Prime Rate Credit

Well, my inspiration for writing this particular post here is that this just happened to me days ago, literally. I have a checking account with a prominent bank, whose name I won’t mention here. I’ve had the checking account since I was in college and it was the only show in town, so I was basically forced to sign up for a checking account there so I could pay my rent with checks, among other necessities that only checks could buy back then (yes, there was no such thing as a debit card back then).

So, I’ve had this account for a good 15 years, and I’ve never had an incident that resulted in overdrafting as far as I can remember. So, about one year ago, I opened a separate business account. I pay all of my business expenses with the business checking account, and still pay for all of my personal effects with my personal checking account with said bank.

Well, things got a little confusing for me last week due to a flurry of activity in my life, and I accidentally paid for a credit card balance with my personal checking account instead of my business checking account, which is with a totally different bank. I didn’t have enough funds in my personal account to cover the charge, so therefore I was hit with massive overdraft fees.

I wouldn’t have minded so much, except I have questioned whether I could get overdraft protection before and was told “no” and wasn’t really offered the best customer service as to how to get it on the account. So, I was agitated, and I wrote to the bank asking them to remove the charges. Actually I threatened to leave and find another bank, which is what I full well meant to do.

However, I was very pleasantly surprised that they removed all but one of the overdraft fees. I guess my patronage does mean something, and to me, that meant a lot, so I stuck with the bank and will still stick with the bank. Oh, and I’ll be careful what accounts I’m paying business vs. personal expenses with too. Lesson is, I learned a very valuable lesson from all of this!

We have a new page on what to look for when comparing credit card offers. This means those credit card offers you get in the mail, and also when you’re shopping online or through other various resources to find a credit card that offers you everything you’re looking for.

There are so many things that credit cards offer these days. Many are for businesses and small businesses, and offer services and features that would appeal to business owners, there are some that are specifically targeted to those that want to transfer balances to save on interest rates, and then there are those who simply want a credit card that is going to pay them back in some way for their loyal use, like the airline miles credit cards and other reward-driven credit cards.

Those types of credit cards are very popular today (rewards) because people are looking for companies to pay them back for all their interest paid into the card, and they are also looking for novel ways to rack up points toward a vacation or some other sort of purchase.

Heck, some people are looking to compare credit card offers that have the best types of look to them. I just got a credit card offer the other day in the mail for Disney, and it included options to put Disney characters on the cover of the card itself. So these days, the design of the credit card itself may even lure in some of the artistic customers more than companies know!

Um, well, not exactly. You see, even though the coffee giant has experienced some stalling in their growth over the past year, and their stock has taken quite a beating, they must not be too expensive, what with the long line I just saw there yesterday while visiting a Bombay store that was going out of business. I’ll admit, I’m a bit too cheap to cough up five bucks for my favorite Starbucks drink, the white chocolate mocha and the peppermint mocha, all that often, but when I’m in the mood for a foofoo coffee drink, the undeniable champ that is also accessible and close is usually Starbucks.

And that’s not to say that they’re the best coffee out there. In fact, I believe that the disappearing Arabica franchise actually has superior coffee to Starbucks, it’s just that Starbucks markets theirs much more efficiently and widely.

With all the credit crises and people holding back on putting things even on their best credit cards with low, fixed apr’s, it’s not exactly a dream environment for any retail business to survive and thrive for too long in an economy like this where consumers are afraid to spend. Starbucks also does have their credit cards for their coffees that are reloadable though, and the newly reappointed CEO Schulz back at the helm, says that they are thinking about rewarding their loyal customers a little better than they are now.

I wouldn’t put too much stock in people saying Starbucks is on its way down though. With an accomplished CEO back at the helm, Starbucks is most likely just facing a little bump in the road, and customers will still gladly pay five bucks for a cup of foo foo joe in my opinion.

With all the media-induced hysteria over a possible recession in the works currently, many are wondering if the answer to our current economic woes lie within government action or not. Many economists tend to think that the government should take more of a hands off approach when it comes to the economy, especially since politicians are not economists and don’t fully understand the cycles of the economy and what make interest rates in relation to prime rate credit go up and down, as well as what might help the economy vs. hinder it more in one way or another.

Bush has said that he is proposing an economy booster (stimulus) package that would involve both incentives for businesses small and large to spend a lot more on business expenses in the year 2008, and individual tax rebates for those that make one hundred thousand dollars or less per year. At least, that’s what the speculation is so far, at the time this prints, who knows, there may be a full blown offering on the table before congress.

Many think that a package like this would only be a temporary fix and may not be enough to prevent a full blow recession of the likes we have not seen since after 9/11 occurred in the year 2001. A recession is when the economy is essentially in the dumper for three months in a row, and consumer spending and confidence is down, and many times I think that we are already in the middle of one, although some insist we are not, but we are on our way there.

The talk so far is that there would be one rebate offered in the form of a few hundred dollars to those filing singly, and a larger tax rebate issues to those that filed as married couples. Some of the things you can do to prevent from going further into debt during times like these is to vow only to use prepaid credit cards and low apr credit cards, and try to curb spending a bit if you can, but only if you need to. Bush’ hope is that this economic stimulus package will help us prevent a full blown recession, and that it can help get the economy and people’s attitudes and fears about credit, mortgages and a recession, moving in the right direction, toward a positive. Of course, it doesn’t help that many major employers are laying off right now, and it is all a cyclical environment.

There may be a market for some good stock buying in the mortgage and banking industry right now. Not only that, but with the Fed most likely cutting interest rates again, there may also be some good mortgage rates that are ripe for the picking coming up if you are in the market or are shortly going to be in the market to buy a home soon.

What do I mean when I say that mortgage and banking stocks may be a good buy right now, when the economy is in the toilet and many banks have publicly acknowledged that the subprime mortgage fiasco as well as issues with worsening recession fears and consumers fearing bad credit and lack of credit availability widening in attack, there may be some excellent opportunities to buy premium stocks at reduced prices. And that means they could go down further before they go back up, so keep that in mind too.

When you invest in anything, you should be sure to do your research on the solidness of the company’s financials, and base it on the fact that they have a solid marketing strategy, good liquidity and money on the books and many other things before pulling the trigger, even if the stock appears to be deeply discounted. I myself have forrayed in to investing in banks as of late, but it’s not without calculated risk, and as long as you calculate your risk, you may do well in the end when this mortgage crisis is over and forgotten .

Problem is, we don’t know exactly when that will be and many naysayers say it will still be a while, and we don’t even know the full impact of it at this point. As long as you can weather the storm, there could be potentially great gains in many of the bigger bank stocks that are supposed to be able to weather these types of financial times, like Well Fargo and Bank of America, who just made a major aquisition in it’s troubled competitor who was majorly hit by the subprime fiasco, Countrywide.

As far as mortgage deals go, whip out the mortgage calculator, and start calculating what type of mortgage interest rate you’d need to be able to purchase a home comfortably. Be careful to factor in all your other month to month expenses though. This is where many people make the biggest mistake, in that they forget to really factor in these other big what-if’s. I mean, are you still going to be able to afford an emergency fund, savings and retirement and so on and so forth?

Gosh, doesn’t it seem like tax time JUST happened? Well, it does to me, but I suppose it’s because I don’t really look forward to tax time like those that get tax returns every year. I remember when I used to look forward to tax time, when I knew that I had overpaid the government during the tax year, and would be getting a decent little return, but those days are gone now that I actually have to pay quarterly tax estimates, and it’s pretty much up in the air whether or not I’ll get anything back if I happened to overpay.

By the way, did you know that by having the most taxes taken out of your check as possible may not be the best idea? Sure, it means that you’ll most likely receive a tax refund at the end of the year, but what about if you took that extra money you got in your paycheck during the year if you claimed, say a “1″ as opposed to a zero (if you’re allowed), and invested it?

Many people don’t realize, but if they did that, they’d end up working out to have a lot more money in their pockets at retirement, even though they never got refunds or maybe even owed a little money at the end of the year.

Let me explain. If you’re not confident that you could take that extra money and actually invest it or use it to only pay off high interest debt, like debt from credit cards for bad credit or some other form of revolving debt, even if it is a low apr credit card for balance transfers of some sort, then you may be better off just having the government take the highest allowance out instead and getting your refund. This is why I think many people do it this way, because they don’t trust themselves to save that extra money and invest it, or they are afraid of owing Uncle Sam money at the end of the year instead of getting a tidy sum back.

I guess the bottom line is being able to take that money out of your check (the money that would have been the additional federal tax had you claimed with no allowances), and save it rather than spend it. If you think you can do that, many financial experts say that is the way to go. Otherwise, you are essentially giving the government an interest free loan for the whole year, while you could be paying yourself interest on that money for the whole year. Something to at least talk over with your accountant, I think!

Well, it was just recently announced that two big mergers happened in the world of mortgage financing, and one mortgage giant bought out another one the most recently, meaning Bank of America bought out it’s former rival Countrywide Financial for a whopping 4 billion dollars in stock. Another good candidate for a buyout right now according to analysts who know more about this stuff than I’d ever care to, are Washington Mutual, which has been battered by subprime mortgage loans, and also Bear Stearns who says right now they are not looking to merge with anyone.

Two other mortgage lenders and bankers that are being speculated on as possible merge partners are National City and Key Corp (where I actually do my banking, and I actually had a car loan with National City for a long time). There has been lots of talk of these mergers because it’s kind of an effort to make the banking industry a bit more solid and united and “unbreakable” by large aquisitions since now more and more cities are also expected to go after bank litigation since their cities have been battered by the subprime crisis.

Take for example Wells Fargo, who is being sued now by Baltimore, who says that they have evidence that according to maps and other demographics, their subprime division specifically went after minorities (predatory lending) and also tacked on numerous fees and high interest. The company says that they have done no wrong, and that those terms apply for any subprime mortgage lender.

The amount of foreclosures has been outrageous in many major cities, including Cleveland, which is by where I live. I know people who have personally been touched by a foreclosure, and it really takes a toll on their credit and on their spirit, so I can understand why people are upset about these practices, however, I’d have to see more proof that company blatantly took advantage of certain poor areas before I could say much!

Dividends is a great word, especially for the investor who likes to not only use the possibility that a stock’s value will increase in per-share price, but also uses the fact that certain institutions pay out what’s called dividends on a quarterly basis.

Dividends are really a beautiful thing, because they essentially split certain earnings amongst shareholders and allow them to enjoy a little extra income, sometimes even in addition to an increase in the stock value itself. In the end, many times dividends are a win/win situation for stockholders as well as the institutions themselves, because they essentially raise capital from people who like dividend prospects, and the holders get the quarterly dividend payout benefit.

Well, many banks and financial institutions, two of the biggest dividend payers in the stock markets, are going to have to cut their dividend payouts or yields as of late because of the ongoing mortgage and bad credit crisis that is happening here in the US. Among those cited as making possible cuts are Citi Group, which may have to slash dividends to help make up for faltering profits, and to save money to put back into the business.

WaMu, or Washington Mutual, also recently announced it would be cutting its dividends, much to the chagring of stockholders, who soundly dumped off many shares and sent the stock price diving recently. Some may say it’s a bargain to buy these big institutions at lower prices, but that really is to be seen, especially since we don’t know how capable they will be to pull themselves out of this crisis and going forward we don’t know what the future holds for these companies.

It’s a shame really, but many times it is said that companies that have high dividend yields could in essence be shooting themselves in the foot in the end because the business profitability may not be able to sustain such great payouts, and they may find they need to cut dividends back, which could send stock prices diving.

Well, the political and financial pundits have been arguing back and forth on this for almost all of 2007, and it still “supposedly” hasn’t happened, even though some are saying we may be steeped knee deep in one right now, it just isn’t being called out that way yet. It’s that ugly 3 syllable word - recession, and it may be coming our way according to some chicken littles, or not according to some naysayers who don’t say it’s not possible, they just believe it may not happen.

Not very reassuring, is it? However, I do believe that media hype has played into the frenzy, and the fact that our unemployment rate went up further than expected in the latest jobs report and the fact that stocks tanked last Friday, combined with the increased gas prices and consumers tightening their pocket books, have only played us more into the hands of a recession than we realize.

The problem is, hysteria like this creates tighter fists around consumer money, and this tightness only further restrains the economy because no one is spending money. True, if you are one who is directly affected by unemployment, by all means, you need to tighten the wallet a lot, but this is not the case for all consumers, and the hysteria has created a domino effect of money tightness where there doesn’t even necessarily have to be any.

What? You say, don’t save? Well no, I’m all for saving, and in fact have been going through a saving streak myself lately to the point where I feel almost allergic to spending money on anything I don’t totally “need”, but I am trying to say that we might be furthering our problems by not spending freely as we can.

With the increased bad credit problems as well as the whole “subprime” mortgage lending fiasco still in its thickest right now (hey, did you know that subprime has won out as word of the year by the way, tell me there’s no mass hysteria there!), it doesn’t exactly look bright right now, but the fact of the matter is that we’ve been through recessions before and we always pull out of them ok.

The government is trying to help us out, but with the current turmoil, I sometimes wonder if they should take more of a laissez fare attitude and butt out and let the economy run this course, which is only natural. Hard to say, but some economists do believe that it’s not for the government to bail us out of bleak economies. Yikes, who knows! Makes my head spin just thinking about all the ins and outs of the situation!

Well, when something stops being in the news we always tend to think the situation resolved itself or has gotten better and is no longer “newsworthy” but that is not the case with a big part of the credit problem here in the US right now. There was a report or reports on how credit card delinquencies and late payments were quite a problem, gosh, maybe almost a year ago, and since it had not been in the news for a while, I thought that this had gotten better, maybe a little more cleaned up, but apparently it hasn’t.

Americans are still over extending themselves via credit cards, no matter what kinds of credit cards they are, airline miles, or whatever, and they are opting to make their payments late or not at all on their credit cards instead of not paying other bills that we all consider more important like utilities and things of the like that would leave us without heat, water, electricity, or a roof over our head (if we don’t pay the mortgage in lieu of paying the credit card bills).

Well, I’m not saying it’s right, but this thought does tend to enter in when we are looking at stacks of bills and we’re not sure what to pay first with the money that we have, which seems to not match up to the money going out the door in those unfortunate months when we run short on the bills.

Credit card delinquencies, as reported by various credit agencies, have apparently almost doubled in this past year, and the worst part is, they say that the worst is still most likely yet to come. We’ve already discussed how I’ve noticed many of my credit card companies are not willing to up credit limits, because they are so wary of people not being able to pay them on time or at all if they are overextending their credit.

This no doubt is hitting credit card companies in the wallet, but this is not unexpected, as many Americans are finding themselves in binds and just getting themselves in deeper through credit card debt, which is notoriously the most destructive of debts if it is abused.