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Getting that first credit card is a big step for your child; one that can have serious negative consequences for years to come.

Your high school graduate wants a credit card. Is that good or bad?

Experts say it all depends on the child and how he or she will use the card.

“If they look at the card as a ticket to more spending, you should be worried,” said Laura Levine, executive director of the Jump$tart Coalition for Personal Financial Literacy. “If they know how credit cards work and are responsible, then it can be a good thing.”

Even though they don’t have a credit history yet, college-bound students may find offers that are comparable to what someone with excellent credit might get. The credit limit will be much lower, but the terms – including rewards – may be the same.

“This is because kids headed to college have a much higher earnings potential than those who are not,” explained Odysseas Papadimitriou, CEO of CardHub.com. “Banks know this and they want to build a relationship with them to get into their wallet as early as possible. “

CardHub.com just published its 2013 list of the Best Credit Cards for High School and College Graduates. None of the cards has an annual fee.

“A card without an annual fee allows the student to start building credit for free – and that is the number one priority,” Papadimitriou told me. “You build credit faster by using the card and paying in full each month, but you still build credit even if you throw it in a drawer or cut it in half. The card company will report to the credit bureaus that you are in good standing.”

Some other options
College kids are a prime target for credit card companies, so they will get offers as they prepare to head off to school.

The law says anyone under 21 who applies for a credit card must have a co-signer on the account or be able to show their ability to pay the bills. A part-time job could be enough to qualify.

“Parents need to remember that a lender may approve their kid for that credit card, even if they don't approve,” said Gerri Detweiler, personal finance expert at Credit.com.

Detweiler and other financial experts encourage parents not to become co-signers because of the potential risk: you put your credit on the line with no real control over how your child uses the card. Legally, you are liable for any debt they incur.

There is a better way.

John Ulzheimer, president of consumer education at SmartCredit.com, advises parents to add their age-appropriate children as “authorized users” on the card. He calls it “a credit card with training wheels.”

“This allows your child to have a credit card with their name printed on the front of it, but as the primary cardholder you maintain all the control,” he explained. “You can essentially manage your kid’s use of the card, almost in real time, and kick them off the card if they start to abuse it.”

Of course, as the primary cardholder, you are still responsible for paying the bill.

Go this route and your child gets all the benefit of having their own credit card, but you don’t have the downsides of a cosigner.

“Your child is actually building a credit history by being an authorized user because the account is showing up on their credit reports,” Ulzheimer said.

We need to talk
Getting that first credit card is a big step for your child; one that can have serious negative consequences for years to come.

Credit scores, which are based on a person’s credit history, will determine their ability to get credit in the future and what price they will pay for it.

Someone with a low credit score may not be able to rent an apartment, get a car loan or open a wireless phone account. Credit reports are now used by employers to screen job applicants and some insurance companies to set rates (where allowed by law).

It’s important to have a conversation with your child about the consequences of not managing that card properly. They need to understand that bills are to be paid in full and on time each and every month.

“One late payment can literally drop your credit score 50 to 80 points or more,” Detweiler explained. “A lot of adults don’t realize that, much less kids who are just starting out. So you want to talk to your kids about how this impacts their credit and how important it is to pay those bills on time.”

Where things stand
A new study from Sallie Mae finds that more college students these days “exercise caution with credit cards” and that’s encouraging.  A third of student card holders have a zero balance, 42 percent have a balance of $500 or less and just 24 percent have a balance of more than $500.

The survey found the percentage of college kids with credit cards has declined during the last two years, from 42 percent in 2010 to 35 percent in 2012. Freshman are least likely to have a card in their name (21 percent) compared to 60 percent of seniors.

Sallie Mae reminds students to only charge what they can afford, pay the bill before it’s due to avoid accidental late fees and to remember that a credit card is a convenience, not a source of spending money.

Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitter or visit The ConsumerMan website.

The Great Recession hurt a lot of people and this loss of wealth will follow millions into retirement, according to a report released Thursday.

Early baby boomers (those born between 1946 and 1955) may be “the last group on track to retire with enough savings to maintain their financial security through their golden years," the study finds. But the rest of us are in for a world of hurt -- especially Gen-Xers (born between 1966 and 1975).

The study by Pew Charitable Trusts, Retirement Security Across Generations: Are Americans Prepared for Their Golden Years? shows that early boomers lost 28 percent of their median net worth; late boomers (born between 1956 and 1965) lost 25 percent from 2007 to 2010. However, Gen-Xers lost nearly half (45 percent) of their wealth – about $33,000 on average – during that same time period. And they didn’t have that much savings to begin with.

“Gen-X is the first generation that’s unlikely to exceed the wealth of the group that came before it and face downward mobility in retirement,” said Erin Currier, director of Pew’s Economic Mobility Project. “They have lower financial net worth than previous groups had at this same age and they lost nearly half of their wealth in the recession.”

Financial planners generally recommend that you save enough to replace 70 to 100 percent of your pre-retirement income when you leave the workforce. Pew’s research shows the typical Gen-Xer will only be able to replace half of that income.

When it comes to retirement savings, late boomers (born between 1956 and 1965) are more like Gen-X than early boomers. They’re on track to replace only 60 percent of their pre-retirement income.

RELATED: Retirement age in US rises to 61 (from 57 in the 1990s

You may be surprised to learn that some people saw their wealth grow during the recession. Pew found that a sizable minority of households – 39 to 44 percent – had a positive change in wealth between 2007 and 2009.

“As an example, more than a third of households in this age group experienced gains in home equity during that two-year period,” Currier noted.

Gen-X: the most financially-challenged group
Gen-X wasn’t in very good shape before the recession hit. Their net worth was less than other age groups that came before them. They also had lowest rates of home ownership of all the groups studied.

The recession only made things worse. They experienced the largest percentage decline in median net worth, losing nearly half of their wealth.

Gen-X has significantly higher levels of debt than those in the other groups did at the same age. Pew found that the average Gen-Xer has already accumulated $80,000 in debt.

Key Findings

• Early boomers are financially prepared for retirement: Those born between 1946 and 1955 are approaching retirement in better financial shape than the age groups that came before them. This group benefited from both the dot-com boom and the housing bubble.Americans in their 50s and 60s have higher overall wealth, financial net worth, and home equity than Depression babies (born between 1926 and 1935) or war babies (born between 1936 and 1945) had at the same ages.
• Wealth accumulation and savings for Americans born after 1955 is mixed: Neither Gen-Xers (in their 30s and 40s) nor late boomers (in their late 40’s and 50’s) are on track to exceed the financial position of those immediately preceded them.
• Baby boomers and Gen-Xers have significantly lower asset-to-debt ratios than do older Americans: Depression and war babies spent the last two decades reducing their debt, while baby boomers and Gen-Xers have been accumulating it. In 2010, war babies had accumulated assets worth 27 times more than their debts. In contrast, assets for late boomers were only four times their debts. Gen-Xers’ assets were about double their debts.

Pew’s Erin Currier believes there is a clear takeaway message for America’s policymakers from this data.

“As they focus attention on America’s retirement security, particular consideration should be paid to helping  the youngest groups change course to make up for these losses in order to prevent downward mobility in the long-term,” she said.

Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitter or visit The ConsumerMan website.

Credit scores are critically important. They determine your ability to obtain credit and how much you will pay for it. 

A bad score could prevent you from getting a credit card or renting an apartment. It can increase the cost of services, such as cell phone, electric and cable.

And yet, a lot of people don’t know much about credit scores.

A new survey done by the Consumer Federation of America and VantageScore Solutions finds that:

• Two-fifths do not know credit card issuers and mortgage lenders use credit scores to decide about granting credit and pricing.
  Two-fifths incorrectly believe personal characteristics such as age and marital status are used in calculating credit scores.
•  Between one-quarter and one-third do not know when lenders are required to inform them of the credit score used in their lending decision – after they apply for a mortgage, when they are turned down for a loan and when they don’t receive the best price or terms.
•  More than one quarter do not know the key ways to raise or maintain their scores – keeping credit card balances low and not applying for several cards at the same time.
•  More than one-third incorrectly believe credit repair agencies are always or usually helpful in correcting credit report errors and improving scores. They are not.

How can you raise your credit score?
To improve your credit score, do things that show lenders you are trustworthy and a low risk. That includes:

• Pay your bills on time every month.
• Keep a low balance on your credit and charge cards.
• Pay down debt rather than just move it around.
•  Don’t open new credit accounts rapidly.

You should check each of your three credit reports for errors at least once a year. It’s free. Go to www.annualcreditreport.com.

To help you learn more about credit scores, the Consumer Federation of America and VantageScore Solutions have updated their interactive  quiz Credit Score Quiz (English) or Credit Score Quiz (Spanish).

During a TODAY Money web chat on Wednesday, John Ulzheimer, president of consumer information at SmartCredit.com explained the ins and outs of credit reports and answered readers questions. You can read the full chat:

Let’s be honest: Interest rates on savings and money market accounts are a joke right now. You’d be hard-pressed to find a financial institution offering even a one percent APY. That doesn't come close to keeping up with inflation. 

Internet banks continue to pay higher rates than traditional banks, according to a new report from MoneyRates.com. The yields at online banks are nothing to write home about, but they’re significantly better than what most brick-and-mortar banks offer.

“Not only are online bank rates on average about six times the level of traditional bank rates, but those two sets of rates are going in different directions,” said Richard Barrington, a senior financial analyst at MoneyRates. “Over the past six months, online bank rates have been rising while traditional bank rates have continued to fall.”

Here are the rates paid in the first quarter of 2013, according to the MoneyRates survey:

Average Savings Account (annual APY)
Traditional banks: 0.015 percent
Online banks: 0.630 percent

The best rates were at Ally Bank, American Express, Sallie Mae Bank, Discover Bank and GE Capital Retail Bank.

Average Money Market Account (annual APY)
Traditional banks: 0.154 percent
Online banks: 0.661 percent

The best rates were at Sallie Mae Bank, Ally Bank, GE Capital Retail Bank, EverBank and Nationwide Bank.

(Read the complete list of America’s Best Rates.)

Greg McBride, senior financial analyst at Bankrate.com, points out that if you’re not comparing what you earn on your traditional savings account with what you could make at an online bank, you could be leaving money on the table.

“Yes, returns are low everywhere, but so is inflation right now,” McBride said. “Squeezing out every little bit of return on your savings gives you the best shot at preserving the buying power of that savings."

Other advantages to online banks
A bank doesn’t need tellers and branches to deliver good customer service. Another new MoneyRate survey finds customers who bank online are slightly more satisfied with the service they receive than those who do not.

The satisfaction rate was 86 percent for online customers and 83.7 percent those who use a brick-and-mortar bank.

“We found that customers don’t seem to miss their bank tellers that much,” Barrington told me.

That’s because online banking is more accepted these days, Barrington explained. People feel comfortable using ATMs, computers and smart phones to interact with their bank. At the same time, banks have closed branches to cut costs. So, they’re not as conveniently located as they once were.

One more benefit: Surveys show online banks tend to have fewer fees and lower fees. That’s a big plus for many people in search of a new bank.

Is online banking for you?
Look at your own banking habits. If you visit your local bank a lot and like the personal interactions you have there, then you may want to stay put.

If you haven’t set foot inside a branch in ages because you do all of your banking online or through ATMs, you may want to look into online banking to boost your return, lower your fees or both.

The decision between a traditional bank and an online bank doesn't have to be all or nothing.

“You can still have your checking account at the local bank, but have your savings account at an online bank to get a better return,” explained Bankrate’s McBride. “Then link the accounts to easily move money back and forth with a couple clicks of a mouse.”

More Information:

NextAdvisor.com: Savings Account Calculator

Bankrate.com:  Highest Yield Money Market and Savings Accounts

Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitter or visit The ConsumerMan website.  

Ilyce Glink

It’s a seller’s market in many parts of the country right now. That’s a big change from the past six or seven years. With buyers competing for the same property, home prices are going up. It’s a good thing mortgage interest rates are at historic lows.

“If you want to get the home of your dreams, you need to be really serious,” advises real estate expert Ilyce Glink, author of the book Buy, Close, Move In. “You've got to get pre-approved, not pre-qualified for your purchase. You have to know what you want and how much you feel comfortable spending (it may be less than what the bank suggests). If you know what you want and how much you want to spend, and you've spent a lot of time in your neighborhood of choice, when the right property comes up, you can pounce.”

During a TODAY Money web chat on Wednesday, Glink, shared some great advice.

TODAY: What do you say to all of the people who still find themselves underwater? Will they ever get back to the plus side again and have some equity in their home?

Ilyce Glink: We're seeing tens of thousands of Americans get back to positive equity every month, as home prices rise. In some places, like Georgia, about 40 percent of all homeowners are underwater. But the national average is now 20 to 23 percent.

Those who bought in 2005 to 2007 might not go positive for the next 10 years, if they were in the hardest hit areas, but most other people will or they will do short sales and have the debt be forgiven.

We will get most of America right-side up again and probably by 2015.

TODAY: What’s the biggest mistake buyers make?

Ilyce Glink: Buyers often make the mistake of buying in the wrong location. The think they can live somewhere, but don't really take the time to thoroughly investigate the neighborhood. They don't walk by the school or visit local stores or dining establishments.

They might check out the school district for the age their kids are today, but not the schools they'd go into 5 years from now.

And, speaking of the future, buyers often forget that they're supposed to live in this house for 5 to 10 years – they think they'll flip it in 24 months and triple their money. NOT!

TODAY: And what’s the biggest mistake sellers make?

Ilyce Glink: Most folks think that their home is worth much more than it is – even if it is in great shape. It can really get in the way of selling your home.

When I tell people that homes values are rolled back to where they were in 2003, a full 10 years ago, they don't fully comprehend what that means. But think back. Your home was probably worth 20% less than it is today – or even less.

Read the rest of the Q & A below:

Crushing student debt is not only killing dreams, it’s hurting the broader economy.

The Consumer Financial Protection Bureau (CFPB) is warning of the “potential domino effects” to the economy of high student debt.  A just-released report from the consumer watchdog highlights the ways this debt can deplete savings, limit spending, and shape choices about a graduate’s career path and where to live.

“College can open up many opportunities, and we do not want that college degree to become more of a burden than a blessing for those saddled with unmanageable debt in a tough employment market,” said CFPB director Richard Cordray in a statement. “So we are concerned that unmanageable student loan debt may be harmful to recovering consumer markets and may be dragging down borrowers’ lives.”

The average amount of student loan debt for the Class of 2011 was $26,600, a 5 percent increase from approximately $25,350 in 2010, according to The Project on Student Debt.

In February, the consumer bureau asked for suggestions on ways to encourage affordable repayment options for those with existing student loans.  It received more than 28,000 comments from borrowers, lenders, businesses and government officials.

An analysis of these comments found several major areas of concern.

• Housing: Student debt may reduce home ownership by limiting the borrower’s ability to qualify for a mortgage or even save for a down payment. This is troubling because first-time home ownership stimulates the economy and makes it possible for existing homeowners to “move-up” to another house.
• Small Business Development: Outstanding student loans can limit a graduate’s ability to save enough capital to start a small business or access small business loans.
•  Retirement Savings: Student loan payments can divert cash from retirement savings. The CFPB cites recent research that shows only half the workers under age 30 have enrolled in their employer’s 401(k) plan and barely 40 percent contribute enough to receive a full employer match. Graduates may need to rely on their parents, who are nearing retirement age, to help pay their debt.

Rohit Chopra, the CFPB’s student loan ombudsman, told NBC News the comments show student loan debt is having a negative effect on how millions of people live their lives.

“Many borrowers expected their college education to be a vehicle to a better life,” Chopra said. “College graduates do earn more money than those who do not have a college degree, but for those with heavy levels of student loan debt it might mean a more difficult time buying a car, simply to get to work. If their credit is hurt, it might mean they won’t pass employment verification checks to get that job in the first place.”

Hopefully, things will get better as the economy recovers and graduates are able to get better-paying jobs that let them pay off debt. But right now, Chopra said, “many borrowers, particular those with private student loans, are struggling.”

So what can be done about this?
The report outlines a number of options suggested in the public comments. Some are market-based solutions; others would require a public policy change. Here are a few of the possibilities:

•  Create refinance options for those who pay on time: Borrowers who graduate, find a job and make their payments on time will typically pay back their loan in full. And yet, they may not be able to refinance their high-rate private student loans with a lower rate that reflects their lower risk to the lender. With some type of “refi relief” these borrowers could potentially save thousands of dollars.

• Help for those in distress: There aren’t many options for borrowers who are trapped in private loans and unable to make the payments. Last year, the CFPB reported that lenders and loan servicers are often unwilling to negotiate affordable terms. The proposed “road to recovery” program would be a negotiable, transparent, step-by-step process where the lender lowers monthly payments to match a reasonable debt-to-income ratio. 

• A fresh start for those who default:  What if lenders worked with these borrowers to design a payment plan that would let them get out of default and repair their credit?  This “clean slate” payment option could have a ripple effect; making it possible for borrowers who default to get a good job and get back on their feet.

At a public hearing in Miami Wednesday night, CFPB director Cordray said the future of this country is linked to the growing burden of student loan debt

“What is at stake is whether some of our most motivated and ambitious citizens – who have the talent to make something of themselves, and lack only the means – will be able to rise and form part of the future leadership of this nation,” Cordray said in prepared remarks. “If instead their hopes and dreams are diverted, discouraged, and defeated by the crushing burdens of a debt that ruins their prospects, we all will be poorer as a result. So this problem should be sounding an alarm bell for all Americans.”

You can read the complete report  or get a factsheet on the Consumer Financial Protection Bureau’s website.

Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitter or visit The ConsumerMan website.

Spouses or unmarried partners who run the home will no longer be penalized for their lack of income when they apply for a credit card.

A new rule from the Consumer Financial Protection Bureau (CFPB) removes an unanticipated roadblock resulting from the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) which was signed into law three years ago this month. The law deliberately set a tough standard for anyone under the age of 21 who applied for a credit card.

The CARD Act required credit card companies to consider a person’s “independent” ability to pay – based on his/her individual income or assets – when evaluating their application for a new account. This was meant to protect students and young adults from getting deep into debt.

When the Federal Reserve wrote the rules to implement the law, it made independent ability to pay the standard for all credit card applications – not what Congress intended

The CFPB’s new rule issued last week, revises the Fed’s rule and allows credit card companies to consider the household income for any applicant 21 years or older who can show they have “access” to that shared money.

That “reasonable expectation of access” would be satisfied if the working partner’s salary is deposited into a joint bank-account or there are regular transfers to the non-working partner’s account.

Millions could benefit
“Stay-at-home spouses or partners who have access to resources that allow them to make payments on a credit card can now get their own cards,” CFPB director Richard Cordray said in a prepared statement.

That’s more than 16 million people who could qualify for a credit card, giving them the ability to build their own credit history.

“This is great news for stay-at-home parents who work hard, but don’t collect a paycheck,” said Gerri Detweiler, director of consumer education at Credit.com.

The rule change was supported by the nation’s bankers, who called it “the right thing to do,” as well as members of Congress in both parties.

 “We applaud the bureau for taking this important step that will help ensure the financial independence of millions of Americans,” said Nessa Feddis, a senior vice president at the American Bankers Association.

Rep. Carolyn Maloney (D-NY), the principal author of the CARD Act, said the CFPB made a “common-sense clarification of that rules” that does what Congress had always intended when it passed the legislation. 

The CFPB responds with amazing speed
The CFPB proposed the revised rule in October, shortly after hearing from stay-at-home moms and dads who said they were being unfairly denied access to credit.

“I am very, very pleased,” said Holly McCall, a stay-at-home mom who lives in Vienna, Va.

McCall brought this issue to the public’s attention last year after her application for a credit card was denied. Despite an impeccable credit score and a husband with a stable income, she was turned down because she did not have any personal income.

McCall, who remembers being “disappointed, embarrassed and upset with the implication,” worked with MomsRising.org to petition the CFPB to fix the problem. More than 45,000 people signed the online petition.

“I am absolutely thrilled that they were so willing to hear what we had to say and make a change for the better,” she told me. “I think it’s a victory for all stay-at-home parents and consumers in general.”

Credit card companies have six months to comply with the rule. Holly McCall plans to wait awhile and then apply for her own credit card – again.

Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitter or visit The ConsumerMan website.

It’s far from a done-deal, but the days of mostly tax-free shopping on the Internet moved one big step closer to ending on Monday.

By a vote of 69 to 27, the Senate passed the Marketplace Fairness Act with bipartisan support. The bill would allow a state that has a sales tax to require online retailers – those with more than a million dollars in out-of-state sales each year – to collect that sales tax from all of its customers in that state.

Under current law, Internet retailers don’t have to collect sales tax unless they have a physical presence in that state — such as a warehouse, office, showroom or brick-and-mortar store. The burden is on you, the shopper, to pay that sales tax if your state collects it — but few people do.

There’s a lot of money at stake here. State treasuries lost around $11 billion in uncollected tax revenue from Internet sales last year, according to a study done for the National Conference of State Legislatures which supports the legislation.

“This bill and its companion in the House will level the playing field for all retailers – both online and off – while safeguarding states’ rights,” said Matthew Shay, president and CEO of the National Retail Federation, in a statement. “And the bill does it all without raising taxes, new government mandates or adding to the deficit.” 

The bill faces an uncertain future in the House, where conservative members have labeled it “a tax increase” that must be stopped.

Grover Norquist, president of Americans for Tax Reform, has called the bill “a bad idea” and he told CNN recently it will not “sail through the House” the way it did in the Senate.

Representative Steve Womack, R-Ark., sponsor of the bill in the House, said “saving local retail businesses” depends on passing this measure. Wal-Mart, which is headquartered in Arkansas, supports an Internet tax.

How are small to medium-sized online retailers dealing with all this?

“Everyone is just kind of holding their breath right now, waiting to see what happens,” said Ron Rule, CEO of Coracent, an eCommerce consulting firm in Tampa, Fla. He believes the biggest impact would be on companies that have a business model based on tax-free sales.

Here are answers to some commonly asked questions about the Marketplace Fairness Act:

How soon could this happen?
Online merchants and states would have time to prepare for the changeover. Even if the House does pass the bill, nothing would happen until the fall.

How much tax would I be charged?
If you live in the five states without a state sales tax – Alaska, Delaware, Montana, New Hampshire and Oregon – you wouldn’t pay anything. Otherwise, the online merchant will add the state sales tax; just as they would if you shopped at a local store.

Will this hurt online sales?
It could slow sales a bit. After all, online commerce has greatly benefited from being a tax-free zone.

“Internet sales have been growing rapidly and it’s going to continue to grow rapidly because there are many advantages to buying over the Internet: convenience, variety and so forth,” said Alan Auerbach, a professor of economics at the University of California, Berkeley. “But there are some purchases that might be marginally discouraged if there’s a tax.”

Could this help sales at traditional stores?
Many believe it could, especially for purchases where the tax savings from shopping online are significant. It might be more convenient to pay the tax and walk out with the item, rather than wait for it to be shipped.

It might also cut down on “showrooming,” a growing problem for local stores. That’s when someone goes to a physical store to check out the merchandise, but then buys it online.

What about the cost of collecting and paying the taxes?
“For some small retailers it will clearly be a burden,” said Neil Bruce, professor of economics at the University of Washington. “This will impose costs on some online retailers who’ve been selling online without collecting taxes.”

Some states don’t charge sales tax and those that do often tax different items. For instance, New York charges sales tax on some clothing; Pennsylvania does not. And the tax rate varies from location to location.

“If you owe a little bit to this state and a little bit to that state, this could be awkward and complicated,” noted Eric K. Clemons, a professor at the Wharton School of Business.

Online merchants who have their site hosted by a bigger company should be OK, but those who run their own platforms and host their own shopping carts may have some technical challenges and added expenses to deal with.

The bill requires state governments to provide software to help calculate the tax how much would have to be collected.

Who supports the bill and who opposes it?
The National Retail Federation has been leading the charge on this one. Brick-and-mortar retailers believe online stores that don’t collect sales tax have an unfair advantage.

Amazon.com, which had always argued against an online sales tax, now supports it. The shift in position comes as Amazon expands operations into more states, requiring the online retailer to collect the taxes from customers in those states.

Another online powerhouse, eBay has lobbied against the bill which it believes will hurt some of its sellers. Ebay wants Congress to exempt businesses that have less than $10 million in out-of-state sales or fewer than 50 employees.

AP contributed to this story.

Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitter or visit The ConsumerMan website. 

Seth Perlman / AP

A home is surrounded by water Wednesday, April 24, 2013, in Peoria Heights, Ill.

The spring floods are here and the summer hurricanes are not that far away.

Flooding is the most common natural disaster in the U.S., according to the Federal Emergency Management Agency (FEMA).

The standard homeowner’s insurance policy does not cover flood damage. You need to buy a separate policy from the National Flood Insurance Program or a private company.

Related story: Effects of Midwest flooding will be felt for months

After recent disasters such as Superstorm Sandy, plenty of people know this. The problem is that too few have done anything with that information.

“We were pleasantly surprised that more than four out of five people – that’s 81 percent – knew that you need to get a special flood insurance policy to cover flooding,” said Doug Whiteman, associate editor for insurance at Bankrate.com, which conducted a nationwide survey to find out. “But not enough people act on that information. They haven’t taken the necessary steps to protect their homes.”

The insurance industry estimates that only 13 percent of the homeowners in this country have flood insurance.

“People may have a false sense of security,” Whiteman suggested. “They haven’t seen a major flood where they live, so they don’t think they need to be concerned about the potential for flooding.”

Know the risk
FEMA has two classifications for flood risk: high and moderate-to-low. The Bankrate survey found that only half the homeowners (51 percent) knew the risk category where they live.

In a high-risk area, your home is more than twice as likely to be damaged by a flood as by fire. According to FEMA statistics, there’s a 26 percent chance your house will have flood damage during the term of a 30-year mortgage.

“But low-risk doesn’t mean no risk,” said Jeanne Salvatore, senior vice president for public affairs at the Insurance Information Institute, an industry trade group. “The National Flood Insurance Program reports that about 25 percent of the claims they pay out are in low-risk areas.”

Flood insurance covers losses from flood waters and flood-related erosion caused by heavy or prolonged rain, coastal storm surge, snow melt, blocked storm drains or levee dam failure.

Salvatore believes everyone should know what the flood risk is where they live. It’s easy to do. Just go to FloodSmart.gov and put in your address. You’ll get the FEMA flood risk designation and find out what a policy might cost.

You can buy up to $250,000 coverage on the structure and up to $100,000 on the contents. Renters are encouraged to get coverage on their belongings. The price is based on your risk and it might be cheaper than you think.

“The average flood insurance policy costs $50 per month, so for roughly the cost of dinner and a movie, consumers can protect themselves,” Whiteman said.  “The average payout is about $30,000.”

If you live in a moderate-to-low risk area you may qualify for the Preferred Risk Policy that provides contents coverage beginning at $50 per year and building/contents coverage starting at $129 a year.

Don’t wait
This is not a last minute purchase. When the rivers are rising or the hurricane is off the coast, it’s too late. There’s a 30-day waiting period after the policy is purchased.

Florida Insurance Commissioner Kevin McCarty recently advised residents that they’ll need to buy flood insurance by May 1 in order to be protected on June 1, the first day of hurricane season. This year's hurricane season is expected to be "above average," according to forecasters at Colorado State University. McCarty also noted that significant rate increases for new and renewal NFIP policies start on October 1, 2013.

Don’t make the mistake of assuming the government will pay for any flood damage. Even if the president formally declares the area a disaster, federal disaster assistance typically comes in the form of low-interest loans. It’s not compensation for your losses.

More Information:
Bankrate: Survey: 1 in 5 Clueless About Flood Insurance

Insurance Information Institute: Does My Homeowners Insurance Cover Flooding?

Insurance Information Institute: Flood Insurance

Bankrate: Got Flood Insurance? You Probably Need It

Locator: Private insurance companies that sell National Flood Protection Insurance

Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitter or visit The ConsumerMan website. 

When T-Mobile announced a new type of wireless plan last month with “no restrictions,” “no annual contract," and "no asterisks attached," many wondered if it was too good to be true.

Now, some officials say it was.

Washington State Attorney General Bob Ferguson said the company’s ads were “quite deceptive.” He believes T-Mobile’s ads “misled consumers on important details related to their service plan,” because there are “hidden charges” for early termination of these phone plans.

Washington state AG

Washington state's attorney general said AT&T's ads were misleading.

Under this “no contract” program, a customer had to buy their own phone. They could make a down payment and then pay off the balance over a 2-year period.

But here’s the catch: those who bought a phone using T-Mobile’s 24-month payment plan were required to carry a wireless service agreement with the company for the entire 24 months or pay the full balance owed on the phone if service was cancelled earlier. That could be hundreds of dollars.

“This lump-sum balloon payment could well be higher than the termination fees for other wireless carriers, depending on how early the customer cancelled,” said Paula Selis, the state senior assistant attorney who handled this case.

Selis said the company did explain all this “in the so-called fine print,” but she noted the information “was not clearly disclosed in a way that a consumer could understand.”

Ferguson, the state attorney general, said T-Mobile cooperated with his office and has agreed to a court-approved settlement that will require it to immediately stop its current advertising campaign. The carrier also will make refunds for telephone equipment to those who already signed up for the plan – between March 26 and April 25 –  who want to cancel.

“This settlement will benefit consumers across the country,” Ferguson said at a news conference on Thursday.

T-Mobile issued this statement:

“As America’s Un-carrier, our goal is to increase transparency with our customers, unleashing them from restrictive long-term service contracts – this kind of simple, straight forward approach  is core to the new company we are building.  While we believe our advertising was truthful and appropriate, we voluntarily agreed to this arrangement with the Washington AG in this spirit.”

Under the terms of today’s court-ordered settlement, T-Mobile has agreed to: 

•    Not misrepresent customers’ true obligations under the terms of its contracts for the sale of service or equipment;
•    Make clear the consequences of cancelling T-Mobile service, including restrictions or limitations on cancellation; fees and costs; and early termination fees;
•    More clearly state in all advertisements the true cost of telephone equipment, including the requirement the customer carry a wireless service agreement for the life of the 24-month financing plan;

T-Mobile will send customers an email telling them they can cancel without penalty and get a refund. This must be done within 30 days of receiving that notice from the company. Those who do cancel will be required to return the phone to T-Mobile at the company’s expense.

Click here for more information on the settlement.

Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitter or visit The ConsumerMan website. 

The job market is tight and that doesn’t make things any easier for the thousands of vets returning home and wanting to re-enter the civilian work force.

According to the Family Work Institute, vets who have served since 2001 and returned to civilian life have higher unemployment rates (men, 9.5 percent; women, 8.3 percent) than their civilian counterparts (men 8.1 percent; women, 7.7 percent).

In other words: Our youngest and most recent veterans are having a harder time finding jobs than the average civilian.

During a TODAY Money web chat on Thursday, Ken Matos, director of research at the Families and Work Institute, spoke with vets who need a job and with employers who want to hire them.

“Our conversations with employers and veteran job candidates have pointed to two big problems,” Matos explained. “First, many employers are just now building up the programs and processes to streamline the recruitment, retention, and development of veteran employees and their families. Second both civilian employers and military veterans can get tripped up by some basic communication issues around understanding the significance and relevance of military experiences to civilian workplaces.”

JT: How can we use military service as a selling point to get a job? Should I play it down or up in my resume?

Ken Matos: That's a common and important question. My answer is yes, you should mention your military service. However, how you present that information is important.

When describing your military experiences, you will want to translate your position titles and tasks into terms that employers can understand. Many military terms are daunting to civilian recruiters.

Some great free online tools for rewriting a military resume to match civilian job descriptions are available at sites like Mynextmove.org, vetsuccess.gov and military.com.  

Bobbie: I'd like to hire vets but I hear mixed things about how they do in civilian jobs. What do you think? And where do I start if I want to hire them?

Ken Matos: Some of the common areas where there can be friction is in recognizing that the military is a very different work culture than many civilian workplaces. It emphasizes teamwork and tight coordination.

Yet, a few open and supportive conversations can make a big difference in helping vets and their coworkers understand each other's perspective and smooth out those rougher interactions.

Sometimes it’s as simple as pointing out what their new priorities should be and giving them a chance to make that a reality.

Read the rest of the Q & A below:

Aaron Barna Photography

Matt Cooper and Eileen Ryan paid a premium for their new energy-efficient home in Olympia, Wash. But they pay almost nothing in energy bills.

Eileen Ryan and Matt Cooper wanted their new house to be good for the environment and they were willing to pay a premium for it. They spent $350,000 to build their two-story, 2,000-square-foot energy-efficient house in Olympia, Wash., and they are happy they did.

“It costs more to build an energy-efficient house, but it costs significantly less to live in one,” Eileen explained.

Their energy bills tell the story. They pay a measly $70 a year to heat and cool the place.

“I don’t mind paying my utility bill each month,” Matt said with a chuckle.

A new study, Home Energy Efficiency and Mortgage Risks, concludes that people who buy energy-efficient homes are 32 percent less likely to default on their mortgage than the average borrower.

They are also 25 percent less likely to prepay the loan. Underwriters consider prepayment a risk factor because the lender or investor gets less than the projected return.

“We were quite surprised by the numbers,” said Nikhil Kaza, asst. professor of city and regional planning at the University of North Carolina at Chapel Hill who worked on the study. “We thought there would be some association between energy efficiency and mortgage risk, but we did not expect such a large association.”

The study used actual loan performance data: a national sample of about 71,000 mortgages for single-family homes, both new and old, that originated between 2002 and 2012. The average sales price was $220,000, so these were not just luxury homes.

Homes with an ENERGY STAR rating were classified as energy-efficient.

Researchers accounted for variables such as size and age of the house, borrower’s credit score, local unemployment rate, neighborhood income, local weather and the price of electricity. “This is very, very powerful,” said Robert Sahadi, director of energy efficiency finance policy at the Institute for Market Transformation, the non-profit environmental group that funded this study.

The results don’t surprise Scott Bergford, owner of Scott Homes in Olympia. He built the Ryan’s home and about 300 other energy-efficient houses.

“My houses sell for a premium and in 30 years not a single buyer has defaulted,” he told me. “These are stable people who are interested in a lifestyle.”

Why the lower risk?

It could be the lower energy bills that add an extra $100 to $150 a month to the family budget. For a moderate-income buyer that’s a big deal. Or maybe the people who buy energy-efficient homes are financially well off or very prudent with their money.

Prof. Kaza told me his study didn’t look at that. He would like to see more research done to figure out why this is happening.

Related at ConsumerMan: World's greenest office building officially opens in Seattle

A call for action
Underwriters look at factors such as debt-to-income ratio, credit scores, loan-to-value ratios and reserves in the bank when their consider a loan application and decide the interest rate.

The Institute for Market Transformation (IMT) would like to see underwriters required to consider a home’s expected energy use. The report calls on the FHA, Freddie Mac and Fannie Mae to “encourage underwriting flexibility” for mortgages on energy-efficient homes.

“Now we have data that shows a home’s energy efficiency could be a positive factor for borrowers,” IMT’s Sahadi said. “We’ve come out of this underwriting crisis and now we’re looking ahead to the next 10 years and what will be the things that could be factors in underwriting performance and we’re offering energy efficiency as one of them.”

A spokesman for FHA told NBC News they knew about the IMT study but weren’t ready to comment on it.

The report suggests that if lenders did consider energy efficiency, they might want to require an energy audit or energy rating on the structure, just as they now require appraisals to calculate the value of the home.

Home builders believe such a change would result in more green homes being built, which would be good for the industry and the environment.

“It lends credence to the notion that we need to be more proactive about lending strategies, mortgage products and appraisal techniques that acknowledge the inherent value of energy efficient homes,” said Kevin Morrow, director of energy and green building at the National Association of Homebuilders.

Environmental groups point out that household energy use accounts for 20 percent of America’s total energy consumption.

Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitter or visit The ConsumerMan website.