August 2011 - Posts - Dollar Stretcher Guest Bloggers
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August 2011 - Posts

  • 5 Real Estate Trends To Watch For

    by Greg Rand

    If the housing market were human, it would look like just wrestled a few alligators, after running an obstacle course through a snake pit. ~ Greg Rand

    The market is beaten and bruised, but still trying to emerge from the recession. Astute consumers need  to know about five new trends that could help them beat the housing blues.

    One of the key elements of a free market is chaos. Chaos is how the markets figure out how to move forward. The important thing to realize in the midst of all these people talking about "the housing market" is that the market isn’t some nameless, faceless thing that lumbers around aimlessly as if it has a life of its own. The market is made up of buyers and sellers. People, just like you and me, who are trying to figure out how to buy low and sell high. It doesn’t matter if you’re a homeowner or an investor. The secret to making sure your real estate doesn’t turn into a money pit is to watch the trends so you can predict where the prices will rise and where they won’t.

    The five trends to watch include:

    1. Short-Term Pain – Show me a market where home prices are back to 2002 levels, and I will show you a market that is overcorrecting.

    2. Overdevelopment – One of the reasons the market is overcorrecting is overdevelopment and speculation, as is the case in Florida. Another reason is that the job base has eroded, like in Detroit. Isolated, explainable, short term distress is the secret. Find your Florida.

    3. Jobs, Jobs, Jobs – Track employment trends to see where companies are moving, and you will see a harbinger for long term housing demand.

    4. Lifestyle – Nothing drives migration patterns long term more that the pursuit of happiness. Look at climate (the Carolinas), leisure trends (Colorado) and cost of living (Texas) for triggers on where the market may shift.

    5. Responsible Government – Look at the state government. Does the state and city in question reward or punish risk-takers? Are you likely to suffer if you succeed there? If so, find somewhere that appreciates entrepreneurs. There's nothing worse than putting your money on the table, only to have it redistributed.

    It comes down to the idea that no matter how the markets change, no matter which way the winds shift, people will always need a place to live. That’s been true of America since the first log cabin. If you plug into that concept, and leave fear in a box on the shelf, you can be ahead of the curve and ride the wave of the trends that matter.

    Greg Rand is an authority on the housing market, and understands the driving forces that create wealth in real estate investing. As the CEO of OwnAmerica, a regular Fox TV news contributor, host of Rand on Real Estate on 77 WABC Radio, popular media commentator and author of Crash Boom from Career Press (available at CrashBoom.com from Career Press)

  • Fed Survey Shows Consumers & Banks Still Cautious on Credit Cards

    by Bill Hardekopf

    Credit card late payments and default rates continue to drop, and the Federal Reserve has pledged to keep interest rates at historic lows. But only a small percentage of banks have eased their lending standards on credit cards. In addition, banks report just a moderate increase in consumer demand for credit cards.

    These are the major credit card findings of the latest Senior Loan Officer Opinion Survey on Bank Lending Practices released by the Federal Reserve on August 15th.

    The Federal Reserve is doing what it can to encourage lending and borrowing, trying to give a positive boost to the economy. But consumers and banks are still cautious. Lenders and borrowers seem to be avoiding the risk of additional debt.

    According to the quarterly survey:

    • 19 percent of large banks (and 14.3 percent of all banks) see moderately stronger consumer demand for credit cards.

    • Credit standards for approving applications for credit cards from individuals or households eased somewhat at 16 percent of large banks and 9.3 percent of all banks.

    • The credit limits on new or existing credit card accounts for individuals or households have not changed much at banks. These credit limits have "tightened somewhat" on 17.4 percent of large banks (and 11.1 percent of all banks) but also "eased somewhat" at 13.0 percent of large banks (8.3 percent of all banks). The limits remained unchanged at 80.6 percent of all banks.

    • The minimum required credit score remained unchanged for nearly all banks (97.2 percent).

    This July 2011 Senior Loan Officer Opinion Survey on Bank Lending Practices is based on responses from 55 domestic banks and 22 U.S. branches and agencies of foreign banks.

    Link to full survey here.

    Bill Hardekopf is CEO of LowCards.com, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories, such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.

  • What the Fed's Actions Mean for Your Credit Card

    by Bill Hardekopf

    The Federal Reserve announced recently that it is keeping interest rates at a record low for the next two years. It hopes that extending low rates for a predictable period will stimulate both borrowing and spending, thus providing a spark to the economy.

    However, the Fed's actions will have very little effect on lowering your credit card's APR. In fact, the interest rate on credit cards could continue to rise.

    Nearly every credit card in America now has a variable rate. The interest rate on a variable rate credit card is made up of two factors:

    1. An Index. The index used by most variable rate cards is the prime rate. The prime rate is made up of the federal funds rate (set by the Fed's Open Market Committee) plus 3%. The federal fund rate has remained at 0% to 0.25% since December 2008. Hence, the prime rate has remained at 3.25% during that entire period. Any increase in the prime rate can lead to a corresponding increase in a card's APR and that increase can take place immediately.

    2. A Margin. This is the additional interest rate added by the issuer for taking the risk in making this loan, which on most credit cards is an unsecured short-term loan. The higher the risk of a particular consumer, the greater the margin the issuer will assess.

    The Fed's actions yesterday will keep the index stable for the great majority of cards that use the prime rate as an index. But issuers can still increase their margins when they feel their risk is too great on making these type of loans or they wish to make more profit on their credit card business. That may very well take place as it has the past few years, despite the passage of the CARD Act.

    Even though the prime rate hasn't changed, the average advertised credit card APR this week is 14.15%, up from 11.64% the week the CARD Act passed in May 2009 (LowCards.com Complete Credit Card Index).

    If the economy becomes too unstable, issuers may feel that their financial risk is too great on these credit card loans. They could begin to do two things: tighten their approval rates on new applications, or increase their margins and thus hike interest rates. If issuers wanted to increase their margins, a provision of the CARD Act prevents them from doing this to consumers during the first year of a new account. But they would simply have to give other existing customers a 45-day notice for an interest rate hike to take effect.

    The Federal Reserve consumer credit report showed that credit card debt grew by more than $5 billion, or 8%, in June, the first back-to-back monthly increases in three years.

    Bill Hardekopf is CEO of LowCards.com, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories, such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.

  • Consumer Tips on Airline Miles Credit Cards

    by Bill Hardekopf

    As the costs of flying continue to climb, buying airline tickets with reward points can save a lot of money. But there are many cards that offer airline rewards and it can be confusing to find the right card. In addition, even if you have the right card and earn enough miles, getting the free flight you want is not easy.

    Limited options around free flights is one of the frustrations of generating airline miles with your credit card, whether it is a generic travel credit card (such as a Discover More or Capital One Venture card) or an airline sponsored credit card (like the Continental OnePass Plus card). In the last five years, the number of Americans who use cards that accumulate points for merchandise and/or airline tickets has incre ased 23%, according to a study by Vertis.

    "Everybody who has a frequent flyer credit card is dealing with more and more people chasing fewer and fewer seats. As a result, redeeming your miles through an airline sponsored credit card is becoming more difficult because you are captive to only one airline," says David Robertson, publisher of the Nilson Report. "With generic travel reward cards, you have a tiny bit more leeway because you are not tied to one particular airline."

    Regardless of whether you have a generic travel reward card or an airline sponsored credit card, here are some tips in using your miles in the most efficient way:

    • Be aware of any expiration dates. You spend money and time earning points, but they may not be yours forever. Read the fine print for expiration dates.

    • Pay your credit card bill on time every month. If you have a late payment, the bank or credit card issuer can withhold the miles you earned during that billing period. If you want them back, you will have to pay a steep reinstatement fee.

    • You may have to pay a fee to redeem your points for tickets. Wells Fargo charges a $24 airline ticket redemption fee. Delta recently eliminated the redemption fee for Skymiles frequent fliers. The fee ranged from $75 to $150.

    • Don't waste your points on a cheap flight. Points are worth about 1.2 cents and it typically costs 25,000 points for a round-trip domestic flight, so a round-trip would cost $300. If a flight costs less than $300, it is cheaper to pay in cash and save your points for a flight that costs more than $300.

    What is more advantageous for the consumer: a generic travel reward card or an airline sponsored credit card? Here are some differences between the two types of cards:

    1. Generic Travel Reward Cards Less Likely to Charge Annual Fees

    From January 2010 to March 2011, only 23% of generic reward card offers contained an annual fee compared to 99.5% of airline cards, according to a direct mail study by Mintel Comperemedia. Most cards waive the annual fee during the first year.

    The generic travel reward credit card is not as restrictive and is less likely to require an annual fee than an airline credit card. With a number of airline sponsored credit cards, you have to charge a significant amount on the card before you can just break even with this annual fee.

    2. Generic Travel Reward Cards Offer More Airline Options

    Airline selection is the biggest difference between generic and airline cards. Airline credit cards limit travelers to the card's issuing airline and its partners. This works out best if your airport is dominated by one carrier or if you are loyal to one airline.

    Generic cards offer more airline options for a free travel ticket. Most generic cards advertise that you can use miles on any airline at anytime. There are no seat restrictions and sometimes no blackout dates.

    Generic cards also offer other redemption options. If you have difficulty redeeming your points for a plane ticket, you can use the points on a hotel.

    3. Generic Travel Reward Cards Offer More Introductory Interest Rates

    About 52% of airline cards did not offer introductory pricing compared to 18% of travel reward cards, according to a Mintel Comperemedia study.

    Introductory periods are shorter with airline reward cards. Since these cards sometimes have slightly higher interest rates, these are not a good option for balance transfers. If you are transferring a balance, look for a card with the lowest rate.

    4. Airline Sponsored Credit Cards Offer Better Bonus Point Incentives

    According to a study by Mintel, eight out of 10 credit card offers in 2009 were for rewards cards offering points, miles or cash back, up from six out of 10 offers the previous year. Both types of airline reward cards use bonus offers to attract applicants, but the airline cards with annual fees offer the bigger bonus.

    Currently, Southwest is offering 50,000 bonus miles after your first purchase with their Rapid Rewards Premier Card, enough for two free flights to almost anywhere Southwest flies. Continental Airlines OnePass and United Plus Visa Signature cards offer 25,000 bonus miles with your first purchase.

    The generic Chase Sapphire card offers 10,000 bonus points after you spend $500 in three months. Discover Miles offers offers 1,000 Bonus Miles each month you make a purchase for twelve months from the date your account is opened (maximum 12,000 points).

    In addition, many airline rewards cards like the Continental OnePass and Southwest Rapid Rewards Premier card will double miles (2 miles per $1 spent) when you use the card to purchase airline tickets. Most frequent flier programs have partnerships with other merchants like hotels, car rental companies, and restaurants. You can also earn more miles with these.

    5. Airline Sponsored Credit Cards Offer More Flight Perks

    Airline credit cards can give customers perks which generic travel reward credit cards don't have access. For instance, the recently-introduced United Mileage Plus Explorer Card gives the cardholder and a traveling companion one free checked bag. Continental and Delta do not charge their cardholders for the first checked bag on a flight. A number of airline sponsored cards also offer upgrades to elite status, seat upgrades, discounts on flights, and access to airport lounges.

    6. Claiming Miles Is Automatic With Airline Credit Cards

    Airline credit cards may be more convenient than general purpose travel reward cards to register mileage credit after a flight. Airlines automatically post mileage onto a traveler's frequent flyer account when the account number is used during booking or check-in.

    With generic travel reward credit cards, the cardholder must claim and monitor reward earning. There are additional steps for converting points to airline miles but this can be done online. Some issuers like Citi will charge a fee for redeeming rewards by calling the Citi Thankyou Service Center.

    Bill Hardekopf is CEO of LowCards.com, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories, such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates.

  • When Your Kids Don't Want to Grow Up

    by Gail Parent and Susan Ende, M.F.T

    Dear Gail and Susan,
    My husband Terry buys his daughter, my stepdaughter Milly, anything she wants, which means that, as a couple, we have less money. Milly’s mother doesn’t work. She lives on alimony. I work and contribute financially to our lifestyle. I don’t want to be a wicked stepmother, but shouldn’t Terry see that although it’s technically his money to give to Milly, Milly is in a way getting money from me, too? I know neither one of them sees it that way. But don’t you think that at the very least, she and Terry should be grateful to me?
    Zoe

    Zoe,
    Hah! Do you really expect your husband’s daughter to be grateful to you? And if you talk to Terry, will he be more grateful? I don’t think so. He might cut down on what he gives Milly, but I doubt it. (Sometimes fathers feel so guilty for leaving their child’s mother that they try to make up for it by giving their children gifts. Sometimes they even give their ex-wives things. You would hate that, wouldn’t you, Zoe?) If you and your husband put your money into one pot, then you should have a say of what comes out of that pot. The problem is that Terry has established a pattern with his daughter that won’t easily go away. Why don’t you open up a charge account at Saks Fifth Avenue and every time your husband buys something for Milly, buy something for yourself? He’ll start to worry about the bills and you can suggest that both you and your stepdaughter cut back. If he won’t cut back on Milly, he doesn’t love you enough. Aren’t you happy you wrote to us?
    Gail, who actually wants you to have more

    Gail,
    I love your idea of a shopping spree followed by mutual agreement to rein in the spending. Very creative! The only problem with the solution is that it exacerbates the already existing rivalry Zoe feels toward her stepdaughter.

    I can understand Zoe’s disappointment that she and Terry aren’t making all the financial decisions together, including gifts to Milly. Parents should be the primary team.

    However, sometimes with blended families, for many reasons, that concept gets lost. As you suggest, Gail, Terry may feel guilty for having left his child and is trying to buy absolution from her. Terry may not know how to say no to his daughter. Perhaps Terry does not know how to parent and hopes to buy his way through it. Or Milly may want assurances that she will not be left the way her mother was, and controlling her father’s money may make her think she’s safe.

    Zoe has let her feelings of rivalry take hold of her. She is measuring her importance to her husband only in monetary terms. She needs to remind herself that Terry chose her as his partner. That she is his number one.

    Zoe also needs to remember that Milly has suffered a big loss, that Milly was sacrificed. I suggest that Zoe warmly include Milly in the new family and help her feel loved and secure. If Milly believes that she belongs, that she has not lost her dad, perhaps her need for things from him will abate.
    Susan

    Gail Parent is a two time Emmy award winning writer and producer whose credits include The Tracey Ullman Show, The Carol Burnett Show, Mary Hartman, Mary Hartman and The Golden Girls. Also a bestselling novelist, Parent is the author of Sheila Levine Is Dean and Living in New York. She lives in Beverly Hills, CA.

    Susan Ende, M.F.T has been a psychotherapist in private practice for twenty-five years and has taught at California Institute of Technology, Pepperdine University, and California State University at Los Angeles. She lives in Pasadena, CA.

    Excerpted from How to Raise Your Adult Children available at Amazon.com

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