Remember layaways?
Neither do we. Mostly because their biggest boom was during the Great Depression. But thanks to the credit crunch, the layaway has been resurrected, reports today’s WSJ.
A layaway lets a customer put a purchase aside without having to pay for it in full upfront. Dying for that Robopanda but not ready to shell out $199.99 to Kmart right now? No problem. Kmart will hold onto one for you! But there is a catch:
Layaway plans aren’t free — most stores charge a fee for setting aside the merchandise, and ask for a down payment. Kmart requires customers to pay a $5 service fee and a $10 cancellation fee upfront, or put down 10% of the item’s cost, whichever is greater. Customers must make biweekly payments over eight weeks to pay the balance. In case of default, the item goes back into stock and the customer receives a refund, minus the $15.
Some other companies, like TJ Maxx, Marshalls and Burlington Coat Factory, are offering similar layaway plans this season as well. (Wal-Mart axed their layaway plan in 2006.) Sites like eLayaway.com have sprung up, luring consumers with iPod Touches for “as low as $42.23 a month.”
In a perfect world, people would only spend money they actually have on holiday goods. But we’re realists and understand the appeal of the layaway. Compared to the typically sky-high interest rates on credit cards, this might actually be a better alternative if you’re in a pinch.
Keep in mind that the store — not a bank or credit card issuer — sets the rules here. If you miss a payment, you still don’t have the item (since they’re laying it away until you pay in full), and you won’t get all of your money back. They’re not going to negotiate a payment plan with you like a credit card company might. (Not that those guys have been super-flexible lately, either.)
Some stores that offer layaways allow you to charge the payments to your credit card, which doesn’t make much sense: Not only are you racking up layaway fees, but you’re also incurring potentially high interest rates from your credit card. Not a good move.
Before you sign up to lay away, ask yourself a few questions: Do you really need that robotic bear (or whatever)? Can you hold off and pay in full later? What will those payments will look like once the holiday hullabaloo has died down?
source : http://blogs.wsj.com
Wednesday, October 22, 2008
Sunday, October 19, 2008
Credit card? Look at your salary first!
With rising salaries, banks and credit card companies are most likely to increase you credit limit. The easy availability of credit, especially on credit cards, has led to a situation, where most have got used to swiping cards.
However, we always tend to forget that the idea of having a credit line does not mean that you need to use it. Also, it is the wrong way to look at credit just because there is some money available for use. You have to pay it back sometime, and with lots of interest. Delaying repayment only increases the burden to a great extent.
Most banks charge over 30 per cent interest on the outstanding amount, while some charge over 45 per cent a year. In other words, for an outstanding of Rs 1 lakh (Rs 100,000), you could be coughing up anywhere between Rs 30,000 and Rs 45,000.
No wonder, financial planners would say that even before taking a card, it is better that you act as your own policeman. Be cautious about the credit limit being offered. For instance, you might be eligible for Rs 1-lakh limit. Ask yourself the important question: Do I really need it?
While the availability of a higher sum is a good sign, it is not necessary that it should be taken up just because it is there. Similarly, there has to be a constant monitoring of the credit that is being used too so that the potential liability does not extend beyond a certain figure.
In this sense, it is necessary for each individual to fix the amount that one can afford to use on one's credit card. Your total credit, including other loans, should not go beyond 30-35 per cent of your income. This will ensure that there is not too much pressure on your finances and there is also some control over the payments.
The overall credit that you need depends, besides the income, solely on your spending habits. If you are a "cash-first" person, who incurs most of expenses in cash, the requirement is of a smaller credit limit.
On the other hand, if you want to provide some additional amount for a buffer for, say, an emergency hospital expense, then a slightly higher limit will be essential for you.
If you like the feel of card swiping the machine so much that all expenses are incurred with it, then you do need a limit that is considerably higher. But whatever be the situation, it is essential that each individual takes a careful look at one's own position and then decides the minimum amount of credit limit that is required on one's credit cards.
But once you have the limit, make efforts right from the time of selection of credit cards to the usage to make sure that you do not get into a debt trap.
Also, if you have a number of cards, you need to look at the situation in its entirety and not piecemeal because the general tendency is to look at the limit spent on one card and say, "Oh, I am not spending on the other, which is already stretched, or I am using one card properly."
Like the entire credit limit across various cards in your total credit available, the total expenditure also has to be across all the cards. And it is a common situation, where one insulates one card from the other for convenience, when it comes to credit usage.
Of course, the final dictum, making payments as much as possible and regularly before the due date ensures lower interest cost and, more importantly, lesser pressure on funds and no headache in the long run.
Disciplined spending is the best way to ensure that there is no overspending on the cards. And that makes life simpler.
source : http://inhome.rediff.com/money/2008/oct/20card.htm
Thursday, October 16, 2008
A Christmas without credit cards? What lower limits mean this holiday shopping season.
Wall Street's problems have captured the attention of Congress, the White House and the media. But on the country's Main Streets, worried workers, struggling small business owners and cash-strapped families are wondering if anyone is paying attention to them. A look at how Americans are coping with the economic crisis.
Here's a scenario that will be more common this holiday season: You fill your arms with purchases and head to the register, where you've been told you'll receive a 20 percent discount by applying for and using the store's credit card. That will help, because you're already nearing your MasterCard limit. But a moment later, the teenage salesgirl says, "Sorry, you've been denied." You slink out, gifts left at the counter, angry and a little bit ashamed, too. Didn't the store encourage you to ask for the card?
That's just one of many ways that this is going to be a different kind of Christmas, as retailers' biggest season collides with newly tightened standards from credit-card companies. Banks and other card issuers have been ratcheting down consumer credit limits, raising interest rates, closing down accounts completely and getting tougher about whom they'll give their cards to in the first place. "Every issuer is looking at this," says John Ulzheimer, president of consumer education for credit.com. "It's one of the top two issues we are hearing about from consumers, and that is a significant change." Since few card issuers are willing to disclose their decisions, it's unclear exactly how many Americans will be affected this holiday season.
At the same time, retailers are trying to fight back by pushing their own cards and starting Christmas sales and displays early. Customers can be expected to use less credit and more cash, propelling them to local stores and away from online merchants. Analyst Dana Telsey, of the equity research and consulting firm the Telsey Advisory Group, expects an even slower holiday season than the anemic one that's been projected. The National Retail Federation had been predicting a 2.2 percent increase in sales this holiday season, the slowest growth in six years, and that was before October's credit meltdown. Sales of big-ticket items like flat-screen TVs could be particularly weak, because the usual "one year, no payments, no interest" offers that often accompany those sales won't be as plentiful.
source : http://www.newsweek.com/id/164052
Here's a scenario that will be more common this holiday season: You fill your arms with purchases and head to the register, where you've been told you'll receive a 20 percent discount by applying for and using the store's credit card. That will help, because you're already nearing your MasterCard limit. But a moment later, the teenage salesgirl says, "Sorry, you've been denied." You slink out, gifts left at the counter, angry and a little bit ashamed, too. Didn't the store encourage you to ask for the card?
That's just one of many ways that this is going to be a different kind of Christmas, as retailers' biggest season collides with newly tightened standards from credit-card companies. Banks and other card issuers have been ratcheting down consumer credit limits, raising interest rates, closing down accounts completely and getting tougher about whom they'll give their cards to in the first place. "Every issuer is looking at this," says John Ulzheimer, president of consumer education for credit.com. "It's one of the top two issues we are hearing about from consumers, and that is a significant change." Since few card issuers are willing to disclose their decisions, it's unclear exactly how many Americans will be affected this holiday season.
At the same time, retailers are trying to fight back by pushing their own cards and starting Christmas sales and displays early. Customers can be expected to use less credit and more cash, propelling them to local stores and away from online merchants. Analyst Dana Telsey, of the equity research and consulting firm the Telsey Advisory Group, expects an even slower holiday season than the anemic one that's been projected. The National Retail Federation had been predicting a 2.2 percent increase in sales this holiday season, the slowest growth in six years, and that was before October's credit meltdown. Sales of big-ticket items like flat-screen TVs could be particularly weak, because the usual "one year, no payments, no interest" offers that often accompany those sales won't be as plentiful.
source : http://www.newsweek.com/id/164052
Friday, October 10, 2008
Bailout has yet to ease fears on Wall Street
WASHINGTON – Why isn't it working?
The Federal Reserve is pumping more than more than $800 billion in loans and investments into banks and corporations. In a move coordinated with other central banks around the world Wednesday, the Fed cut interest rates.
The Treasury has $700 billion to buy mortgage-backed securities, with the hope of rebuilding a market for these complex debt instruments. Treasury officials are still saddling up, but the fact that Congress approved the bailout and President Bush signed it has not restored confidence to stop the panic.
Stocks are still going down. More dangerously, banks are still refusing to lend to each other.
So why?
In part, economists say, because we still don't have a clear grasp of the extent of the problem. There are mortgage foreclosures still to come, credit card debts to charge off and many questions still unanswered about the value of the complex derivatives that came to underlie the financial system in the last decade.
Patience, counsels Liz Ann Sonders, chief investment strategist with Charles Schwab Corp. Things haven't calmed down in part because the financial crisis is still spreading.
"It's almost like, we're coming up with solutions, but while the global domino effect is still in its crescendo phase," Ms. Sonders said.
Some economists say a fundamental problem is that the financial community can't tell the difference between a company with a liquidity problem that's short a few bucks and one that's insolvent, or wiped out. Loans can handle the first problem. Capital obtained from selling all or part of the company is required to fix a solvency problem.
"When a bank gets in trouble, it seems like it's always a liquidity issue, but what drives the liquidity issue is the solvency concern: 'Am I going to get my money back?' " said finance professor Frank Anderson of the University of Texas at Dallas.
In this uncertainty, many older investors have panicked and are selling their stocks to try to save what they can of their retirement nest eggs.
"Millions of people relying on 401(k)s for their retirement, they are just freaking out now," said Bernard Weinstein, director of the Center for Economic Development and Research at the University of North Texas. "The brokers call it GMO – 'get me out!' "
Finance professor Dr. Anderson noted that the Dow Jones Industrials Average hit its all-time high of 14,164 points one year ago, and has since fallen more than 5,000 points.
News Source : http://www.dallasnews.com/
The Federal Reserve is pumping more than more than $800 billion in loans and investments into banks and corporations. In a move coordinated with other central banks around the world Wednesday, the Fed cut interest rates.
The Treasury has $700 billion to buy mortgage-backed securities, with the hope of rebuilding a market for these complex debt instruments. Treasury officials are still saddling up, but the fact that Congress approved the bailout and President Bush signed it has not restored confidence to stop the panic.
Stocks are still going down. More dangerously, banks are still refusing to lend to each other.
So why?
In part, economists say, because we still don't have a clear grasp of the extent of the problem. There are mortgage foreclosures still to come, credit card debts to charge off and many questions still unanswered about the value of the complex derivatives that came to underlie the financial system in the last decade.
Patience, counsels Liz Ann Sonders, chief investment strategist with Charles Schwab Corp. Things haven't calmed down in part because the financial crisis is still spreading.
"It's almost like, we're coming up with solutions, but while the global domino effect is still in its crescendo phase," Ms. Sonders said.
Some economists say a fundamental problem is that the financial community can't tell the difference between a company with a liquidity problem that's short a few bucks and one that's insolvent, or wiped out. Loans can handle the first problem. Capital obtained from selling all or part of the company is required to fix a solvency problem.
"When a bank gets in trouble, it seems like it's always a liquidity issue, but what drives the liquidity issue is the solvency concern: 'Am I going to get my money back?' " said finance professor Frank Anderson of the University of Texas at Dallas.
In this uncertainty, many older investors have panicked and are selling their stocks to try to save what they can of their retirement nest eggs.
"Millions of people relying on 401(k)s for their retirement, they are just freaking out now," said Bernard Weinstein, director of the Center for Economic Development and Research at the University of North Texas. "The brokers call it GMO – 'get me out!' "
Finance professor Dr. Anderson noted that the Dow Jones Industrials Average hit its all-time high of 14,164 points one year ago, and has since fallen more than 5,000 points.
News Source : http://www.dallasnews.com/
Wednesday, October 8, 2008
Credit can't cover our cost of living anymore
WASHINGTON – You know what's coming.
Auto loans, student loans, mortgages and home equity loans – all are tough to get now and will be harder to come by for years. Lenders are expected to ration credit rather than raise interest rates. Risk is out. Cash is king.
Household debt has soared from about 45 percent of GDP in 1985 to more than 100 percent today, or $14.5 trillion – more than the total value of all the goods and services produced in the economy in the last year.
Clichés about inebriated consumers are rife: The party's over. Hangover. A return to sobriety.
There is another perspective.
"The core driver of the mortgage collapse is a 10-year trend in which consumers have seen their real wages decline, their debts increase and their savings depleted," said Greg Larkin, a consumer spending analyst with Innovest Strategic Value Advisors in New York.
"This, combined with unprecedented leverage, liquidity and fraud, is what has got us to where we are," he said.
Keeping up via credit
In other words, while income stagnated, consumers used credit to keep up with the rising cost of living. Between 2000 and 2005, the U.S. Census Bureau found that household income declined in the Dallas-Fort Worth area. It's nosed up a bit since, but not by much.
Lenders were delighted. They had plenty of money to lend and lots of investors willing to share the risk. Some of the business models for credit card companies actually relied on loan delinquencies with their late-payment penalties to boost profit, Mr. Larkin said.
As with subprime mortgages, consumers with poor credit histories were lured to credit cards with cheap interest rates and loads of fine print that ballooned rates and spanked anyone going over spending limits.
When Washington Mutual Inc., the nation's largest savings and loan, was seized by the government last month and sold to J.P. Morgan Chase, 48 percent of its credit card holders were considered subprime borrowers, Mr. Larkin said.
News Source : http://www.dallasnews.com/
Auto loans, student loans, mortgages and home equity loans – all are tough to get now and will be harder to come by for years. Lenders are expected to ration credit rather than raise interest rates. Risk is out. Cash is king.
Household debt has soared from about 45 percent of GDP in 1985 to more than 100 percent today, or $14.5 trillion – more than the total value of all the goods and services produced in the economy in the last year.
Clichés about inebriated consumers are rife: The party's over. Hangover. A return to sobriety.
There is another perspective.
"The core driver of the mortgage collapse is a 10-year trend in which consumers have seen their real wages decline, their debts increase and their savings depleted," said Greg Larkin, a consumer spending analyst with Innovest Strategic Value Advisors in New York.
"This, combined with unprecedented leverage, liquidity and fraud, is what has got us to where we are," he said.
Keeping up via credit
In other words, while income stagnated, consumers used credit to keep up with the rising cost of living. Between 2000 and 2005, the U.S. Census Bureau found that household income declined in the Dallas-Fort Worth area. It's nosed up a bit since, but not by much.
Lenders were delighted. They had plenty of money to lend and lots of investors willing to share the risk. Some of the business models for credit card companies actually relied on loan delinquencies with their late-payment penalties to boost profit, Mr. Larkin said.
As with subprime mortgages, consumers with poor credit histories were lured to credit cards with cheap interest rates and loads of fine print that ballooned rates and spanked anyone going over spending limits.
When Washington Mutual Inc., the nation's largest savings and loan, was seized by the government last month and sold to J.P. Morgan Chase, 48 percent of its credit card holders were considered subprime borrowers, Mr. Larkin said.
News Source : http://www.dallasnews.com/
Tuesday, October 7, 2008
Retailers Report Credit Card Use In Decline
FORT WORTH, Texas --
With consumer confidence on the decline and many shoppers tightening their belts, retailers are surprised to report how many people are paying for purchases.
For six years, Norma Talbott has owned and operated a small Frisco jewelry store. In a tough economy she said her sales have been surprisingly stable with the exception of one major change, people are now paying with cash.
For some, life without credit cards has been a way of life for a while. For others, it's a changing mindset brought on by Wall Street woes.
Visa and MasterCard both reported growth in their last quarterly earning statements, but Visa said that growth was due in large part to its debit card business as consumers shift away from traditional credit card spending.
Mike Davis with the Cox School of Business said if the trend sticks it's a good sign that consumers are getting wiser.
"It certainly means people are being more careful, that they're feeling stressed about this economy and they ought to," said Davis.
The thing Davis said would be really concerning is if the economy continues to head south and credit card spending goes up.
Davis said that is an indicator people are in an emergency situation and credit is the only source of money available.
News Source : http://www.nbc5i.com/
With consumer confidence on the decline and many shoppers tightening their belts, retailers are surprised to report how many people are paying for purchases.
For six years, Norma Talbott has owned and operated a small Frisco jewelry store. In a tough economy she said her sales have been surprisingly stable with the exception of one major change, people are now paying with cash.
For some, life without credit cards has been a way of life for a while. For others, it's a changing mindset brought on by Wall Street woes.
Visa and MasterCard both reported growth in their last quarterly earning statements, but Visa said that growth was due in large part to its debit card business as consumers shift away from traditional credit card spending.
Mike Davis with the Cox School of Business said if the trend sticks it's a good sign that consumers are getting wiser.
"It certainly means people are being more careful, that they're feeling stressed about this economy and they ought to," said Davis.
The thing Davis said would be really concerning is if the economy continues to head south and credit card spending goes up.
Davis said that is an indicator people are in an emergency situation and credit is the only source of money available.
News Source : http://www.nbc5i.com/
Monday, October 6, 2008
Four in the net for Rs 1cr credit card fraud
NEW DELHI: Though just a Class XII pass out, 32-year-old Sajid Ahmed Choudhary is an expert in computers and has allegedly cheated several banks of nearly one crore. The special staff of the south district police arrested Choudhary and his three step-brothers for the crime on Thursday.
According to the police, the gang had set up a fake travel agency called Diamond Tours and Travels. Choudhary used to approach different banks and rent out card swiping machines or EDCs from the bank. Using these machines, they used to allegedly swipe stolen credit cards to transfer money into their account. The police picked them suspecting to be terrorist, however, later found their involvement in a cheating case.
While investigating their links, the police learnt they had duped Citibank, ICICI bank and DCB bank. The first complaint was received from Citibank manager Harminder Mann in Gurgaon.
It was alleged that two persons by the names of - Vishal Verma and Anil Verma - had approached the bank. The duo opened a current account no 0005724284 in the name of Diamond Tours and Travels. Vishal Verma was shown as the proprietor of the firm, which according to the duo was functioning out of G-5, Krishna Complex, main road Nithari, Sector-31, in Noida.
The two had, reportedly, given an address in Ashram as their residence address. They deposited Rs three lakhs and requested for one EDC machine. As proof of residence, Vishal Verma submitted a copy of Passport No. E-0472233 which carried an Ashram address.
‘‘Over the next few months, it was found that several credit cards of different banks were swiped from this machine and money worth Rs 71.5 was credited into the travel agency’s account. Interestingly, all the swiped cards were issued by foreign banks to foreign customers only,’’ said DCP (south) HGS Dhaliwal. Citibank woke up to the fraud only when several of its customers started disputing the charges debited to their credit card accounts and the bank started having disputes with the card issuing banks. ‘‘During the investigation, we found Vishal Verma was actually Sajid Ahmed Choudhary of Mumbai. On Thursday, a team led by inspector Vijay Singh of the special staff conducted a raid and arrested Choudhary along with his three associates,’’ added Dhaliwal.
An expert at hacking, Choudhary revealed he had studied only up to Class XII. While working on the internet, he changes the Internet Protocol address as well as browsers to hide his presence and location. He also, allegedly, creates viruses and uses them to hack the administrative control of the website. His gang had been operating for the last four years. Initially settled in Mumbai, he started placement jobs for Reliance Infocom. He was arrested in 2005 when he hacked a Reliance website. While in jail, he met another fraudster, Kamal Kumar, who advised him on online hacking. After getting bail in the year 2005, he again started cheating.
He was arrested by the Mumbai ATS in January this year on grounds of suspicion and later, was found to be involved in a cheating case. He was released on bail in March. Since then, he shifted base to Delhi. Here, Kamal Kumar, allegedly, had already been operating a fake travel agency using the fake identity of Anil Verma since January.
The other three accused - Shabbir Ahmed, Sabir Ahmed and Shahnawaj - are his step-brothers. The accused were arrested from Madanpur Khaddar on Thursday. Among other things, Rs 7.5 lakhs, 28 credit cards of different banks and three card swiping machines were seized. Meanwhile, a police remand for eight days has been sought for the accused.
News Source : http://timesofindia.indiatimes.com/
According to the police, the gang had set up a fake travel agency called Diamond Tours and Travels. Choudhary used to approach different banks and rent out card swiping machines or EDCs from the bank. Using these machines, they used to allegedly swipe stolen credit cards to transfer money into their account. The police picked them suspecting to be terrorist, however, later found their involvement in a cheating case.
While investigating their links, the police learnt they had duped Citibank, ICICI bank and DCB bank. The first complaint was received from Citibank manager Harminder Mann in Gurgaon.
It was alleged that two persons by the names of - Vishal Verma and Anil Verma - had approached the bank. The duo opened a current account no 0005724284 in the name of Diamond Tours and Travels. Vishal Verma was shown as the proprietor of the firm, which according to the duo was functioning out of G-5, Krishna Complex, main road Nithari, Sector-31, in Noida.
The two had, reportedly, given an address in Ashram as their residence address. They deposited Rs three lakhs and requested for one EDC machine. As proof of residence, Vishal Verma submitted a copy of Passport No. E-0472233 which carried an Ashram address.
‘‘Over the next few months, it was found that several credit cards of different banks were swiped from this machine and money worth Rs 71.5 was credited into the travel agency’s account. Interestingly, all the swiped cards were issued by foreign banks to foreign customers only,’’ said DCP (south) HGS Dhaliwal. Citibank woke up to the fraud only when several of its customers started disputing the charges debited to their credit card accounts and the bank started having disputes with the card issuing banks. ‘‘During the investigation, we found Vishal Verma was actually Sajid Ahmed Choudhary of Mumbai. On Thursday, a team led by inspector Vijay Singh of the special staff conducted a raid and arrested Choudhary along with his three associates,’’ added Dhaliwal.
An expert at hacking, Choudhary revealed he had studied only up to Class XII. While working on the internet, he changes the Internet Protocol address as well as browsers to hide his presence and location. He also, allegedly, creates viruses and uses them to hack the administrative control of the website. His gang had been operating for the last four years. Initially settled in Mumbai, he started placement jobs for Reliance Infocom. He was arrested in 2005 when he hacked a Reliance website. While in jail, he met another fraudster, Kamal Kumar, who advised him on online hacking. After getting bail in the year 2005, he again started cheating.
He was arrested by the Mumbai ATS in January this year on grounds of suspicion and later, was found to be involved in a cheating case. He was released on bail in March. Since then, he shifted base to Delhi. Here, Kamal Kumar, allegedly, had already been operating a fake travel agency using the fake identity of Anil Verma since January.
The other three accused - Shabbir Ahmed, Sabir Ahmed and Shahnawaj - are his step-brothers. The accused were arrested from Madanpur Khaddar on Thursday. Among other things, Rs 7.5 lakhs, 28 credit cards of different banks and three card swiping machines were seized. Meanwhile, a police remand for eight days has been sought for the accused.
News Source : http://timesofindia.indiatimes.com/
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