Time to buy bank shares?

There is one way to profit from banks’ bumper profits – buy shares in them. A couple of months ago few pundits would have been recommending investors pile into the financial sector, after all Northern Rock and Lehman Brothers had collapsed completely, RBS had to be bailed out by the Government, HBOS was forced into an humiliating merger with Lloyds TSB, who then subsequently needed Government assistance – and dividend payments were cancelled virtually across the board. Banks were at the sharp end of the financial crisis, were leading the stock market south.

But as some of the profits posted this week prove, fortunes can be made – as well as lost – quickly.No one is suggesting investors should buy bank shares indiscriminately. As the results from Northern Rock, Lloyds TSB and RBS prove it is a pretty mixed bag. And those banks in which the Government still owns a large stake – such as RBS – are unlikely to start to paying dividends any time soon.

Nic Clarke, a banking analyst at stockbrokers Charles Stanley said: “We are more positive on HSBC and Standard Chartered, which also unveiled excellent results this week.”

At the other extreme are RBS and Lloyds, which the broker rates as a “hold”. Given the problems with these banks Mr Clarke is not recommending investors buy into these banks. But he added: “If you already hold these shares there seems little point in selling now.” He points out that the share prices in both banks has risen fourfold since their low.

Graham Spooner, an investment adviser at The Share Centre said these are promising results “but it is not all good news”. He points out that profits at Barclays UK retail arm have fallen significantly, while the bank’s bad debts continue to rise. Meanwhile HSBC is also suffering from hefty losses in the US, although its Far East operations continue to perform well.

As a result he says he would only recommend Barclays shares, and then only to higher risk investors. For low-to-medium risk investors he says both Barclays and HSBC remain a “hold”.

How to profit from your bank

Banks are moving back into the black, with both Barclays and HSBC posting multi-billion pound profits this week.

In part, this return to profitability has been driven by many banks offering far less competitive deals to their customers.

Not all banks are sitting so pretty: Northern Rock and Lloyds for example are still squarely in the red. But here, too, there are fears that banks are trying to repair their balance sheets by squeezing more profit from consumers.

Borrowing rates across all banks have remained stubbornly high and most people trying to secure a mortgage, personal loan or credit card will find rates higher than a year ago, particularly if they have a less than perfect credit score.

In particular, banks stand accused of exploiting home owners looking for the security of a fixed-rate mortgage. According to Moneyfacts, the financial data provider, the profit margins on these deals now stand at a 20-year high.

It is a similar picture with credit cards. Today the average APR rate is 18.1pc – up from 17.4pc a year ago – despite the fact that interest rates have fallen from 5pc to 0.5pc over this period.

Banks are not only getting more parsimonious about what they are prepared to lend, they are also paying far stingier rates of interest on money deposited with them.

Current accounts are a prime example. Today the vast majority of current accounts (83pc) pay less than 0.1pc interest on credit balances – again according to Moneyfacts. A year ago only about half (57pc) paid such a low amount. Worse still, nearly half of accounts today (49pc) pay no interest at all on money held in a current account. This is a sharp increase from a year ago, when only 19pc of current accounts did not pay interest.

Over this period the average overdraft rates have reduced marginally. But this masks the fact that a number of better-paying accounts, including the one offered by Nationwide BS, have recently had their rates raised.

Savings accounts are also paying less. A year ago the average easy access rate was 3.73pc; today it is a meagre 0.75pc; although this is mainly due to the dramatic fall in interest rates, rather than profiteering from banks.

With the gaps between savings rates and borrowing rates widening, it is not very hard to see how banks are making money.

But savvy customers can beat the banks at their own game. Kevin Mountford of Moneysupermarket.com says: "Consumers can help themselves by ensuring they shop around for the best deals."

As he points out, while many of the products advertised by the big banks offer pretty lacklustre rates, most banks still have one or two "best buys" designed to lure new customers through the door. Often these are "loss leaders", offering short-term introductory rates on which the banks make no money.

Banks make their money from existing customers who have little enthusiasm for moving their money elsewhere.

If you want to profit from the banks, rather than let them profit from you, you need to take advantage of such offers. And once you have secured the right deal, don't be shy about switching again. Loyalty rarely pays in financial services.

Follow our guide to get the current best banking deals on the high street.

Profit from your bank: credit cards

Virgin has the best offer – lasting for 16 months, although there is a fairly typical balance transfer fee of 2.9pc.

Those who intend to use the card for spending should apply for a First Direct or Tesco card – both charge no interest on new purchases for the first year.

Watch out for cards that offer zero interest on both balance transfer and new purchases. If the balance transfer offer is longer you may not be able to clear the cost of "new purchases" until the transferred balance is cleared in full – landing you with unexpected interest charges.

A Guide to Bank Credit Card Applications

A bank credit card is an extremely incredible and convenient piece of plastic with which one can purchase goods and services. An average American now holds up to eight bank credit cards. In order to qualify for a bank credit card, the applicant must be eighteen years of age and should have a good credit history.

U.S. banks offer various types of bank credit cards. After choosing the appropriate bank credit card, the consumer needs to submit a duly completed bank credit card application. An application and processing fee must also be paid along with the application. An individual can apply for a bank credit card online or through the phone. U.S. banks usually send bank credit card applications by ordinary mail, since the consumer is required to sign the applications upon receiving them. When bank credit card applications are transmitted online, there are more chances for fraud.

Most bank credit card applications include personal information about the consumer such as name, age, date of birth, marital status, applicant's current and previous addresses (only when the current address is less than two years), e-mail address, driver's license number, and social security number. To enter the employment details of the applicant, fields such as occupation, employer, position, household income, and source of other income are available. Bank account information is also included in the bank credit card applications. Moreover, the applicant needs to specify whether he is a citizen or a permanent resident of the U.S. If necessary, the details of the co-applicant/spouse are also required to be entered in bank credit card applications.

If the applicant is a student, in addition to the basic personal information, bank credit card applications have fields for entering student status, school name, graduation year, major, and campus telephone.

Once the bank credit card applications are completed and submitted, the bank will verify the details by contacting the consumer in person or through the given telephone numbers. The bank issues bank credit cards only when the consumer proves to hold a good credit record.

Canceling a Bank Credit Card

Nowadays, the trend of making payments with bank credit cards is rapidly increasing. But having too many bank credit cards can create a negative impact on the credit score of the person. If a bank credit card is no longer in use, it is better to cancel it. When a bank credit card is lost or stolen, it is better to cancel the credit card in order to avoid fraudulent use of the card.

Before canceling a bank credit card, one should check whether any balance remains to be paid for the particular bank credit card. Notify the bank about canceling a bank credit card only after paying off the balance amount completely. Otherwise, some banks increase the interest rate if the cardholder tries to cancel while a balance still exists.

Canceling a bank credit card can be done either by sending a letter to the bank or notifying the bank of the cancellation by phone. The request letter should contain the name, address, and account number of the cardholder. Always keep a copy of this letter to avoid future problems. On accepting the request, the bank sends back a notice, either on the same day or the next day. The rewards on the credit card as well as bank machine access stops upon cancellation of a bank credit card. Moreover, the convenience checks issued by the bank are destroyed.

After canceling a bank credit card, the person must get a copy of the current credit report and make sure to verify the credit score. The cancellation of the credit card must be reported correctly in the credit report.

It is always advisable to keep the bank credit card when the person is planning to take a vehicle loan or mortgage. Canceling a large number of unused bank credit cards can also adversely affect the credit score.

Credit cards provides detailed information on Bank Credit Cards, Bank Secured Credit Cards, Bank Student Credit Cards, No Bank Account Credit Cards and more. Bank Credit Cards is affiliated with Banking services.

ATTENTION: Bank and Bank related Frauds!!

Bank and Banking Related Fraud

Cheque Fraud / Check Fraud

Check fraud accounts for yearly losses of at least $815 million, more than twelve times the $65 million taken in bank robberies annually.

Check Kiting

Cheque kiting is when in-transit or non-existent cash is recorded in more than one bank account. The crime usually occurs when a bank pays on an unfunded deposit.

For example, a bum check is deposited into an account. Before the cash is collected by the bank, a check is written against the same account and deposited into a second account, or cashed. The increased use of wire transfers allows this type of scheme to be perpetrated very quickly.

Uninsured Deposits

At least two companies solicit uninsured deposits on the Internet. Netware International advertises itself as a "Constitutional" bank and FocusInternational.com, Ltd., is a West Indies company seeking deposits for an unidentified bank.

They lure depositors by offering high rates of interest, or promising offshore secrecy. Neither company is authorized, supervised, or regulated by any U.S. State or Federal bank or financial institutions regulator. Deposits in these companies do not have the protection of the Federal Deposit Insurance Corporation or any other state or federal deposit insurance.

continue QuickTour

Credit Card Theft and Fraud

One con, while in jail serving a state prison term for credit-card theft, actually perpetrated yet another credit card scam over a seven month period, using a technique that allowed him to hide the fact that he was calling from jail.

He would start off by calling the county-run nursing home saying he was a Bell Atlantic technician and that he needed the person to dial a special code to test the lines. When the person pressed the requested numbers, he would be connected to an outside line that he used to call businesses.

When he called the businesses, he would tell them he was a credit-card representative and that he needed customers' names and phone numbers to verify recent transactions. With that information he then called the cardholders and posed as a credit company employee, saying he needed personal information to check for fraud.

With this personal information and the credit-card numbers, he then requested and received more credit cards with which he made about $25,000 worth of purchases of such things as sports memorabilia, flowers, and gift certificates. He also bought calling cards so he could continue the scam.

Some of the items were given to other inmates in exchange for helping with the fraud while other items were shipped to friends to be held for him until he got out of jail.

Duplication of Card Information - Skimming Scams

Credit card "double scan" machines can copy info from the magnetic strip of your card and create a new duplicate card for which your account will be billed for any purchases. Try to keep your card in sight when possible to avoid this problem.

While card issuers have fraud detection software which picks up unusual spending patterns, smaller purchase "skimming" can be subtle and prolonged, compared to the flurry of spending when a card is stolen outright.

Keep a record of your account numbers, their expiration dates, and the phone number and address of each company in a secure place.

Void incorrect receipts and destroy carbons.

Save receipts to compare with billing statements.

Open bills promptly and report any questionable charges promptly and also in writing to the card issuer.

If you realize they've been lost or stolen, immediately call the issuer. Many companies have toll-free numbers and 24-hour service to deal with such emergencies.

By law, once you report the loss or theft, you have no further responsibility for unauthorized charges. In any event, your maximum liability under federal law is $50 per card. If you suspect fraud, you may be asked to sign a statement under oath that you did not make the purchases in question.

Booster Checks

A booster check is a non-sufficient fund (NSF) check used to make a payment to a credit card account. One group used "booster checks" to "bust out" legitimate credit cards. They used credit card "convenience checks" issued by the banks and credit card companies to inflate their credit card limits; or to "bust out" the credit card to double or triple the established line of credit.

Because banking laws require financial institutions to immediately post credit payments even before the check has been cleared, they would use the window of time between the posting of the credit card payment and the discovery of the bad check to go on a spending spree and purchase, among other things, large amounts of gold coins from legitimate coin vendors.

They would also go to store owners who knowingly aided the bust out scheme, who would "swipe" the credit cards through point-of-sale credit card terminals located at their businesses. While these transactions would appear to be legitimate, no merchandise would actually be exchanged.

Once a credit card company transfers funds to a store owner's bank account, a collusive merchant is able to dispense funds from the busted out credit card. The merchants in this case allegedly issued kickback checks to the card holder for the amount of the transaction, and they would then receive a kickback from the card holder which would amount to a small percentage of the transaction.

The Secret Service estimates the total loss in this one case is between $10 million and $15 million.

Falsification of Loan Applications

While scheming to defraud four banks and a credit union, one con opened checking and savings accounts using a false name and a fraudulently obtained new social security number. He then applied for seven loans for the stated purpose of financing the purchase of motor vehicles.

He also submitted false documents concerning his employment and income, including fake tax returns. By producing fictitious records including motor vehicle appraisals, insurance documents and invoices he obtained approximately $380,000 in loans for the purchase of a 1976 Rolls-Royce Silver Shadow, a 1978 Ferrari model 308 GTS convertible, a 1992 Mercedes-Benz model 300SE, a 1995 Mercedes-Benz model SL320 and a 1994 Mercedes-Benz model 500SL.

He also applied for and was issued multiple credit cards and charge cards. In just seven months he ran up charges leading to losses of at least $460,000.

For example, he used an American Express account to pay $27,000 towards the purchase of an item of jewelry, used an MasterCard to place a $5,000 down payment towards the purchase of a 1955 Mercedes-Benz 300SL Gullwing with a purchase price of $203,000 and a 1964 Ferrari 250GT Lusso convertible with a purchase price of $153,000, and then used the American Express account to pay $320,000 towards the purchase of these two antique automobiles. He also used various VISA and MasterCard accounts to obtain substantial cash advances and used the American Express account to pay $93,600 towards the purchase of a Patek Philippe Moon Phase watch with a purchase price of $95,600.

Laxity of Enforcement

One of the problems with enforcing bank fraud laws is that it is often relegated to a low priority, or ignored altogether, because the activity can span several jurisdictions, involve many unidentified subjects, is non-violent and usually there are few leads.

Normally, the typical bank robber nets $700 and is caught within 24 hours, yet the average check scam involves losses of more than $2,000, the perpetrators are seldom caught, and there are more than one hundred times as many cases as bank robberies. Out of 10,000 cases the losses exceeded $60 million dollars.

Many bank fraud suspects are able to elude arrest by furnishing false identification when cashing stolen, forged, or counterfeited checks. One effort to stop this crime is the "Check Print" program which requires non-bank customers to provide a thumb print, using a clear solution, on the negotiated check for identification purposes. With this positive identification, it has been much easier to identify, arrest, and successfully prosecute bank fraud scams.

Check Security Features

Check manufacturers help deter check fraud by making checks difficult to copy, alter, or counterfeit. Some useful security measures include:

Watermarks. Watermarks are made by applying different degrees of pressure during the paper manufacturing process. Most watermarks make subtle designs on the front and back of the checks. These marks are not easily visible and can be seen only when they are held up to light at a 45-degree angle. This offers protection from counterfeiting, because copiers and scanners generally cannot copy watermarks accurately.

Copy Void Pantograph. Pantographs are patented designs in the background pattern of checks. When photocopied, the pattern changes and the word "VOID" appears, making the copy nonnegotiable.

Chemical Voids Chemical voids involve treating check paper in a manner that is not detectable until eradicator chemicals contact the paper. When the chemicals are applied, the treatment causes the word "VOID" to appear, making the item non-negotiable.

High Resolution Microprinting. High-resolution microprinting is very small printing, typically used for the signature line of a check or around the border, in what appears to be a line or pattern to the naked eye. When magnified, the line or pattern contains a series of words that run together or become totally illegible if the check has been photocopied or desktop scanned.

Three-dimensional Reflective Holostripe. A holostripe is a metallic stripe that contains one or more holograms, similar to those on credit cards. Those items are difficult to forge, scan, or reproduce, because they are produced by a sophisticated, laser-based etching process.

Security Inks Security inks react with common eradication chemicals. These inks reduce a forger's ability to modify the printed dollar amount or alter the designated payee, because when solvents are applied, a chemical reaction with the security ink distorts the appearance of the check.

Cooperation between Check Manufacturers and Financial Institutions

Participating financial institutions can report all checking accounts "closed for cause" to a central database, called ChexSystems. This program prevents people, who have outstanding checks due to retailers, from opening new accounts.

You can use this information before opening new accounts to spot repeat offenders and you can also use MICR information from a check presented with the applicant's drivers license number to check the SCAN file for any previous fraudulent account activity.

The bankruptcy trend

The bankruptcy trend
The number of personal bankruptcy filings in the fiscal year ended Sept. 30, 2003, rose 7.8% from the same period in 2002, reaching 1,625,813, according to the American Bankruptcy Institute (ABI). Thats twice the number of people filing for personal bankruptcy protection in 1993.

The amount of debt as a percentage of personal income tends to track bankruptcy filings, the ABI said. And the amount of debt payments as percentage of income has steadily increased in the last 10 years, according to the Federal Reserve.

Entering the real world
A cap, a gown, a degree, maybe a hangover and an average of $20,000 in debt: Thats what graduating students are leaving college with.

In the 1999-2000 academic year, about 60% of students graduating with a bachelor's degree from a four-year public college took out a federal student loan at some time, with a cumulative average debt load of $16,100, according to National Center for Education Statistics. Thats up more than 36% from the average amount public university graduates borrowed just four years previously.

For students at private institutions facing larger tuition bills, the debt load tends to be even higher. In 1999-2000, about 66% of students graduating with a bachelor's degree from a private institution borrowed an average of $18,000, up more than 27% from the $14,100 they borrowed on average in 1995-96.

Credit card debt among students is also growing at a fast clip. In 2000, 78% of students had a credit history and credit cards, up from 67% a scant two years before, according federal student-loan financier Nellie Mae. The average credit card debt per student jumped to $2,748 in 2000, up more than 46% from the average of $1,879 in 1998. The percentage of students with four or more cards rose to 32% from 27%.

Is there any evidence at all that America's youth is learning some early lessons about debt? Well, it's not much to cling to, but the average number of credit cards per student fell to three in 2000 from 3.5 in 1998.

And yet, if recent history is any guide, the typical student -- rather than paying off that college debt in the working world -- is destined simply to gather more: The average U.S. household with a mortgage, two college graduates who borrowed money for school and more than one credit card, owes about $112,000. And that figure is only expected to rise.

How deep in debt we are?

All Polonius wouldnt have gotten very far in America today. He's the Shakespeare character in Hamlet who warned, neither a borrower, nor a lender be.

Modern society, as we know all too well, is overrun with both borrowers and lenders. But just how big is the typical family's debt? How fast is it growing? How does your mortgage compare to the Joneses next door? And how might consumer debt -- your debt -- affect the U.S. economy?

We decided to look at the most recent numbers and take a snapshot of household debt in the United States, circa 2004. What emerges is a picture that's both familiar and unsettling. Yes, consumer debt -- encompassing credit cards, mortgages, student loans and more -- is growing like a well-fed St. Bernard puppy. No, there's no sign that the growth will slow. Yes, some economists worry about the ill effects, but no, not many of them are sounding urgent alarms.

It's hard not to be worried when confronted with numbers such as these:

About 43% of American families spend more than they earn each year.

Average households carry some $8,000 in credit card debt.

Personal bankruptcies have doubled in the past decade.

It's not clear exactly where the debt trend will take U.S. consumers or the U.S. economy. But it is clear that both are sailing in uncharted waters.

Consumers owe nearly $2 trillion

American consumers owed a grand total of $1.9773 trillion in October 2003, according to the latest statistics on consumer credit from the Federal Reserve. Thats about $18,654 per household, a figure that doesnt include mortgage debt. The number is up more than 41% from the $1.3999 trillion consumers owed in 1998.he majority of consumer borrowing, about 63%, is represented by so-called "non-revolving" debt such as automobile loans. But "revolving" credit, which most typically involves credit cards, is an increasingly significant part of the equation. Revolving debt currently totals $735.3 billion; that's about 31% higher than it was only five years ago. The figure has more than doubled in a decade.

Among the key drivers of debt expansion in recent years:

Unusually low interest rates.

The rising popularity of Internet shopping, in which credit cards are the currency of choice.

The hot housing market, which has encouraged buyers to stretch for new homes.

The aggressive extension of credit to consumers with weak credit scores.

Credit for consumers with fair or poor credit ratings typically comes with higher fees and interest rates, says Lydia Sermons-Ward, spokeswoman for the National Foundation for Credit Counselors. And while that access to capital helps some disenfranchised consumers, the availability of risk-based credit has also greatly increased the amount of debt per household and could lead to more financial problems for families, Sermons-Ward says.

There is a tendency for consumers to take advantage of credit offers without really thinking through the consequences of overspending, she says.

Just one word: plastics

The average amount of credit card debt in households with more than one card is now more than $8,000, according to CardWeb.com. Thats 167% more than the $3,000 average for households in 1990.The average American has 2.7 bank credit cards, 3.8 retail credit cards and 1.1 debit cards, for a total of 7.6 cards per cardholder, CardWeb.com said. About 18% of all personal consumption expenditures in the country are made on bank credit cards. Add in retail cards and debit cards and the figure rises to 24%.

The most unsettling aspect of all these credit card transactions is that many Americans dont see their income as a spending cap. About 43% of U.S. families spend more than they earn, according to a Federal Reserve study. And on average, Americans spend $1.22 for every dollar they earn, according to Myvesta.org.

Are high debt levels threatening to dampen consumer spending, which accounts for about two-thirds of the U.S. economy? Bank One Chief Economist Anthony Chan says decidedly yes. He flatly predicts that consumers will spend less in 2004 because of the amount they are borrowing.

Household liability as a percentage of disposable income is at its highest level ever in the United States, Chan said. Yes, its too high. Next year consumer spending will probably lag growth in real GDP by a percentage point or even more.

To make up for the effect of the high debt burden, job growth will have to soar, he says. We need to see employment picking up and wages picking up before we see the consumer being able to avoid the impact of the high level of consumer credit.

The mortgage rush
Mortgage debt is the next major piece of the debt picture. In fact, the amount owed on mortgages dwarfs the amount owed on credit cards or other loans. The average principal amount owed on a mortgage is $69,227. Nearly 14 million homeowners, about 19% of all homeowners in the country, owe more than $100,000.

American Housing Survey 2001

National Northeast Midwest South West Median years left on mortgage 29 29 28 29 29 Median outstanding principal $69,227 $70,516 $58,966 $59,848 $102,264 Median total loan as % of value 56.40% 50.30% 55.60% 59.80% 57.40% Median cash received in primary mortgage refinance $24,513 $27,839 $19,362 $21,219 $28,431 Number of homeowners with 3+ mortgages 1,008,000 220,000 265,000 301,000 222,000

Source: U.S. Census Bureau

Because of historically low interest rates -- often below 6% for 30-year loans -- many homeowners have been overborrowing, says Mark Zandi, chief economist at Economy.com. Debt loads were already onerous, and they have been borrowing very aggressively in recent years, he says.

Other strategies for debt elimination: 10 steps to elimination

All it takes to fall behind on credit card payments is one month of expenses that exceed your ability to pay. Suddenly, you're in debt. Many people feel overwhelmed at the first sign of trouble. After all, how do you pay bills with money you don't have?

Kerry York, executive director of the nonprofit Consumer Credit Counseling Service of New Hampshire and Vermont, says, "Half of our clients who seek debt counseling are new to this type of financial hardship, and they are embarrassed and uncomfortable. The worst thing someone in debt can do is ignore it." Fortunately, there are constructive steps you can take to turn your finances around.

Prioritize.

Organize your bills so you can see exactly how much you owe and who your most important creditors are. Personal debt is confusing enough without having to deal with paper overload. Unless you are crystal-clear about what you owe, it's easy to continue spending money.

Make a solid plan for attacking your debt.

List everything you owe and the corresponding interest rates you are paying. Pay the most important debt first. Then pay off the debt that carries the highest interest rate. What you're aiming to do is eliminate the debt with double-digit interest rates.

Keep only one or two credit cards.

Remember, every time you use a credit card you are in effect borrowing money. The more cards you carry, the more confusion you'll have when it's time to pay your bills, particularly if you forget which credit card you used.

Also, consider asking your credit card company to lower your interest rate, especially if you have a history of paying your bills on time. You'll never know unless you ask.

Make your payments promptly.

Try paying off as much as you possibly can every month. Always pay more than the minimum amount you owe, even if it's a small amount. When you pay a card off entirely, close the account and have a little ceremony as you cut the card in half. The satisfaction is hard to beat. Financial expert, Suze Orman says, "Once out of debt you'll find the pleasure of not creating debt far exceeds the momentary thrill of buying something on credit that you don't really need, can't afford, and won't really care about much beyond the time you get it home."

Cut out luxuries and extra items you can live without.

When tempted to spend money on an item or service you want but may not need, remind yourself of all of your monthly obligations such as mortgage or rent, food, health care and transportation expenses, and the temptation should pass.

If you own a home, look into a home equity loan or line of credit.

You can't borrow your way out of debt, but using an asset like your home is essentially borrowing money from yourself. The interest on a home equity loan or line of credit is generally deductible at income tax time, and you can benefit from the savings.

You should only take out a home equity loan, however, if you are determined to remain debt-free, according to experts. You don't want to run up new debt after you use a home equity loan to pay off the old balance. Since the equity in your home may represent your single largest asset, you might also want to consider refinancing your existing mortgage. There are costs involved, but interest rates are at near-record lows and the overall savings may be worth it.

Borrow from family or friends.

This option makes sense if they can lend you money at a low rate of interest. But more than any other debt-reduction technique, this requires an accurate paper trail to determine how much money you've borrowed and from whom. You will also need to adhere to your agreement. Consider this option only if you are willing to do what it takes to make regular payments until the debt is satisfied.

Renegotiate the terms of your loans with your creditors.

Getting your creditors to rework the terms of your loans is sometimes possible. "Most creditors have heard every sad story in the book and are forced to be pretty hard-hearted," says Mike Whitten, senior counselor at the nonprofit Consumer Credit Counseling Service of Mid-Oregon in Eugene. "Having an impartial third party negotiate for you often gets results. Sometimes creditors will lower the interest rate on a loan just to show support for the debtor and to assure that payments are on time."

Borrow against your life insurance or the savings in your 401(k) account.

Both options offer fast results but carry risk. Again, you are borrowing your own money but with high penalties in case of default. If you borrow against your life insurance and fail to pay your premiums, your policy will lapse. Most 401(k) loans must be paid back within 5 years. If you leave your job before then, you must pay off the entire loan balance at once or you'll pay income taxes and a 10% penalty on the outstanding balance. In addition, your new contributions will be used to reduce the loan, not add to your savings.

Get help.

This sounds simple but most people are not sure where to go when debt has them over a barrel. Professional debt counselors can help you strategize and negotiate lower interest rates. They can also simplify the process of paying down your debt by consolidating your payments into one. This way, your payment is made to the debt-counseling firm, which then disburses it to the various creditors. For information on finding a debt counselor, try nonprofit organizations like the National Foundation for Credit Counseling at www.nfcc.org or GreenPath Debt Solutions at www.greenpath.com.

How to eliminate debt in seven easy steps?

You finally have a good job and a great salary; it's time to start setting some money aside for the future. Unfortunately, no matter how hard you try, you just can't seem to save enough cash to open even a simple savings account.

The problem is that you're stuck knee-deep in debt, and every penny that goes into your pocket comes right out to pay the interest.

Not only are your debt levels not dropping, they're rising. And you're already contemplating borrowing more money just to pay the interest on your current debt. What can you do when there is no end in sight? Follow these seven steps; not only will you reduce your debt, you'll eliminate it.

1. Use common sense

The best way to reduce your debt load is to use some common sense. The No. 1 reason people have so much debt is because of how easy it is to obtain and use credit.

People fail to realize how much they have already spent, and before they know it, they're maxing out their credit cards on a monthly basis. The best way to know just how much money you are spending is to pay for everything in cash.

This means using credit cards only for emergency purposes, such as unexpected car expenses and medical emergencies. By paying with cash, you will gain a higher appreciation for every hard-earned dollar.

2. Stop impulse buying

If you want to freeze your debt, you must freeze your spending, especially if you don't have the income to support such high levels of debt.

If you continue incurring more debt, you soon won't even have enough funds to pay for the interest. So unless it's an emergency, stop making impulse purchases.

3. Develop a plan

There is an old saying in the financial world: If you fail to plan, you plan to fail. This advice applies to everyone, including family households.

Start by developing a road plan that will take you to debt-free zone. You need to know how much your total debt is and how long it will take you to pay it off given your current payment plan.

The next process involves establishing a budget. List all your revenues and keep track of your expenses. This will give you a better idea of how much money is coming in, how much money you're spending on different activities, and whether or not you can sustain your current spending habits.

Once you know exactly how much you're spending, it's time to cut back on unnecessary expenses.

Take a close look at each expense and determine which ones can be eliminated. You can then use that extra money to lower your debt.

Cutting back takes a lot of willpower. If you find it difficult to do so, I suggest you set up expense jars. They work in a very simple manner: Set up a jar for each main activity, such as movies, clubbing, restaurants, fast food, gas, and so on.

Every month, put cash into each jar according to your budget. Once the money is gone, stop that particular activity. If there is money left over, apply it to reducing your debt. As rudimentary as it may seem, this technique works wonders.

4. Research money-saving options

Look for money-saving opportunities like low interest rates and credit card offers. Before settling down with a creditor, shop around. Most people are afraid of banks; they think that it is still as hard to get a bank loan as it was in the early '50s. But today, most creditors are eager to lend you money. Don't be afraid to negotiate the rates.

If you don't have time to shop around and compare lending rates, you can always check out BankRate.com. You'll get an instant look at the average rates on various types of cards, as well as links to the best credit card deals.

Carefully look at these different plans. Some credit cards allow you to cut your interest in half simply by paying an annual fee of $20. Imagine that: You pay $20 once a year and your annual interest rate gets cut from 18% to 9%.

5. Take action

Don't be lazy. Formulate your money-saving plan today and follow it to a tee. Just because you know the way home doesn't mean you'll actually get there until you take action.

Most people do develop a debt management strategy. The only problem is that they forget or don't have the willpower to go through with it. Discipline is key, so get ready to whip yourself out of debt.

6. Don't close credit card accounts

When you close your credit card accounts, you reduce your options. As long as your current credit card companies aren't charging you any fees for inactivity, it's in your best interest to hang onto your accounts.

The problem with closing accounts is that you're at the mercy of whatever credit cards you decide to keep. That's the equivalent of having to shop at one store no matter how good the prices are elsewhere.

Plus, when credit card companies notice that you're not using them anymore, they'll generally send you an offer that saves you money.

Always keep your options open and be ready to switch banks once you get a better offer.

7. Always pay on time

The worst thing you can do is make late payments. If you let the deadline pass, you'll pay interest on the full credit card balance as of the purchase date.

The late fees hurt you immediately and would be better used to reduce your debt. They're also a strike against your credit rating and future bargaining power.

By paying late, you also diminish your chances of getting the best rates and deals on a car loan or a mortgage. In the long run -- especially in the case of a mortgage -- that kind of negligence can cost you thousands of dollars.

LIVE DEBT-FREE

Debt management is an important duty. Use common sense and willpower to control your spending habits. Shop around for the best rate before settling with just any credit plan and always pay on time. Remember that knowing is only half the battle.

Creditmagic.org- helping you bild up credit

In this crisis time creditmagic.org with its credit repair service perfectly fits in. Credit repair service (bad credit repair service) is what helps you get rid of negative items on your credit report. It starts off with a free consumer credit counseling service. Herein credit counselors analyze your credit situation and identify your credit problems so as to provide you with credit repair help (credit help).

With credit repair help, fixing negative items on your report gets easier. There are counselors/experts who negotiate with creditors and credit bureaus in order to remove collections, charge offs, late payments on your report. The purpose is to repair credit and ensure that you can improve your score. This actually helps you to qualify for loans and credit at better rates and terms.

While you take advantage of consumer credit counseling service and credit repair help, the credit counselors assist you in 4 ways.

1. Identify mistakes: The counselors help you identify past credit mistakes and repair credit.
2. Credit clean up advice: The counselors offer credit clean up advice through free credit counseling and forum discussions.
3. Counseling to manage debt: You get free consumer credit counseling advice on how to manage your debts better and avoid negative items being reported on your credit report.
4. Emergency credit repair: You get emergency credit repair tips so as to build credit fast. This will help you to qualify for loans in case you need financial assistance to tackle money problems.

While experts offer credit repair help, here is a list of articles to help you understand why it's important to build credit and how you can protect your credit by use of credit laws and consumer rights.

LINK: www.creditmagic.org

Common features of Debt Management Programs

After joining a DMP, the creditors will close the customer's accounts and restrict the accounts to future charges. The most common benefit of a DMP as advertised by most agencies is the consolidation of multiple monthly payments into one monthly payment, which is usually less than the sum of the individual payments previously paid by the customer. This is because credit cards banks will usually accept a lower monthly payment from a customer in a DMP than if the customer were paying the account on their own. Some DMPs advertise that payments can be cut by 50%, although a reduction of 10-20% is more common.

The second feature of a DMP is a reduction in interest rates charged by creditors. A customer with a defaulted credit card account will often be paying an interest rate approaching 30%. Upon joining a DMP, credit card banks sometimes lower the annual percentage rates charged to 5-10%, and a few eliminate interest altogether. This reduction in interest allows the counseling agencies to advertise that their customers will be debt free in periods of 3-6 years, rather than the 20+ years that it would take to pay off a large amount of debt at high interest rates.

A third benefit offered by credit counseling agencies is the process of bringing delinquent accounts current. This is often called "reaging" or "curing" an account. This usually occurs after making a series of on-time payments through the debt management program as a show of good faith and commitment to completion of the program. For example, a client with an account with a monthly payment of $50 which has not been paid in two months might be considered by the creditor to be 60 days past due. After joining the DMP and making three consecutive monthly payments, the creditor could reage the account to reflect a current status. Thereafter the monthly payment due on the statements would be the monthly payment negotiated by the DMP, and the account report as current to the credit bureaus. This process does not eliminate the prior delinquencies from the credit bureau reports. It merely gives a fresh start and an opportunity for the client to begin building a positive credit history. Like all derogatory credit information, the passage of time will lessen the impact of the negative marks when credit scores are calculated.

Many educational facilities have begun to incorporate credit practice into the curriculum. Schools have been incorporating the Charge Large Board Game. Players or students now learn and practice using credit paying-off in cash. The different level credit cards and upgrading system (in the Charge Large game) makes for an incentive for players to use their credit card and paying them off in full. It is said by 2011, the Charge Large Board Game will be in 70% of colleges practiced during orientation and in the classroom setting. In addition, by 2011, the Charge Large Board Game will be in 65% of high schools throughout the United States. Therefore, students receive credit counseling prior to receiving any form of credit.

Are you in danger? Can you control your credits? What do you need to watch out for? Check it!

So let's make this clear: If you're able to pay your bills and are current on all your accounts, you almost certainly don't need credit counseling. If your interest rates are too high, you usually can negotiate a lower rate with your credit-card companies just by asking -- or threatening to move your account elsewhere.

Here's when you might think about full-scale credit counseling:

• You can't pay the minimums on your credit cards.

• You're consistently late paying one or more of your regular bills.

• You're being hounded by creditors and collection agencies.

• Your efforts to work out reasonable repayment plans with your creditors have failed.

Be warned: If you're too far in debt, credit counseling may not be able to help. There are limits to how little your creditors will accept, and a credit counseling service may not be able to cut your payments enough to either give you breathing room or get you out of debt. If that's true, bankruptcy may be the best of bad options.

Your payments also shouldn't stretch on for years. The typical plan takes two to four years to complete. Responsible credit counselors say bankruptcy is usually the better option if the repayment would take more than five years.

WHAT TO WATCH OUT FOR?

Once you've decided you want credit counseling, you should investigate the company or service carefully before signing up. Red flags to avoid include:

Big upfront fees. Consumer Credit Counseling Services typically charge a $10 set-up fee. If you're paying a lot more, you may be the one who's getting set up, unless you're getting extensive and personal money coaching that could justify the fee.

No accreditation. Legitimate credit counseling firms are affiliated with the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies.

Delayed or missing payments. Some companies pocket your first months' payments as a fee, rather than passing the money on to your creditors. Missing payments can hurt your credit rating. Find out how much of each monthly payment is going to your creditors, and when it will be sent to them.

Unrealistic promises. Some companies falsely promise that you can settle your debts for little or no money, without hurting your credit rating. Legitimate credit counseling services help you pay back what you owe, albeit at lower interest rates, and acknowledge there may be some affect on your credit rating and ability to obtain new credit.

Who needs credit counseling?

Obviously, all these outfits are finding plenty of eager customers. Americans' debt loads have been running at record levels, and bankruptcies are high.

It's hard to get an accurate bead on how many people signed up for debt repayment plans through credit-counseling services. Of those in debt repayment plans, said Lydia Sermons-Ward, spokeswoman for the National Foundation for Credit Counseling, about half were expected to successfully complete their plans. The other half were expected to drop out, with some of those filing for bankruptcy.

Typically, counseling services negotiate lower payments with credit-card companies and other lenders, then make the payments using a check or electronic funds transfer sent to them by the consumer each month.

Most of the counseling services' fees are paid by the lenders themselves, which send back to the services a portion of the payments received. This has led some critics to charge that credit counseling is just a tool of the lending industry.

The payment system, known as "fair share," has certainly encouraged the growth of credit counseling services. And some agencies, driven by competition, are now openly courting consumers who haven't fallen behind on their debts by promising lower interest rates. This development has angered credit-card companies and often hurts consumers, who may find out too late that such plans can hurt their credit ratings and are often unnecessary.

How to choose a credit?

Bank credit has to do with the amount of funds that an individual or a business may be able to borrow from one or more lending institutions. In effect, bank credit is a measure of how much in the way of cash loans may be issued, based on the credit history and the assets of the company or person. Here is some information about how bank credit works, and why knowing your bank credit rating may be very important.

Because bank credit focuses on the borrowing capacity of the individual or business entity, the premise is a little different than the extension of a line of credit. First, bank credit has to do with loans that are taken out for specific purposes, rather than general purposes. Second, they often involve some sort of collateral that helps to ensure the repayment of the loan in the event of default.

A basic philosophy of the banking system is that when money is loaned out, there must be a reasonable expectation of repayment of the loan, plus interest. This means that looking at the overall financial status of the applicant is important. Assets such as property, savings and stock accounts, current indebtedness, employment status and annual net salary or wages, and overall credit rating are all components that factor into determining the bank credit of the applicant. This is a far more comprehensive approach than is normally used for the issuing of a credit card.

Understanding the importance of bank credit often becomes apparent when applying for a mortgage to finance the purchase of a new home. Depending on the overall financial health of the prospective homeowners, there may or may not be a sufficient level of bank credit to allow the approval of the mortgage. This may be true even if the applicant can demonstrate a steady source of income and is not in arrears on any current financial obligations.

There are some ways to improve a bank credit rating. First, look at credit card debt and eliminate it if at all possible. Also, cut down on the number of open credit card accounts. The combined worth of your lines of credit will impact your bank credit rating. Fewer credit cards means less potential to incur large balances that would hinder repayment of a loan or mortgage. Keep one or two credit cards and pay them off each payment cycle. This maintains a healthy credit record and will reflect favorably on your bank credit and will increase your borrowing power with your local financial institution

What is bank credit?

The borrowing capacity provided to an individual by the banking system, in the form of credit or a loan. The total bank credit the individual has is the sum of the borrowing capacity each lender bank provides to the individual.

Description

This section is from the book "Banking, Credits And Finance", by Thomas Herbert Russell. Also available from Amazon: Banking, credit and finance (Standard business).

Practical Features Of Bank Credits

We are a practical people who are more given to consideration of improving our methods than to reflection upon our existing greatness or that of our predecessors. For that reason I have up to this time devoted your attention to progress in methods and means of credit research. I will now turn your attention to some practical features of the business we are doing based on bank credits. I have been much interested in determining the relative volume of bank loans on commercial paper to the various classes of borrowers. While this relation undoubtedly fluctuates widely it is my conclusion that the following statement reflects about the average condition:

Per cent

Commercial loans by banks to manufacturers . .......50

Commercial loans by banks to commission men .....15

Commercial loans by banks to jobbers........30

Commercial loans by banks to retailers........5

This was ascertained from the distribution of 186 different loans, aggregating upward of thirteen million dollars. The average distribution of some sixty million dollars of loans placed through brokers in New York gave the following relative proportions:

Per cent

Commercial loans through brokers to manufactures...........................................................................45

Commercial loans through brokers to commission men........................................................................15

Commercial loans through brokers to jobbers ....30

Commercial loans through brokers to retailers ...10

The striking preponderance of loans from banks to manufacturers is evident from both of these statements. It becomes of interest to us, then, to study further these various classes of borrowers, and I have prepared from the statements of some one hundred concerns a set of typical balance sheets that will bring before us some credit features, which it will be of profit to us to study with care.