ING Gets It Right - The We The Savers Statement

Posted by The Happy Rock on October 2, 2008

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I thought this was so well thought out and written that it deserves a mention. ING Direct put out a We, The Savers statement that clearly identifies how we can be responsible for ourselves during this rough economic stretch. I appreciate the sentiment, plus ING is my bank for both checkings and savings and I love their services.

Here is the list :

We will spend less than we earn.
We will use our home as a savings account.
We will take care of our money.
We will defend our credit worthiness.
We will ignore unsolicited credit card marketing.
We will know the cost of borrowing.
We will invest for the long term.
We will take care of the things we have.
We will remember what matters.
We will be heard.

Click here to read the full statement to get a breakdown of each point.

» Filed Under Banks, Financial Succes

Why APY Matters And The APR Lies

Posted by The Happy Rock on March 28, 2008

APR and APY. I know that I have had to look up the difference more than once in my life. It is one of those facts that is easy to understand, but they easy to forget. The numbers are usually similar, but the subtle difference can cost you a lot of money. So, what do they mean and what is the difference.

Annual Percentage Rate(APR) is the rate that a company assigns to the financial product. If a credit card has a 12% APR that means that will mostly like charge 1% a month for 12 months. If you carried a $10,000 balance on a 12% APR credit card, the simple interest would be $10,000 * 12% or $1,200 dollars in interest for the year. Seems simple enough, but what about the APY.

Annual Percentage Yield is the actual rate that you receive at the end of the year after taking into account compounding interest. Banks and lenders don’t use the simple interest formula they use compound interest. Using the compounding method on the same $10,000 balance on a 12% APR credit card, you would pay $100($10,000 * 1%) in interest the first month. The next month you will pay $101($10,100 * 1%) in interest the second month, $102($10,201 * 1%) the third month and so on until the end of the year. This compounding will actually cost you $1,268.25 interest rather the $1,200 you would have thought. That difference is the displayed in the APY. 12% APR compoudning monthly is 12.68% APY.

Earning interest on interest works for you when saving, but against you when you borrow money. Lenders will try and show you the APR, while savings vehicles will show you the APY. Either way FOLLOW THE APY.

» Filed Under Banks, Productivity(Financial)

Tricks The Banks Play To Make You Pay

Posted by The Happy Rock on August 27, 2007

This is a guest post form Linda Bustos. Linda is an editor for CreditorWeb, where you can learn about credit cards, compare offers, and apply for a business credit card online.

We all know that banks are not on our side. They offer us products and services to make our lives more convenient and pull us through financial jams, but we end up paying for them through interest charges…and bank fees…and late payment fees…and overdraft charges…and NSF check fees…the list goes on.

Banks have no shame in trying to squeeze as many cents and dollars from their clients. Financial institutions have many games and tactics, but their only power over you is your ignorance to them. Here are 6 tips that banks will never outright tell you but that will keep your hard earned cash in your pocket.

1. Late Credit Card Bill Trick

Some credit card companies will send bills out late in the billing cycle, reducing the amount of time you have to actually pay the thing — sometimes with only a couple days. They’re legally required to send your bill at least 14 days before payment is due, but with mail eating up to three days each way, you have an eight day window to send in your payment. Online banking can shave three days off that time. But remember that sometimes your payment won’t go through the same day depending on which bank you’re using, so it’s just best to pay up the day you get the statement or set up automatic checking account withdrawals. But be careful if you choose that option, always make sure you have enough cash in the account. But, making only minimum payments is gonna cost you dearly in interest fees, so it’s best to just discipline yourself to pay right away.

2. Accidental Overdraft

You can ask your bank to monitor your checking account so that if you happen to overdraw your account, they’ll call you right away. Number one, you stop spending - and number two, you can request that they give you until the end of the day to replenish your account and avoid the $15-$25 overdraft penalty and the inconvenience of a bounced check.

3. Loan Insurance - Just Say No

Additional life or disability insurance on a loan only protects the bank in the event you die or cannot work anymore and can’t make your payments. You’re paying their premiums for them, plus they’re getting a commission on the insurance policy that originates from an insurance company. Bad, bad, bad. Life and disability insurance is fine, just get it from an insurance agency yourself and make sure the policy benefits YOU.

4. You Can Have Loan Fees Waived

Your mortgage loan or home equity loan is a great source of revenue for the bank. To save you from going elsewhere, the bank can stand to relieve you of a few hundred dollars worth of fees to keep your business - but you have to ask.

5. Interest Rates are Always Negotiable

“The rate for this type of loan is X%.” Wrong! There is always room for negotiation, and don’t be fooled by the banker’s tactics of not mentioning the rate at all and just filling it in on the note, or suggesting that because you need the money immediately you should take X% and you’ll negotiate it later.

6. Low Interest Credit Cards Could Cost You More

There are two common ways banks make up for the lower rate: annual fees and no grace period. If you’re paying $35-$50 for the privilege of a few percentage points less, that’s still a type of interest - a lot of interest if you don’t normally carry a balance anyway. And if the conditions of the lower rate involves no grace period, you will pay interest even if you pay faithfully in-full each month.

» Filed Under Banks, Credit Cards, Guest Posts