Consumers Should Hunt out Best Credit Card Deals

As many different reports have recently demonstrated, many American households and individuals are still heavily reliant on credit cards. While some are using plastic simply for emergencies or for one off purchases there are others who are using them on a regular basis. While credit cards can provide convenience and ease as well as financial flexibility, experts have warned that those using them need to ensure that they have the right credit card in the first place.

The credit card industry has become extremely competitive, and those who are looking for a card have plenty of choice available particularly if their existing credit score is good. However, there are various things that consumers need to look at in order to ensure they find the right card for their needs.

According to officials, there are a number of key points that have to be considered by those who are trying to find the right credit card for their needs. One of the main ones to look at is the rate of interest charged by the credit card provider – something that is especially important for those who plan to spread the repayments on their credit card balance. Those who plan to pay off the balance in full each month will not be charged interest but may still want to look for a lower rate card just in case they do decide to spread repayments at some point in the future.

Another important thing that consumers need to look at is whether there is any annual fee charged for the credit card. Not all credit cards charge this fee but it can vary among those that do. The interest free period is also important, as this will enable consumers to see how long they have to clear their balance without being hit by interest charges.

Experts have also stressed the important of using a credit card sensibly in order to benefit from the convenience and flexibility without risking spiraling debt or credit score problems. This means paying off as much of the balance as possible each month rather than making just minimum payments – and where possible paying the balance off in full. Users also need to make sure that payments on the card are made on time in order to avoid late payment fees and a black mark on their credit scores.

One official said: “Credit cards are ideal for those who want a financial backup and something they can fall back on in an emergency. They are also great for regular use providing the balance is paid off in full each month, as this means no interest is charged but you still get to enjoy the benefits of having a credit card.”

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Keith Ellison, Religious Leaders Speaking Out Against Bad Credit Lenders

If there is one ground zero place in the United States that is taking the fight to the payday loan industry then it’s the state of Minnesota. It seems as if everyone – public officials, religious groups and non-profit organizations – are banning together to rein in payday loan lenders.

Case in point, religious leaders are collaborating with Minnesota Democratic Congressman Keith Ellison to rally against websites that offer short-term, personal loans for people with bad credit. The two are looking to help those impoverished Minnesotans who have been seriously affected by payday loans.

Speaking at a forum at Greater Friendship Missionary Baptist Church in Minneapolis, faith leaders and the congressional representative presented the case that payday loan storefronts offer higher rates in black communities. At the same time, according to the speakers, bad credit loan establishments provide predatory products that put people into debt.

“Payday lending is not fair. It is not credit. It is robbery,” said Pastor Paul Slack of New Creation Church.

Ellison added that the group’s primary initiative is to ensure that consumers do not get caught into the trap or cycle of debt.

“The fees are so high that they got to get a loan to pay back the loan, and then that goes on and on,” Ellison said. “That is a core principle. You got to break it.”

Just what do they want? Well, more regulations on the entire payday loan industry. This includes a cap on the maximum interest rate.

According to the Minnesota Department of Commerce, payday lenders issued just under 400,000 payday loans in 2014 that were valued at around $150 million.

Minnesota Officials Already Working on Legislation

It is expected that next year Minnesota lawmakers will introduce a bill to limit the vast growth of payday lending (http://www.startribune.com/minnesota-legislators-to-try-again-on-payday-loan-reforms/321936171/). This would be the second time legislators have tried to regulate the payday loan niche – lobbyists quashed any regulatory reform by spending more than $300,000 to kill the bill.

As part of the previous legislation, officials wanted to limited the number of payday loans a customer can take out to four and capping interest rates. It’s believed the same elements of that bill would be part of the newest edition of the legislation.

Rep. Joe Atkins, DFL-South St. Paul, has said that any new bill wouldn’t “be a disaster” because he wants to take a balanced approach to protecting consumers and ensuring payday loan lenders keep their doors open.

“But on the same token, I don’t want to put them out of business,” said Atkins. “I just want to put reasonable interest rates in place.”

Nick Bourke, director of Pew Charitable Trusts’ research on small dollar loans, notes that states across the country have implemented three primary types of reforms: cap on interest rates, a longer time to repay the principal and a limit on the number of payday loans a customer can take out.

Of the three options, Bourke believes the third one is still the most dangerous one.

“It allows a harmful product to stay on the market,” Bourke said. “Because the payday loan looks artificially good to people, it looks like a short-term loan for a fixed fee.”

Leaders with the Minnesota State Baptist Convention confirmed their support for any type of regulatory reform on the industry. Rev. Billy Russell, president of the organization, said in a statement that his group will fight for the congregants who have been harmed by bad credit loans.

Russell purported that the industry maximizes profits while preying on the most vulnerable.

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Texas Finance Commission head: ‘There’s nobody out there that forces anybody to take any kind of loan’

The payday loan industry receives a lot of criticism and heat from both public agencies and the general public. Some of the common complaints are the number of fees and the high interest charges that are applied to each short-term loan. However, one Texas payday-lending officials has defended the industry.

Speaking with the El Paso Times late last month, chairman of the Finance Commission of Texas William J. White, who is also vice president of Cash America, a large payday lender, argued that no one ever forces customers to take out loans and that people should be responsible for their own decisions.

“People make decisions,” said White. “There’s nobody out there that forces anybody to take any kind of loan. People are responsible for their decisions, just like in my life and in your life. When I make a wrong decision, I pay the consequences.”

State Senator and Texas Gubernatorial candidate Wendy Davis is now calling for the top finance official to submit his resignation or for Republican Governor Rick Perry to remove him from public office. Perry appointed White in 2011.

“Texans are tired of backroom deals and dishonesty in Austin. William White can’t protect Texas consumers while representing several predatory payday loan lending companies on the side. Mr. White should resign from his post — and if he won’t, Governor Perry should remove him,” Davis said in a statement.

“It’s really disgusting that an industry that profits from the poor by charging 1,000-plus interest is put at the head of the state’s financial regulatory agency. It’s saying, ‘It’s not only OK, but we’re going to put them in charge.'”

Davis has been submitting legislation against payday loans since 2009, but the bills have largely failed in the legislature.

Cash America issued a statement defending White and said that his appointment to the agency was not a conflict of interest.

“One of the requirements for that [commission] seat states that Bill must be affiliated with a consumer credit organization, which he is through Cash America,” said Yolanda Walker, a spokesperson for Cash America, in a statement. “Bill does not work with specific lobby teams, but members of the Finance Commission are regularly contacted by bankers, mortgage bankers, savings and loan representatives and consumer credit organizations.”

Governor Perry has also come out against Davis’s comments and called it nothing more than “grandstanding from a political campaign.”

Attorney General Greg Abbott, who is seeking the Republican nomination for governor to succeed Perry in the next election, also criticized her remarks.

“Sen. Wendy Davis’ statement is blatant election-year hypocrisy. Perhaps unknown to Sen. Davis, state law mandates that industry executives serve on the Finance Commission, and Sen. Davis voted to confirm William White to his position,” said Abbott.

“Sen. Davis also had two opportunities to amend bills pertaining to the requirements to serve on the Commission, and both times Sen. Davis chose not to do so. Before calling for the resignations of those she voted to confirm, Sen. Davis might take a hard look at her own record.”

The Texas gubernatorial election is scheduled for Nov. 4 of this year.

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Loan Rehabilitation to Improve Credit Score: Fact or Fiction?

What is Loan Rehabilitation?

Loan rehabilitation allows you to improve your credit score by changing the status of your loans. The only types of loans that are eligible for rehabilitation include federal loans. Examples include Federal Perkins loans, Health Professions Student Loans, Federal Stafford Loans, and more. Someone will rehabilitate their loan after it has been defaulted, which means the person hasn’t made a payment in 270 days or more.

What are the impacts of a defaulted loan?

Wage garnishment – Wage garnishment can occur after you have defaulted on your loans. It involves taking a portion of your pay check before you receive it. This action ensures that some of your work money will go towards the debt that you owe.

Poor credit score – Because you will have a loan in “default” status on your credit report, your credit score will be negatively impacted.

How does the loan rehabilitation process work?

If you are thinking about going through the loan rehabilitation process, the first step is to contact your loan lender. The National Student Loan Data System provides people who don’t know who their loan lender is with a comprehensive database of federal loan lenders. After you have negotiated an agreement with the lender, you will probably be required to make nine payments during a 10 month long duration. This means that you can miss one month’s payment and still have the ability to rehabilitate a loan. After this process has been completed, you will no longer have a “default” status on your credit report.

What are the benefits of completing the loan rehabilitation process?

Improved credit history – The biggest benefit of loan rehabilitation is probably that it gives you the ability to improve your credit history and/or score. This is important because lenders who offer personal loans look at your credit history in order to gauge the risk associated with giving you a loan. If they think you are a high risk, they will only offer loans that have high interest rates. In the worst case scenarios, you are unable to obtain a loan at all. This could be especially important for people who plan on making big purchases, such as an automobile or home.

New student loans – After you have completed the loan rehabilitation process; you will be eligible to apply for new loans and grants. This could be especially important for graduate students who need additional funding for their education, but defaulted on their federal undergraduate student loans.

Freedom – Knowing that you are improving your financial situation will give you additional freedom. You won’t have to worry about the debt collectors, missing payments, or having a poor credit score.

What are some of the other important factors to consider?

You only get one chance – An important factor to consider before you apply for loan rehabilitation is that you will only get one chance. If you are not ready to rehabilitate your loan or do not have the financial capability, you should wait.

In conclusion, loan rehabilitation can improve your financial situation and make you eligible for new loans and grants. Because you only have one chance to rehabilitate your loan, you should always make sure that you will have the financial capability to make 9 payments during a 10 month period.

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How to Protect Your Accounts From a FDIC Default

Given the way in which the FDIC’s $25 billion in assets is considered to be too small to bail out a systemic financial collapse of the $9.3B in deposit accounts in the USA, we can start to take a look at how it is that investors can take steps to mitigate the risks of the FDIC being unable to cover out their savings accounts. Specifically, we want to look at how it is that strategies traditionally recommended by financial advisers (such as the recommendation to spread money across multiple deposit accounts) might instead be replaced with movement of funds into different types of financial institutions, and how it is that investors can still maintain their access to liquidity in the process.

One of the ways in which financial advisers will suggest for high net-worth clients to stay within FDIC requirements is to keep multiple bank deposit accounts at different financial institutions, so as to ensure that each account is individually covered under the insurance policy. However, this strategy assumes that the FDIC will not be simultaneously bailing out the deposit accounts of both of these institutions at once (which has lead to a ‘double dipping’ situation that will not likely be accommodated), and secondly, it assumes that the FDIC will have access to enough capital to pay for all of the accounts in question.

The end result is that personal savers following this strategy are still exposed to the kind of ‘black swan’ risks that they are trying to avoid by keeping their money in savings accounts in the first place. As such, savers should shift their focus to other kinds of financial institutions that don’t actually touch their savings accounts in the first place, meaning that their funds at not exposed to the risks associated with lending or derivatives.

Banks are capable of going insolvent because they use the funds in their deposit accounts to lend out money to other clients. In the event that too many of their loans go bad, the bank might not have enough money left-over to pay back to the depositors, and the savers lose out. That being said, financial investment companies, such as brokers or financial advisory companies do not lend out the money that they are holding, and therefore place their holding accounts (unless they are involved in fraud, which in an unfortunately real risk) in the names of their clients, and leave them isolated.

Even the stocks, bonds, or mutual funds of these clients are then held distinctly in the client’s name. From there, even the margin loans provided by the brokerage house are coming from the company’s own pocket, and are not associated with the funds on deposit from their clients. The end result is that, in the event that a brokerage house goes bankrupt, a client’s assets must be distinctly held, and can therefore be transferred over to the client themselves, or a third party company (ie. another broker) that is willing to take on the new business.

The end result is that the accounts are essentially safe, so long as the brokerage house has followed the legal frameworks required of them. Unfortunately, the last decade has also seen a few occasions where companies did not follow this framework, and left their deposits out of a portion of their money. As such, it is best to go with a large and reputable company, rather than a small boutique firm, in order to mitigate this risk.

The second way for a personal saver to mitigate the risks of FDIC default is to place funds inside a whole life insurance plan. In this sort of strategy, a saver pays money into an insurance policy that holds a tangible cash surrender value, and can therefore act as collateral for a loan. This latter aspect makes them invaluable products, because it means that a saver can build up their wealth (tax free at that) in the insurance policy, and access it through extremely cheap loans from their bank.

Granted, this means that the customer needs to pay a small interest premium to access their long-term savings, it also means that they are on the other side of the balance sheet equation, and therefore protected against the risks of a systemic default. Specifically, in the event of a systemic bank failure that cannot be covered out by the FDIC, the worst case scenario is that the saver is only liable for the principle of the loan, plus the small interest premium, rather than the 10-40% hair-cut that would be taken off of their deposit account in the event of a financial crisis of similar size as that which occurred in Cyprus.

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Are FDIC Bank Accounts Really Safe

The FDIC is considered to be the bastion of safety that protects American deposit account holders from the risks associated with their financial institutions collapsing due to their own operations. With $250,000 worth of deposits being insured for each account, and $25 billion in funds on hand ready to bail out depositors directly (not the bankers this time, but the depositors themselves), savers have been assured that their money is safe, even in the event of a financial catastrophe. However, there’s a strong argument to be made to the contrary, which means that personal savers might want to take a minute to dig into the details of what’s really going on here, and what a complete liquidation of the retail banking sector would actually entail.

As it stands today, there are approximately $9.3 billion in deposits held by financial institutions in the United States. Assuming these deposits were all insured, the fund itself is already short by $9.25 billion in funds, meaning that they would be unable to bail out American depositors in the US if they all required it at once. In fact, they would only really be positioned to bail out 0.2% of the deposits required in the event of a systemic banking failure.

Interestingly enough, this systemic failure was exactly what was described in 2009. Because of the way in which the financial positions of the various financial instructions have become so intertwined, it actually a very plausible conclusion to make that the failure of a single major financial institution would actually cascade into the collapse of multiple financial institutions at once (as was the case in 2009), resulting in the need for the majority of the FDIC’s funds. The end result is that the FDIC, as it stands today, might very well only be suited to protect against minor financial setbacks, rather than the rather large shocks that tend to be occurring in today’s market.

The next step to take in evaluating the ability of the FDIC to cover out deposit accounts is to look at its ability to obtain leverage on its own terms (ie. the terms of the federal government) to bail out depositors in the event of a collapse. This would mean that the FDIC would essentially become a bank on its own, and would borrow money from outside parties (perhaps through the sale of bonds, from the government directly, or even from international investors), using its existing balance sheet as a fundamental asset sheet, and would then use the proceeds of these funds to pay out deposit account holders going forward.

The likely next step would then be to pass the costs of the bail-out loans onto the other remaining financial institutions, and to pay off the debts over time as a means of maintaining the integrity of the deposit accounts in question. However, even if the FDIC were able to obtain extremely favorable borrowing terms, it would actually require a lender to forward 3000x the fundamental value of its own account to settle out the loan accounts. Given that banks themselves are frowned upon when they operate beyond 30x leverage, it stands to reason that the FDIC would be stuck raising only anywhere between $75B-$1,500B, leaving capable of covering 16% of its deposits outstanding, and again, falling short.

While this sort of analysis is done with very broad strokes, and therefore only provides an illustration of how to put FDIC protection into perspective for a personal saver, there are a few key points to take away from it. Specifically, because of the way in which the FDIC is arguably not capable of bailing out a systemic financial failure, it suggests that the traditional strategies recommended by financial planners might not be enough to protect a saver from a major financial event. Actions such as spreading out money into a variety of different account types and across multiple institutions might not be effective in the event of a shortfall. So with all of this in mind, how is it that we can make sure that even our insured deposit accounts are covered?

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How a Divorce Can Impact Your Bank Account

Divorces are complicated situations to navigate, and they aren’t getting any easier as they become more and more common. Between the various facets of litigation, obligation, and the sheer stress associated with the event as a whole, taking a few minutes to understand how it is that divorce comes together can be a very valuable learning investment. In this particular article, we’re going to look at how it is that the different types of divorce settlements can change the outcomes of a divorce agreement, so that we can have a better understanding of our options going forward.

In general, a couple will try to pursue what is known as a No-Fault divorce that is Uncontested. This means that everyone involved in the relationship is in agreement with the proceedings, and wants to pursue the agreement with as little hassle as possible. Also known as an amicable divorce, this sort of arrangement is by far the most cost effective, as it involves a minimal amount of litigation and court time. However, if even one point of the divorce document should go up for dispute, it becomes a contested divorce, and the couple must start coming up with legal arrangements to help them resolve their respective claims against the issues at hand.

Complications can also arise for divorcing couples when there is an issue of ‘fault’ at hand. Fault is a concept that suggests one of the people in the relationship was causing the divorce through perhaps adultery, some form of abuse, incarceration, or even some form of physical illness. While filing for a ‘faulted’ divorce is fairly out-dated, it is still sometimes claimed in the more bitter of proceedings. It is in these situations that legal battles tend to escalate, and expensive proceedings tend to be drawn out be the emotional contexts of the event itself. Worse yet, the faulted mortgage could also be contested, meaning that the couple is then also going to be arguing over both the integrity of one individual in the marriage, as well as their respective claims over particular assets and incomes going forward.

Aside from the proceedings of an actual divorce, couples can also file for a process known as ‘annulment’, which actually strikes a marriage from the record. This means that, as far as the law is concerned, the marriage never really happened in the first place. Such an action is usually filed for shorter term marriages, and can be submitted on the grounds of things such as misrepresentation, adultery, or even a general misunderstanding about the lifestyles of the spouse.

While the end result of all these actions creates the same outcome for the married couple, each one comes with its own level of costs and hassle. As such, divorcing couples should take the time to reach up on their options, and to understand how it is that they measure up against their particular situation.

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How to Protect Your Accounts From a FDIC Default

Given the way in which the FDIC’s $25 billion in assets is considered to be too small to bail out a systemic financial collapse of the $9.3B in deposit accounts in the USA, we can start to take a look at how it is that investors can take steps to mitigate the risks of the FDIC being unable to cover out their savings accounts. Specifically, we want to look at how it is that strategies traditionally recommended by financial advisers (such as the recommendation to spread money across multiple deposit accounts) might instead be replaced with movement of funds into different types of financial institutions, and how it is that investors can still maintain their access to liquidity in the process.

One of the ways in which financial advisers will suggest for high net-worth clients to stay within FDIC requirements is to keep multiple bank deposit accounts at different financial institutions, so as to ensure that each account is individually covered under the insurance policy. However, this strategy assumes that the FDIC will not be simultaneously bailing out the deposit accounts of both of these institutions at once (which has lead to a ‘double dipping’ situation that will not likely be accommodated), and secondly, it assumes that the FDIC will have access to enough capital to pay for all of the accounts in question.

The end result is that personal savers following this strategy are still exposed to the kind of ‘black swan’ risks that they are trying to avoid by keeping their money in savings accounts in the first place. As such, savers should shift their focus to other kinds of financial institutions that don’t actually touch their savings accounts in the first place, meaning that their funds at not exposed to the risks associated with lending or derivatives.

Banks are capable of going insolvent because they use the funds in their deposit accounts to lend out money to other clients. In the event that too many of their loans go bad, the bank might not have enough money left-over to pay back to the depositors, and the savers lose out. That being said, financial investment companies, such as brokers or financial advisory companies do not lend out the money that they are holding, and therefore place their holding accounts (unless they are involved in fraud, which in an unfortunately real risk) in the names of their clients, and leave them isolated.

Even the stocks, bonds, or mutual funds of these clients are then held distinctly in the client’s name. From there, even the margin loans provided by the brokerage house are coming from the company’s own pocket, and are not associated with the funds on deposit from their clients. The end result is that, in the event that a brokerage house goes bankrupt, a client’s assets must be distinctly held, and can therefore be transferred over to the client themselves, or a third party company (ie. another broker) that is willing to take on the new business.

The end result is that the accounts are essentially safe, so long as the brokerage house has followed the legal frameworks required of them. Unfortunately, the last decade has also seen a few occasions where companies did not follow this framework, and left their deposits out of a portion of their money. As such, it is best to go with a large and reputable company, rather than a small boutique firm, in order to mitigate this risk.

The second way for a personal saver to mitigate the risks of FDIC default is to place funds inside a whole life insurance plan. In this sort of strategy, a saver pays money into an insurance policy that holds a tangible cash surrender value, and can therefore act as collateral for a loan. This latter aspect makes them invaluable products, because it means that a saver can build up their wealth (tax free at that) in the insurance policy, and access it through extremely cheap loans from their bank. Granted, this means that the customer needs to pay a small interest premium to access their long-term savings, it also means that they are on the other side of the balance sheet equation, and therefore protected against the risks of a systemic default.

Specifically, in the event of a systemic bank failure that cannot be covered out by the FDIC, the worst case scenario is that the saver is only liable for the principle of the loan, plus the small interest premium, rather than the 10-40% hair-cut that would be taken off of their deposit account in the event of a financial crisis of similar size as that which occurred in Cyprus.

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The Different Types of Business Loans

Small Business Loan – The most common type of small business loan is the 7(a) program. Something that you should know about this loan is that the lender looks at what the business (not the individual) has. For example, your business has to operate for a profit in order to be eligible for this type of loan. If a business is operating at a loss but the owner has the money to repay the loan, the business is still not qualified. In order to find out if your business is considered small, you should take a look at the North American Industry Classification System.

Merchant Cash Advance Loan – If you get a merchant cash advance loan, the life span will typically range from 3 to 18 months. A unique feature about this type of loan is that they are considered “fast loans” and the borrowers will often pay this type of loan back daily. If a business decides to pay the amount back through a split withholding, the credit card processing will automatically “split” up the money. Because the credit card processing automatically gives the financier back their money, it is often considered less risky for the lender. It tends to be popular among retail stores and other types of merchants. A potential draw back about this type of business loan is that it tends to be more expensive than other options.

Start-up business loans – This loan is specifically meant for owners who are just beginning their business. In this situation, your personal credit history DOES impact your eligibility for the loan. It requires asking a lender for a certain amount of money in return for some of your profits. The big obstacle that a business faces with this type of loan is proving that they are worth the money. Because they have not been around for a significant amount of time, they have to convince a financier that their business will succeed. This can be tricky, but well worth it for the owners that are just starting out.

Professional loans – In order to qualify for professional loans, you have to be working in specific industries. Some of the occupations that make people eligible for professional loans include doctors, lawyers, and other types of high paying jobs. A doctor may use this type of loan if they need to purchase some expensive equipment in order to practice. A potential draw back about these types of loans is that they are only given out to individuals in high paying fields. These types of loans come in both secured and unsecured. The interest rate will depend on the type of loan that you get and what industry you are in, but are typically between 5 and 10%.

Equipment financing – Another loan that you can apply for in order to purchase supplies is the equipment financing loan. The major difference between an equipment financing loan and professional loans is that they are always secured and are available to all industries. Therefore, there is a lot less risk for the lender or financier. Funding usually ranges between one to three months and the interest typically ranges between 8 and 25%.

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