Archive for the ‘Finance’ Category

Credit Card – Things you should know

December 2nd, 2008 Vijaianand

Last week was a busy week at my work as I was working extra hours to get things done. Obviously, work takes priority as pays the bills. For that reason, I had to miss my last week post.



Before that, I posted a blog about CITIBANK which was needed to shed some light on the issue. Let me switch gears to get back to my favorite which is left over topic, IDENTIFY THEFT&CREDIT CARDS. I talked about why credit is preferred by many people and talked about self searching yourself to see whether you need one or not. This post I am going to cover some things on how to get a credit card taking different individuals role from different walks of life.



Getting your first Credit Card



First of all, once you decid to get a card after finding its ease of use and to avoid the burden of carrying cash all around. To tell you frankly, it is not that easy to get one these days. It was easy a year ago but not now as companies are going back to basics looking out for credit history to offer a card. You would have to have good credit history to get a credit card with good limits. But Credit history only gets built once you start borrowing and paying back your debts from the lender whether its credit card company and bank. Its Catch 22!!



Normally, you are eligible to carry a credit card after 18 years. So College students are very attractive customers for the credit card companies.


If you are a student, you are sure to be haunted by credit card companies as they are so willing to offer your student loans. That’s one way to start out credit history and many people do that way. Many kids have good bank history even before they start their college because of their well planned parents who open accounts and educated their kids on money and saving ideas. I strongly recommend parents to educate their kids early and give a kick start to their financial life.



Let say you didn’t go to college and your parents didn’t help you out, then it gets tough. You have to start it all out from scratch. Luckily you found a job and earning reasonable income. You can open a bank account and get your earning flow through the bank. This way you would have accomplished a good bank history. Once you have the bank history, you can apply for a credit card with low credit limit as many banks offer these days and start building your credit history.



Another section of consumer are the Immigrants(like me when I came first) who are here to work and your situation is similar to the above. They don’t have any history of any type as they don’t even have SSN. They have to start it all out and it is tough so most of the time they dependent on their company offerings until they accomplish some history.



Without credit history, it makes living in America a tough ordeal. I been there and learnt lot of lessons. You cannot buy a car, you cannot get a good place to live and list goes endless. You end up depending on their big brothers/co workers who came before them for everything. Once they good bank history, try banks low credit limit cards many banks offer binding to your savings/checking account. You can start with those credit cards to get your history and slowly you will get into to good books of credit card companies.

Once you got into the good books of credit card companies with good credit history and credit score, then you will start getting offers at your door steps and they won’t stop until you die.


Things to know in advance


1. If you have a good credit history, attractive offers will sure to show up for you even in bad times like this one. Credit card companies/banks need borrowers to borrow money so they can do business and make money in interests. But be wary of their offers. Its not all the same.


Every credit card is different and they have similar rules but different mechanism to attract you to getting the card. So read the offer carefuly before signing up.

2. I strongly recommend you to check whether your credit card issuing bank offer Fraud Alerts for free or might be able to sign for little cost. This alert system come in handy to give signals when peculiar activity happens in your card that may be a hacker who got your card number or thief stole your card.

3. Check all the fine prints like fees or charges on withdrawals, Interest rates for Balance Transfer/Purchases, fees on Balance transfers. Some card offers 0% interest on purchases which is not the same as Balance transfers to your card. Both are entirely different. Also check whether they have transaction fees for Balance transfers. Many credit card companies charge 3% – $10 min fees but very rarely you get free balance transfer fee offers.

4. Check on their billing period and when do they start so you can plan on paying back the money borrowed. Also try to check on their grace period which is either 20 or 25 days depending on their bank offering the card.

5. Finally, just make sure the offers are right when you apply for your card over the phone which is better than applying over mail. That way you can confirm the offers sent to you and you can always use that conversation in future when things go wrong.

I covered some basic as well as important points on how to get a credit card and how to start your credit history according to my experience. I will cover some more facts and pointers in my next post on what are the ways your card or card number can be stolen so you can watch out and what you can do when it happens.

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CITIBANK – TOO BIG TO FAIL

November 24th, 2008 Vijaianand

Like many NRI’s, I am also a customer of CITIBANK. I just want to put out this blog to talk about CITI GROUP and its problems, concerning people who are searching for answers about its bankruptcy and sell off rumors. This day calls for a quick update on this matter.


Economy Struggle


A wild, life threatening roller coaster ride is being played out in the Stock Market all over the world. I did mean life threatening for a reason to make a point. Like a uneven ride dangerous to riders, many people jobs are at stake including 53,000 from CITI Group because of the upheaval in stock market. Blood shed in wall street has been worse these past few weeks. It affected the Main street to large extent. US economy is going thru a real tough time similar to 1929 great depression and witnessing yet another big job loss since 1991, 16 year high. It is bad as it gets and it might get worse as we are approaching the year end.


“The economy is deteriorating tremendously fast,” says Raghuram Rajan, a finance expert at the University of Chicago. “The concern is how much more [risk] is there. This stuff seems unbounded. That’s what the investor is really worried about at this point.”



CITIBANK ISSUES



Being said all about the market, CITI GROUP banking giant is been talks for long time being a major victim of toxic mortgages and bad corporate decisions. Once the biggest U.S. bank, with a market value of $274 billion at the end of 2006, Citigroup has now slipped to No. 5 behind Minneapolis-based U.S. Bancorp. Last week was one of the bad weeks for the 11 year old group which is formed after merger of CITIBANK and Travellers group in 1998.. It has lost so many billions and has around 2 trillions of dollars in bad debt. It already wrote off billions of dollars as bad debt in books for the last few quarters. Even after announcing 10% last April and 20% job cuts next year to tackle the situation, stock plummeted badly as investor concern about bad debt to 70% last friday since this year..


Including a $25 billion capital injection from the U.S. Treasury under the $700 billion Troubled Asset Relief Program, the company has at least $50 billion of capital above the amount required by regulators to qualify as “well capitalized.” according to bloomberg.com. But still, it won’t be able to survive the storm and weather out unless it gets special attention to avoid its bad assets getting on his neck pushing for sell off or bankruptcy. An endorsement by billionaire Saudi investor Prince Alwaleed bin Talal by investing around 7 billions but still that’s not enough to keep the company afloat.


CITI BANKRUPTCY, TOO BIG TO FAIL


There were worries all over world and even rumors about company spinning off certain parts of its assets. Even rumors about a possible sell off, but who can buy this bank giant. It will be like frog eating a snake, bad for both companies whoever end up buying it. If it collapses to announce a bankrupt Chapter 11, that would be big blow to US economy.


US Government which bailed out AIG which was an insurance Giant came for another rescue by announcing a special massive bail out offer on Nov 24, 2008 designed to rescue the company from bankruptcy while giving the government a major say in its operations. It was the largest bailout in history. The Treasury will provide another $20 billion in (Troubled Assistance Relief Program)TARP funds in addition to $25 billion given in October. The Treasury Department, the Federal Reserve and the FDIC will cover 90% of the losses on its $335-billion portfolio after Citigroup absorbs the first $29 billion in losses.In return the bank will give Washington $27 billion of preferred shares and warrants to acquire stock. The government will obtain wide powers over banking operations.


Is my deposits safe?


If I want to say something about CITIGROUP, I like to say CITI GROUP will never go out of business or nobody can buy this big of a financial service company. SO US Government will do all its best to keep this company alive. With that note, all US bank desposits will be covered under FDIC to the max of 250K. Interestingly, there are lot many credit cards offered by CITI compared to Bank deposits directly to consumers. There might not be a direct impact to consumers like other bank failures.



To be cautious, you will be better to split the deposits and have it different banks. Share your comments and thoughts…

Posted in Economy, Financial Literacy Tags: , No Comments »
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IDENTITY THEFT 3 – Credit Cards, A Bitter and Sweet deal

November 18th, 2008 Vijaianand

In the Part-1 post, we saw how I was so close in losing the identity by losing the check book through my true story. In the second part, I shared some very famous Internet scams which rocks the web community written by a well known writer to keep you all abrust of the happenings. In this post, I am going to talk about my favorite topic – Credit Cards, how to be nice and play safe with it.


Nowadays, nobody likes to carry even a dollar in their wallet. It is all plastic money that dominates the wallet space. Recently the trend is changing due to credit card debt problems which surmounts to 978 million this year, second to mortgage debt. Many are turning back to greenback cash to safeguard themselves getting lured into their own credit card crisis. But still credit cards are an attractive item around the world among people who can manage and manuver around the loop holes without getting trapped because of its unbeaten promises.


Why Credit card rules?



Credit card is one among the most wanted item by broad range people starting from teens to age old adults. A funny thing about credit card is, you should have a better experience in borrowering money and paying it back (which is translated a good credit history) to borrow even more money. Credit Companies loves to lend you money if you are one of that kind who has good history by sending attractive offers but they except you to fail in a way so they can make money out of you by keeping you in debt. They need a good borrower to lend money and expect a chance to make you bad to make money out of you via interest payments. Isn’t a really tricky business model or what?


Credit card is one of a kind invention by mankind but it can’t escape the ravage of consumer critisim. It has two sides like any other consumer product with both bad and good.



I have many of good points to say listing few below,



1.Avoids carrying cash around

2.Free access to money when in need but comes with fees and charges

3.Usability everywhere in any stores, theatres, theme parks, online stores, online advance bookings etc.,

4.Buy anything from anywhere around the world without local currency

5.Free Auto&Travel Insurance Protection by many cards

6.Help to build good credit history inturns helps to get big things

7.Money back in dollars and gift cards8. Airline miles, Merchandise/Gift points and so much more.

In the bad side though, I don’t have many to complain which are 1.Indulge in shopping spree without any penny in hand,

2.Free access to Money which can drag you into debt

3.Charges and High Interest rates can eat your savings

4.Opportunity to lose identity easily by losing the card


Looks like the number of pros beat the hell out of cons. Most of the disadvantages can be easily overcome by proper money management and cautious credit card handling methods.



Do you really need Credit card?


It depends on each of us unique lifestyle. Everyone needs to evaluate their own situation keeping the good and bad aspects into context and take a decision.


According to my view,

1. a very well managed and organized person can handle credit cards without any trouble and even make money by investing the free money from credit cards.



2. If you are starting out in your career, start out slow but apply one card at time and building your credit history slowly. If the foundation is strong, you can build a very good house on top of and realize your dreams with a good history.



3. If you are kinda of person who never can save or hold the money tight and always go shopping spree, it would be hard one you. You might endup in debt if you cannot pay back your expenses.
 

So it is a really tricky tool which works wonders when it with a person who knows how to handle using knowledge and experience. Otherwise it can get you in trouble and even make your life a disaster.


I have lot more to talk about credit cards like what you need to know before getting one, what are the ways thieves can hijack your identity and what you need to know when your card is stolen. Pretty good stuff coming, so watch out.

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