Be Careful Not To Exceed 6 ACH Transfers On Your Savings Account Per Month

I was routinely checking my Citibank balance online the other day when I noticed a little warning box above my account balance mentioning something about a savings account transfer limit of 6 per statement cycle imposed by a federal rule called Regulation D. I had heard about it before but never previously paid it much attention. Examining the reminder message, it was clear to me that this was something that might easily be overlooked by the average savings account holder. It’s the type of important information that should be, but isn’t readily advertised enough by banks.


Banks Place A Limit On The Number of ACH Transactions You May Execute Per Month

Bank savings and money market accounts are regulated by the Federal Reserve Board’s Regulation D, which governs deposit accounts and their reserve requirements. The reserve percentage is the amount mandated by federal law that banks must retain in house and not loan out to customers. For savings and money market deposit accounts, Regulation D limits the number of electronic ACH transfers that one can make to 6 per statement cycle, which is about a month. While the regulation doesn’t impose a reserve requirement for savings and money market accounts, it does impose about a 10% reserve requirement for checking accounts. Because checking accounts are utilized more frequently, the reserve requirement is to ensure that banks can meet demand and not run out of money. Because savings accounts are not subject to the reserve, the transaction limit helps to keep deposit withdrawals to a minimum.

In the past, before the popularity of online banks such as Emigrant Direct and ING Direct, this was less of a problem since bank customers usually visited their local brick and mortar branch to request bank transfers. Now, with the growing popularity of online banks and the emergence of interest rate chasers, customers are starting to hit or exceed their ACH limit with greater regularity. Every bank enforces Regulation D requirements differently. One time violations of the monthly limit will usually result in finance charges or refusals to process the excess request, but frequent violations may cause your bank savings account to be closed and terminated, with the balance transferred to your checking account or sent to you in the form of a check.


Transactions That Count Towards the 6 ACH Transaction Limit Include:

Online transfers from savings to a linked account (such as checking)

Outgoing online transfers made to another bank through ACH or via online wire transfers

Transfers made via phone banking

Pre-authorized deductions by a third party

Checks written from a money market account

However, Transactions That DO NOT Affect Your Limit Include:

Transfers and deposits into a savings or money market account

Withdrawals and transfers made at an ATM machine

Withdrawals and transfers made in a bank branch via a teller

A Few Possible Solutions To Get Around The Limit

Because banks don’t usually track and display your remaining limit for you on their websites, other than manually doing it yourself, another solution is to forgo the FDIC insurance benefits of savings accounts altogether and deposit your savings into a money market fund through a brokerage firm instead. There are usually no caps on the number of transactions you can make with money market funds, although some funds do impose minimum limits on the amount you can withdrawal at one time, as well as waiting periods for withdrawals. While money market funds are more akin to stock investments and theoretically involve a bit more risk, the interest yields are usually much higher than that offered by ordinary savings accounts. But if you want complete flexibility and liquid access to your money, perhaps you should just stick with plain old checking accounts. There are no restrictions with checking accounts, although the interest yields are usually low to none.

Source: Money Blue Book

0% APR Credit Cards

Credit cards have grown to be a necessity for us especially now that we have fast changing needs. These cards have provided us with practicality and convenience such that we can now purchase goods and services without the need of going out or spending using hard cash.


But we also know that through the improper use of credit cards we can fall fast into debt. The APR or interest rates significantly increase your credit card dues, thus if you can’t maintain spending wisely, you may end up bankrupt as the year ends, not to mention the fact that this ruins your credit rating. So, if you want to protect yourself from getting into this kind of situation-and of course, save more money, then there’s one solution you can do: get a 0% APR credit card!

Why should you take advantage of a 0% APR credit card?

APR stands for annual percentage rate, and at most times, companies offer an initial 0% APR on their credit cards for 12 months as part of their package. With a 0% APR credit card, you can save money since it lowers the amount you have to pay on your credit card bill. This introductory offer can be applied on new purchases or balance transfers, even both. With this promo, you can then spend more on the both your needs and wants without worrying about the interest added to your bill.

The second main reason why you should take advantage of a 0 APR credit card is because the offer doesn’t last forever. The 0% APR promo usually lasts for 6 to 12 months, depending on the package. There are even some companies that do not provide such offer, so when you are planning to make a credit card application, you must first check whether the card you want has a 0 APR promo, and how long will it last.

Another great advantage 0 APR credit cards can do is that it helps you in building up your credit rating. If you are the person who can manage paying your monthly bills regularly, then your credit card company will continue to supply your more benefits aside from 0 APR, such as lowering your interest rate after the 0 APR promo expires. You will then have more freedom to make as many purchases as you can since the lower rates and other benefits are there to help you out.

Meanwhile, if you want a new card to do balance transfers, then 0 APR credit cards will suit best in this need. These cards provide you with more flexibility in transferring balances during the promo period. This also helps you in reducing interest payment, and gives you more time to pay back the balances which you have transferred after the offer period expired.

Once the introductory offer of 0 APR expires, you then become a full-fledged credit card holder. This means that you will now be charged with a regular APR rate. Unfortunately, while you are still entitled to other benefits, the 0 APR will never come back, as it is only a one time introductory promo. Credit card companies may change your APR anytime they want, however, depending on your payment attitudes as well as your credit history. Thus, if you want to keep a low interest rate on your credit card after the promo expires, then you should pay your credit card bill always on time.

The Credit Card Crunch

If there’s one bill most Americans have difficulty paying, it’s their credit card bill. This may be due to a variety of reasons, but this can lead to more serious effects both on credit card users and credit card companies. Because of unpaid bills, companies may no longer provide a 0 APR promo on their credit card packages in the future. Thus, you must grab the opportunity while it is still present; you may not be able to avail of a 0 APR credit card in the next few months because companies have already removed it from their deals.

You may also want to check the different packages credit card companies offer to their clients. If you look deeper on the conditions of their deals, you may see that some packages provide 0 APR credit cards to clients that have a good credit rating. This is one of the present effects of the credit card crunch; companies are now making it difficult for consumers to avail of 0 APR credit cards and only provide it to those who meet their qualifications. Thus, you should get yourself a 0 APR credit card while you still can.

Getting a 0% APR Credit Card

If you are now planning to get a 0% APR credit card, the best way to do so is to compare the deals between different credit card companies. You can check their websites online, or read reviews about their credit deals first. You should first know how long their 0 APR promo lasts and how much will be the interest rate after the offer expires. This way you can gauge if you can keep up with your card’s terms and conditions, and finally come up with a sound decision.

Before making a credit card application, it is also important to look not just on the 0 APR promo, but also on the other features and fees included in the credit card package. Some companies indeed offer a 0 APR for the first 6 to 12 months, but the other smaller, hidden fees can actually add up and make you pay for a regular credit card bill, without the promo. Also, keep in mind of the grace period in paying your credit card bill-going beyond this period can actually put you into bigger trouble, even if your card has 0 APR.

You should also consider your lifestyle before getting yourself a credit card; if you think you will benefit more from a 0 APR credit card than a credit card that purely offers rewards and rebates then go for it. What’s important is that you will be able to pay your bills and not be shackled to debt. Remember, credit cards are made to help you become a wiser, more responsible spender.

Source: BlueVerse.com

Capital Gains, Dividends, and Taxes

I've come across these questions several times in the last few days, so I thought I'd answer them to dispel some intuitions novice investors have.

1. If I reinvest my dividends, do I have to pay taxes on them?

Whether you reinvest your dividends or not, this decision will never (unless tax laws are changed) affect your taxes. Whether your dividends are taxed depends on what dividends you're talking about and in what kind of account you're receiving them.

Let's start with regular stocks--like the ones traded on NYSE, NASDAQ, and Pink Sheets. In a regular, taxable brokerage account, or if you buy directly from the company in a taxable account (e.g., not as part of a 401(k), etc) you have to pay taxes on all your dividends. It does not matter if you reinvest your dividends or not. There are two ways in which regular stock dividends are taxed: ordinary income and qualified dividends.

The ordinary income tax rate on dividends, or the ordinary dividend tax rate, is based on whatever tax bracket you're in. Let's say you're in the 25% tax bracket. That is how much tax you'd pay on your dividends if they're taxed as ordinary income.

The qualified dividend rate, at least for now, is much lower. It also depends on your tax bracket, but the maximum rate is 15%. For people in the lowest tax bracket, the rate on qualified dividends is 0%. This will probably change in the future, especially if the Democrats control all the branches of the government.

The way your regular stock dividends in a taxable account are taxed depends on how long you hold the dividend paying stock. If you hold the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date (the ex date, etc is explained here), your dividends are taxed at the qualified dividend rate.

Many companies also have preferred stocks, which trade on the exchanges like regular stocks. These usually pay out a big dividend, have a narrow trading range, and the company reserves the right to buy the stock back for a certain price. If the company goes out of business, holders of the preferred stock have priority over holders of the regular stock in terms of who gets what of the company's remaining assets (the order of priority is bondholders, preferred stockholders, and regular stockholders).

There are two types of preferred stocks. The most common is a hybrid between a bond and a stock. The "dividends" the company pays out on these preferred shares are treated as debt. The company gets a tax break. As an investor, however, you incur the ordinary dividend rate, no matter how long you hold the stock. Only around 100 companies (mostly utilities) have preferred shares that pay out dividends that can, if you hold them for the requisite period, be qualified dividends. They typically have lower yields.

There are also tax exempt "dividends." These come from municipal bond mutual funds and closed end funds that invest in municipal bonds. Here is a great article on such closed end funds. I put dividends in scare quotes because they're not really dividends. The payments you receive from municipal bond funds are actually tax free interest payments. Depending on the fund, some, usually a very tiny percentage, of the payments you receive may count as something called "private activity bond interest." This "is interest paid by private activity bonds, issued to encourage private-sector investment in the development of certain facilities which serve various specified public purposes, and exempt interest dividends paid by mutual funds that are attributable to such interest." Private activity bond interest has tax implications. While municipal bond interest is exempt from federal taxes, you may still have to pay state taxes on your "dividends."

2. If I reinvest my profits or capital gains, can my taxes be deferred or exempt?

No. Every time you sell an asset for a profit in a taxable account, you incur tax liability. It does not matter if you use your profits to invest in something else.

There are two types of capital gains: short term and long term. Short term capital gains are taxed as ordinary income. Whatever tax bracket you're in is the rate at which your profit is taxed. For simplicity's sake, let's take a regular stock as an example. Suppose you buy GE in a taxable account, hold it for less than a year, and then sell it for a gain of $200. Let's say you're in the 25% tax bracket. You'll have to pay $50 in taxes (25% of 200).

Long term capital gains rates also depend on your tax bracket, but they are lower than the ordinary income rate. The maximum tax rate on long term gains is 15%. Taking the same example, suppose you buy GE in a taxable account, hold it for over a year, and then sell it for a $200 gain. Suppose again that you're in the 25% tax bracket. You'd have to pay $30 in taxes.

Here is a great little calculator for short term and long term capital gains taxes. The thing to remember is that to qualify for long term capital gains rates you have to hold your stock for at least a year and a day.

Mutual funds and ETFs (some, not all) pay out dividends, some of which can be counted as ordinary dividends, qualified dividends, short term capital gains, and long term capital gains. It depends on what the fund invests in and what the fund manager does. The more active the manager is in trading stocks, the more likely you are to receive ordinary dividends and short term capital gains. Once again, it does not matter whether you reinvest your mutual fund and ETF dividends. As long as you hold them in a taxable account you're going to pay taxes on them.

The way to avoid taxes on your capital gains and dividends is to receive them in a tax deferred (such as an IRA or 401(k)) or tax exempt account (such as a Roth IRA). With an IRA, you only pay taxes when you start taking money out after retirement. With a Roth, you pay no taxes, since you're investing with after tax money. For more on this, click here or here.

The bottom line is that reinvestment has nothing at all to do with taxes. Whether you pay taxes (and what rates) depends on what kind of account you're holding your assets in, how long you hold them, and what kinds of assets they are.

Source: Slacker Wealth

Are you in a personal credit crisis? The warning signs

Yes, the country is in a financial crisis, and the government has provided a $700 billion Band-Aid to help stop the bleeding. But what kind of first aid is there for your personal finances?

Many Americans are struggling to pay their bills and keep up with rising prices, and the debt is mounting. Consumer debt is now at $2.58 trillion, according to the Federal Reserve's consumer credit report released Tuesday.

But how bad is it for you?

The first step is admitting you have a problem, says Bill Hardekopf, CEO of LowCards.com and author of "The Credit Card Guidebook."

"It's important to make sure that you recognize and admit that you have a debt problem. Then you can face it head on," Hardekopf said.

A good guideline for consumers is their ratio of debt-to-income, suggests Eric Tyson, author of "Personal Finance for Dummies." Debt should account for less than 20% of annual income, including car loans and credit cards, Tyson said. For example, if you make $40,000 a year and you had $10,000 on credit cards, "that would be worrisome."

There are other telltale signs that you may have a debt problem. For example, if you worry about debt or how your bills are going to get paid, it could be a sign of trouble according to Greg McBride, senior financial analyst at Bankrate.com.

"Or if you are robbing Peter to pay Paul," McBride said, referring to those who use credit cards or take additional loans so they can stay current on outstanding obligations, and that includes putting a payment on plastic when you don't have enough cash in your account to pay for something outright.

Another warning sign is that you've been hit with a late fee or over-the-limit fee in the past year because you didn't have the money to pay your bills - or you have to juggle bills month to month because you can't afford to pay all of them.

And finally, take a look at your credit balances. If at least one of your credit cards is maxed out, then you have a debt problem, adds Hardekopf.

Financial experts offer these steps to help consumers climb out of personal debt and turn their financial picture around - even before the economy does. Here's how:

1. Look at the big picture. Experts agree that before fixing your finances, you must first take stock of your complete financial picture. Compile all of your bills and outstanding debts, including credit cards, mortgages, student loans, auto loans, personal loans and bank loans, and pinpoint exactly what you owe on each account and in total. List the creditor, monthly payment, outstanding balance, interest rate, due date and credit limit for each.

2. Pay important bills first. If you have to make choices about what to pay, prioritize the bills that are necessary to cover health, shelter, basic food and transportation to work or school, Hardekopf said.

3. Call your creditors. If you have missed payments, your creditor may be able to help you work out a payment plan, lower your rate, or lower your monthly payment, or even waive the late fee. Also try to negotiate lower rates. If you're paying the monthly minimums, then you're likely getting killed by interest. But some lenders may be willing to lower your rate if you explain your situation to them. Otherwise, shop around for a mortgage or credit card with a lower rate.

4. Transfer balances. If you have a high interest rate on one card and a running balance, consider transferring that balance to a card with a lower interest rate. Some cards still offer 0% for 12 months for balance transfers. That's a great opportunity to pay as much as you can over the monthly minimum and pay down your balance over 12 months. But keep in mind that most cards do charge a balance transfer fee of 3%, Hardekopf warned; so look for one that has a cap on the balance transfer fee. The amount you save on interest payments should more than offset the fee.

5. Quit the cards. If you feeling like you are drowning in credit card debt, stop using credit cards altogether. Often switching to cash or a debit card helps keep balances under control, save money on interest and has also been shown to decrease spending overall.

6. Prioritize paying down debt. Start with the credit card that has the highest interest rate. If they are all about the same then start with the credit card that is almost at its credit limit. Reducing your debt-to-credit ratio will improve your credit score. Experts suggest getting your credit card balance to less than 30% of your credit limit.

7. Bulk up your payments. Aim to pay more than the minimum amount for your loans, especially credit cards. The minimum payment might be a mere 2% of your balance, which makes paying off that debt almost impossible. For example, Hardekopf offered, if you have a credit card balance of $8,000 and your interest rate is 12%, making only minimum payments of 2% a month would take 346 months to pay off the balance and cost $7,696 in interest. If you pay 5% of your balance each month, it will take 109 months to pay off and will cost you $1,579 in interest.

8. Check your credit report for mistakes. For a free copy of your credit report, visit annualcreditreport.com or call 877-322-8228. It's not uncommon to find an old error that's dragging down your credit score. You can make a dispute by mail, telephone or online. If a corrected error results in a higher credit score, contact your creditors to make sure they know about it, and ask for a lower interest rate.

9. Get help. If paying down debt and cutting expenses doesn't seem feasible, contact a reputable debt counselor for help. The National Foundation of Credit Counseling (nfcc.org) is a good place to start. But look for someone that has a skill set that matches what you need, Tyson said. "If you're struggling with 'should I refinance my mortgage' a lot of financial advisers are not set up to answer questions like that."

10. Start saving. According to McBride, the greatest barrier to saving is not the means but rather the discipline. Start putting a small amount aside in a high-yield bank money market deposit account or savings account. "Nothing you do financially will help you sleep better at night than knowing that you have money in the bank for a rainy day," McBride said.

Source: Jessica Dickler, CNNMoney.com staff writer

Ways To Make Extra Cash

IF YOU ARE ONE OF THOSE PERSONS WHO HAVE TO BE SEARCHING FOR COINS BETWEEN THE CUSHIONS OF THE COUCH AFTER YOU PAY YOUR BILLS, THEN THIS IS JUST FOR YOU!

Creating a stream of Residual Income might be something you want to take a look into and get some more information on. When you create residual income, you are taking a step towards making extra money in a manner that does not require constant effort. While with Linear income, what you earn is directly proportionate to the number of hours invested (your typical 9-5 work)

HERE ARE 5 PRACTICAL WAYS TO EARN RESIDUAL INCOME:

1. Join associate or affiliate network marketing programs.

2. Produce printed copies of art work such as paintings, computer backgrounds and wall papers, etc and advertise on free advertising sites.

3. Collaborate with someone and publish literary work such as historical articles/manuals or poetry. It could be a one time work but it has the potential to earn you money constantly or at least for a season. This is how authors and artistes make money while they sleep.

4. Have YOUR GSAT, CXC lessons, presentations and/or lectures put on a CD and labeled for students or individuals to purchase. I know a few teachers and lecturers who have done this and have made extra money every semester or every time they make a presentation without even marketing the product. Just Print, Bind and Sell! Or Burn, Label and Sell, that’s it!!

5. Start a savings and/or investment program that pays you residual income in the form of interest or dividends. This could be stocks or bonds. You put money once and you can get up to 22% interest. The money works for you!!

That’s it! I know what just happened, a thought I am too familiar with just popped up in your head -“AH THAT’S TOO MUCH TO DO”. It’s the thought that will keep you from REALIZING what you are made of. Well you can submit to it, or LITERALLY box yourself hard, get up and determine to do something about your financial welfare. My aim is to show you that you can do it – you have to believe you can. I am doing it!

Written and © to: Andre P. Llewellyn

The Rule of 72, 114, and 144

Rule of 72 or the “Rule of Doubling”

Most people are familiar with the Rule of 72, the simple formula that can be used to estimate how long it takes to double your money based a certain expected interest rate. For example, you expect to get an 9% rate of return on your money. At that rate, how long will it take to double your money?

To calculate this, simply divide 72 by 9 to get 8 years. For instance, if you were to invest $100 with compounding interest at a rate of 9% per annum, the rule of 72 gives 72/9 = 8 years required for the investment to be worth $200; an exact calculation gives 8.0432 years.

Accuracy

The formula is reasonably accurate in the 6% to 12% range (especially in the 8% to 9% range), and progressively loses accuracy at smaller or larger values.

With 4% interest rate it will take 18.0 years to double the money
With 5% interest rate it will take 14.4 years to double the money
With 6% interest rate it will take 12.0 years to double the money
With 7% interest rate it will take 10.3 years to double the money
With 8% interest rate it will take 9.0 years to double the money
With 9% interest rate it will take 8.0 years to double the money
With 10% interest rate it will take 7.2 years to double the money

The Rule of 114 or the “Rule of Tripling”

To estimate how long it takes to triple your money, divide 114 by your expected interest rate (or rate of return). Using the 8% return figure from the first example, the formula would look like this:

114 ÷ 8 = 14.25 years

Accuracy

The higher the expected rate of return, the less accurate the formula is. However, this is also true of the Rule of 72.

Now for the Rule of 144 of the “Rule of Quadrupling”

To estimate how long it will take to quadruple your money, you can use the number 144. Simply follow the steps in the above example but substitute 144 for 114.

For more mathematical details visit wikipedia.