Tag Archives: Interest Rates

Check Interest Rates Regularly to Stay in the Money

How often do you check the interest rates on your investments? Even if you found the best home for your surplus cash a few months ago, there is no guarantee the interest rate is still just as good. Things change regularly in the world of finance and investments, so you must be diligent if you want to get the best return on a regular basis.

Set it and forget it

Many of us are guilty of using the above method to set up our investments. We do the hard work to find the accounts offering the best deals in our situation and then forget all about them. It can be many months or (in the worst case scenario) years before we realise how poor the interest rate has become.

Clearly we need to take a different approach. We need to make sure we check on our investments regularly – something we should be doing anyway – to make sure they are still performing well for us.

Set a reminder

How do you remember other important tasks you need to do? Do you set reminders or alarms on your cell phone? Maybe you have a desk calendar – either online, on your computer or an old paper and pen version – that gets updated with important notes.

Whatever method works for you, add a reminder to your schedule to check the performance of your investments on a regular basis. Ideally a monthly check is good – interest rates can change at any time and you don’t want to miss out on more than a month’s worth of interest if you can help it. This is particularly important if you rely on your investments to provide you with an income. In this situation it is best to make sure your investment check happens every month without fail.

Set a course for a more positive attitude towards your investments

It’s easy to become lazy when it comes to investments. We arrange them, sink the money into whatever account, bond or other investment vehicle works best, and that’s it. The rest takes care of itself.

But of course we have to keep an eye on these investments otherwise we may find they take a downward turn. As we’ve seen, this can happen very easily and it does happen to plenty of people every single day.

The most important thing to remember is that you and you alone are responsible for your investments. Interest rates change all the time and it is important to always get the best return if you want to make sure you can stay ahead of inflation. This alone can diminish the value of your investments, and when it is combined with lower interest rates you can see the damage it can do.

If you do just one thing with your investments today, make sure it’s this: set a reminder for the next available weekend to spend an hour or so checking interest rates. You will be glad you did.

Does It Really Matter Why Chase Revived the Free Balance Transfer Credit Card Market? Not Unless You’re an Investor

A free balance transfer credit card is just one of those deals that seems too good to be true, especially in the post-recession environment.  But go ahead and pinch yourself because it is real and you are not dreaming.  Consumers with above-average credit can indeed trade in their high regular interest rates for 0% introductory transfer rates without paying a thing.

If you’re surprised to hear that, you’re certainly not alone.  So-called free balance transfer credit cards were by all accounts dead and gone following the 2010 implementation of the Credit CARD Act.  This landmark law prohibits many of the predatory revenue streams that certain banks once relied upon to the dismay of consumers everywhere.  This includes the bait-and-switch tactic of using teaser rates to lure new customers before jacking up the finance charges once they had incurred a balance.

Absent the ability to raise rates at will, how can banks possibly make money off accounts that don’t charge any fees?

Such was the prevailing thought before Chase changed the game with its Slate Card.  You can avoid interest for 15 months with this card without having to pay an annual fee (many cards charge more than $100 a year) or the standard balance transfer fee of 2-4% of whatever debt you bring with you from another account.

The Slate Card’s value to consumers in our debt-reliant society is plain to see.  For example, the average household currently holds about $6,600 in credit card debt, on which they’re likely paying interest at a 17% clip (or higher).  Well, a credit card calculator will show you that by making $200 monthly payments, the Slate Card will save that average household nearly $1,700 in fees and finance charges while helping them pay off what they owe 7 months faster than they would with their original card.  The Slate Card also outperforms the average balance transfer credit card by some $1,100 and six months’ time.

While you might be inclined to send in an application before asking too many questions about how such a great deal can possibly be sustainable, this is an issue we’ve already given a bit of thought.  There are a few plausible rationales (addressed in further detail below), but the overarching notion is that banks these days are pulling out all the stops to bring the most dependable consumers into the fold.  With lessons about the importance of customers who can pay their bills even in the most financially turbulent times fresh in their minds, issuers are offering unprecedented sign-up perks – including initial rewards bonuses worth hundreds of dollars and 0% introductory rates for up to a year and a half – in the hopes of convincing people to switch their credit card allegiances.

With that in mind, Chase could conceivably be using the Slate as:

  • The Bait Needed to Hook & Cross-Sell Wealthy Consumers:  Chase obviously offers far more than just credit cards, and it would be shortsighted to assume that the Slate Card is part of such a narrowly-focused plan.  In other words, Slate’s flashy terms could just be a way for the bank to get its foot in the door with high-wealth individuals (who are most likely to have exemplary credit) before bringing more profitable products to this captive audience’s attention.  This is, of course, a risky strategy since consumers aren’t too brand loyal these days and most people simply use balance transfer credit cards as a one-off opportunity to get out of debt.

  • A Means of Influencing Investor Perception:  It’s common for investors to evaluate the strength of a bank’s credit card operations based on its outstanding balances as well as the default rates of its customers.  These metrics will typically give you a sense of how much business the bank does as well as how sophisticated its underwriting procedures are.

    The obvious exception is when a bank artificially increases its outstanding balances (thereby lowering default rates in the process) by offering a balance transfer deal that is too good to pass up, for example.  This isn’t necessarily what Chase is doing with the Slate Card, but the company’s leadership (and stock position) has been under fire in recent months, so it’s at least a possibility that’s worth considering.

At the end of the day, why Chase continues to offer the Slate Card won’t really matter to most consumers.  The ability to save heaps of money and get out from under the burden of debt is far more intriguing.  But if you’re considering any other investment in a bank like Chase that offers such a dubiously profitable product, you should certainly ask yourself why that might be before pulling the trigger on your trade.

 

Odysseas Papadimitriou, a former senior director in Capital One’s credit card division, is the founder and CEO of CardHub.com – a leading website that covers personal finance and helps consumers find the best credit cards and prepaid cards for their needs.

Understanding Investment Risk

If you are keen to start your very first investment then you are sure to have done a lot of research into which sector best suits you. But before you begin to invest your hard earned money, you might be interested in learning about all the different types of investment risks.

These days you can invest in almost anything, from gold and silver on BullionVault to luxurious holiday homes. Each have their own risk and no investment is 100 per cent safe and is a guaranteed win. Many people make the mistake of thinking that to buy gold bullion is either “safe” or “risky.” However, it cannot be categorized so simply. There are several types and levels of risk you should know before you begin investing.

Market Risk: This means that your investment could lose its value in the market.

Interest Rate Risk: This means that you could lose value due to a change in interest rates. This only applies to fixed-income investments.

Reinvestment Risk: There is a risk that your investment will be reinvested at a lower rate of interest when it matures.

Political Risk: If there is political action in a country where you have placed your investment then you could lose value. Developing countries are particularly susceptible to this.

Liquidity Risk: This means that there is a risk that your investment will not be available for liquidation when it is needed. This mainly applies to fixed-income investments or real estate property which may not be able to be quickly sold at an equitable price.

Purchasing Power Risk: If there is inflation in the market then your investment could lose its purchasing power. This risk applies to fixed-income investments.

Tax Risk: This is the most common risk which applies to almost all investments. Tax risk means that your investment might lose its value due to taxation.

How to Prepare Yourself for a Potentially Really Brutal Debt Ceiling Fight in 2013

Money is such an emotionally charged topic that many people try and avoid it until it really matters. Inevitably, many of us will have to deal with our piling debt. One solution for dealing with it all is debt settlement.

Here are another ten useful tips by Consolidated Credit that could keep you from getting saddled by credit debt in the coming year.

1.     Reduce Interest Rates If Possible

Almost every student loan lender has some kind of interest rate discount for people who set up direct deposit. The discounts are usually not huge, but they can help you save a lot of money in the long run. It would also be good to check with the lender to see if they have any other interest rate deductions. Lenders are often able to reduce the interest rates based on factors like having a high credit score or having a history of on-time payments and even if they cannot, it doesn’t hurt to double check.

2.     Loan Consolidation

In some cases, loan consolidations can be real life savers. A person can also reduce interest rates with loan consolidation. A person will need to pay close attention to the effect it will have on all the loans.

3.     Bigger Payments

It does sound obvious, but it still deserves attention. Sure, the easiest way to pay off a loan faster is to simply pay more each month. But how much more should a person pay? And will the lender accept the increased payments? These are important questions that need to be answered.

4.     Earn More To Pay Back The Loan

Of course, it’s hard to make larger payments towards a loan if you don’t have additional money in the first place. Taking up a second job is the best way to earn extra cash that can then go towards paying off the loan.

5.     Budget Better

To budget your expenses is always going to help in the end. Make a monthly budget and try not to over- spend. Your budget will be the one thing that will help guide your way towards paying off the loan faster.

6.     Save Money

It is extremely important that you save money. Without proper savings, you will definitely find it harder to pay off your loans or credit debt.  To accomplish this, it will help to save money in every aspect of your life, from going to the grocery store to visiting restaurants on weekends. Consider carefully the price of every item you purchase and ask yourself if you really need it.

7.     Give Yourself A Goal

If additional income is not being generated, it is okay to compensate by putting monthly expenses like utility and grocery bills on the credit card. But make sure to make your monthly payments on time to avoid credit debt.

8. Be Realistic

The worst way anyone can unknowingly sabotage their own debt-free goals is by considering themselves to be perfect and trying to accomplish difficult outcomes in short time periods. When you set unrealistic expectations for yourself, chances are you will fall short and be disappointed

9. Track Your Spending

One solution is to track your spending. If you use a proper spending plan (aka budget), it will help you make frugal choices. To be successful with your goal, you’ll need to act based on the budget you find yourself on.

10.  Understand Your Interest Rates

Most of us have taken out loans at some point in our lives but we often neglect to understand how the interest rates work. Whether your debt consists of student loans, credit cards, an auto loan, a mortgage, or all of the above, devote some time to reading the fine print on your statements so that you understand exactly what you’re paying each month and why. One solution is to identify the loan with the highest interest rate and put it in your cross hairs first.

Conclusion

Inevitably, many of us will have to deal with our piling debt. One solution for dealing with it all is debt settlement. These practical ways should help to evade or at least cushion the fall. Otherwise, the muscular debt ceiling is sure to slice us all from dimple to duodenum.

Author’s Bio:

This article is composed by Elaine McPartland who is associated with “Consolidated Credit” as their community writer. She has an expertise in writing articles related to debt consolidation and how to pay off debts easily and smoothly. You can add her at her google+ profile

Editions TV Show Looks at 4 Reasons to Buy a Second Home

Right now, the real estate market is considered a buyers market.  Over the last few years, home prices have fallen dramatically in most major markets, and interest rates on home loans are the lowest on record.  Both of these reasons makes it a really good time to buy real estate. You can find amazing country houses for sale.  However, what if you already own a home?  Should you buy a second home?

Editions TV with Terry Bradshaw looks at some major reasons why now is the time to consider buying a second home.  For many people, they go to the same few places all the time on vacation, and this can be a great reason to buy a second home.  But what other factors are there to consider?  What should you know?  Here are some of the key things to think about when considering buying a second home.

The Financial Implications

The first thing to consider about getting a second home is the financial implications of it.  As mentioned earlier, right now, home prices and interest rates are both very low.  This can make it financially easier to buy a home than it would have been in the past.   However, as Editions TV show points out, it can be incredibly difficult to get a loan right now.

Lenders are being very strict with who they lend to.  In order to get a loan on a primary residence, not even a second home, borrowers have to have impeccable credit, with very high credit scores.  As such, you may have to put much more down on a second home, or even pay all cash.  However, since prices are low, this can be a good investment.

 Editions TV on Family

Family is important to most people.  And having a comfortable place for everyone in the family to get together at is very important.  Having a second home can also be a second home for the entire family.  This can be a place where birthdays and reunions happen, or even fun family events like Thanksgiving or Christmas.  When you have a second home, it is more than just a place, it can be a meeting place for the whole family, who can hopefully enjoy it for years to come.

A Home Away From Home

Plus, having a second home can be a home away from home for you.  Instead of staying in a hotel, staying in a second home should be much more comfortable.  With a second home, you can decorate it exactly how you would want to.  You can furnish it with your belongings, and put up your family pictures.  That way, when you stay at your second home, it is just like being at your primary house.  That really makes it a much more comfortable place to stay than just any lodge or rental house.

Plus, when you have your own home, you can cook and have all the amenities that you’re used to having.  This can make it much more comfortable than a hotel room or something similar, and can be great if you plan on having family over.

Making It A Smart Investment

Finally, Editions TV with Terry Bradshaw believes that you can make getting a second home a smart investment.  First, if you travel a lot, look at how much you spend on hotels and lodging for the year.  Then, look at what the cost of a second home would be?  If they are close, why not invest in a second home that would probably provide you with more amenities that you would normally get while you’re traveling.

Second, a second home can be a good source of income when you’re not using it.  If you are thinking about getting a second home in a tourist area, you can leverage that home to be a vacation rental when you’re not using it.  There are many vacation rental firms out there, and they can handle the logistics of it while you just enjoy getting a paycheck when you’re not there.  And when you want to stay there?  You just let them know.

Why Do Stock Share Prices Change?

Even if you don’t yet know too much about the stock market, you’ll probably be aware that prices change on a regular basis. But why is this? Why can the price of one share be at one level on one day, and an entirely different level the next? Let’s find out more, so you know what to expect if and when you start buying or selling shares.

Supply and demand

This natural law means the price of something – anything, not just shares – is likely to go up the fewer items are available (supply). However it also relies on how many people want that item (demand).

Let’s say there are 100 shares at $10 each. If less than 100 people want them, the price might drop or stay the same. If more than 100 people want them, the price will rise. If there are 1000 shares at $50 each and less than 1000 people want them, the price would stay static or drop. More than 1000 buyers would lead to a price rise. So you see the amount of shares available and their initial price do not matter. It is the law of supply and demand that matters.

Profit warnings

Sometimes businesses will issue profit warnings if they are having a tough period of trading. These will usually lead to a drop in the share price, as the business could be in trouble. The shares will not therefore be as valuable as they would be if a business issues a good report on its earnings, pointing towards a better and more profitable future in turn.

The influence of outer forces

This might sound like something in a sci-fi drama, but in reality it’s nothing of the sort. Every business is affected by all manner of external forces. This could be anything from a rise in interest rates to a recession. If a business starts experiencing problems owing to an external force such as this, you can be sure the share prices will be affected accordingly.

Of course if a business bucks the trend and still brings in good profits despite such issues from outside, its share prices will typically rise and improve. This will be in contrast to other businesses that may be struggling.

The actions of a large shareholder

While some shareholders have relatively small amounts of shares, others have lots. These are the big shareholders that represent companies of various kinds, such as insurance brokers. If one of these shareholders should sell their shares – for whatever reason – it can spark panic among the rest. Why are they selling such a large amount of shares? Even if the company isn’t in trouble, this type of action can send the prices into freefall.

So you can see there are lots of reasons why the prices can change. The more you understand this before buying or selling shares, the easier it will be to understand the movements of the stock market. It also adds to your knowledge, and that can only be a good thing.

What Kinds of Mutual Funds Can You Get?

Many people have heard of mutual funds. But even though they are often talked about as if they are all alike, nothing could be further from the truth. Mutual funds can be classified in all kinds of different ways, although there are several main kinds that can be noted to exist if you are a beginner. Here we will go through these types so you can delve into each of them in more detail.

Stock funds

If you are considering getting involved with stock funds you must remember they are better focused on for the long term. It would be unwise to assume you could get a good return over the course of a few months. We are all aware of stock market crashes that have occurred in the past. However, even with these crashes in mind, the overall trend for the value of stocks has still been on the rise.

One other point to remember is that this category of mutual funds is generally best if you are happy to take on a little more risk in the hope of gaining a bigger reward.

Bond funds

Those who feel more secure knowing they have a more reliable source of income will likely feel more confident investing in bond funds. Of course they come with risks, much like any other mutual fund, but they are greatly reduced when compared to the other types. One of the key risks is a potential rise in interest rates. This has the effect of reducing the value of the bonds, thus making them less successful.

Balanced funds

As the name would suggest, these are normally a balanced mix of both stocks and bonds. This might be suitable for you if you want to invest in both types but you want to keep them together in one mutual fund. Obviously it makes sense to identify exactly which types of stocks and bonds go to make up any specific mutual fund before you invest. And remember, there will be a degree of risk involved so bear this in mind as well.

Money market funds

This type of mutual fund traditionally carries a far lower risk of loss than the kinds of funds mentioned above. However this is tempered by the fact that the returns are usually lower than the others as well. It is the classic case of less risk, less reward. The other kinds of mutual funds offer a higher degree of risk, but if that risk pays off you can expect a higher return as well.

Understanding the differences – and choosing the best mutual funds for you

Everyone will have their own ideas as to which type of mutual fund will be best for their financial needs. Risk appetite, expectations and finances will all play a part, but it is wise to understand what options there are and which type of mutual fund will be the best choice. Once you know the options you can make an informed choice.

Are You Ready to Buy a Home?

For the last few years, in many areas of the United States, home markets have fallen while interest rates have reached historic lows.  Many who are underwater in their homes have been waiting and waiting for the market to rebound while those who are waiting to become home owners continue to wonder where the bottom of the market is and when is the best time to buy.

There are now indications that the market is slowly beginning to improve.  If you haven’t jumped into home ownership yet, you may wonder if now is the time to begin your home search and to see how much you qualify for a mortgage loan.  However, before you take the leap to homeownership, make sure you are truly prepared.  Remember, many people who found themselves in dire financial straits a few years ago were in that position because they bought a home before they were truly prepared.

Can you pay 10 to 20% down?  Conventional wisdom used to be to have a down payment of 20%, but that can be difficult in some areas of the country where typical housing prices are $400,000 or more.  At the very minimum, you should plan to have at least 10% down.  If you can’t, from a conservative viewpoint, you are probably not yet ready to own a home.

Have you practiced making the monthly payment?  If you are currently renting and paying $1,000 a month and a house in your price range with your available down payment would cost $1,560 a month, begin setting aside an additional $560 a month for at least 6 months to make sure you can comfortably afford the monthly payment.  (Plus, practicing like this can bulk up your savings.  Setting aside an additional $560 a month for 6 months will net you an extra $3,360 in your savings.)

Can you afford to set aside money for repairs and maintenance?  While many homeowners wish their homes would never need expensive repairs, that just isn’t reality.  Homes need to be maintained and repaired, and if you don’t put that money aside, you can find yourself in a financial mess.  Experts recommend you set aside 2 to 4% of your home’s value for annual repairs.  On a $250,000 home, that means you should set aside $5,000 to $10,000 or approximately $415 to $830 a month in addition to your monthly house payment.

Can you afford annual property tax?  Property tax rates can vary widely depending on your location and the value of your home from just a few thousand dollars to $10,000 or more.  Before you buy, determine what your property taxes will be and how much you should set aside annually.

Unfortunately, new homebuyers often just focus on one price—the monthly property investment mortgage payment.  However, there are many more variables and expenses than just the mortgage.  Even though now is still a great time to buy, before you take the leap into home ownership make sure you can afford all of the expenses.  And remember too, you will be able to deduct some of your expenses on your income tax filing, essentially lowering your expenditures a bit.

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