(MONEY Magazine) – S&LS LOOK ROSY NOW, BUT THEY COULD WILT LATER THIS YEAR

Savings and loans are back! After a series of disastrous failures during the 1980s that cost taxpayers $500 billion, nearly all weak institutions have been closed or sold. "S&Ls are now essentially as healthy as banks," says Warren Heller, research director of Veribanc, a firm that rates the safety of banks and S&Ls. Veribanc expects 12 to 25 of the nation's 1,578 remaining S&Ls to fail this year, the smallest number since the late 1970s.

The point is, you should again consider putting your money in S&Ls. In addition to being reasonably safe now, they continue to offer better deals than a typical commercial bank. S&Ls operate on lower profit margins than do large banks. Therefore, they often offer higher rates on savings accounts and lower rates on loans, and require lower minimum balances to waive monthly fees (see the table below).

This S&L edge may not last forever, however, because banks are about to get a windfall. The insurance premiums they pay to the Federal Deposit Insurance Corporation, which guarantees accounts for as much as $100,000, are likely to drop by 67% (to 8¢ per $100 of deposits from 24¢ per $100) when the FDIC's Bank Insurance Fund reaches its target level later this year. Banks will pass on to consumers at least some of the expected $4 billion in annual savings via higher yields on CDs and savings accounts, says Tom Maier, a bank and thrift analyst at Kemper Securities in Chicago. Meanwhile, S&Ls will continue paying 25¢ per $100 of deposits to prop up the Savings Association Insurance Fund, which backs thrift deposits. "With higher costs, many S&Ls won't be able to keep up with the banks," Maier says.

--Vanessa O'Connell

CHECK INTO THE TERMS OF YOUR 0% DEAL

Did you take advantage of a retailer's sweet-sounding 0% financing deal for a major holiday purchase? If so, make sure you know all the terms of the offer. In a survey of seven stores--including Sears, Circuit City and CompUSA--during November and December, the Massachusetts Department of Consumer Affairs discovered that only Sears' 0% financing deals came with no strings attached. The other stores' offers contained sneaky provisions that could hit shoppers with unexpected charges. "Zero-percent deals may seem to be a free ride but often come with retroactive charges that consumers don't expect," says Priscilla Douglas, secretary of consumer affairs for the State of Massachusetts.

Six of the stores (all but Sears) trumpeted their 0% financing in bold type in newspaper ads and circulars while burying the exact terms of the offers in tiny footnotes. Furthermore, when state officials visited the stores posing as shoppers, salespeople did not mention any of the potentially costly provisions unless the "shoppers" asked about them.

For example, a Lechmere store advertised "0% financing and no payments until May 1, 1995" for customers who bought a video camera using Lechmere's credit card. Yet only one of the three Lechmere employees that an undercover state regulator questioned was able to provide information on the conditions of the offer. One important catch: A customer who did not make timely payments on any other Lechmere credit-card purchases would have the interest charges on the video camera reinstated. A representative of Montgomery Ward, which recently acquired the Lechmere chain, told Money that the stores will provide fuller explanations of any future offers. Spokesmen for Circuit City and CompUSA said that their promotions did not violate any federal or state lending laws.

How can you tell if what you thought was a free ride may turn out to have costly tolls? Ask the store for written information that tells you exactly when your balance is due, whether you're required to make payments during the interest-free period, and what penalties and interest you'll owe if you don't pay in full when the deal expires.

If you discover that you may already owe penalty payments, call the company's customer service line and explain that you were not initially provided with the details of the deal and that you would like the penalty to be waived. If the company balks, complain to your state's office of consumer affairs.

--Vanessa O'Connell