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Finance

Check out my first market update post for Financial Advisory. The link can be found below.

 AIG Continues To Rally

Finance

There are situations in which it is appropriate to use your credit card over your bank account. If your bank account is overdrawn and you would be charged multiple overdraft fees than it just might be worth it to use your credit card instead. I am not suggesting that you rely on your credit card but in some situations it might save you money. Only use this advice when absolutely necessary and you are able to pay your card in full each month.

Read my complete article at Forbes:Forget Your Bank Account–Use Your Credit Card

Finance bank accounts, Forbes article, using your credit cards

After losing $8.9 billion in the last quarter of 2009, AIG is finally selling off major assets and attempting to pay back the government’s huge investment in the insurance giant. AIG which lost $61.7 billion in one quarter last year and has received over $182.5 billion in government financing is selling AIA Group to British insurance company Prudential for $35.5 billion dollars. AIG will receive $25 billion in cash and $10.5 billion in securities.

AIA Group is an Asian insurance company whose services include life insurance, retirement planning, wealth management, accident, and health insurance. The federal government currently owns 80% of AIG and large stakes in AIA. AIG is attempting to unwind its businesses by selling off its most valuable non-core assets and repay the government’s loans. Despite AIG’s stock currently trading at $25.82, it is impossible to determine the value of AIG shares because there are too many unknowns. What is the value of AIG’s non-core assets? How much earning power will the company’s core assets have going forward? What are the derivatives in the Financial Units portfolio worth? How long before the firm returns to profitability? Will the government be able to unload its 80% stake without causing the stock to plummet? Until these questions are answered AIG is a stock that you should avoid.

Finance AIG, AIG bailout, AIG losses

This is an article that I wrote for Moneycrashers on the Advantages & Disadvantages of a Roth IRA.

Planning your retirement is one of the most important decisions that you will ever make concerning your financial future. Many people have questions about the different types of retirement accounts available and which one is the right plan for them. Let’s take a look at one type of retirement account known as the Roth IRA. A Roth IRA is an individual retirement account which allows an individual to set aside a specified dollar amount of income after taxes. This tax-advantaged retirement account derives its name from United States Congressman William Victor Ross Jr., who was the legislative sponsor of the bill creating this plan.

A Roth IRA provides tax free growth of your money in lieu of getting a tax deduction. Think of a Roth IRA as an umbrella, and you can put almost anything that you want under it. A Roth IRA may be invested in stocks, bonds, mutual funds, certificates of deposits, and/or money market accounts. Individual retirement accounts can be set up at a bank, brokerage house or any financial institution. 

Roth IRA Eligibility

Here are a few of the rules to be eligible to fully contribute to a Roth IRA:

• If you are a single tax filer your modified adjusted gross income needs to be less than $105,000. Married tax filers need their income to be less than $167,000.
• The maximum annual contribution is $5,000 per person. Married couples can contribute $10,000. If you are 50 or older you can contribute $6,000 per person annually due to a catch-up provision.
• Your contributions can be withdrawn at any time and are not tax deductible because they are made in after tax dollars.

Roth IRA’s are an easy way of creating tax free income and growth for your retirement portfolio.  Let’s say you invested $5,000 annually over a 20 year period into a Roth IRA, and at the end of 20 years, your money grew to$500,000. You may have lost out on the tax deduction on the $100,000, but you do not have to pay any taxes on the $500,000 when you withdraw funds after age 59 and a half. This can add up to a substantial savings as your earnings increase.

Roth IRA Benefits

Tax Free Growth – Earnings are not subject to income tax as long as you have held the account for at least 5 years, and you are at least 59 1/2.

Easy Withdrawal Process – Direct contributions can be withdrawn at any time, tax free.

Multiple Retirement Accounts – A Roth IRA can be set up even if you have another retirement plan.

No minimum withdrawal requirements - There are no required minimum distributions as in a traditional IRA or 401(k).

Inheritance – Assets can be passed onto beneficiaries after death.

The rest of the article can be found here.

Finance advantages of a Roth IRA, Roth IRA, Traditional IRA

The last few days have not been good for the major banks. First, the Fed raised the discount rate 25 basis points which will increase the interest rate at which banks are able to borrow money from the Fed. Secondly, Bank of America, the largest bank in the US, has to pay 150 million dollars in a settlement with the SEC over the bank’s Merrill Lynch purchase in 2008. Now the major banks are facing potential losses in the billions due to new credit card laws. JP Morgan Chase, Bank of America and Citigroup are the three largest credit card issuers in the US. Although the new credit card laws aren’t good for banks, they are great for the cash strapped consumer. While the new credit card laws don’t solve all of the problems with credit cards; it’s a good start.

Here’s how the new laws affect you.

1. Credit card companies must wait 60 days before raising rates on delinquent customers. Under the old rules paying your bill 1 day late meant that credit card companies could raise your interest rate to the highest default APR.

2. No more over-limit fees. Customers must opt in to approve over the limit transactions which would generate fees.

3. Anyone under the age of 21 must have a co-signer to qualify for a credit card or be able to show proof of income. This should protect students from being preyed upon on college campuses. Students are often offered free food and clothes in exchange for filling out a credit card application.

4. Fees are limited on popular “fee harvester” cards offered to individuals with bad credit. I have written posts on fee harvesters before. Subprime cards have so many fees that they often eat up the available credit before you ever receive the card. These fees cannot exceed 25 percent of the available credit in the 1st year.

5. No more double cycle billing. This should stop card companies from charging interest on debt paid off the previous month.

6. Credit card statements must be mailed 3 weeks before their due date. Due dates can no longer be arbitrary time periods. Credit card companies are famous for picking due date like Friday, January 23rd by 10am. In the past you had no idea of knowing when your payment was received. You had to trust your credit card company’s word. And we all know a credit card company wouldn’t lie…sure.

7. The higher interest rate balance will be paid first. All payments above the minimum payment must be applied to the highest interest rate. This should make it easier for cardholders to reduce their balances.

In response to the new credit card laws, credit card companies have come up with new tricks. They are raising annual fees on credit cards and charging inactivity fees to customers who don’t use their cards enough. It only figures.

Photo by SqueakyMarmot

Personal Finance Credit Card Act of 2009, new credit laws 2010

Premier Bank is justifying their ridiculously overpriced credit card with an APR of almost 80%. This article was found on yahoo.com.

                 Issuer of 79.9% Interest Rate Credit Card Defends Its Product

If you have bad credit in the new era of credit card regulation, be prepared to pay — dearly — for the privilege of using credit. That’s the message underlying recent credit card offers that feature jaw-dropping interest rates of up to 79.9 percent.

The sky-high rates may be a sign of things to come in the market for so-called subprime credit cards as issuers who lend to the riskiest of borrowers try to figure out how to stay in business and comply with the new credit card reform law.

“We need to price our product based on the risk associated with this market and allow the customer to make the decision whether they want the product or not,” according to a statement issued by Miles Beacom, CEO of Premier Bankcard, the South Dakota credit card marketer that mailed test offers in September and October featuring 79.9 percent and 59.9 percent annual percentage rates (APRs) on cards with $300 credit limits. Premier markets credit cards issued by First Premier Bank.

Yes, It’s Legal

A national bank charging 79.9 percent interest on a credit card is legal — as long as the issuer fully discloses the terms as required by the federal Truth in Lending Act. Still, the high rate has been met with shock across the country because it is so much higher than prevailing APRs and penatly interest rates. The CreditCards.com Weekly Rate report national average for bad credit credit cards was 14.15 percent on Feb. 12.

Finance

I trimmed my position in Goldman Sachs at $155. I still like Goldman but the stock looks vulnerable. I think I will get a cheaper price to buy back in.

Finance

And the lowest rated bank is…….. HSBC. I read an article today in the New York Times about how HSBC is the least trusted bank in America. Apparently a survey was given to customers of 7 of the major US banks and HSBC received the worst score. Only 16% of customers believe that HSBC operates in the best interests of its customers and does what is best for them. HSBC customers believe that the bank only does what is right for its bottom line. This is the lowest score in the history of the survey. It sounds like HSBC has a lot of work to do to rebuild customer trust. Surprisingly Wells Fargo and Bank of America scored the highest of the national banks. 40% of Wells Fargo customers approved of the bank. Despite all of its high fees, 33% of customers believe that Bank of America does what is best for them. This was a shock to me because I hear so many complaints about Bank of America from its customers.

All of the major banks scores are relatively low when compared to credit unions. The survey found that credit unions had a 70 percent approval rate. Customers were quite satisfied with credit union practices and felt as if credit unions looked out for their best interests. In my opinion credit unions are still the best value for your dollar. It looks like the big banks better improve on their customer relations or they are going to be in big trouble when it comes to maintaining their deposit base.

Finance bank customers satisfaction, bank ratings, HSBC, lowest rated bank

My friend Ben sent me this great debate about the iPad on the Charlie Rose show.

Finance