Top Bank Promotions

Thursday, 15 December 2011

Are Bank Promotions Worth Looking Into?

You’ve probably seen various promotions for opening a checking account and wondered if it was worth it?  Depending upon the type of promotion offered and the strings attached some of these promotions are definitely worth a look.

Generally, checking account promotions involve some sort of giveaway: cash, points, airline miles or electronics.

Most banks restrict bonuses to new customers, who then have to meet specific requirements to claim the loot.

Among the restrictions could be maintaining a minimum daily balance, making a certain number of withdrawals with an ATM card or setting up recurring direct deposit of your paycheck.

You also may encounter promotional interest rates that last for a period of time. The fine print of such offers generally indicate that rates are variable and may be subject to change. If you’re looking for this type of deal, try to find checking accounts that tell you how long the promotional rate will last. Always find out what the rate will be after the promotional period ends and what type of monthly fees are involved.

Thursday, 1 September 2011

Credit Card Balance How What You Owe Is Calculated

Balance Computation Methods

If you dont have a grace period or if you plan to pay for your purchases over time it's important  to know how the credit card companies is calculating your finance charges. Which balance computation method is used can make a significant difference in how much of a finance charge you'll pay  even if the APR and your purchasing habits reminan pretty much the same.

Average Daily Balance. This calculation method is the most common. It credits your account from the day the credit card company receives your payment. To calculate the balance due, the issuer totals the beginning balance for each day in the billing period and subtracts any credits made to your account that day.

While new purchases may or may not be added to the balance, cash advances typically are included. The resulting daily balances are added for the billing cycle. Then, the total is divided by the number of days in the billing period to get the average daily balance.

Adjusted Balance. This usually is the most advantageous method for cardholders. The credit card company figures your balance by deducting payments received during the current billing cycle from the balance at the end of the previous billing cycle. Purchases made during the billing cycle are not included.

This appraisal gives you until the end of the billing period to pay a portion of your balance to avoid the interest charges on that amount. Some issuers exclude prior unpaid finance charges from the previous balance.

Previous Balance. This is the amount you owed at the end of the previous billing period. Payments, credits, and purchases made during the current billing period are not included. Some creditors exclude unpaid finance charges.

Two-cycle or Double-cycle Balances. credit card issuers sometimes calculate your balance using your last two month�s account activity. This approach eliminates the interest-free period if you go from paying your balance in full monthly to paying only a portion each month of what you owe. For instance, if you have no previous balance, but you neglect to pay the entire balance of new purchases by the payment due date, the credit companies will compute the interest on the original balance that previously had been subject to an interest-free period. Read your agreement to find out if your card issuer uses this method and, if so, what exactly is the two-cycle method is used.

How do these methods of calculating finance charges affect the cost of credit? Suppose your monthly interest rate is 1.5 percent, your Annual Percentage Rate is 18 %, and your previous balance is $400. On the 15th day of your billing cycle, the card issuer receives and posts your payment of $300. On the 18th day, you make a $50 purchase. Using the Average Daily Balance method including new purchases, your finance charge would be $4.05. Using the Average Daily Balance method excluding new purchases, your finance charge would be $3.75. Using the Average Daily Balance Double Cycle method including new purchase and the previous months balance, your finance charge would be $6.53, and using the Adjusted Balance method, your finance charge would be $1.50.

If you dont understand how your balance is calculated, ask your issuer. An explanation also must appear on your billing statements.

What To Look Out For When Shopping For Credit

The grace period on your credit card may be shortened, or erradicated. Commonly a credit card bill is handled in the following manner: You buy an item or service with your credit card.

The merchant reports the charge to the credit card issuer. The credit card issuer then pays the store and posts the charge to your account. If you do not pay off the account within the 25-day grace period, interest is charged, beginning on the date that the charge was posted to your account. However, some banks have shortened the grace period to 20 days -- only if you pay off your account in full each month! This amounts to a penalty for customers wh o always pay off their credit card debts. Some credit cards have eliminated the grace period entirely. You must pay interest on everything, from the day you buy it, even if you pay the full balance each month.

Low monthly payments have a high price tag. You may believe it is beneficial to have a card that only requires a monthly payment of two percent or 3% of the balance. Quite the contrary. The longer you carry out payments, the more of your money the card issuer stands to collect in "finance charges." Your best bet is to pay off your entire balance each month. If you cannot do that, pay off as much as you can afford.

You may pay interest twice in one month. If you paid off your full balance in January, but then failed to pay the total balance in February, some credit companies will bill you for two months' worth of interest. This is called 2 cycle billing.

Cash advances cost you extra. Most credit card companies impose both a finance charge and a transaction fee for cash withdrawls. Interest begins accruing from the day of the advance, and the transaction charge is often 2.5% of the amount advanced. Even credit card issuers that promote no finance charges often charge transaction fees.

The real deal is in the fine print. Don't fall for a "teaser" credit card offer. If you are offered a new credit card with a low introductory rate, such as 6%, be sure to read the small print. When the introductory period finishes, your full balance will in all likelihood be subject to a much higher rate such as twenty eight percent.

Your new credit card may also come with benefits such as a free lifetime warranty, discounts on travel, or protection if a purchased item is goes missing. If you sign up, be sure to read all notices of changes in the terms of your account as credit card companies commonly withdraw the special benefits while raising both the interest rate and the finance charges.

Some MC and Visa cards have payments deducted directly from your checking account. These debit cards look exactly like credit cards, but they offer less consumer protection. You don't have the same right to charge back problem purchases. These may be offered as checking account promotions.

If you miss payments, the bank may be able to withdraw funds from your checking account without your approval. If the card is lost or stolen, you must report the problem within 60 days or be responsible for all purchases made with the stolen card.

You can negotiate a better deal. If you are receiving a unfavorable deal on your credit card such as two cycle billing, finance charges of 18% or more, annual fees, and no grace period  you can contact the credit card company and ask for new terms. These fees are not requisite costs of doing business, and you can ask that they be reduced or eliminated.

Or change to a more affordable card and transfer the outstanding balance.

What Is FDIC Insurance And Why It Is Important

FDIC insurance stands for Federal Deposit Insurance Corporation, and is an isurance that is funded by premiums paid by the financial institutions. All of your accounts should be in banking institutions with FDIC insurance.

For example, if your bank becomes insolvent, your deposit balances are insured and repaid to you from the FDIC.

If you do have to rely on the FDIC your biggest concerns will be the timing required to receive your money and the lack of interest on your funds until the date the insurance pays you.

So it is a smart idea to have emergency reserves in a separate financial institution if insolvency is a concern. Furthermore, your deposits are guaranteed up to $100,000 per financial institution, not per account.

If you have deposits that exceed the $100,000 limit in one bank, you should consider moving the excess to another financial institution if you want the deposits insured by the FDIC. This would include any accounts that you may have acquired through a checking account promotion.