Four smart moves for 1998: these tactics- and the potential payoff -are worth toasting

Kiplinger's Personal Finance Magazine,  Jan, 1998  by Joan Goldwasser

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Another set of New Year's resolutions to add to the list: Boost your yields on savings and trim your rates on loans. These moves will contribute to a more prosperous year. * Build a CD ladder. You can stay nimble with your savings and take advantage of higher yields if they come along by "laddering" maturities -- staggering them so that a portion matures at regular intervals. If interest rates increase, you will have funds available to reinvest at higher yields. If rates dip, most of your savings will still enjoy yesterday's higher rates. The bank with one of the best fineups of high yields at different maturities is Capital One Federal Savings Bank

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Payoff: At the very least, a CD ladder is insurance against a losing bet on the direction of interest rates. Shopping out of town for the best rate is a guaranteed winner. For example, stashing $10,000 in a fiveyear CD at Capital One's 6.7% rate versus depositing it in a bank that pays 5.45%, the average rate, earns an extra $125 in the first year alone.

* Refinance your mortgage. The average rate for a 30-year fixed-rate mortgage is 7.2%, so it pays to figure out whether you'll be in your house long enough to recoup any closing costs with lower monthly payments (see "Yields & Rates," Dec.). The table on page 64 shows mortgage deals around the nation -- you can find good deals in other cities on the Internet from Bank Rate Monitor (www.bankrate.com). Also consider a "no-cost" loan. If you can reduce your rate without paying closing costs, lower monthly payments deliver savings from the get-go.

Payoff: Refinance a $150,000, 30-year fixed-rate mortgage at 8% with a "no-cost" loan at 7.5% that was recently available from Norwest (800-979-3322) and you'd save $751 in the first year.

* Reassess your home-equity line. Compare your rate with those in the table to see if it's time to switch. Many banks now offer the best credit risks prime rate (recently 8.5%) for as long as you have the loan.

Payoff: Switching $25,000 from a 10.5% home-equity line to a new line at prime could save $500 a year in interest.

* Trade in your credit card. Call and see if you qualify for one of the low-rate credit cards listed on page 64 -- with an annual fee if you traditionally keep a balance, or with no fee if you pay off your charges every month.

Payoff: If you carry a balance of $2,000 on an 18% card and switched to Pulaski Bank & Trust's 7.99% rate, you'd save $200 over the next year. Trade-off: You'll also pay a $50 fee.

Overseas CDs: Get ready for a bumpy ride

When you can get a rate of more than 14% on a one-year CD -- and apply for it over the Internet -- you might wonder what the catch is. CDs paying such rates from Treasury Worldwide (888-456-2323; www .treasuryworldwide.com) are all from foreign countries. And if you go abroad for yield, fasten your seatbelt:

* High minimums. You can purchase a foreign-currency time deposit for periods from 30 days to one year in 30 currencies, including Mexican pesos (14.4% for a one-year CD), South African rands (12.5%) and Israeli shekels (11.7%)-but you'll have to pony up at least $20,000 for each currency you choose.

* Currency risk. The money you invest is converted into the local currency and then deposited in an overseas bank. If the dollar gets stronger (as it has lately), the pesos or shekels will convert to fewer dollars at maturity.

* Spotty deposit insurance. Some countries, including the highest-rate ones cited above, do not offer deposit insurance. But no one purchasing a time deposit has lost money so far from a bank default. ery well: how

COPYRIGHT 1998 The Kiplinger Washington Editors, Inc.
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