Categories
banking

Dormant Bank Account Fund Approved

What happens to money left unclaimed in bank accounts that people have forgotten about? In some cases, the account holder will remember (or be reminded) that it’s there, but in others, that simply doesn’t happen. In the United States, each state runs a missing money program where unclaimed funds go. Each state is required to keep the money or other valuable property in an individual’s name until it can be claimed. If it isn’t claimed after a certain point, it can be used by the states.

But things are different in the UK. In cases when there is unclaimed money it could be put to use helping good causes – and that’s exactly what’s happening, thanks to a new initiative involving a major financial group of businesses…

The Co-operative Financial Services will run the fund that collects money from dormant bank accounts to use in the Big Lottery Fund, after receiving authorization from the Financial Services Authority (FSA), which regulates providers of financial services in the country.

As reported on Think Money, the new fund will be known as Reclaim Fund Ltd, and will be run on a purely non-profit basis. As such, it will operate independently from the rest of The Co-operative Financial services, with its own Executive and its own Board.

It’s part of government plans in which all money held in bank accounts that have been untouched for 15 years or more will be put towards charitable causes. However, some of this money will be held back by Reclaim Fund Ltd, just in case account holders do realize they have a dormant account and want to claim their money back.

It is thought that the Reclaim Fund will receive a total of £400 million or so from dormant bank accounts, with the first distribution to the Big Lottery Fund in the region of £60-100 million, transferred in phases over the next 12 months.

In England, some of the money will be used to fund the ‘Big Society Bank’, which according to the Financial Times will lend money to businesses whose goals will produce “a social benefit”.

It’s good to see the UK government doing good things with the money – and it’s something the US might want to consider in the future.

Categories
saving money

How to Establish a Savings Account for College

The cost of college is slowly creeping higher as the return in pay for a college graduate slowly declines. The average college student will make significantly less than the average college student made as little as ten years ago. This is mostly due to a struggling economy so beginning a college savings account for your child or children can be extremely helpful to their future.

There are different types of savings accounts

Saving for college is essential to avoid taking out large student loans. The type of savings account that will best fit your lifestyle and income varies so there are a few options out there to establish a savings account for college. The most commonly used option, and the only one available across the United States is the 529 Plan. Option number 2 is a savings account through a private bank or college fund company. One of the newest options are called Loyalty programs like Upromise and BabyMint. One other choice is a minors trust fund.

How to make the best choice for your family

Research states that the 529 Plan is the best option for almost any family situation. The money is saved through your state treasury, is tax free until the year funds are withdrawn, and also remains in complete control of the parent(s) who funds the account rather than going into the hands of a not as responsible college student. A private savings account can effect the expected family contribution when your child applies for financial aid.

Loyalty programs are typically created by business or credit card companies to help you build a savings account. Kroger works with Upromise, and every time you buy groceries and use your Kroger Plus card they contribute a small percentage of the cost of certain items to an account. This is basically a hassle free way to help you save up for your child’s future and can be used in tandem with any of the other accounts.

Making tough decisions

If you are having difficulty choosing the correct savings account for your needs, contact a financial planner who specializes in future and family planning accounts to discuss your options thoroughly. You may decide to take a completely different route than the ones discussed above but most generally they will suggest one of those options. After you have made a decision, take your time thoroughly setting up an account with a specialist. Contact your state for a 529 Plan, research banks and private companies for the best interest rates for a private account, or set up an account online to manage Upromise or BabyMint.

Categories
banking

Bank Accounts 101: Which One is Best for You?

In this day and age, pretty much everyone over the age of 18 should have some type of bank account. Bank accounts are essential if you want to get direct deposit from your job or if you want to pay for your everyday purchases with a debit card. However, with so many different types of accounts out there to choose from, it can be confusing to know which type is best for you. Here is a brief overview of the different types of accounts available and the basic features of each one.

Savings Accounts

Savings accounts provide an incentive for customers to save money. Savings accounts with banks and credit unions will usually come with an interest rate that is higher than a traditional checking account, but lower than CDs or money market accounts. Savings accounts will allow you to make deposits and withdrawals, but there is usually a cap on the amount that you can make in a monthly period. Some banks will even charge you a fee if the balance on your account falls below a specified minimum amount. You should not use your savings account to pay for your everyday expenses. This is what your checking account is for. Most banks will let you open a savings account for free, so customers can easily open both a savings and a checking account.

Checking Accounts

A checking account is the most basic type of bank account. You will usually get checks and a debit card for free when you open an account. You will use these items to pay for your everyday expenses. Most people will also set up direct deposit with their employer so that their pay check will automatically be credited to their account. Because you will have a lot of money going in and out of your account on a monthly basis, you will want to choose a bank or credit union that does not place any stipulations on this.

Money Market Accounts

A money market account is an interest-bearing account that invests your money in short-term debt including CDs, Treasury Bills and commercial paper. Money market accounts usually offer rates that are higher than other types of accounts, providing you with more money-making potential. However, these accounts usually require you to deposit a large amount of money initially to even open an account. Additionally, these accounts do not typically come with debit cards or checks and some banks will charge a service fee if your account balance falls below a specified minimum.

Certificate of Deposits (CDs)

CDs are also known as ‘time deposits’ because you have to agree to keep your initial deposit in the account for a specific amount of time. For this amount of time, typically lasting from three months to several years, the money will be virtually inaccessible. Because of the stringent terms of this type of account, the rewards are greater and you will be paid a much higher rate of interest. If you do end up taking take the money out for any reason, you will usually be charged a substantial early withdrawal fee. Therefore, do not open up this type of account if you expect that you will need the money before the maturity date.

Categories
credit

Recent California Supreme Court Ruling Drives Lawsuits

After a ruling in February in the California Supreme Court, it is now illegal for a retailer in the state to request the zip code of customers paying with a credit card. Apparently this information was being used for marketing purposes although consumers were led to believe otherwise. The result: more than 150 class-action lawsuits have been filed in California against numerous companies. The retailers include Kohl’s, J.C. Penney, Bed Bath & Beyond and Wal-Mart.

More than 40 of these lawsuits were filed in San Francisco Superior Court but include other jurisdictions in California as well.

Consumers claim the basis for these lawsuits is they were deceived into providing personal information under the assumption it was pertinent to finalizing the credit card transaction or for fraud prevention. Instead, consumers are learning this information seems to have been used for marking purposes.

The court ruled that collecting zip codes is illegal under a law that bars stores from collecting “personal identification information” when it is not needed for a transaction. The law was originally put in place to prevent customers’ personal data from being misused. But that is the same justification stores are using for taking zip codes; they say it is an anti-fraud measure.

In the Supreme Court Case, Pineda v. Williams-Sonoma Stores, Inc., a woman sued the home store Williams-Sonoma after the company used her name and zip code to find her address and added it to a marketing database.

Clearly most consumers would not have divulged personal information, such as their zip code, if they knew what it was really being used for. Stores in California certainly won’t be asking for zip codes moving forward, but that isn’t enough for many consumers who feel they’ve been violated and deceived in a big way.

Bill Dombrowski, president of the California Retailers Association told The San Francisco Examiner: “Most of the time, it’s being used to verify the credit card is your credit card, so it’s for fraud prevention.”

But the California Supreme Court disagrees.

Categories
credit

Consumer Spending Drives Economic Growth

The economy has been kicking back into gear, and consumer spending plays a big role in driving this upswing, as it accounts for 70% of the economy. With the recent profit increases credit card companies have seen, it seems consumers are back out there using their cards to make purchases instead of cash or debit cards. As card companies report increasing earnings, mailboxes are filling with credit card applications once again.

Increase in Consumer Spending

As mentioned in a previous Credit-Land.com article, after this past holiday season, consumers in all income brackets said they had no intention of putting a hold on their spending this year. The holiday season might remind consumers it can also be fun to shop for ourselves once in a while. Also, with unemployment rates decreasing, consumers who have kept to a strict budget might be letting loose for a change, an maybe filling out a credit card application or two, because they can finally afford to do so. Consumers have more confidence in the slowly improving economy and are less worried about keeping a tight budget and saving money. This is shown in a report by the U.S. Bureau of Economic Analysis, which reported a 4% increase in consumer spending in the fourth quarter of 2010. This is the largest percentage increase in 5 years.

Consumers Not Afraid to Use Their Credit Cards

With a decrease in credit card delinquency in the fourth quarter of 2010, it seems consumers are more confident in their financial position. Because they are making more of their payments on time, cardholders are facing fewer late payment fees and interest rate hikes. This is most likely encouraging to consumers, who feel secure to once again use their credit cards for purchases.

Credit Card Companies See Increases All Across the Board

Of course if people are spending more money, it’s no surprise they are using their credit cards more, too. Credit card companies are seeing an increase in their net income and in card member spending. For instance, American Express reported net income of $1.1 billion in the fourth quarter of 2010, compared with $716 million a year earlier. A large percentage of this gain can be attributed to cardholders charging more to their credit cards.

 

Categories
banking

Five Reasons to Use a Credit Union Instead of a Bank

As the economy continues to suffer and big name banks continue to take flak for unscrupulous practices, credit unions have begun to grow. Many people fail to realize the advantages a small credit union has to offer because they cannot see past the blaring marketing plans of big name banks. The major difference between credit unions and banks is that big banks are businesses. Commercial banks have one intention: to make more money from their customers (you). Big name banks often have very low interest rates, loan rates are competitive, and they are always trying to sell you things. On the other hand, credit unions exist to help their members. The following are five reasons why credit unions are your best banking option today:

1. Member Owned: This means that every person with an account at a credit union is a partial owner of that credit union. While wealthy shareholders typically own major banks, you don’t have to be a wealthy shareholder to have some say in the business procedures of a credit union. The minute that you open a credit union account, you own a portion of the credit union. You will get to vote on who you want to serve on the Board of Directors and therefore help guide the direction of your credit union. You are able to provide personal input into what financial services you are interested in having through the credit union.

2. Non-Profit: As mentioned before, big name banks are businesses. They run off of the profit they make from their customers. Because credit unions do not exist to make a profit, they often offer better services at lower costs. They are community oriented and tax-exempt. A credit union is not going to try to sell you something or dupe you into a service that you don’t want or need just to make some money. They are more customer-oriented because their customers are also their members.

3. Better Interest Rates and Loans: Credit unions offer higher interest rates on your savings, money market and CD deposits than typical banks do. They tend to also offer lower interest rates on your mortgage, auto loans, and credit cards. This is possible because of the way the non-profit aspect of a credit union works. The credit union makes profit and then returns the profits back to its member in the form of better interest rates.

4. Lower Penalties on Overdrafts: One of the most aggravating aspects of a big bank is their overdraft charges. Most everyone is going to have an overdraft or two at some point in their life. And most banks are going to take advantage of those times when we lose track of our balances or run out of cash. Big banks tend to charge outrageous fees even for the slightest overcharge. Because credit unions are smaller and more member-oriented they are typically more willing to work with individuals who are having financial difficulties. Many credit unions will not even charge for overdrafts and instead send you a notification and try to solve things with you.

5. Better ATM Access: It is a common misconception that credit unions have highly limited access to ATMs. Although credit unions are typically small, many allow you to access ATMs of other credit unions for no additional fees. So, while they will likely not have as many ATMs nationwide as some of the big national banks, they do offer fairly thorough ATM access, often through an ATM network.

Categories
credit

Wells Fargo and Chase Introduce Microchip Credit Cards in U.S.

It appears the U.S. is finally making an effort to catch up with other countries in the implementation of microchip-embedded credit cards, also known as EMV-chip technology. Wells Fargo & Co. announced Wednesday that they will test EMV chip cards with 15,000 customers who travel abroad frequently. On Thursday, JPMorgan Chase announced that it would add a chip to its high-end Palladium card.

The U.S. has lagged behind countries such as Japan, Mexico, China, Brazil and most European countries that have already made the conversion from magnetic strips to microchip-embedded credit cards. American Express Blue cards originally offered microchip credit cards, but without the necessary payment infrastructure at U.S. ATMs and merchants, the feature was unpopular. Fearing a drop in credit card applications, American Express replaced the chip with RFID, the technology that allows payment by holding the credit card near a reader, in 2005.

Microchip Versus Magnetic Strip Credit Cards

EMV technology has already become the standard throughout Europe and other countries because it provides heightened security and protection against fraudulent charges. It is beneficial to every party involved, including consumers, retailers and credit card issuers. Every in-person transaction requires a PIN. One reason the U.S. has fallen behind is that U.S. issuers have focused on RFID technology — also known as PayPass or Blink — instead, hoping to drive credit card applications.

U.S. Travelers Face Difficulty

Almost 10 million American travelers had trouble using credit cards in 2008, costing about $4 billion in lost transactions and $447 million in lost revenue for card issuers, according to Bloomberg News. In some cases, consumers can show identification to verify the card is indeed theirs, but many European retailers simply refuse to accept credit cards without the microchip. Additionally, travelers have faced difficulty using the ever-growing number of automated kiosks in Europe, many of which only accept microchip-embedded credit cards. As discussed in other Credit-Land.com articles, credit cards are often the most convenient payment method for travelers and it is not the smartest idea to travel with a large amount of cash.

Categories
credit

ABA Reports an Improvement in Most Loan Delinquencies

Consumers are doing a better job of paying their credit card bills on time. According to a recent report by the American Bankers Association, bank-issued credit card delinquencies dropped to their lowest rate of 3.28% in the last quarter of 2010, compared with the 3.64% it had been in the previous three months. A delinquency is defined by the ABA as a payment overdue by 30 days or more. This is the lowest bank-issued credit card delinquency since the first quarter of 2001, nearly ten years, and it is also below the 15-year average of 3.92%.

The rate of unemployment has been falling steadily and dropped to 8.8% in March. Private-sector employers added 216,000 jobs that month. Clearly, our economy is slowly but surely recovering, and consumers are better able to make their credit card payments in a timely manner.

In addition to bank-issued credit card delinquencies, the overall delinquency rate decreased in the final quarter of 2010 from 3.01% to 2.68%. In fact, 9 out of 11 loan categories that the ABA tracks decreased in the fourth quarter. In the category of home improvement loans, ABA reported a slight rise in loan delinquencies to 1.26% from 1.23%. The only other category that did not show a delinquency decrease was housing loans, but these remained unchanged at 4.05%.

ABA chief economist James Chessen believes these figures to be encouraging.  “I’m feeling hopeful about further declines in delinquencies because of continuing job growth, but the unknowns are the impact of higher gas and food prices,” he said in a statement.“The 2% reduction in federal payroll taxes that began in January was intended to boost discretionary income. Unfortunately, rising prices have dashed any chance of that.”

The Associated Press reported in March that food prices in February saw the biggest rise in 36 years. Cold weather was mostly to blame, The AP said, but prices on food commodities have risen sharply over the last year.

The national average gasoline price on April 11 was $3.77, compared with $2.86 a year ago, according to AAA. Instability in oil-producing countries like Libya pushes gas prices up, along with rising demand as Americans travel to work more and once again have money to travel on vacation.

Clothing retailers, too, are raising prices. The price of cotton has more than doubled in the last year, according to The AP, and synthetic fabrics cost nearly 50% more. As shoppers return to stores, steep discounts are no longer needed.

With recent world events and rising gas and food prices, consumers will certainly continue to face challenges. But the fact that unemployment rates are improving seems hopeful. The more money consumers make, the more they will be able to make necessary payments on time. Hopefully, we will continue to see delinquency rates drop throughout 2011.

Categories
credit

Save Money with Credit Cards

One of the best perks to having a credit card is the rewards program many of them offer. Credit card companies use this benefit to attract new customers and keep their current ones. That doesn’t mean credit card reward programs are a free gift to you from the credit card companies; certain restrictions do apply, and it might not be worth it to participate in a rewards program depending on the circumstances. However, rewards benefits from a credit card company can really add up to some substantial benefits, if you approach them the right way. Here are some suggestions on getting the most from the best rewards credit card.

Save Money with Credit Cards

  • Most rewards credit cards require you to pay off your balance every month. If you have a balance that carries over, the benefits may be reduced or you could be ineligible for rewards at all.
  • Typically, credit cards that offer rewards will have a higher APR than ones who don’t. Make sure you shop around to get the best APR you can while still receiving rewards.
  • You might have to do a little bit of math. If you have to spend an obscene amount of money for a $30 gift card, is it really worth it? Probably not.
  • If you travel often, a credit card offering free air miles might seem like a good idea. Keep in mind you’ll have to charge and pay off a lot of purchases before you are able to redeem those miles. There may be blackout dates and expiration dates that prevent you from using earned miles – it’s important to read the fine print of any offers.
  • Speaking of expiration dates, these may occur on travel miles, lodging discounts, points, even merchandise and cash back offers.
  • Fuel rewards are very popular, especially with the soaring fuel prices today. However, most credit cards require you purchase your fuel from specific places in order to earn rewards. Generally, places like supermarkets or smaller stations are not included in the cashback plan.
  • Know the limits placed on earned rewards on credit cards by the company. For instance, some credit cards only allow you to earn up to a certain percentage and then you won’t earn any more. If your credit card company has a rewards program that gives you points up to 1% and not a penny over, you have to decide if it’s worth it.

Credit card reward programs can definitely add a lot to the credit card experience, but you have to know the ins and outs to make the most from rewards credit cards. Do a little homework and compare credit cards and what they have to offer to choose the best one for your lifestyle. Don’t forget to read the fine print, and don’t be afraid to walk away and find a better credit card that better suits you. After all, this is your money you’re spending.

Categories
credit

Big Spender Alert: Credit Card Rewards for High-End Users

If you’re wealthy enough to own an American Express Platinum or Centurion card, you’ve already been enjoying the more than 40 perks of being a cardholder. But your deal just got even better. American Express recently announced three new perks for high-end customers who also happen to be frequent travelers. The first two perks are for both Platinum and Centurion cardholders, and the last is solely for Platinum cardholders. Although both of these cards come with fairly substantial annual fees, these new programs can definitely benefit the right cardholder.

The first new benefit is Priority Pass Select, which involves access to more than 600 lounges in airports all over the world, a perk that typically costs $399 for unlimited access. In the past, cardmembers could already use American Airlines, Delta and US Airways’ lounges. But with this new program, cardmembers will have additional lounges available to them. Also, cardmembers have the option of signing up for a Priority Pass card, which benefits them with complimentary snacks, refreshments and Internet access in more than 300 cities.

The second new perk added for cardholders is Global Entry credit, which offers expedited clearance for pre-approved, low-risk travelers. Before enjoying these credit card rewards, cardmembers must complete an in-depth background check and interview conducted by Customs and Border Protection. They also have to pay a $100 application fee, which covers them for five years. But if cardmembers pay the fee with their Platinum card, they can request reimbursement. Once completing the screening with CBP, cardmembers can save considerable time when traveling – up to 70 percent of the typical wait time involved in international traveling.

That’s not all: American Express has also become one of a few credit card companies to offer cards with no currency exchange fees for its Platinum cardholders. Cardmembers can make international purchases while saving the 2.7% foreign transaction surcharge.

American Express isn’t the only one courting its high-end users. Chase is partnering with British Airways to offer bonus miles for new enrollees to the British Airways Visa Signature Card who apply by May 6. This is the equivalent of 2 free round-trip flights. Cardholders receive 50,000 miles after their first purchase and another 50,000 miles if they spend $2,500 within the first three months. It’s tempting to take advantage of these kinds of offers, and these programs can certainly benefit a frequent international traveler.