In order to improve its liquidity, a major Cape Cod bank recently sold some of its shares in the Bank of America for $493,000. For account holders, the boost in liquidity was a reassuring move as the bank did all it can to ensure its customers were taken care of. One of the biggest tests for the institution was providing solutions to government employees who were affected by the shutdown. The ramifications to personal finances were hard-felt and for government employees, the road to recovery is already underway as investments and debt repayments once again continue.
Track The Various Credit Reports
One of the biggest reasons to track your credit score, is to ensure that there are no errors on it. With the furlough, government employees are encouraged to check whether this has affected their score as those who fall between the 580 and 669 range will pay around $45,000 in interest over the lifetime of their loans more than those with higher scores. It’s worth the effort to ensure that accounts are up to date and that the bureaus are notified should defaults, notices, or other negative ratings be corrected.
Another report that could affect those impacted by the furlough, is the Chexsystems reporting tool that generates an internal banking report. This report could prevent consumers from opening accounts or applying for financial products if they’ve had returns on their accounts, bounced checks, unauthorized overdrafts, or negative account statuses that haven’t been disputed and rectified.
Pay Off Those Short-Term Loans
One of the first items that should be tackled is that high-interest short-term loan that is often the go-to in situations where emergency savings are simply not available. According to research, 41% of Americans couldn’t weather a financial storm of $400, let alone a government furlough of 35 days. Payday loans offer fast cash but tend to be far more expensive than credit cards, which already tip in at around 25% interest for those with lower credit scores. Once the salary back-payments land, it’s imperative to settle the short-term, high-interest loans first. These can quickly spiral out of control and cause even more damage than the actual furlough.
While the shutdown has ended and things seem back to normal, government employees should consider increasing their emergency savings to ensure they can cover a financial emergency such as this. Not only is saving up for events like these far less stressful than trying to qualify for a loan at a reasonable rate, it also happens to be far more cost effective.