When you hear the words “stress test”, a treadmill, a heart monitor, and your next physical probably come to mind.  When you hear the words “stress test” in the news these days, it is actually referring to something else-tests the government is currently performing on America’s “big banks” amidst this financial crisis.

What are bank “stress tests?”

Shortly after officially taking office as President, Obama and his administration decided to perform stress tests on the nation’s struggling banks.  According to an online article published by NPR back in February, these stress tests “are a widely used method of figuring out how strong a bank’s balance sheet is – essentially using computer models based on historical data to judge how it would withstand various hypothetical situations.“  Another term used to describe the stress testing process is called “shocking” the bank’s books.

Which banks are undergoing government-imposed stress tests?

In February of 2009, the government mandated that all U.S. banks with assets of more than $100 billion would be required to undergo stress tests. This brings the grand total to 19 banks.  These tests were designed to ensure that banks could survive, and continue lending, even if the following shifts were to happen in the future:  unemployment rising to above 10 percent and home prices falling by an additional 25 percent.

Why are they being conducted?

The Treasury stated that banks will undergo these stress tests to determine whether they “have the capital necessary to continue lending and to absorb the potential losses that could result from a more severe decline in the economy than projected.” All of the 19 banks being tested are expected to pass the stress test; however, some banks will be rated higher or lower than others.

Implications of making stress test results public

The White House is still deciding whether or not they will make the results of these stress tests available to the public.  Previously, all of the banks receiving bailout money had been considered equally, preventing the more deeply wounded banks from receiving any negative attention.  The Federal Reserve even announced last week that all results must be kept confidential, as financial results like this are rarely made available to the public.  Nevertheless, some within Obama’s administration believe that results need to be released to confirm the validity of the assessments to the American people.

What if a bank fails the stress test?

As citizens affected by the credit crisis on a daily basis across various aspects of life, it is important to ask yourself what you would do if the bank you bank with failed this government-imposed stress test.  According to Treasury officials, the stress test actually “won’t be “pass or fail,” but a question of what level of capital was adequate.” Either way, these “stress tests” should have little, or no affect on the way you bank.

This past Thursday, Wells Fargo released a surprising first quarter earning report that displayed profits, mirroring what Citi Financial profit reports stated a few weeks ago.  Stocks of Wells Fargo surged to their highest level in 2 months, shooting way past the expectations of financial analysts.  More specifically, Wells Fargo reported that it expects earnings of approximately $3 billion for its first quarter; The Dow rose 246.27, or 3.1 percent, on Thursday to 8,083.38.  According to information released on Forbes.com, “the profit forecast of 55 cents a share is more than double the Street’s consensus estimate.”

You may be wondering how Wells Fargo doing so well amidst the recent credit crisis that America faces?  They have stated that acquiring Wachovia has achieved better results than previously anticipated.  Wachovia has contributed approximately 40 percent of its total revenue, which comes to $20 billion.  Many believe this may be a sign of better times to come for the banking industry, which means better times to come for the people of America.

Wells Fargo’s CEO, John Stumpf, commented that “Our business momentum is strong, and we expect our operating margins to remain at the top of our peer group.”

These profits have sent waves of encouragement throughout Wall Street during an otherwise relatively quiet week; this type of positive news has been rare during these tough economic times.   The hope is that Wells Fargo’s success this first quarter will spill over to other banks as well.  Furthermore, The New York Times reported that all 19 banks would pass federal regulators’ ongoing “stress tests”; the objective of this government-imposed test is to estimate how banks would hold up if the economy were to crash even further.

So what does this mean for consumers with regard to loan financing options?  Wells Fargo earned good fees; simultaneously, low interest rates drove 450,000 customers to either purchase new homes or to refinance existing loans.  Doing so has successfully lowered people’s monthly payments.  As a result of the Wachovia acquisition, along with an increase in the number of mortgage applications, the low amount of borrowing activity is likely to increase.

Furthermore, The Federal Reserve has helped reduce mortgage interest rates by buying lots of the Fannie and Freddie-backed loans packages.  President Obama echoed the widespread enthusiasm, stating that “A lot more people can take advantage” of the refinancing program.  He also urged Americans to find out if they are eligible at the website www.makinghomeaffordable.gov

To build on the Friday Financial Fitness from two weeks ago, we have included 5 more every day tips to save money.  Taking simple steps to save money has a chain reaction that improves the quality of your life in more ways than one.  First, additional money in your pocket will help you pay off those bills faster, thus decreasing stress and anxiety that often accompanies debt.   By decreasing your debt at a faster rate, you will also be well on your way to improving your credit score; improving your credit score impacts your borrowing opportunities.  Below, we outline 5 more ways to save money on a daily basis.

5 More Everyday Tips to Save Money

1. Cook at home; then bring your leftovers to work for lunch

Every day, millions of Americans spend a minimum of $5.00 a day when going out to lunch during the work day.  If you live in a more expensive city, the price of a single lunch can skyrocket to $10 or more per day.  When you’re working 5 days per week, that adds up to $50 per week, $200 per month, and $2400 per year.  That $2400 could be used to pay off outstanding debt, or put away for a rainy day!  Though the work week is often busy, try to set aside some time (maybe even on a Sunday) to cook for the week.  Buying groceries is much cheaper than buying your lunch every day; cooking in bulk for the week will help you pocket that much more money over time.

2. Make personal calls on your cell phone during evenings and weekends

Many of us find that every month, our cell phone bills seem to skyrocket.  One call here, another call there-and suddenly you have exceeded the total number of minutes included in your plan.  If you have a plan that offers free phone calls in the evenings and on the weekends, try and schedule your personal calls during these times. Month to month, this will reduce your bills, helping you pocket a substantial amount of cash over the course of a year.

3. Avoid ATM Fees

When you’re in a hurry and you need cash, it’s convenient to withdraw money at the closest ATM you can find.  If you are withdrawing money from another bank’s ATM, the average fee each time you do is around $1.97.  Fees can even go up to $4.00, depending on where you are.  Banks make a fortune charging non-customer surcharges and consumers spend a fortune filling banks pockets.  Next time you’re in a hurry to get cash, take a few extra minutes to figure out if your bank has an ATM nearby that you may not know about.  If you really want to stop spending on non-customer surcharges, plan to get cash before you go-those few extra minutes of planning will save you money over time!

4. Track every dollar you spend for 2 weeks

This simple, 14 day exercise will bring more awareness to your personal spending habits.  Get a small notebook that you can carry around with you; for 2 weeks, simply record every dollar you spend and what you buy.  After the 2 weeks are up, it will be interesting to see where all your money has gone.  Take a close look at every purchase and then figure out ways to cut corners.  You may be surprised to find that you may not need that $5.00 magazine after all.

5. Leave your credit card at home

During this financial crisis, it is crucial to not only limit the amount of cash you are spending, but also to limit the number of times you swipe your credit card.  Though there has been a recent push to regulate credit card companies and the fees and interest rates they charge, racking up credit is a dangerous habit that all too many Americans have developed.  Simply stated, if you cannot afford, don’t buy it!  Help yourself resist the temptation to swipe that credit card by leaving it at home.  If you don’t have it with you, you can’t use it

In response to the financial crisis, Americans need to be well-aware that changing our frivolous spending habits is crucial; however, this week, Congress is holding credit card companies responsible for their practices as well.   Consumers are subject to credit card companies’ terms and conditions upon signing their detailed agreements; however, what happens to consumer rights when these credit card companies change terms at their own discretion?  The results have proved disastrous for everyday Americans’ bank accounts, as abusive credit card practices find new ways to create endless amounts of monthly fees.

Credit Card Companies’ Abusive Practices

To understand both the importance and potential impact of laws that protect consumers against credit card companies, it is crucial to be aware that credit card rates change unexpectedly.  Fees often appear on your monthly statement out of nowhere, even when you pay your bills on time and have made serious efforts to be in good credit standing.  These companies raise interest rates and dramatically cut credit limits, with little or no regard for how these changes affect loyal customers.  Struggling consumers are left with a large bill and little support-until now.

Senate Banking Committee Approves Bill to Regulate Credit Card Companies

Good news: the Senate Banking Committee, led by Chairman Senator Chris Dodd of Connecticut,  approved legislation that will begin the fight against unfair credit card company practices.  Below is what was outlined in the bill:

• “Protect consumers from “any time, any reason” interest rate increases and account changes.”

• “Prohibit unfair application of card.”

• “Protect cardholders who pay on time.”

• “Limit abusive fees and penalties.”

• “Prohibit issuers from using a consumer’s card history with another creditor to raise interest rates.”

• “Prohibit issuers from charging interest on debt that has already been repaid.”

• “Ensure that cardholders are informed of the terms of their account.”

• “Protect young consumers from aggressive credit card solicitations.”

What will the Credit Card Accountability, Responsibility, and Disclosure Act do for Everyday Americans?

This bill will give a voice to consumers that goes beyond the 24/7 customer support that most credit card companies offer.  The consumer’s voice will now have legal backing, as the government is taking the first step to acknowledge the role credit companies have played in the US financial crisis.  According to The Consumer Federation of America’s Legislative Director Travis Plunkett, “Congress is taking a strong stand against the traps and tricks that many credit card companies use to increase their profits at the expense of financially vulnerable consumers.” With a July 1, 2010 deadline to implement the bill’s outlined changes, Americans can begin to feel good about the progress we are making towards fixing the credit crisis.  The crisis certainly cannot be fixed overnight, but bills like this make accountability a priority for both businesses and consumers.  With legal backing, credit card companies will be forced to take an active role in getting our economy back on track.