Category Archives: Finance news - Page 2

Homeowners Defaulting On Mortgage Payments

Posted by on May 29, 2011 No comments

Those with home mortgages are defaulting on their repayments much faster given the current global financial crisis. Tight household budgets and elevated cost of living expenses are causing great stress to customers. Eeven people who have done their leveled best, used home loan calculators but no avail at this point.

Westpac records record gains

Australia’s second largest bank, Westpac, disclosed never before reached profit levels and also unveiled that non-payment of outstanding mortgage rates have reached levels similar to those Australia had in 2008. A six month cash profit statement for Westpac showed an increase of 3.17 billon, a 7% increase from just one year ago. The bank also posted a net profit of $3.96 billon, which was a 38% boost from one year ago which the bank directly relates to the acquirement of St. George.

Westpac Chief, Gail Kelly, despite the low base, expects profits to continue rising even though homeowners continue to have difficulties paying higher cost of living expenses.

The source of some loss for Westpac

According to Westpac’s home loan books, homeowners made up 1.5 percent of the bank’s loans that were 30 days delinquent on payments at the end of March. Ms. Kelly indicated that the rise in mortgage delinquencies was “entirely within our expectations.”

She stated that even though homeowners were probably going to need assistance in the near future with repayment options, that Westpac did not constitute this to mean a loss for the bank.

The rate of those homeowners who are 90 days or more delinquent rose to 0.6 percent which shows a significant increase that is almost double the rate from the previous year.

Queensland has been hit the hardest with mortgage delinquencies but every state is feeling the crunch of the defaults. This is indicating a new wave of mortgage stress for homeowners.

The rising level of mortgage defaults seems next to impossible to believe despite Australia’s low rate of unemployment. Jonathon Mott, a USB analyst, speculates that the deficit might have been caused by the first-time home buyers who were given grants to assist in purchasing a home.

Australia and New Zealand Banking Group shows similar results

The ANZ, Australia’s third largest bank, also reported a 38% rise in profits for the first half but also claims that lender growth will continue to slow as the interest rates soar.

Australia’s quickly developing relations with the Asian countries, including China, is forcing the central bank’s hand. The expansion into the Asian countries kept in line with results that were posted. The bad debt charges were a little more than what was expected.

The central bank has had no choice but to increase interest rates to unprecedented levels in the developed world. Consumer confidence is strained resulting in lack of spending passed on to retailers. This, in turn, is hurtful to Australian exporters who convert currency back into weaker Australian dollars.

ANZ’s Chief Executive, Mike Smith, states that if the central bank continues to increase interest rates that it threatens to “stall the economy.”

If consumers cannot invest in businesses due to the higher cost of living expenses, businesses cannot produce profits and they will just refuse as they have the home loan interest calculator as well.

Australia’s Reserve Bank did not change the cash rate, currently valued at 4.75%, but it anticipated that this rate will have to be altered soon.

Mr. Smith went on to say that “I think lending growth is going to be much slower” which will make it much more difficult for Australia’s big banks to grow their profit margins. It is not expected that lending growth will recover to pre-crisis levels any time soon.

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Why Do Americans Have So Much Debt?

Posted by on May 29, 2011 No comments

The average American household has about $8,000 in charge card account debt and many consumers are applying for a second mortgage and consolidating loans only to apply for more charge cards more and more. Young people are finishing college with lots of loan debt and carry this debt for years.

Why do we continue to overspend and put ourselves in debt? When a psychologist examines a patient and wants to find out why they have a certain problem, they usually look at their past and childhood. Financial trouble can definitely be traced back to their childhood.

Parents today focus on making sure their kids do well in school, don’t do bad things, go to college, and have a good career. Schools emphasize writing skills, math skills, and the arts.

I am not saying that any of these things are bad, by no means! I hope they keep working on and developing these skills. The problem is what they are not including in this list of important things to teach your kids. Most parents do not emphasize finance skills.

If a child becomes an adult never learning anything about money, they will use money based on their own experiences. Once they find out that they can exchange money for the things that they love, they will continue to do so. Add in charge card accounts, and they now realize that they can get more stuff without even having to pay for what they want with money they had to work for.

Usually, these consumers become spending addicts and every time they get paid they’ll spend it on things they don’t need and won’t have anything left for what they do need. They will force them into debt.

We can try to prevent this by teaching them about money when they are young. Parents today need to teach their kids the value of cash and how to budget, save, and spend money correctly in order to keep them out of debt.

If you are a parent, you should point them in the right direction and try to provide good guidance into money management. You can help do this at Teen Money Central which you can find more information about in the link in the bio section below. How do you teach them?

Don’t buy them everything they want. Give them an allowance, not attached to chores, so that they can learn to budget their cash and buy their own things. Encourage them to save. Have them open up a high interest bank account and deposit regularly to it so that they can see that it’s possible to earn money with minimal effort.

Encourage them to apply for a job when they are old enough and have them spend their own money on things such as clothes, music, going out, etc. Teach them about investing and why it’s important to save for their future. Have them open up a custodial account to an online brokerage firm so that they can get hands on experience.

Don’t buy them a car. Have them save for their own car. Or, you can match whatever they save and put it towards their car. Teach them how to budget their money. Don’t give them a charge card account. Follow these ideas and watch your kids learn to handle their money.

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Understanding Charge Card Rewards Programs

Posted by on May 29, 2011 No comments

A commenter on a recent article of mine on charge card usage, suggested a follow-up post with an eye to uncovering the mysteries of credit card account rewards programs.

And in my research, I discovered it’s a murky world of points, rebates, fees, and interest rates out there! A lot of it comes down to personal choice, but here is some information to aid your plight for a suitable charge card account rewards program: 

Three types of rewards

There are typically three types of rewards programs: point-based, cash back, and frequent flyer miles. Some programs offer combinations of these rewards, with varying value for point redeemed.

Points-based programs involve accumulating points (based on the amount you spend), and then redeeming your points for merchandise from their catalogue. Points leave a little to be desired, since depending on what you redeem your points for you might not get a lot of value.

For example, Smart Money has an article on this topic , where they show you the Good, Bad, and Ugly of credit card rewards programs. Case in point for the ugly:

You could trade 39,200 Bank of America WorldPoints for a 30GB iPod, which retails for $249. Or you could use just 35,000 points to get a $350 check — enough to buy the iPod at your local electronics store. You’d come out roughly $100 ahead, and saved 4,200 points to use for another reward.

Gift certificates tend to be the best value for your points when flipping through the catalogue, and it is generally recommended that you stay away from the merchandise, since it is over-priced and lacking in quality. The gift certificate option also carries an added value advantage, since credit companies strike deals with the retailers to give them a deal on the gift certificates, whereas a dollar is a dollar when it comes to cheques or merchandise.

Cash back is most common, and offers quick rewards for your buck. However they can also have limitations; Some will only start to honour the cash back policy once you have spent a minimum amount of money, and yet others will cap the total amount of money they’ll reward.

Frequent Flyer Miles for airline tickets will sometimes give you the best bang for their buck, but can be a pain to redeem. Many issuers have blackout times, while others only designate a certain number of seats per flight as airline rewardable seats. If you don’t book your ticket early enough you can be out of luck, especially if you want a flight that’s commonly flown and redeemed for.

Saving for airline ticket rewards can also be tedious and take some time to accumulate for, and in this changing airline world, increasing fees and limitations could pose problems in the future. I have already noticed that one of the rewards programs I use have imposed a stipulation that if you do not use your points within seven years of the point being rewarded to your account, you lose it. So if you are saving up for a big reward (or on the flip side have accumulated tons of points over the years and haven’t used them), you may lose your chance.

Also, expect to pay out of pocket for the taxes, fuel surcharges, and other miscellaneous expenses (like a special booking charge if you redeem on the phone with an agent as opposed to online). But hey – a buck is a buck. To fly across the country (or around the world) for the cost of the taxes is rarely something to complain about.

Tips for the reward-hungry charge card account user

Pay off that balance!

As stressed in my previous article and related comments, using a rewards program is for responsible charge card account users. If you rack up a balance with an eye to getting rewards, and then spend the next 6 months or more trying to pay off the balance (and paying interest all the while), then the value of your rewards decreases significantly. Pay off those darn cards every month and treat your credit card like a debit card or chequebook – if you don’t have the cash in your account, don’t whip out the plastic.

Don’t get sidetracked by the smaller rewards

Initially it can take time to build up a big enough balance to start redeeming for the rewards you really want. Don’t lose patience and redeem your 800 points for an item of insignificant value when what you really got the card for was airline tickets, or special gift certificates. Most rewards programs have tiered systems that offer sweeter rewards (with better value) for those with more points. Your patience in saving up will be rewarded.

Get the card for the rewards you want

If what you want is an airline ticket to Hawaii, then search for the best card to get you there. I found a program (in Canada) where flights to Hawaii required fewer points than even some continental flights, and I chose that card with an eye to getting that ticket. It took time, but my boyfriend and I are now living (temporarily) in Hawaii, and got return tickets for a total of $76 in taxes for both of us (whereas paying in money would have been over $1,600 for both of us).

Look for bonus points

Lots of programs will offer bonus points depending on where you spend your cash or what you buy. Check online for bonus offers regularly, and spend wisely. You can often get triple the miles with a little research and effort.

Look at points conversion programs

Some programs are in cahoots with each other, and you can transfer or convert miles from one program to another. Be wary of those that charge a fee to do so, and take a close look at the conversion ratio. Sometimes they’re way out of whack such that is makes no sense to convert.

Specific programs vary from country to country (and sometimes even within regions), so I won’t go into many specifics with regards to individual program choices. It’s up to you to decide which rewards will ultimately benefit you the most. Just remember to use it wisely or else the interest fees will end up costing you more than you’re getting in rewards, and it’s a safe bet that that is exactly what the credit card account companies are counting on.

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Getting Out Of Charge Card Account Debt

Posted by on May 29, 2011 No comments

Debt is the hottest topic on personal finance blogs around the world. Why? I would venture to guess it is because so many consumers are drowning in it. The unfortunate truth is that few consumers care to read about debt until it has already had a negative affect on their financial situation. This can make the final solution to their debt problems even more difficult to hear about.

I’m no stranger to debt. I had been managing school loans, vehicle loans, and a few small charge card account payments since I was 19, and I was successful in keeping a clean credit record. Then a few poor life choices left me responsible for over $30,000 in charge card debt at age 24. With nothing tangible or memorable to show for my efforts, I could have become bitter. Maybe I could have filed for bankruptcy (this was before the laws changed considerably.) Ultimately, however, I chose to consolidate, reduce the rate, and pay those debts off early.

Why am I telling you all of this? Two reasons: (1) It lends credibility to my view on debt and repayment. (2) To keep you from throwing things at me when you read the next paragraphs:

The number one question I hear from people in debt is NOT: “What’s the best way to pay this off?”

It is usually: “How do I get out of this debt?”

Note that in their wording, they are usually implying that they are wanting to get out of their obligation of the debt, though not necessarily through repayment. Google searches for popular debt-related terms bring up scads of results for help in “Getting out of debt” — all of which seem to give a quick and easy way out. A few clicks and some reading will tell you, however, that the scheme is all the same, and repayment is almost always involved.

So to answer the question of “What is the Best Way to Get out of Debt?” — my answer is simple: Whatever way is quickest, easiest, and costs you the least amount of cash, while at the same being perfectly legal and moral. Ditching your financial obligations by having a cousin co-sign while you walk away is NOT the best way. Making a conscious decision to default when you could be paying something (anything) is NOT the best way. Looking for answers from the sky for a way for you to not have to repay a debt (when you could if you wanted to) is NOT the best way.

I am saying this with the full understanding that someone reading this will have a unique situation that warrants blowing off a loan. I will guarantee that a handful of others will insist that they had no choice. I am, therefore, not talking to you, specifically. The $30,000 in debt that I repaid gave me zero benefit. It was the product of putting my name on a few accounts that were taken advantage of in the most grievous of ways. It would have been easy to say, “It wasn’t my debt,” default and start over 7 years later, instead of taking almost 6 to pay it all back. For this reason, I am speaking to the majority of those suffering from excessive debt who may not feel the benefit of their spending, realized they spent more than they could truly afford, or who simply got the short end of the debt stick. A loan is a loan, which is almost always best to pay back. Period.

I realize that if everyone paid back their loans, small claims courts would shut down, and debt collectors would lose jobs. Search Engine Optimization would change dramatically, and books on finance would lose their place among the Best Seller’s List. Thankfully, there will always be those who won’t pay up. But for the rest of us, there is still one answer to the debt problem: Make payments – no matter how small. As painful as it feels right now, no amount of money can buy the integrity and honor of making good on a loan.

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Credit Cards Have Dirty Little Secrets Too.

Posted by on May 28, 2011 No comments

The average American has around 8 credit cards and is carrying roughly $9000 in credit card account debt. If that’s not bad enough, the charge card account companies are involved in what can only be described as a conspiracy to keep Americans in debt, permanently.

I watched an incredible PBS documentary online last night called “Secret History Of Credit Cards”. You can watch the 5-part eye-opener here at your leisure. But if you don’t have an hour to spare, here are some of the biggest dirty secrets for you. You may want to sit down for these.

Dirty Secret 1 – Minimum Payments = 35+ years of repayments.
The minimum monthly payment used to be 5%. That caused a problem for the charge card issuers. Folks were being forced to pay off their balance too quickly, PLUS the cost of that 5% minimum made people wary of running up high bills. The solution was genius. Institute a 2% minimum payment. Not only will consumers splurge more because they have to pay less back each month, but it adds thousands of dollars in interest and increases the repayment time by DECADES. Sneaky doesn’t even cover it.

Dirty Secret 2 – A late payment to ANY creditor can skyrocket your interest rate.
I’m not talking here about just your charge card account payment being late. If you miss a car payment, mortgage payment, cell phone bill, in fact any payment, your APR can automatically increase to the massive default interest rate, which is usually 25-35%. Even if you’re ON TIME with your credit card payments, a late payment anywhere else can instigate this penalty. It’s known as the “Universal Default Clause.” Supposedly, it protects the charge card issuers from folks who are credit risks. Like these multi-billion dollar companies need protection from the little consumers.

Dirty Secret 3 – There is NO LIMIT put on late payment charges.
This is something no other industry could get away with. You’d think there would be some kind of law preventing the banks from charging loan shark penalties, but there isn’t. Be just one hour late for a payment and instead of a $5 or $10 fee (which, prior to the 1996 Smiley vs. Citibank case, was the limit), you’re looking at least $30. Mine charges $36. Many financial analysts believe that with no cap on these fees, they will easily rise to $50-$60 in the next year. And remember, when you’re late they’re also killing you with a huge APR. Double whammy.

Dirty Secret 4 – There is also no federal limit on APRs.
Don’t you find it odd that in a time of very low interest on anything from car loans to mortgages, charge card companies can hand out interest rates that embarrass loan sharks. Well, it’s not unusual to see 34.99% annual percentage rates, especially as a default rate, and the reason is simple. Most credit card account companies reside in states like South Dakota or Delaware. States that have very weak or even no “usury laws”. So, there’s no cap on interest. By law, there’s nothing to stop them charging whatever interest they want. Here’s a map that links to the locations of top 10 credit card issuers.

Dirty Secret 5 – You can often pay interest TWICE in one month.
This one’s called “two-cycle billing” and it’s also a completely legal loop-hole. Let’s say you pay off the balance of your card in full at the end of one month, say April. But in May, you don’t pay off your complete balance. Boom, some charge card issuers will charge you for two months’ worth of interest. Aren’t they lovely?

Dirty Secret 6 – Grace periods are getting shorter…or being eliminated.
Remember the good old days, when you had 25 days to pay off your balance without incurring charges? Well, those could soon be a distant memory. Some banks have already shortened the grace period to 20 days. (Do you know what yours is? It may have changed.) And other banks are doing away with grace periods completely. That means you’re paying interest on anything you buy, the second you buy it, even if you pay off your balance each month. The clock is running folks.

Dirty Secret 7 – Cash advances hit you twice in the wallet.
First, as I’m sure you know, you’ll get a different, higher interest rate applied to your money advances. But you also get hit with a transaction charge, around 2.5%. Even credit card accounts that confidently announce “no finance charges” can still bill you for transaction charges.

Dirty Secret 8 – The fine print is a web of deceit.
Let’s be honest, these days you need 2 hours and a law degree from Harvard to understand the mumbo-jumbo in the fine print. But try and read it if you can. Because this is where the charge card issuer can hide a whole bunch of nasty surprises. The biggest is scarier than Godzilla on crack. Basically, the charge card issuer can change your interest rate at ANY time, as long as they give you 15 days notice. No reason required. Imagine if any other industry worked that way, like your mortgage? While you’re reading the fine print, also check for things like purchase protection, lifetime warranty coverage and travel discounts. These may end when your introductory rate ends. And speaking of that, what does your introductory rate become after the teaser period? It could be more than you bargained for, especially if it’s a variable APR.

Dirty Secret 9 – Good payers are called deadbeats!
Deadbeat – it’s what charge card companies call those folks who are responsible and pay off the balance each month. They don’t like those consumers, not one bit. That’s because they make little to no money off of them. No, charge card companies like you to carry a nice hefty balance and pay only the minimum each month. If you’re one of those people, known as ‘revolvers’, you’re part of the crowd that contributes roughly 90% of the credit card account company’s income. What a crazy upside-down world credit is.

Dirty Secret 10 – You can demand, and get, a better deal.
APR too high? Hate the annual fee? Want a longer grace period? It turns out your charge card company may just have to do your bidding. See, the fees they charge are not considered a necessary cost of doing business, so you can request, firmly, that they be reduced or eliminated. Now, imagine what would happen if we all did that? No wonder they want that one kept secret. And remember, if all else fails, find a lower cost interest rate card and transfer your balance. You have at least that going for you.

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Judgements That Lead To Become A Landlord

Posted by on May 28, 2011 No comments

There are some things to consider if you are thinking of jumping into the market of being a landlord. Being a landlord can provide you with extra income but does not come without hassles. If you have a property that you are considering leasing out to tenants there are some aspects to consider:

Listing with an agent or advertising yourself

There are many advantages to using an agent. An agent is someone you will hire and who agrees to a certain amount to advertise and maintain your property. He can also help you in finding best home loan Australia so you can make your home valuable. For those who do not live locally, this may be a desirable option. A real estate agent will:

- Advertise and show the property to potential renters
- Prepare any necessary documents/lease agreements
- Ensure that the terms of the agreements are being met
- Collect rental payments
- Arrange for repairs
- Deal with issues, such as noise problems
- Conduct inspections
- Clean and inspect the unit after lease expires

You will need insurance on the property

You will need to take out an insurance policy on the unit in the event that a renter causes serious damage. Insurance companies can offer policies that cater to landlords. These policies can protect you from things such as:

- Lack of payment from the renter
- Damage inflicted by the renter to the structure of the home
- Theft
- Damage to any appliances or fixtures provided by the landlord

The tenant typically will provide insurance for the contents of the unit, which will cover personal belongings or anything with which they entered onto the premises.

Things to consider when deciding on tenants

Landlords can develop a form for potential renters that will provide necessary information. Landlords can ask for the following information:

- Identification
- Income
- References
- Previous housing accommodations
- What is the anticipated length of stay in your unit
- Possibly occupants
- Contact information

It is strongly suggested that, as a landlord, that you contact any references given and discuss your possible tenant to determine if they would be suitable tenants. You can ask questions along the lines of:

- How long have you know this person/family
- Have they been timely in previous rental payments
- Are they capable of keeping your unit in acceptable condition
- Do you believe they would be able to continue to make timely rental payments
- Are there any other details you should be made aware of?

A landlord needs to be careful not to discriminate. You cannot exclude possible renters based on:

- Age
- Marital status
- Children
- Gender
- Disabilities
- Pregnancy
- Race
- Sexuality

A landlord must also realize that you must keep up your property whether you have a tenant or not. Payments on the property will have to continue to be made and if you go for a length of time with no tenant you would be a double mortgage payment – one for the home you live in and one for the rental property and you must be very picky to get a best home equity loan whenever you need.

There are also costs associated with travel expenses, if you do not use a real estate agent, to and from the unit to do inspections, collect payment or make repairs to the property. Repairs can be expensive, especially when carpets or appliances need replacing. The unit will most likely need to be repainted after a tenant departs.

Owning a rental unit can be lucrative, especially if you are able to maintain more than one property but you also need to consider if the hassle involved in caring for these properties is a challenge you are willing to take.

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