Personal Finance Ology

Another step you can take in making an informed decision on which loan or savings product you choose is to know as much as you can about the financial services you need so that you can shop around for the best deal.

Alongside it being your duty to do as much research as possible there is also a responsibility that the lenders have to you. The Consumer Credit Protection Act of 1968, also known as Truth in Lending, is a law requiring lenders to disclose all the costs affiliated with your loan. This is where the Annual Percentage Rate (APR) or the actual cost of the loan including fees and expenses is found. This rate is normally higher than any advertised rate that may have gotten your attention and should be the rate you use when deciding which loan will work best for your situation.

For example, the next time you receive a mailing for a credit card pay attention to the way the interest rate is advertised. The company may state that the interest rate is 10 percent however somewhere in the fine print will be a disclaimer indicating the APR is 10.25 percent. You must review the credit card company’s guidelines to be really sure about their offer.

Deception

There is a lot of confusion and complication when deciding to choose a loan based solely off of the APR. This is because lenders use APR’s differently. Some may include all of the fees associated with the loan while others will include some fees and leave others out. Lenders use this to get around the Truth in Lending law and provide the consumer with a number that will more likely get them to borrow.

Advantages of APY

Not only did the Truth in Lending law require lenders to provide the APR but it also requires them to quote interest rates on an annual basis. This is the Annual Percentage Yield. APY is easier to use over APR because it gives you numbers that you can compare. Whereas with the APR you couldn’t really compare numbers because all of the numbers were calculated differently depending on the lender.

With the APY it’s pretty simple. All you have to do is calculate the total interest earned on an interest-bearing account for a full year. The APY allows you to compare two products with the same length however one may pay interest quarterly while the other pays it monthly. Since it would be more complicated to compare the rates of the two products by using their methods of interest payouts, it would be easier to calculate the APY. The key thing to remember here is that some products you are calculating the APY for may not have a length of time for a year. They may only last for 6 months or so. In this case you would be using the APY to get an idea of which product is the best deal. Your calculations for that particular product will not give you the actual APY.

Clarity

APR, Annual Percentage Rate, is meant to be the cost of the loan in totality and is used when you are borrowing money. Meaning any fees or expenses normally are added in and the total amount you are going to pay for the loan is revealed in the APR. However, many lenders will only disclose certain fees and expenses in the APR making it a deceptive number. You should always read the fine print and if you have any misunderstanding contact a bank representative for clarity.

APY, Annual Percentage Yield is the total amount of interest you could earn on an investment or deposit product. It is used to calculate and compare your profit on different deposit products. It should be remembered here that if you are comparing products that don’t last as long as a year then you are only getting an idea of the potential earnings of those accounts for the sake of comparing and not getting the actual APY.

Another factor in calculating interest rates and their effects on your loan or investments is compounding interest. For more information on compounding interest you can take a look at the article “The Basics of Interest (Part Three)” where it is discussed in more detail.

Photo by: quizzleblog

Filed under: banking, credit card, debt, interest, money by admin - 107 Comments →

Now that the $787 billion stimulus package has been negotiated to terms both Congress and the President can agree upon, the new question is what effect does it have on those dealing with this weak economy. I know throughout all of the meetings and disagreements, I was curious as to how it would be changed around and how it would benefit me. Well here is what I’ve discovered after following this saga venomously.

According to CNNMoney.com the money’s allocation is broken down into three parts. $308 billion (39% of the money) goes to discretionary spending. This includes projects related to energy infrastructure, such as making homes energy efficient etc. $267 billion, which is 35% of the funds, is dedicated to direct aid. This increases unemployment and food stamp benefits. Lastly 26% of the funds, $212 billion dollars are allocated for tax relief focused mainly on individuals however some businesses may benefit from this relief as well.

In an effort to break the recovery plan down further I’ve decided to add a few pointers. The recovery plan includes:

A $400 credit per worker. A full credit is given to singles making $75,000 or less and for couples the credit will double for those making a combined $150,000 or less.

Temporary expansion of the child tax credit will lower the income requirement by $3,000 this year and next year.

Homebuyer incentives that are increased to $8,000 as opposed to $7,500 for homes purchased from January 1, 2009 to December 1, 2009. It also removes the requirement that made homebuyers pay back the credit if they stayed in the home over three years.

Car-buyer incentives offering the ability to deduct state and local tax if your income is less than $125,000 as a single filer or less than $250,000 if you are a joint filer.

Higher education tax credit goes from $1,800 to $2,500 and shall be in effect this year and next year.

Alongside these prominent points the recovery plan also has a lot more to offer. Other benefits include a twenty five dollar weekly increase to unemployment benefits, a 13.6% increase to food stamp payments, health insurance assistance for the unemployed, a 5% increase in the earned income tax credit, a one-time $250 payment to retirees, those who are disabled and those who are not working, it even offers a tax break for families in the higher income bracket.

I tend to believe this recovery plan covers a spectrum of assistance and it has the potential to assist a vast majority of people. As with anything it takes time to fix and recover all that has been lost but I am looking forward to it slowly reviving a dying economy. However, I am curious to see how others feel about this $787 billion recovery plan. Please feel free to comment, complain or applaud the efforts of the higher ups and vocalize any concerns, resolutions or tips on how you will use your portion for benefit. We all can learn from one another’s opinions and ideas!

Photo by: Shirley Two Feathers

Filed under: debt, economy, money by admin - 82 Comments →

I’m going to take a break from my posting today and enjoy reading some great articles that have been submitted to me as I host the Money Hacks Carnival: Bailout Edition.   So feel free to checkout the latest news and articles that these authors have posted to help me bailout my readers

Editor’s Top Picks

FMF presents An Example of What I’ve Been Talking About posted at Free Money Finance.

nickel presents Save Money by Renting Out a Room posted at fivecentnickel.com.

Mr. ToughMoneyLove presents Tracking Our Economic Recovery posted at Tough Money Love.

PFR presents Provident Bank Checking Account $123 Bonus posted at Personal Finance Reviews.

Patrick @ Money Saving Deals presents CoolSavings.com - Free Coupons and Money Saving Deals posted at Money Saving Deals.

The Smarter Wallet presents Charting Stock Movements With Fibonacci Trading Techniques posted at The Smarter Wallet.

Other Blogs - Should they be bailed out? You decide!

Investing
PT presents Tips on Dealing with Credit Rollbacks posted at Prime Time Money.

Brian presents Best CD Rates posted at Monitor Bank Rates.

Ray presents Is buy and hold investment strategy dead? posted at Financial Highway.

Finance Tips 101 presents Why Take The Risk Of Day Trading posted at Finance Tips 101.

Manshu presents Gold Funds - Expense Ratios and Minimum Investments posted at OneMint.

Michael Cohen presents Even If We Are The Next Japan, Stocks Aren?t Necessarily A Short posted at Stock Investment 123.

Buying Stuff
Junior presents What To Do If You Can?t Make Your Car Payments posted at Car Commentary.

mfd presents Optimize your Bank Interest through Automation posted at My Findependence Day.

Adam presents Basics of Prepaid College Tuition 529 Savings Plans posted at Your Money Relationship.

Loans and Credit
kathryn presents Get Your Taxes Done for Free! posted at Out of Debt - Christian Finances and Debt Help.

DebtLite presents What Are the Root Causes of Debt? posted at Debt Advice.

Abigail Perry presents How to deal with debt collectors posted at i pick up pennies.

The Investor presents The recession is not a lifestyle choice posted at Monevator.

Madison presents $8,000 First Time Home Buyer Tax Credit posted at My Dollar Plan.

Patrick @ Military Money presents Looking for a Job? Consider Joining the Military posted at Military Finance Network.

Carson Brackney presents How to Value a Charitable Donation posted at Personal Finance Analyst.

Sun presents Discover Escape Card 25,000 Bonus Miles Promotion posted at The Sun’s Financial Diary.

BankMan presents Limit Six Savings Account Withdrawals Per Month posted at High Yield Savings Accounts.

The Financial Blogger presents IACI actually makes a good move posted at Intelligent Speculator.

Curt presents 7 Reasons Why Banks Should Increase Interest Rates posted at PennyJobs.com.

Todd Johnson presents Search Engine Optimization posted at Richard Lee.

Dividend Tree presents Dividend Investing In All Economic Cycles | Dividend Tree posted at Dividend Tree.

Economy
Barry presents Tug Of War Between Retailers And Frugal Consumers posted at Associate Money.

Tom Tessin presents Secured Credit Cards that Report to Major Bureaus posted at FSC Blog.

Kevin presents How to Pay for the Octuplets posted at The Red Stapler Chronicles.

Pinyo presents Introduction to Peer-to-Peer Lending posted at Moolanomy.

Kathryn presents Freelancer’s Guide to Important Tax Deductions posted at KathrynVercillo on Bukisa.

D4L presents The Best Dividend Stocks In The World posted at Dividends Value.

Frugality & Saving Money
Momma presents Top Recommended Paid Survey Sites: Making Money with Online Surveys posted at Engineer a debt free life.

Beef Up Your Piggy presents Don’t Swear Off Plastic Completely posted at Beef Up Your Piggy.

Ramis presents Some tax savings strategies posted at Financial Highway.

MoneyNing presents Counter Intuitive Way of Lowering Your Spending posted at Personal Finance Blog by Money Ning.

Chris presents House-hunting expenses and how to minimize them (part 2) posted at Home I Own.

Investing School presents Beta and Alpha Returns for Us Sane Investors posted at Investing School.

Alex presents Printable Mothers Day Cards posted at Home Life Weekly.

ChristianPF presents How long does it take to get your tax refund? posted at Christian Personal Finance.

J. Money presents Shredding 700+ receipts: Not fun, but good to do. posted at Budgets are Sexy..

Mara Rogers presents Household Tips To Save You Time And Money posted at Secrets for Money.

LAL presents What did you get from your parents Part I posted at LivingAlmostLarge.

Jeff@Stretchydollar presents Dealing With Financial Frustrations, Part I posted at stretchyDollar» StretchyDollar.com.

Income
Frank Curmudgeon presents House Prices: The Long View posted at Bad Money Advice.

FIRE Finance presents TaxCut - Upto 36% OFF Discount Coupons posted at FIRE Finance.

Jake Stone presents Fake Money Blog » Hopeless sales gamble posted at Fake Money Blog.

FFB presents Economic Credit Crisis Visualized posted at Free From Broke.

Todd presents How To Pay For College posted at HarvestingDollars.

Savings Toolbox presents Finding Yourself unable to Make Your Mortgage Payments? posted at Savings Toolbox.

Destroy Debt presents More Grocery Shopping Saving Tips posted at Destroy Debt.

Scott Crawford presents Understanding Your Credit Report posted at DebtGoal.

Heather Levin presents Want To Live In A Shipping Crate? posted at The Greenest Dollar.

Tushar Mathur presents Zecco: Free stock Trades ? posted at Everything Finance.

Other
Dan presents Deal of a Lifetime in Muni Bond Investments? posted at Darwin’s Finance.

Mr Credit Card presents ThankYou Network Citi Rewards Review posted at Ask Mr Credit Card’s Blog.

Jeff Rose presents 8 Unusual Things to Hold in Your IRA posted at Jeff Rose.

Silicon Valley Blogger presents Zecco vs TradeKing: Which Online Stock Brokerage Account To Choose? posted at The Digerati Life.

Relax presents The happy way to spend money posted at The Wise Curve.

Ryan Suenaga presents Ask the Readers: What are your Best Money Hacks? posted at Uncommon Cents.

Thursday presents What Does the Economic Stimulus Plan Mean For You? posted at Wealth Junkies.

Dawn C presents 7 Little Hacks to Saving a Bucket Full posted at Frugal For Life.

jim presents Highest Short-Term CD (Certificate of Deposit) Rates posted at Blueprint for Financial Prosperity.

The Happy Rock presents Deep Freeze - Freezing Sale Items To Help Stretch Your Grocery Dollars | The Happy Rock posted at The Happy Rock.

TStrump presents 5 Tips to Make Travelling by Air Easier | The Strump posted at The Strump - Financial Blog.

Miss M presents Deliverance from Debt: A.D. – After Debt posted at M is for Money.

Filed under: banking, business, credit card, debt, equity, interest, money by admin - 664 Comments →

How Can I Improve My Score? I’m glad you asked! Here are a few tips that will get you moving towards an improved credit score, improved interest rates and most importantly a peace of mind in your financial world:

First Tip: Take Yourself Off The Credit Bureau Marketing List

Ever been tempted by all of those “great” offers of credit or “low interest, no qualifying” loans and mortgages? Although they may sound like great offers many of them are not. If you continue to read the small print you will notice that their is a very high annual fee or the interest rate may only be good for a couple of months and then it goes up.

Instead of getting involved in these risky offers and maybe defaulting on one of the loans, you can permanently take yourself off of the credit bureau marketing list. The reason you are receiving these offers are because the credit bureaus sell your information to companies that want to offer you lines of credit. Therefore, by taking yourself off of their marketing list you will no longer receive these offers, decrease your chances of identity theft and can even increase your score by 5 to 10 points. Simply visit www.optoutprescreen.com and permanently opt-out.

Second Tip: Keep Credit Card Balances Below 30% Of The Credit Limit

Here’s what’s really important. It is pertinent that you not close any of your credit card accounts. If you were to pay off your credit card account and then close it this would take away from your credit history and may cause your credit score to drop a few points. As mentioned previously, it is important to create a strong credit history so that you appear less of a risk to lenders.

Therefore, because you are working on improving your credit score, you would want to keep the credit card open, even if you were to pay it off. However, if you cannot completely pay your credit card off, try to pay each one down to at least 30% of the credit limit. When a potential creditor is looking at your credit report one of the key things they look at is your debt-to-income ratio. Paying your credit cards balance down by at least 30% shows that you are in control of your finances rather than vice versa. If you have multiple credit cards, transfer high balances to cards with low balances so that all cards are 30% of their respective credit limits.

Third Tip: Maintain 3 Active Revolving Credit Lines

As mentioned above it would beneficial to never close a credit card account, wait 6 months between opening new accounts and always remember the oldest credit cards with the highest balance have the biggest impact on your credit score.

In general, having multiple credit cards isn’t a bad thing. You just want to make sure you are current on your payments and have at least 30% of the balances paid. I wouldn’t recommend more than three credit cards. Leave the one with the highest limit closer to zero and use it only for emergencies.

Also note that revolving credit lines are VISA, MasterCard and Discover not department store cards, debit cards, gas cards etc. And always remember to keep the balances below 30% of the credit limit!

Fourth Tip: Have At Least One Active Or Paid Off Installment Loan

One way to build your credit score quicker is to have at least one installment loan. These loans include auto loans, leases, boats loans or credit attached to personal property such as computers or furniture. When you purchase any of these items make sure it is an installment loan and not a revolving line of credit. You find out the type of loan you are receiving by asking the lender.

Fifth Tip: Negotiate A Deletion Letter Before A Collection Is Paid

Before you agree to pay a collection always try and negotiate a deletion of the collection from your credit report. Make sure you get this agreement in writing and signed by the collection company before you pay. A key point to note here is that the further away the negative items on your credit report are the less impact they have. For instance, collections that are two years old only hurt your score minimally. Negative items over four years old really don’t hurt your score at all.

There’s No Time Like The Present!

Get started now!

You can receive a free credit report (with no trial offer) from the three major credit agencies, Equifax, TransUnion, and Experian. A federal law requires them to give you your credit report for free once every 12 months. All you have to do is request your report via web at www.annualcreditreport.com , by phone 877.322.8228 or mail by mailing your request to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, Ga. 30348-5281.

Some individuals may feel like they are in too deep to come out ahead of their financial debts, but there is always a way out. It is important to note, however, that doing so takes time and effort: you can’t expect it to just happen over night. If you are willing to put in the energy and time it takes to clean up your credit score, sufficient improvements can be made.

Improving your credit score isn’t an easy feat, but it isn’t as hard as most people think. You won’t be able to instantly increase your credit score, but six to eight months is a good window of opportunity to get the desired results. And once you increase your score it is that much easier to maintain!

Filed under: credit card, debt by admin - 82 Comments →