Darwin's Finance » Banking

Highest Saving Account Rates OnLine

Darwin — Fri, 19 Feb 2010 03:27:02 +0000

As of February 18, 2010, these are the highest savings account rates that can be easily achieved online without geographical restrictions, credit union restrictions, military service requirements, etc. While these interest rates may seem somewhat anemic, they are actually among the highest in the country given a 0% Fed Funds rate and the cost structure benefits of online banking over conventional brick and mortar outfits. The nice thing is that the interest rates on these larger established banks have been relatively steady compared to some other bait and switch banks I’ve seen that offer rates significantly higher than the market rate, then precipitously cut the rate once you’re there. All of these savings accounts are FDIC insured up to $250,000.

EverBank 1.51%

Ally Bank 1.30%

WTDirect Savings Account 1.26%

ING – The Orange Savings Account 1.15%

Why Pay High Credit Card Interest Rates with Low Rate Alternatives Out There?

Darwin — Sat, 23 Jan 2010 13:15:36 +0000

Given the current economic environment, historical spending patterns and myriad other causes, millions of Americans are faced with mounting high interest rate credit card debt each month because the rate they’re paying on existing credit card accounts is at exorbitant rates of 20%-30%.

While the most obvious alternative would be to pay down credit card debt quickly, that’s completely out of reach for many people in the near term. As such, the question is, what’s the next best way to reduce monthly payments and eventually dig out of debt? Are there low rate alternatives out there within reach? There are, but many people either don’t have the knowledge, the time or the inclination to take advantage of lower rate alternatives.

0% Interest Balance Transfer Cards

A front-runner would be a 0% Interest Balance Transfer. While this may only provide temporary relief, at least it allows one to start to dig out and pay principal for some time period rather than interest. Some top 0% interest balance transfer cards include an up-front fee which likely pales in comparison to paying double digit fees every month. For instance, a one-time fee of 3% is a steal considering one might be paying 25% annually for years.

Here are some top options:

Discover More Card

Introductory Balance Transfer APR: 0.0% for 6 months from the date of account opening for balance transfers made with your application, then the standard APR for purchases.

Introductory Period: 6 Months

Balance Transfer Fee: 3%

Annual Fee: None

__________________________________________________________

Slate from Chase

Introductory Balance Transfer APR: 0%

Introductory Period: 12 Months

Balance Transfer Fee: 3%

Annual Fee: None

__________________________________________________________

Visa Black Card

Introductory Balance Transfer APR: 0%

Introductory Period: 6 Months

Balance Transfer Fee: 3%

Annual Fee: $495

Lending Club

By acting as either a lender or borrower on Lending Club, you’re essentially taking out the middle man – all the bureaucratic overhead, marketing fees, writeoffs for other bad loans, profits to shareholders, etc. that account for the high interest rate you’re paying on that credit card. If you can no longer open a new credit card account for a zero interest transfer, Lending Club would be your next best step. Under the Prosper.com system (now somewhat defunct; Lending Club is emerging as the front-runner), I used to make loans to people at 8-12% that had previously been paying 25%-30% on their debt with conventional credit card companies. By simply taking out a loan on Lending Club, individuals can immediately drop their monthly debt costs by hundreds of dollars for very little effort. This reduction in expenses could be directed at paying off higher interest debt.

While some risk does exist for Lenders obviously, the risk to Borrowers is really only the contract they enter into which, to me, beats paying exorbitant fees – think about if your credit card company cut your interest rate in half – that would be nice, right? This is a pretty good deal if you live in a state that is able to work within the confines of Lending Club. Check out this Lending Club review for more information.

What to Avoid

Payday loans are generally not a good choice under any circumstances. While someone could conjure up a once in a lifetime scenario where it made sense to have access to immediate cash no matter what the interest rate, even over short periods of time, an annualized rate of 80% is an annualized rate of 80%. Any time you’re borrowing at rates even higher than your credit cards, you’re doing yourself a disservice.

With tax return time coming up, don’t fall for the “rebate loan” come-on either. The rates on some of these loans are in the triple digits and it’s simply to get your hands on money that you probably didn’t (or shouldn’t have) planned on anyway. It’s a positive windfall each year, don’t turn it into a high interest loan. Just wait the couple weeks for the check to arrive. If your tax preparer is pushing this, I’d question their ethics. They may very well be handsomely rewarded for each one of these that they sell given the fat margins. They are simply not good for taxpayers given the rate. Ask if they’ll do one for you at the going mortgage rate, say, 6% annualized. See what their reaction is.

Should the US Adopt a “Bonus Tax” Like Europe is Enacting?

Darwin — Mon, 14 Dec 2009 13:14:31 +0000

I was rather dismayed but not surprised when I saw the news that the United Kingdom was enacting a “bonus tax” which is to be a one-time tax on bonuses of bankers in excess of $40,000. As the circus spread its influence, France signaled that it will enact a similar policy and Germany’s chancellor referred to the idea as, get this – “Charming”. Not to be outdone in the game of punishing those rich greedy bankers, I wonder what the pay czar has in mind within the US aside from the current mandate of enforcing pay caps on the upper echelon of US banks that received government assistance. Aside from the fact that a one-time tax such as this is really nothing more than a punitive measure and would take in only marginal revenues in a single tax year, it sends a horrible message and it would be oh-so enticing to extend it or make it permanent once lawmakers see just how good it felt to punish those nasty bankers.

While this would have sounded outlandish and far-fetched years ago (OK, well, that also was under a Bush presidency so it would be silly to even imagine but…) given what’s transpired in just a year of this new administration, I wouldn’t be surprised at all to see a “bonus tax” on all US workers. I mean, the administration was actually mulling over the prospect of oversight of all bankers’ pay even if they didn’t need TARP funds a while ago until they shifted gears a bit to focus on something of substance – umm, the economy and double digit unemployment?

Imagine a Bonus Tax for Every Industry

With your typical American coming nowhere near a $40,000 bonus if they get one at all, the reality is that most Americans wouldn’t bat an eye at an attempt by Congress to enact harsh taxes on these “fatcat” bonuses right? Just like few on main street really care that the top 2% of Americans are going to be forced to fund healthcare for millions of Americans or that Congress is mulling over a “war tax” the rich should fund as well. The obedient American has been conditioned to seek more and more handouts and freebies to “get theirs” without really questioning why they’re getting it, whether they should be getting it or at what net cost. Cash for this, Cash for that, homebuyer tax credits – this is all borrowed money that our children will someday have to pay back – and our generation should be ashamed for robbing them of their future. But we’re not. Let’s consider how a Bonus Tax would hit other non-bank industries:

There are millions of middle-class commission based jobs that rely heavily on bonuses. This ranges from business-development type professions in every industry from contract manufacturing to environmental consulting. Sales reps are often start with a marginal salary with the potential for big bucks by way of a bonus structure for closing the deal. This type of low salary/high bonus combination drivers out mediocre and complacent performance and rewards aggressive, results-oriented cultures. Of course, when this goes too far, there are pockets of unethical behavior, win-at-any-cost attitude and other examples of a system gone awry. But, in the majority of cases, this is a system that has worked well for companies and employees alike and has been in place for decades with wild success.

Why Does Everyone Hate Bankers So Much?

There’s a poll that the major pollsters like to circulate every so often asking which group Americans dislike the most. The usual suspects are politicians, big tobacco, energy companies, big pharma and Congress. The honors seems to rotate around every so often, but each time Congress has the top slot, you can rest assured there will be a new villain in the picture. A while back, it was the Auto executives being forced to drive a car out to Washington to testify because they were vilified for flying a corporate jet, but as the public grew tired of throwing barbs at Detroit, Congress needed to shift gears and go back to the bankers.

Sure, large banks screwed up. So did small ones. So did lenders, underwriters, lax regulation, lax oversight where regulation actually existed, and so did the lawmakers that forced “a home for every American” even though it’s plainly evident that many Americans never should have, and never should be homeowners. Let’s not forget all the Americans that falsified income statements during the lending process as well. There’s plenty of blame to go around, but Congress is doing a full-court press to direct the ire of the public toward bankers – while they’re paying back the money they borrowed. I don’t know, maybe Congress is angry that they’re losing the control of the banks they so desired when they imposed said standards and now that the banks are looking to sever ties with Uncle Sam, it’s a renewed attempt to villify them.

Will the Bonus Tax Come to Be?

I’d like to think not, but nothing surprises me anymore. While Wall Street firms are major contributors to both parties and money talks, I have to imagine that they’ll stop at actually enacting anything like this and just talk tough so they have good sound bites to share during the next election cycle on how tough they were on bankers. The outcome would be a further distribution of wealth – a complete destruction of wealth, really. All the professions that rely on the risk/reward cost structure that drives performance and entrepreneurship would see their model turned upside down and it would really curtail the type of innovation we see today in America. But this seems the be the goal, so who knows?

What are your thoughts on a Bonus Tax?

Disclosure: I don’t work in banking and I don’t recieve a large cash bonus as part of my compesation. I just think this is wrong.