Can Hackers Clean Me Out?

Mutual fund firms are pushing hard to get customers to sign up for online access to their accounts. But what if someone hacks into my account and empties it? Would I have any legal recourse to require the mutual fund company to reimburse me for the loss? -- Lincoln Keill, Sacramento, Cal.

To put it bluntly, no. "Customers have no recourse unless they can prove that the institution was negligent in the theft," says Matt Bienfang, senior analyst with TowerGroup, a financial-services consulting firm.

But that doesn't mean you shouldn't do business on the Internet. Fund companies and brokers have gone to great lengths to protect your money online, both by encryption technology and by administrative procedures that would make it tough for someone to clean out your account.

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At T. Rowe Price, for example, proceeds are sent only to the address you have on record. So if somebody were to hack into your account, the check would still show up at your address and be payable to you. If an address change is submitted online, the company does not allow redemptions for ten business days and sends a confirmation of the change to both the new and the old addresses.

Charles Schwab and E*Trade are among a handful of online brokerages that offer a security guarantee, promising to cover 100% of any losses in your account because of unauthorized activity. But those guarantees aren't ironclad. At Schwab, for instance, there's a key disclaimer: "If you share [your login or password] with anyone, we'll consider their activities to have been authorized by you."

Even if you're found to be at fault, you may still be able to get your money back. Bienfang cites a North Carolina case in which E*Trade made the customer whole, even though the client had not installed security software, such as spyware protection, on his computer. "E*Trade felt that any damage to its brand as a result of the incident would be more expensive than reimbursing the client's loss," says Bienfang.

Big gamble

I am pastor of a church in Arkansas, and we have about $32,000 in an account for one of the ministries we will be starting next year. Instead of letting the money sit in a savings account, I thought it might be better to drop it into a mutual fund, such as CGM Focus. What do you think? -- Jerry Ables, Camden, Ark.

CGM Focus has been a fabulous performer (with an annualized return of 26% over the past five years). But you'd be putting way too much faith in its manager, Ken Heebner, and the stock market in general, to invest money that you'll need in a year.

Although stocks deliver superior long-term returns, they are notoriously unpredictable over the short term -- witness the market's 22% decline in 2002. And although Focus made money during the 2000Ð02 bear market, there's no guarantee that it will do as well during the next downturn. In addition, Focus is twice as volatile as the average diversified domestic stock fund, so it's not a fund to own for a period as short as one year.

Your best bet is to keep the money in the bank -- in a six-month or one-year certificate of deposit -- or in a money-market fund. Money funds with low expenses now yield more than 4%, and yields are likely to trend upward as the Federal Reserve continues to raise short-term interest rates. For the top-yielding CDs, see our yields and rates page.

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What's the score?

I am having a hard time trying to compare credit scores. If I have a 730 credit score with Experian, does that equal a 730 with Equifax and TransUnion? -- J.R. Arnold, Hickory Withe, Tenn.

Not necessarily. But don't drive yourself crazy comparing the nuances of different credit scores.

Based on your history at each of the three major credit bureaus -- Experian, Equifax and TransUnion -- you'll actually have three standard credit scores compiled by the company Fair Isaac. Those are the so-called FICO scores, the most commonly used measures of credit, and they range from 300 up to 850, the best. Mortgage lenders, for example, usually get all three scores and use the middle one.

You can get a free copy of your credit report every year from each of the three credit bureaus by going to www.annualcreditreport.com. The free reports don't include your credit score. But at www.myfico.com you can order one score from any of the bureaus for $14.95. One score should be all you need to get an idea of where you stand.

Although FICO scores are the best known, they're not the only credit scores. If you go to Experian's Web site, www.experian.com, you will receive a different version, the PLUS score, which is becoming popular with credit-card companies and auto lenders. It ranges from 330 to 830. You can order your Experian credit report and PLUS score for $14.50.

And the three credit bureaus recently joined to create yet another measure called the VantageScore. Already being marketed to lenders, VantageScore should eventually replace PLUS and other scores proprietary to the credit bureaus and compete against FICO. VantageScore may be available to consumers within a few months.

Don't sweat it if your credit scores don't match up. "The specific model is not important to a consumer," says Experian's Maxine Sweet. "What matters is that you understand how to have a strong, low-risk credit history. That will result in excellent credit scores regardless of the model." (For advice on improving your credit number, see Boost Your Score.)

Grandma's money

My son's maternal grandmother contributed money to a state-sponsored 529 college-savings plan on his behalf. After my wife and I divorced, Grandma withdrew the money before the child's 18th birthday. Can my son contest the withdrawal in court? -- Name withheld, via e-mail

Your son would probably have a tough time getting the money back. In most cases, Grandma is considered the owner of the 529 account and has a right to change the beneficiary.

In fact, that's one of the big attractions of 529 plans for grandparents: If one grandchild gets a full scholarship or ends up not going to college, grandparents may name another eligible family member as beneficiary (see IRS Publication 970, Tax Benefits for Education). If she wishes, Grandma can even take the money back for herself, subject to taxes and penalties. "The beneficiary generally has no rights to the money in a 529 plan," says Joe Hurley, of Savingforcollege.com.

The only exception, says Hurley, is a custodial 529 account, a situation in which the money was originally in a custodial account for the child and then rolled into a 529. In that case, the money would legally belong to your son and he could take Grandma to court to get it back.

My thanks to Joan Goldwasser and Manuel Schiffres for their help this month.