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Archive for July, 2008

Reward cardholder prefer rewards levels to APR

Written by admin on Jul 31st, 2008 | Filed under: Uncategorized

According to a recent report the majority of credit card holders in the UK who have rewards based credit cards are more interested in the type and level of rewards that they receive from their credit card than in the rate of interest and other fees that are charged on the card. It is estimated that around 50% of rewards based cardholders are more interested in what they can earn on the card rather than on how much interest they are likely to pay.

This could be because many of those with rewards based credit cards tend to clear the balance within the interest free period anyway, which means that the APR charged will not affect them, as they are able to avoid paying interest charges. Those that plan to spread repayments on their credit card balance should look at other options, such as a 0% purchase credit card, as otherwise the interest that they pay will far outweigh the rewards that they earn on the card.

One industry official stated: "Credit card rewards programmes clearly remain an important element in attracting and retaining card customers. However, consumers need to ensure they choose the right programme to suit their spending habits and lifestyle. Issuers need to understand that consumers want more control in redemption but the trade-off is that rewards programmes do not have to be as rich in benefits as they have been. I think we’re entering a new era for rewards programmes in the UK and many of the traditional propositions need radical review."

There are many different types of rewards based credit cards on the market, and consumers are urged to find the one that best meets their needs, and offers rewards that they will use and find valuable.


Taking The Risk Out Of Your Financial Goals

Written by Toi Williams on Jul 30th, 2008 | Filed under: Uncategorized

Risk is something that everyone will experience when trying to plan for their financial future.  Many things that have to do with finances are uncertain from year to year, making it difficult for a person to predict how events will affect their financial stability.  Sometimes, circumstances beyond the person’s control can wreak havoc on their financial planning, such as an illness or death in the family or the loss of a well paying job, but in most cases, predictable events have the greatest effect on the person’s financial situation.  By reviewing these predictable events and adjusting your finances before these events come into play, you can effectively manage the risks you are taking with your financial future.

Now, not all risk is a bad thing when planning for your financial future.  Taking some risks with your finances can help them to grow more quickly, such as purchasing good stocks in the stock market, but the trick is knowing when to hold on to the risky assets and when to reduce the risk to prevent the devastation of your account balances.  Managing the risks that you are taking can be difficult and many people will make a few mistakes before they get the hang of managing their risk effectively.

How Much Risk Should You Be Exposed To?

When planning for your financial future, the amount of risk you should be exposing yourself too should be directly related to your age at the time.  Workers that are younger can accept more risk into their financial planning because if the deal goes bad, they will have more time to replenish their finances before retirement.  As a person becomes older, the level of risk that they are exposed to should be reduced until there is virtually no risk to their finances in their retirement years.

If a mistake is made and the person finds themselves facing a large loss, the answer is not to take on more risk to try to recoup their losses quickly.  People that choose to go this route almost always find themselves facing significantly larger losses than they began with.  The correct reaction would be to chalk up your losses as a learning experience and reduce the amount of risk that your finances are exposed to until you have rebuilt your accounts to their previous levels. 

In order to manage your financial risk successfully, you must do your research before making any major financial decisions.  Do not buy a stock without researching the company simply because someone has told you that the stock is hot and you will obtain a sizable return on your investment.  Stocks that rise fast can also fall fast, taking your financial stability with it if you have invested too much of your money in the company.  Take the time to weight the pros and cons of each financial decision and that way, you will never really be surprised by the outcome.


Refinancing Your Home? Here’s Some Things To Think About

Written by Toi Williams on Jul 29th, 2008 | Filed under: Uncategorized

Refinancing your home is an important decision that can have many negative consequences if the timing is not right.  If you are considering a refinance, it is very important that you take some items into consideration before making a final decision on whether to refinance or not.  Refinancing a home loan without taking into consideration whether the timing is right can cost you thousands of dollars in penalty fees and interest payments over the life of the mortgage loan.

1. The Reason For Refinancing The Loan
Refinancing a home loan for certain reasons is always a bad idea and you should avoid falling into these traps at all costs.  A home loan should never be refinanced to pay for an expensive vacation or to pay off credit card debt so that you can charge more items to your credit cards.  Using the equity in your home in this manner is a phenomenal waste of money and if you cannot pay for these items in any other way, it is a good bet that you should not be going on the vacation or purchasing any more items that are not absolutely necessary.

2.  How Interest Rates Are Moving
Right now, mortgage interest rates are steadily rising in all parts of the country and the type of mortgage loan product that you currently have will determine what steps you should take next.  If your current mortgage loan is a traditional, fixed rate loan then it may be cheaper for you to stay in your current mortgage to prevent your mortgage payments from increasing due to the higher interest rates.  However, if you took out an adjustable rate mortgage loan to pay for your home, it may be best to try and refinance into a fixed rate mortgage to lock in the current interest rate and mortgage payment before the rates rise further.

3.  Length Of Time You Will Be In The Home
A home loan should only be refinanced if you are planning on staying in your home for at least five more years.  Any length of time shorter than that and you will find yourself paying the mortgage company hefty prepayment penalties for paying off the loan early, often costing thousands of dollars.  The prepayment penalties required for getting out of the loan will take away from the amount of money you will have for placing a down payment on a new home, not to mention the fact that you will be giving a great deal of money to the mortgage company for nothing.

By thinking about these items before you decide whether or not to refinance your home loan, you will reduce the risk of refinancing at a bad time and losing thousands of dollars on the deal.


How Your Credit Report Affects Your Finances

Written by Toi Williams on Jul 28th, 2008 | Filed under: credit score

Although credit reports have been around for a very long time, many people still do not understand what their credit report contains and how it will affect their lives.  Because of this lack of understanding, many people dismiss the importance of their credit report and neglect to review it for inaccuracies or negative information.  The truth is that a credit report is one of the most important financial instruments used today and it can have a bigger impact on your financial future than any other item in your life.

What Is On A Credit Report?

Your credit report is a very important part of your financial future because this is the information that most creditors look at when determining whether you are credit worthy or not.  Your credit report contains a history of every account that you have ever opened and the status of those accounts, whether they are current or have had late and missed payments in the past.  Your credit report also details any credit obligations that you have defaulted on in the last 7 to 10 years, with balance amounts and the length of time since the account has received a payment listed beneath the name and address of the creditor.

Your credit report details your credit history which is used to determine your credit score.  If there are numerous defaults and late payments listed on your credit report, then your credit score will be decreased for every piece of negative information that is reported to the credit bureaus to be listed on your credit report.  Even having a creditor pull your credit report to determine your credit worthiness can decrease your credit score by 5 points per occurrence.

How Does This Affect Me?

If there is a lot of negative information listed on your credit report, it could cause a number of problems in different areas of your life.  Creditors, such as mortgage lenders, credit card companies, and car dealerships, may deny you credit because you are considered a credit risk and they do not know if you will pay back any loan that they extend to you.  Obtaining a credit card from a retail store may be difficult as well, as they also determine whether they should give you credit based on your credit report and credit score.

Credit reports are used in other areas of your life as well.  Some employment positions use your credit report as an indication of your level of personal responsibility and may be reluctant to hire someone that has a bad credit report.  People have also been turned down for apartment rentals because of a bad credit report indicating to a landlord that you have trouble paying your creditors and may not pay your rental payments on time.  Your credit report is very important to your economic future because it can affect so many significant areas of your life.


Carnival of Personal Finance #163 Published

Written by admin on Jul 28th, 2008 | Filed under: blog carnivals

This week’s carnival of personal finance is at YouNeedABudget.com.  Our article about 3 Credit Card Tricks that Keep More Money In Your Pocket has been included in the carnival, as well as a number of other great personal finance readers.  Here are some that I liked:


Trying To Reduce Or Eliminate Your Debt? These 5 Steps Can Help You

Written by Toi Williams on Jul 27th, 2008 | Filed under: mindset, saving

Are you interested in getting out of debt and stopping the monthly payments you must make to your creditors?  If so, you are in the company of about 75% of the population that has found themselves with more debt than they are comfortable with.  There are certain steps that can be taken to eliminate the debt that you have and prevent you from accumulating more, which is the only way to truly realize debt freedom.

Step 1 – Changing The Way You Think About Debt
In recent years, debt has become an acceptable way to get the things that you want quickly, instead of saving up for the items over time as our parents did and only purchasing the things that you can afford.  This has translated into the highest level of consumer debt in history and millions of people across the nation filing for bankruptcy protection from crushing debt.  In order to become debt free, you must begin to think of debt as something to be avoided at all cost and conduct your life accordingly.

Step 2 – Stop Digging The Hole That You Are In
The biggest step in eliminating your debt is to stop creating more debt.  You will never eliminate the pile of debt you have accumulated if you are adding to the total each month by purchasing more items.  If you have credit cards, put them away somewhere that they are not easily accessible and stay away from the stores where you know that you always purchase more than you intended to.

Step 3 – Make All Of Your Payments On Time
Nothing increases debt faster than penalty fees on an account and you are not receiving any benefits from the extra money that you are paying to the companies.  Penalty fees assessed against an account for paying the bill late can range from $5 for the cable bill to $39 for a credit card bill.  If you are being assessed numerous penalty fees on several different accounts each year, you could end up paying thousands of dollars extra to these companies in a very short period of time.

Step 4 – Cut Out The Convenience Fees
There are many different things that people do without thinking that could be classified as a “convenience fee”, such as the $2.50 paid for the convenience of using an ATM that is not branded to your bank or the $4 paid for the convenience of purchasing a coffee instead of brewing your own at home.  Over time, these convenience fees can add up to thousands of dollars that could have been saved by taking a few minutes out of your busy schedule to do things for yourself or to plan ahead for the things that you will need throughout your day.

Step 5 – Save Money For Emergency Expenses
One of the biggest reasons that people fall into debt and remain in debt is that they spend all of the money that they make and do not have a cushion to use in the event of an emergency.  If you have no savings when an emergency financial situation arises, you are much more likely to charge the amount to your credit card, where you will pay up to 30% interest, or you will take out a payday loan, which charges 390% interest packaged to look like a fee and can trap you in a cycle of debt that may take months to release yourself from.  By placing some money aside in a savings account, you can ensure that you will not have to use either of these options when a financial emergency arises.

 


Reverse Mortgages: Are They A Bad Idea?

Written by admin on Jul 27th, 2008 | Filed under: Uncategorized

Anybody that has been watching television in the last few years have seen a commercial for a newly created financial product called a reverse mortgage.  These products are geared towards seniors and the commercials are very vague about what a reverse mortgage is, other than stating that it will get you the money that you need.  Although the commercials for the products state that they are a good way to obtain additional financing, many people believe that the reverse mortgage was created to prey upon the vulnerabilities of senior citizens who are often living on fixed incomes and provide a way for financial institutions to drain the equity out of a homeowner’s house.

What Is A Reverse Mortgage?

A FHA reverse mortgage product allows a homeowner to take equity out of the home in the form of a lump sum payment or several equal payments spaced out between specified periods of time.  There are no restrictions on what the money can be used for, although many of the people that obtain the loans use the money for their living expenses or to fund a major project that they are having completed.  The amount of the loan is based on the amount of equity that the homeowner has in the home at the time of the loan and only certain percentage of the equity can be obtained through the reverse mortgage process.

Only senior citizens that are homeowners and have a significant amount of equity in their homes will qualify for a reverse mortgage.  In fact, a person is not able to apply for this type of mortgage product unless they are at least 62 years of age and if the person is older, they will qualify for a higher loan amount than if they were closer to the age of 62.  There are no payments due on the loan during the lifetime of the homeowner unless they decide to transfer ownership of the home, at which point the entire principal and interest of the loan becomes due.

What Are The Negative Aspects Of A Reverse Mortgage?

One of the biggest negatives associated with obtaining a reverse mortgage is the huge fees that are charge for originating the loan in the first place.  Because there are no payments due on the reverse mortgage until the home has transferred ownership, there is no way to tell how long the loan will be in effect, which could be many years or only a few months depending on the circumstances.  In order to ensure that the financial institution will make money on the reverse mortgage, they will charge high fees and take them out of the initial payment to the homeowner.

Another negative aspect of the reverse mortgage is that in many cases, the financial institution ends up holding all of the equity that was in the home, effectively preventing the homeowner from leaving the home to another person in their will.  People that do not have any close relatives or do not intend on leaving their home to a family member after they have passed on may be okay with this, but people that would like to leave their home to their children or their grandchildren will find that whoever they leave their home to will owe a great deal of money to the lending company when the home changes hands.  Whether a reverse mortgage is right for a person depends on their situation at the time and what their plans are for the future, but it is important for the person to take all of these things into consideration when deciding if they should take out a reverse mortgage.


Get A Good Deal When Buying New Wheels – 5 Great Car Buying Tips

Written by Toi Williams on Jul 26th, 2008 | Filed under: Uncategorized

Purchasing a new car is a major decision with long ranging financial consequences, so it is very important to learn all that you can to get the best deal that you can when shopping for new wheels.  There are a number of different tips that should be followed when shopping for a car to ensure that you are not being taken advantage of and that you are paying a reasonable price for the car that you want.

Tip #1 – Choose Your Price Range Before You Start Shopping
Many people make the mistake of deciding how much they can spend based on the car that they desire or are looking at in the dealership at the time.  These people often find that they are paying more than they can afford for the car and have to cut back in other areas of their lives to meet their car payment obligation.  A car payment should never exceed more than 20% of your monthly income, so calculate what about 15% of your monthly income would be and use that as a limit for the monthly payment for the new car.

Tip #2 – Do Some Research Before Heading To The Dealership
Before going to a dealership to begin looking at cars, try to do some research online to determine what cars you may be interested in and which cars are within your price range.  This will save you a lot of time from going around from dealership to dealership looking at many different cars in many different colors and trying to compare them when they are in different places.

Tip #3 – Review Several Prices For The Chosen Car Before Negotiating
Car dealerships are in the business of making money and most good salespeople can smell a sucker from a mile away.  Review the listed price of the car that you have chosen on the websites of several different dealers before negotiating with your salesperson and take advantage of the payment calculators that are can be found on a number of different websites.  This way, you will have a better idea of how much the car should cost and how much your payments should be each month.

Tip #4 – Look For Deals On Cars Or Financing
In today’s competitive market, many car dealerships are offering special deals on their cars or on financing their cars in order to draw more people into the dealership.  Sometimes, these deals are very good for the customer because the dealership is trying to get rid of vehicles that they have ordered too many of.  Be sure to look for deals in the advertising of dealerships that are nearby because you may find that you can get the car that you want for a lot less than you would have otherwise. 

Tip #5 – Be Sure To Test Drive The Vehicle Before Purchasing
You would be amazed at the number of people that purchase a vehicle without first test driving it.  Test driving the vehicle will show you if you will be comfortable driving the car, how the car handles, and how the engine of the car performs   People that do not do a test drive before purchasing the car often find that they do not like the way the car feels when they are driving it and often end up spending more money to get out of that car and into another one within the next two years.


5 Tactics Retail Stores Are Using To Get More Of Your Cash

Written by Toi Williams on Jul 25th, 2008 | Filed under: Uncategorized

Retail stores are experts at separating consumers from their hard earned money, with some spending millions of dollars a year on researching how to get you to spend more with each visit.  Many consumers find themselves helpless against this onslaught and routinely walk out of retail stores carrying many more items than they intended to purchase and spending much more than they intended to spend.  Here are five of the most common tactics used by retail stores to increase your spending and the steps that you can take to avoid them.

Tactic #1 – Placing Shopping Carts By The Entrance
Many retail stores place shopping carts by the entrance so that people that are shopping in the store will not limit themselves to the items that they can carry.  Retailers know that if a person has a lot of space in their cart, they are less likely to hesitate to pick up an item that they perceive to be a good deal, even if they do not really need the product.  If you are going into a store to pick up a few items, leave the shopping cart at the entrance and carry the items by hand or in the small hand baskets that the stores generally hide inside the store.

Tactic #2 – More Expensive Items Placed At Eye Level
Many consumers that are faced with a large amount of choices will generally choose the first product that they see that is acceptable, especially if they are in a rush.  This is especially true at grocery stores where there could be 50 different types of canned vegetables and 70 different varieties of cereal to choose from.  By placing the most expensive items or the items with the highest profit margins at eye level and the least expensive items near the floor or on the top shelf, the store is increasing the chance that you will choose the higher priced item.

Tactic #3 – Staple Items Spread Throughout The Store
Some of the most common items that people travel to the grocery store for are bread, milk, and eggs because these are the items that they generally run out of the quickest.  Grocery stores know this and will place the bread in aisle 1, the milk in aisle 18, and the eggs in the back of the store to get you to walk past nearly every item in the store to get the few items that you were looking for.  This increases the chance that you will see something that you believe to be a good deal or that you forgot that you needed and will purchase more items while you are in the store.

Tactic #4 – Items That Are Not On Sale Displayed To Look Like They Are On Sale
Who can resist a good sale?  Sometimes stores will create an elaborate display at the end of an aisle, where it is more noticeable, with the price of the item in large letters like it is the best deal in the world or place the items in bins instead of on shelves to make them look like clearance items.  In many cases, the prices displayed for these items will be no different or only a few cents less than the regular price of the item, but because of the perceived sale more people might pick up the item for purchase.

Tactic #5 – Placing The More Profitable Departments At The Front Of The Store
Many retailers plan their stores to make customers walk past most of the high priced, high profit items on their way to the lower priced items at the back of the store.  This gives the retailer numerous opportunities to entice the consumer to pick up a high profit item that they may not have been considering when they walked into the store.  If you are going into a store for a single item, it is best to walk straight to where the item is located in the store, and then walk straight to the checkout counter to pay and leave.


5 Simple Solutions To Save $500

Written by Toi Williams on Jul 24th, 2008 | Filed under: Uncategorized

For some people, saving money seems to be the hardest thing in the world.  Every time that they save a little bit of money, an unexpected expense arises to clean out the bank account once more.  There are some simple solutions that can be used to help a person save $500 quickly and once that first $500 is in the savings account, the person will begin to see their savings grow more quickly.

Solution #1 – Conserve Energy
With energy prices skyrocketing at an astronomical rate, it is more important than ever to conserve energy and keep your energy bills as low as possible.  There are many ways that this can be achieved, from turning the lights off when you leave the room to turning on the sleep timer on the television each night so that it does not stay on all night to turning the thermostat up in the summer and down in the winter.  Being conscious of how much energy you are using each day can save you as much as 35% off of your energy bill each month with simple changes and as much as 50% each month with dramatic changes to your routine.

Solution #2 – Conserve Gasoline
Unless you have been living in a news-less bubble over the last six months, you know that gas prices have risen dramatically in the last several months and relief from the high prices is nowhere in sight.  Conserving gasoline is not difficult to do, it just requires some adjusting of the way that you spend your day.  You can conserve gasoline by running your errands on the way home from work to avoid making another trip, bringing your lunch with you to work instead of driving to pick something up, or carpooling with coworkers that live in your area.

Solution #3 – Purchase Store Brands
There are many items available in grocery store where a person would not be able to tell the difference between the store brand and the brand name item.  This is especially true of anything that will be covered in sauce when cooked, most paper products, seasonings, and canned/fresh/frozen produce items.  Almost everything can be found as a store brand at the grocery store and the store brand can be as much as 50% cheaper than the brand name product.

Solution #4 – Cut Your Cable Bill
Do you really watch all 300 channels plus the premium movie stations that you are paying for with the deluxe cable package?  Chances are, unless you are at home all day just watching television, you only watch a few of these channels on a regular basis and maybe catch a movie on one of the premium movie channels once a week.  This means that you are paying for a whole lot of channels that you never even watch.

The easiest way to cut the amount that you are paying for home entertainment is to stick to the basic cable package and begin a movie collection for the times that there is nothing on that you would like to watch.  Some basic cable packages begin around $20 per month and thrifty consumers can find movies that they would like to watch at resale shops for as little as $2, a fifth of what it cost to purchase a single movie theater ticket.  The movies sold by these shops are guaranteed to work like new and may have many of the older titles that are hard to find in regular retail stores along with movies that had just been released on DVD in recent months.

Solution #5 – Reduce Discretionary Spending
There are many things that people purchase every day without really thinking about it because they perceive the cost to be too small to worry about, but every item that you do not purchase means more money saved in your pocket.  Instead of purchasing coffee on the way to work each morning, brew your own and place it in travel mug to be taken to work with you.  Instead of purchasing the overpriced snacks in the vending machine, put some gum or mints in your purse and save money while you lose weight from not snacking every day.  Most people have dozens of items that they could cut out of their daily routine and never even miss them.