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Credit: Consumer borrowing grows in September, but credit card use falls

Americans borrowed more in September to buy cars and attend college, but they charged less to their credit cards for a third straight month. The figures suggest that consumers are growing more cautious about taking on high-interest debt in a weak economy.

Total consumer borrowing rose $7.4 billion in September, the Federal Reserve said Monday. In August, it had fallen the most in 16 months. The September figures reflected a 5.8% increase in borrowing in the category that includes car and student loans. But the category that covers credit card purchases dropped 1% after larger declines in July and August.

Credit card use has fallen nearly 19% since September 2008, the height of the financial crisis. For many consumers, adding debt with high interest rates is too risky when jobs are scarce, pay raises are few and unemployment has been stuck near 9% for more than two years.

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Banking: Bank of America blindsiding cardholders?

Credit card issuers have drawn fire for jacking up interest rates on cardholders who aren’t behind on payments but whose credit scores have fallen for other reasons. Now, some consumers complain, Bank of America is increasing rates based on no apparent deterioration in their credit scores at all.

The major credit card lender in mid-January sent letters notifying some responsible cardholders that it would more than double their rates to as high as 28%, without giving explanations for the increases, according to copies of five letters obtained by BusinessWeek.

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What You Need to Know about Banking

When it comes to choosing a bank, consider both convenience and cost. Some charge flat monthly fees; others charge a fee for each check written and each deposit made. Some charge if you go below the minimum balance, use a live teller, use another bank’s automated teller machine (ATM), make an account balance inquiry, have your canceled checks returned to you each month, or close your account. Most charge for bouncing checks, placing a stop payment on a check, and using your overdraft protection.

Reconcile your checkbook monthly and review your credit card statements for errors. Scam artists are finding new ways to target these two areas and if you’re not alert, you could get taken for a ride.

Review your banking habits, identify the services that are most important to you, compare fees for those services between several different banks, and then choose the bank that

fits your needs for the best price. If you use ATM machines to withdraw cash from your account on a weekly basis, for example, you wouldn’t want to choose a bank that offers free checking but charges a hefty fee for ATM transactions. You may decide to use a traditional brick-and-mortar bank in your neighborhood or an Internet bank in cyberspace.

In today’s world, you’ve got a few options when it comes to banking. One such option is to pick a credit union over a traditional bank. Banks are owned by investors; credit unions are owned and controlled by customers, who are members. Credit unions are nonprofit organizations and return surplus earnings to members by lowering interest rates on loans, increasing interest rates on deposits, or offering free or low-cost services.

The most basic requirement for any bank or credit union you choose is that it must be insured and fully backed by the U.S. government. This ensures that your account will be protected for up to $100,000, or $250,000 for retirement accounts. For credit unions, the National Credit Union Association (NCUA) provides coverage. Banks may be covered by the Federal Deposit Insurance Corporation (FDIC).