who have hidden under a rock for years–years–when tax season rolls around. They want to come clean, but are afraid the IRS will send storm troopers to carry them away. Relax: simple failure-to-file isn’t a crime, although it can be costly. Failure to file penalties are much worse than failure to pay penalties, and you lose out on any tax refunds you might have gotten after three years have passed. The fix is straightforward: find yourself a CPA or other good tax pro, bring what documentation you have and take your medicine.

Doing complicated taxes themselves. I’ve used a tax pro ever since starting my first freelance business many years ago, and that was even in the years when I was doing our taxes eight or nine times a year to test out various tax software. My pro has always found deductions I missed and been a great resource year-round. If you’ve got a business or a lot of investments, find yourself an expert. At the very least, you should be using software like Turbotax–today’s tax code is simply too complex to tackle by hand.

Paying with a credit card. Whatever rewards you’re getting from using a card are more than offset by the fees charged to use plastic. If you can’t pay right away and have a very low rate on your card, charging could make sense, but the IRS’ payment plans also come with pretty low interest rates.

Using rewards points to pay your taxes. American Express just announced that you can do this with their rewards cards, but the exchange rate is awful. You need 200 points to pay $1 in taxes, according to CreditBloggers.com. (Normally, you want an exchange rate of at least 1 cent per point or mile; CreditBloggers points out you can get a $25 Barnes and Noble card on Amex’ site for 2500 points, and even the less desirable exchange rates that typically apply for merchandise typically give you 100 or so points to the dollar.)

Taking out a refund anticipation loan. If you file electronically and opt for direct deposit, you can get your refund in about 10 days. That’s all. It’s insane to pay an interest rate that’s effectively in the triple digits to get your money faster from a tax preparer that offers refund anticipation loans. If you need the money so badly, then file earlier in the season; your wait time may be even shorter.