Tuesday, March 25, 2014

0 What Happens When Your Bank Closes?

A question that have crossed the minds of people who have a savings account, credit card, or checking account at any bank is, what will happen to their account in case the bank closes? As your bank works to grow the money you invested over time, there still comes a risk, although a relatively minimal one. Banks can sometimes make a bad decision and lose money. In the event that your bank would have to close, you will also lose money you have invested. Thanks to a law passed by the United States government, you may still recover money you have lost in cases of such an unforeseen event.

The Role of FDIC

It was reported that back in 1930s during the Great Depression, a large number of people tried to withdraw all their money from bank accounts—events that was called “bank runs.” To better protect consumers, then US President Franklin D. Roosevelt signed the Banking Acts of 1933, which gave birth to the Federal Deposit Insurance Corporation (FDIC). The FDIC provides deposit insurance to protect individual accounts against bank failure. 
close, bank, picture, funny, black and white

Depositing funds at an FDIC-insured bank secures investments and provides insurance in case the bank goes under. The best thing about it is that the investor can benefit from the insurance policy even if they don’t spend anything on premiums. The banks are the ones that pay premiums on behalf of their depositors. The premiums paid by the banks comprise FDIC’s deposit insurance fund, which is used for paying back losses to depositors. 

So how does the FDIC help when a bank is falling down? First of all, the FDIC will be monitoring the failing bank closely and takes charge of the bank through a conservatorship. Depositors will get a letter in the mail where they will be informed that their bank will be closing soon. The bank will then be turned over to the FDIC, which will try to sell the bank.

If the Bank is Sold

During the takeover, the bank may close down on a Friday and then open again on a Monday after it has been taken over. You may still use your bank ATMs, old checks, and debit cards up to the amount insured, but only for a limited time, usually a few months. 

Meanwhile, direct deposits will be transferred automatically to your account at the new bank. Certificate of deposits (CD) at a failed bank is insured for up to $250,000 by the FDIC. On the other hand, time-deposit CDs will still mature in the same period as agreed upon with the original bank because it’s considered legally binding. If you’re a CD owner, you need to check the mail for alerts. Acquiring bank will tend to decrease the rate. 

For closed banks, a check will be sent typically within a week. If yours is a checking account, you’ll need to order new checks from the new bank. You can also choose to close the account and move to another bank altogether, although you’ll  have to wait longer because the paperwork will take long to process. 

A standard money market account, which is very much like a savings account, will earn interest rate set by the bank and typically has a limit for the amount of transactions for its customers. It’s usually insured by the FDIC for up to $250,000.

The standard money market should not be confused with money market mutual fund, which usually consists of short-term CDs, including government or corporate bonds and treasury bills. Because these funds are investments held by mutual funds and are not bank deposits, they are not insured by the FDIC. If your money market deposit account is insured, expect your money to be inaccessible for several days. Interest rates may also be subject to change with the new owner.

Meanwhile, fiduciary accounts including brokered accounts, escrow accounts, Uniform Transfers to Minors Act, UTMA, accounts, Interest on Lawyer Trust Accounts or IOLTA, are insured for up to $250,000 by the FDIC. Fiduciary accounts are the accounts owned by one party but managed by another.

If the Bank is Not Sold

So what happens if the bank is not sold to any entity, you ask? You’ll get a check in the mail for the loss of up to the insured limit. However, during the time of processing, you’ll have to wait several days before you can get access to your money, or you’ll have limited access. Instructions will also be sent to you regarding  what to do with your safety deposit box.

How Much Will I Get?

If you are a depositor, then you will get an insured rate of up to $100,000 per bank account. This means that if the account is a joint account, you will get half of it. Meanwhile, if you have below $100,000 in the closed-down bank, you will be pleased to know that you’ll most likely be getting all your money back. The insurance covered by FDIC includes savings, money market, checking accounts, and CDs. The downside of it is that stocks, bonds, mutual funds, stocks, or life insurance plans aren’t covered.

If you have more than $100,000 worth of assets in the bank, a good precautionary measure will be to spread the funds across more than one bank. You can also maximize insurance on your funds by utilizing the various types of ownerships. IRAs are usually insured for up to $250,000. If you have bank assets worth more than $250,000, any amount beyond that is not insured.

Meanwhile, those who had no time to insure all of their bank funds may still get refunds from the FDIC, with an average return of 72 cents per dollar. 

What Happens To Your Loan?

In case you’re wondering what to do with your loans (credit card loans, personal loans, etc.) in case a bank closes down, you should definitely continue paying your loans according to your agreement with the bank. Just because a bank was sold to another entity doesn’t mean that you should stop fulfilling your payment obligations. It’s recommended that you continue with the payments and just wait for a loan statement from the new bank. The process of establishing a new entity might take some time.

Monday, February 17, 2014

2 Simple Ways To Get Out Of Debt

When you’ve got a lot of debt, it could feel like there’s no viable way out. The truth is, the world just started to recover from a devastating financial recession a couple of years ago. So if you’re in this position, you’re not alone. Many hard working consumers were laid off from work. Tons of people, struggling to make ends meet used credit cards and took out loans to cover their expenses while they looked for work that was seemingly impossible to find. But now, more and more people are getting back on solid ground, only to be reminded of their debts every single day. Here are 3 ways that you can fight back, and finally dig your way out of debt!

debt, debt ceiling, cat, funny, finance, memeOption #1: Good Budgeting

I’ve worked with a lot of clients on debt relief. One of the first things I noticed in the industry is that most of the problems can be fixed with better budgeting. Although it may take a little gumption at first to get things all set up, when you get a proper budget together, it will be much easier to manage your money, and finally pay off your debts.

One of the best ways to put a budget together is through the use of a spreadsheet. On your spreadsheet, you want to include all sources of income as well as all of your necessary expenses. Your expenses should include everything from rent to food, gas, daycare, and everything in between. Subtract your total expenses from your total income, now you’ve got your extra funds amount. Allocate as much money as you can to making extra payments on your debts while still holding a little back for monthly entertainment purposes.

Option #2: Sell Your Structured Settlement

If you’ve got a structured settlement, you may be in a very good position for paying your debt off. Although receiving small payments every 2 weeks or every month is enjoyable, you’ve got the option to get paid in one big lump sum.

With one big payment, you may be able to pay off your debts, and put money in savings for the future. Although this isn’t a perfect option for everyone, for some, it’s a great way to not only pay off debts, but to get ahead once again!

Option #3: Sign Up For Credit Card Hardship Programs

Because the worldwide financial recession caused so many people to fall into debt, many lenders started opening up hardship departments within their branches. These are departments designed to help you liquidate your balance as quickly as possible without spreading your budget too thin.

Those who qualify for financial hardship programs are generally given one of two options - either a long term financial hardship plan, or a short term financial hardship plan. In long term programs, interest rates are reduced and consumers are placed on a fixed monthly payment amount. This allows them to pay off their balances quickly without adding too much interest if any at all into the mix.

Final Thoughts

If you’re in a position of overwhelming debt, it’s important to realize that you’re not trapped. You’ve got tons of options! As a matter of fact, the 3 mentioned above are just the tip of the iceberg. All it takes is doing a little research and finding an option that’s right for you!

Friday, February 7, 2014

0 4 Hidden Credit Card Perks and Benefits that Consumers Should Know

meme, me gusta, credit, credit card, funny, lol, finance
Credit cards make us paranoid at times. We typically associate negative connotations to these plastic cards: never ending monthly payments, compounding interest, and a lifetime of debt among others. There are also perks and benefits credit cards offer, however, that can make us think the other way around.

Flexible Payments
Not everyday is shopping day, but if you have a credit card, you can practically buy what you can and pay just one-third of the amount owed next month. 

So, if you are buying the iPad Air, which costs around PHP 32,000, you have to pay the exact amount if you want to buy in cash. But if you have a credit card and you want to buy the iPad, you just have to swipe your card. If you buy an iPad air, your purchase will reflect in your next bill and you’re only required to pay at least the minimum amount of 3%: around PHP 1,000. 

Speaking of flexibility, you can take advantage of 0% monthly interest promos that most credit card companies in the Philippines offer. If you take advantage of a three-month 0% interest promo for your iPad Air, you just pay around PHP 11,000 for three months with no interest starting not today, but next month.
If the promo is for 12 months at 0% interest, you will only have to pay around PHP 2,600 per month starting next month. That’s a PHP 30,000 difference, and a lot better than paying in cash, because you can make use of your cash for other stuff or save it for an emergency fund.

Worry-Free Utility Bills Payment
This is one convenient feature of credit cards offered here in the Philippines, since most credit card holders pay utility bills. Paying these bills through your credit card will help you:
·   Avoid the long lines in payment centers
·   Pay ALL your bills through one statement
·   Organize and track your bills

Let’s say you live in the Metro: you have to pay Meralco, plus your Maynilad or Manila Water bill, plus your phone bills, among others. To make things worse, they have different due dates. If you use your credit card, you can set up an auto-pay facility to take care of your bills once they arrive, and then all you have to pay is your credit card statement. Better yet, you can also pay your credit card at home or wherever you are through online banking.

Supplementary Cards
If you have a big family, or you have a loved one who is far away, or if you’re teaching your teenager to manage finances, supplementary cards can be a good tool. Supplementary cards work like sharing your credit limit. If your credit card has a PHP50,000 credit limit, you share it with your supplementary card holders.

You can rely on supplementary cards during emergencies too. Let’s day your daughter – a first time driver – just had her first flat tire; she’s far away and doesn’t know what to do and where to go. If she has her supplementary card, emergency money is not a problem. Whatever she buys through her card will reflect on your bill as you are the primary card holder.

Balance Transfer
Sometimes, unfortunate events happen that make our already tight finances suffer even more. Sometimes it’s unavoidable to have debts and compounding interests on several credit cards that you own. Fortunately, you can consolidate your debt into one card through balance transfer.
Let’s say you have four credit cards from different banks, and you are paying 20% interest monthly. If you take advantage of a balance transfer, you can pick the bank that has the lowest interest and consolidate your debt into that bank’s credit card, and pay only for one interest per month. Contact your banks regarding this option and choose where to transfer all your debts.

These perks and benefits would not be to your advantage if you’re not financially responsible. It always depends on how you use or misuse your credit cards. If you’re an impulsive and reckless buyer, don’t expect to be debt-free!
About the Author:
This article was contributed by Mark Yasay of MoneyMax, Philippines leading comparison website. This portal helps individuals in saving money by comparing credit cards, personal loans, insurance and broadband plans.

Monday, February 3, 2014

0 Lessons from the Recent Recession

recession, meme, funny, power, rangers, lol, finance, economyThe Great Recession has created a big impact not just in America, but in nearly all nations across the globe. It has affected thousands: people lost their jobs, banks suddenly had plenty of money-lending problems, and the value of properties went down.
Which was—ironically enough—a piece of good news, especially for those planning to own or buy properties. If you’re one of them, do you know your options? 

Housingloans and credit cards are two of the easiest ways through which people can afford to buy a house or property they have a yen for. 

Real Estate in the Aftermath of the Recession  
For some, the recession has resulted to poor credit due to foreclosures, unemployment, and other related issues. For those who have their own residential properties, losing their jobs isn’t their only problem. Meeting the mortgage payments on their properties has brought more pressure and stress on them. And while some have resorted to selling off their properties during the Great Recession, this is hardly an ideal solution to the problem.
Because of many foreclosed homes, money lending companies now tend to be more cautious in giving financial aid to people who plan to purchase a residential property. 

The Good Side of the Great Recession
The recession taught people the importance of saving money. Between the years 2007 to 2008, the rate of household savings increased to at least two-fifths. Banks have an improved rate of persuasive saving. Even though recession brought decreased ratings in the stock market, devalued the market for residential properties, and increased the number of unemployment, there’s still a something good or positive that came out of it. People felt the urge to save money for their financial stability in the future. They tried to spend less to save more.

Having too many possessions is impractical—if you can’t afford them. So more people learned the value of recycling. Other women tried to spend less cash on their clothes, while some tried to minimise their weekly or monthly food costs. Impulsive buying habits were changed and personal finances were cautiously and carefully budgeted.

There are only a few of the positive things in the aftermath of the great recession. Also, since the value of homes went down, it was buying time for those who had the cash and wherewithal to spend. 

If you’re one of them, here are a few tips for you, especially if you’re looking to own property during the recession:

  • Would-be buyers are on the hunt for Foreclosure properties because it’s a great opportunity to buy properties with sharp discounts. So make sure you remember to ask for that discount.

  •  Make sure you choose a payment scheme that will sustain your financial standing.

  • You need to save money that you can use as down payment.

  •  If you want to apply for a house loan, make sure you have a good and clean credit report so you get to be approved immediately by most money lenders.
  • Check the location and the condition of the house. Look for good buys rather than investing in a home-wreck.

Know that buying a house is a long-term investment so make sure you’re prepared for anything, six-ways-till-Sunday prepared. If you are, you just might get that home loan approved for that house or property you’ve been eyeing all this time.

Thursday, January 23, 2014

1 Grandma’s 8 Effective Tips on Saving Money

Many of us would prefer to listen to our grandparents’ advice rather than our parents or our own. It’s probably because of their experience, or it’s because they’re not annoying like other people (sorry mom and dad). Now, if there’s something I’d never forget about my grandma, it’s her tips on how to save money.

                Let me share my grandma’s money wisdom to you.

1)      Use a Piggy Bank
meme, funny, grandma, finance, moneyI remember getting a piggy bank for my birthday, and Christmas, and my next birthday. Honestly, I always thought they were useless. However, she said I should just keep them out in the open, and set them near the door so I could slip spare change or extra bills in my pockets. True enough, it became so easy to drop the coins I had on me, and by the end of each year, I managed to save a good amount that proved to be a decent addition to my savings.
2)      Have a Budget
Whenever she randomly gave me money (it’s probably because she loves me so much), grandma would always ask me how I planned to spend it. What did I want to buy? Would I save it instead? If I said I wanted to buy something, she’d remind me not to spend it all in one go. Instead, she suggested I make a budget to make the most out of my money.
3)      Live a Simple Life
As I mentioned above, my grandmother was never the fancy type. Even though she had money, she knew it was enough to have decent clothes and food to eat each day. She didn’t go on luxurious shopping sprees or spent money for costly house decors. By her example, I learned never to waste money on designer clothes and shoes either.
4)      Save for Retirement
Before retiring, my grandmother was an outstanding employee wherever she worked. She was known for her tireless efforts to produce great results. She was never complacent with her tasks. When I asked her why she was working so hard, she told me she was also saving for her retirement. She didn’t want to rely on pensions or money from her children. She wanted to make sure she had her own means of ensuring she lived comfortably, and that would only be possible if she had enough money saved.

5)      Unplug Electrical Appliances When Not in Use
My grandmother always called us out for leaving our appliances plugged in (except the refrigerator) when we weren’t using them. Sometimes, she unplugged my mobile phone while I left it recharging on the table. Though these make her seem pesky at times, it actually helped cut a few dollars off our electricity bill. Another lesson learned there: small sacrifices actually do help in the long run.
6)      Don’t Use Too Much Gadgets
Speaking of gadgets, my grandmother disliked it when we were too gadget-dependent. She always said it was better to talk to people in person. That it was better to write on paper, to call people instead of texting. And although she loved to do video conference calls with our family members overseas, she told us simplicity was still the best. We grew up without feeling the need to get the latest phones or tablets—and we never felt bereft in any way.  
7)      Walk
Aside from a sterling reputation at work, my grandma was also known for being a regular “walker” outside her home. She would spend her mornings walking back and forth the sidewalk. She would do her inhale-exhale exercises in the fresh morning air while greeting her neighbors. This made her strong and healthy. She told us to do the same. So when I started to work already, I’d walk instead to wherever I needed to be—so long as these places were only a few short distances away. I didn’t think riding taxis or driving cars was ever a necessity, so this habit helped me save money.
8)      Love Your Family
This particular advice, she didn’t really tell me straight. I say this because this is how I saw her live her life. My grandmother gave so much importance to money, but she knew when and how to spend it properly. She didn’t waste it on jewelry or stuff she knew she wouldn’t really use. If there was something she spent huge on, it was on me and on the rest of the family. Every now and then she would buy food to cook for the whole clan. There’s really nothing like a deliciously-prepared home-cooked meal to bring everyone together. It was always about keeping the family tight-knit.  

                It has definitely been easy add to—and grow—my savings because I saw how grandma did it her whole life. I know that when I have my own family, I’d do the same as well. The best way to teach something is to live it, after all. I’m sure that if anyone else follows these tips and makes them their own, more people are surely going to reap the financial, and emotional benefits, in their lives— all thanks to my grandma’s money saving advice.

About The Author:
Mark Yasay is a social media enthusiast and a writer for MoneyMax, the Philippines most comprehensive online platform for comparing financial and telecom products. MoneyMax aims to consistently find the best broadband plans, credit cards, loans, and other services and products that suit your needs.

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