Take care of your credit, and credit card companies will want to take care of you.

Banks have put together some hard-to-find credit card offers to attract consumers with high FICO scores. If you’ve built a strong credit history, you can earn unusually high cash back rebates, travel perks, and low interest rates on balance transfers. According to CardRatings.com, five credit cards rank highest at offering great perks to consumers with excellent credit:

1. Discover More Card–Over the past few years, Discover Card has made some of the boldest moves to attract more consumers with high credit scores. Earn this card, and you can enjoy a zero percent balance transfer for 18 months with just a 4 percent transfer fee. During your first six months with the card, you’ll pay no interest on purchases while earning between 1-5 percent in Cashback Bonus rewards.
2. Simmons Visa Platinum–You’ve probably never heard of Simmons Bank, and they’re probably okay with that. Simmons saves its credit card invitations for consumers with the very highest credit scores. Apply via one of their credit card applications online, and you can surf your other debt to a Visa card with an APR as low as 7.25 percent and no balance transfer fee.
3. Fidelity Investment Rewards American Express Card–One of the best cash back credit cards on the market requires you to maintain a brokerage account at Fidelity Investments. If your FICO score tops 700, you probably already do business with Fidelity, anyway. You’ll need to ask for an invitation to Fidelity’s version of the American Express Card, which will drop 2 percent of everything you spend into a tax-deferred investment account.
4. PenFed Visa Platinum Cashback Rewards Card–Another perennial candidate for best cash back credit card, PenFed designed this Visa card to help military families manage their finances while earning rebates on everyday purchases. If you’re not in the service, that’s fine. Join an associated non-profit organization to show your support for our soldiers, and you’ll qualify for membership in this innovative credit union.
5. Capital One VentureOne Rewards Credit Card–You’ve seen the television ads, but a high FICO score can get you invited to one of Capital One’s best-ever balance transfer offers. With no balance transfer fee, 0 percent APR, no annual fee, and no foreign transaction fees, this special edition of the Venture Visa card gives unprecedented flexibility to travelers who like earning bonuses without being tied to a single hotel chain or airline.

Earning the best credit cards requires strong FICO scores
Because you’ve got to have a high credit score to qualify for any of these credit card offers, follow these tips to improve your financial profile:

• Start small. A department store or gas station card can help you kick start your credit history. Build a solid track record by charging routine transactions, then paying your bill each month.
• Watch your percentages. Pretend your credit limit’s only about 30 percent of what it says on your statement, then keep your balance close to that pretend threshold on every account.
• Restrain yourself at checkout. Retail credit cards can pinch your credit score if you apply for too many, too quickly. To credit bureaus, you could look like someone whose identity has been stolen. Or, you could just look desperate for quick credit.
• Stay loyal to your first credit cards. Cancelling an account can reduce the history of your credit file. A high score often requires hanging on to the oldest card in your wallet.
• Track your scores. While you won’t see much change from day to day, many websites now offer free FICO score reports or similar free credit scores that update every few weeks. Just understand the distinction between a report that’s truly free and one that requires a paid membership to an affiliated service.

Over time, once you’ve earned one or two of the excellent credit cards on this list, you can rebalance your wallet to include just the accounts that give you the best rates and the best perks. Until then, use your credit cards responsibly and regularly to make yourself an attractive future cardholder.

Joe Taylor Jr. is an internal business consultant for a Fortune 500 company, who writes about finance, culture, and design. He holds a Bachelor of Science in Communications from Ithaca College.

Image: Michelle Meiklejohn / FreeDigitalPhotos.net

Source URL: Top 5 credit cards for consumers with excellent credit

Copyright Protected © 2011 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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Broker ages

I have an uncle who’s a multimillionaire. And he’s always talking about the latest call he’s received from his broker. When I was a kid, I somehow pictured the person who called him as a thin, elderly gentleman with parchment-thin skin, wearing a morning coat and wing collar, like one of those plutocrats that they used to feature in 1930s Hollywood movies.

But I was wrong. Even when I was a little boy, brokerages employed thrusting young people who were as far away from the top hat stereotype as you could get. And you can get a lot further now. Because today there are two sorts of brokerages: those that provide proactive, personal service and advice to high net worth individuals such as my uncle, and those that offer do-it-yourself online trading environments that are open to everyone.

Discount brokers

Traditional brokers call up clients with hot tips and recommendations that supposedly provide investors with an inside track. But that comes at an eye-watering price, and it’s not at all clear that their record of spotting likely winners is as good as they sometimes claim.

Discount brokers often have the same information online that their traditional counterparts offer, but it’s up to you to dig it out, and act upon it. The good news is that their fees are a tiny fraction of those changed in the high-end part of the brokerage market. So now the question is: which of the online discount brokers is best for you?

Discount brokers and lists

Back in March 2010, Barron’s published its rankings of the best online brokers. Then, just two months later, SmartMoney published a very similar survey. But if you look at each publication’s top five, there’s not a single firm that appears in both. How can that be?

Well, they differed in their views of what makes the best online brokerage the best. So let’s try to cut through all that, and come up with our own list. But, first, some basics.

Best online brokerages–but not necessarily for you

When Barron’s was picking its 22 best online brokers, it used eight criteria:

1. Trade experience
2. Trading technology
3. Usability
4. Range of offerings
5. Research amenities
6. Portfolio analysis and report
7. Customer service and education
8. Costs

Together, these form a reasonable basis on which to make a judgement, but you probably don’t need to worry about them all. A while back now, one of my colleagues wrote a piece on this site on this very topic (Review of the Best Online Discount Brokers), and very wisely pointed out that you can’t choose your best online broker until you identify what you personally want from it.

For example, if you plan to trade only in stocks, you don’t care about a company’s range of offerings. If your investments are likely to remain few, you’re less likely to worry about your broker’s sophisticated portfolio analysis. And if you are only going to buy on the basis of your millionaire uncle’s tips (okay, I’m projecting here), then why be concerned about a site’s research facilities?

Best online brokerages getting better

If you’re thinking of getting into online trading, now could be a great time to start investing. The last few years have seen discount brokers upping their games, particularly in the areas of customer service, research facilities and new technologies–including mobile trading platforms.

Most importantly, some of the best online brokers have also been slashing their prices. For instance, SmartMoney says that Charles Schwab cut its commissions by more than 30 percent between 2009 and 2010, while Fidelity’s plummeted by up to 60 percent.

Best online brokers according to Barron’s

Here’s Barron’s pick of the top-five best online brokerages. Bear in mind that these all scored extremely highly, so variations are often tiny, and criticisms sometimes close to nitpicking.

1. Thinkorswim. Great all-rounder, but particularly strong for trading technology, research amenities and the trading experience. Not so good for costs.
2. MB Trading. Gets the same star rating as thinkorswim; slightly worse in some respects, but better on costs and usability.
3. Interactive brokers. High scores in most areas, but let down by usability, and portfolio analysis and reporting.
4. TradeStation Securities. Respectable performance across the board, though a more limited range of offerings.
5. OptionsXpress. Some very high scores, but not great trading technology and more expensive than the others in the top five.

Best online brokers according to SmartMoney

The same caveat applies to SmartMoney’s pick of the top-five best online brokerages as to the Barron’s list. These are among the best of the best, so scores may vary very little.

1. Fidelity. Inexpensive, wide range of products, great tools and attractive banking services. Top scores in every area.
2. E-Trade. Higher commission than Fidelity, and slightly weaker in its research services and range of products.
3. TD Ameritrade. Same commission as E-Trade, and same top scores across the board as Fidelity, except in respect of banking services where it is weaker.
4. Charles Schwab. Lower commission than E-Trade and TD Ameritrade, but higher than Fidelity. Strong all-rounder, but let down by trading tools.
5. TradeKing. Very low commission (less than half that of E-Trade and TD Ameritrade), but fewer banking services, and less good product range and research than the others in this top-five.

Our own best online brokerages list

Okay, I promised you our own list of the best discount brokers. So here goes. It’s been compiled by merging the SmartMoney and Barron’s lists, and identifying the ones that stand out

1. Fidelity. Cheap and very, very good. The one to beat.
   
2. TradeKing. Great for budget-conscious users who don’t need too many bells and whistles.
   
3. TD Ameritrade. May be perfect if you aren’t interested in additional banking services.
4. E-Trade. An impressive all-rounder.
5. Charles Schwab. Could be the top pick if you don’t need sophisticated trading tools.
   

Actually, I might just forward that list to my uncle. He could save a fortune in brokerage fees.

Peter Andrew has been writing about–and for–business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.

Source URL: 3 top lists of the 5 best online brokers

Copyright Protected © 2010 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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The Chinese Revolution

If you are like me, when you think about China you almost get dizzy. It’s hard to imagine over one billion people living in a country with a market for goods and services that is literally exploding as the country modernizes. By 2014 the International Monetary Fund estimates that over 10 percent of the world’s GDP will be accounted for by China. Now that’s an economic revolution.

You just can’t help but wonder what kind of investment opportunities exist in China for individual investors like us?

Should you invest in China?

Before we discuss investment strategies, we should consider if it’s unpatriotic to invest abroad. My answer is a simple no. First of all, if you invest in China and earn dividends or take profits, that money comes right back to the United States. Also, in the global economy countries rely on each other. We need the Chinese to keep buying our foreign debt and they need us to keep buying their goods.

China has a lot of long-term economic potential. This means that the earlier in your life you can start investing in China, the better off you may be. Even just a few dollars from your monthly paycheck could mean a big payoff at retirement if growth in China is as strong as projected. If you have an IRA account, investing in China may be even more advantageous due to the tax advantages and the power of compounding returns.

3 easy ways to invest in China

MoneyBlueBook has found a few good ways that you can invest in China, even if you are only starting with a small amount of money:

1. Mutual funds that invest in China. There are funds that target Chinese stocks specifically or regional funds that target China along with other Asian countries. Morningstar.com is a good place to start in your search. You can sort funds by type, performance or holdings.
2. Exchange-Traded Funds (ETFs) that target China. An ETF is simply a basket of related stocks that are traded openly on an exchange. You can use one of the best online brokers with low account minimums and good commission rates to buy ETFs.
3. Chinese currency You can also bet on China by holding their currency called the yuan. Many U.S. banks will allow you to convert U.S. dollars into yuan directly or you can open a FOREX trading account at a brokerage firm. Just remember, currency trading can be high-risk, high-return.

One not so easy way to invest in China

So why not just buy individual shares of Chinese stocks? Why hit a single, when you can swing for a home run? The answer is that direct investing in Chinese stocks on the Shanghai Exchange, Hong Kong exchange or via American ADRs can be tricky, not to mention the higher commissions and service fees that you will get hit with. You also increase your risk when you own just a few stocks, instead of a mutual fund or ETF.

Take the stock of Baidu Inc., the company that runs the Chinese search engine that rivals Google, as an example. You could research the incredible growth potential of the market for internet search in China and evaluate the stock’s fundamentals. But do you feel comfortable forecasting how the Chinese government may police or limit internet usage in China? That’s what we mean by tricky and risky.

A better plan is to avoid buying individual stocks in China and let the expert portfolio managers worry about the politics in China.

Keeping the proper asset allocation

If you invest in China via mutual funds, ETFs or currency trading you have already helped to diversify your portfolio. Another important consideration is asset allocation. Many financial analysts recommend that you keep no more than ten to fifteen percent of your assets in foreign equities. This means as you buy more China-based assets, keep on eye on the total percentage of your portfolio wrapped up in China and other foreign investments.

Clark Schultz is a writer who contributes articles on the topics of finance, the economy and savings for major financial sites. He resides in University City, Missouri with his wife and three young children.

Image: Salvatore Vuono / FreeDigitalPhotos.net

Source URL: Are you investing in China yet?

Copyright Protected © 2010 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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Like many people, the recession encouraged me to take a harder line with my budget. I’m definitely saving more and being more careful with spending.  But I’m also looking past just saving the money I already have — I’m looking into earning it.

This morning, I checked on the interest rate on my emergency savings account, and it turned out to be less than 0.5 percent, much lower than I realized! As a result, my next financial move will be to shift some of those savings into a fund where the interest is higher. I decided to do some research, and thought it might be helpful to those foraying into this higher return territory.

From savings accounts to mutual funds

While your basic emergency savings should stay intact in a fund where the money can be accessed quickly when necessary, as soon as that savings account has reached your target comfort level it is time to move into slightly riskier territory to increase the return on your money.

Investors with a deep understanding of the stock market might feel ready to invest in individual stocks, but individuals who are new to the investment world tend to opt for a mutual fund. A mutual fund pools money from investors and builds a portfolio of investments within the fund, with the investors sharing in the gains or losses of the fund.

The main reason new investors opt for mutual funds, besides their professional management, is that

they often allow small investments of as little as few hundred dollars. Unlike a certificate of deposit with penalties for early withdrawal, mutual fund investors can also redeem their shares at any time.

What to watch out for

On the downside, investing in mutual funds usually requires the payment of fees or sales charges that cut into your profits. Working with a discount brokerage can reduce your fees, and if you take the time to find the best online broker you may be able avoid fees almost altogether.

For those of us used to our principal being FDIC-insured, it is important to know that mutual funds are not insured and can lose money. However, in general, these funds can be safer than buying individual stocks because they are professionally managed and diversified.

Types of mutual funds

While thousands of mutual funds are available for investors, there are three main categories:

1. Money market funds: relatively low risk investments because they can only invest in high-quality, short-term investments. But low-risk also means that the returns are somewhat low.
2. Bond funds: Bonds vary widely in their investment choice, so some are riskier than others. The safest invest in government bonds, while the riskiest are high-yield bond funds called junk bonds. Investing in municipal bond funds have the added benefit that they can help reduce your taxes.
3. Stock funds: Stock funds include growth funds that invest in stocks with potentially large capital gains; income funds that invest in stocks that pay dividends; index funds that invest in the stocks in a market index like the S&P 500; and sector funds that invest in a particular industry such as health care or consumer products.

Mutual funds: How do I find them?

Some mutual fund shares can be purchased directly from the fund, but most are sold through brokers, banks, financial planners or sometimes insurance agents. When choosing a broker, make sure you search for the best online brokers or best online banks that meet your needs. If you intend to stick to investing in mutual funds rather than trying your hand at buying and selling individual stocks, look for an investment company that offers a wide variety of mutual funds so that diversifying is easier.

One good option can be a brokerage such as Vanguard or Fidelity that offers a variety of funds within one company. Some of these brokerages will allow you to transfer your investment from one fund to another without paying a fee.

Make sure you check to see the fees associated with different mutual fund accounts you are considering. Try to find a fund with low fees so you don’t lose too much of your investment to expenses. In addition, look for a “tax-efficient” fund so you don’t get hit with a big tax bill on your dividends.

Taking the time to do a little bit of research into the reputation of various brokerages can go a long way to making your first dip into the mutual fund pool profitable.

Personal risk assessment

Once you have chosen a brokerage, you need to do some research (and perhaps a little soul-searching) about your comfort level with risk. If you have funded your emergency savings, you may be more comfortable taking some investment risks. In addition, your age should influence your willingness to take risks. Younger people have more time to recoup any losses than those nearing retirement age.

Whatever investment strategy you decide to go with, make sure to periodicaly reassess your investments, and make sure that they’re working for you, not vice cersa.

Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance and business. Her clients include The Washington Times, Urban Land Magazine, NAREIT’s Real Estate Portfolio, and numerous Realtor association publications. Michele’s first book, “HOMEBUYING: Tough Times, First Time, Any Time” is available now at Amazon.com or from www.MicheleLerner.com.

Source URL: A quick guide for moving into mutual funds

Copyright Protected © 2010 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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By Richard Barrington

Have you ever run a long-distance race?

I find it useful to think of saving money like distance running. If you obsess over the total distance, then each step seems hopelessly insignificant in covering the necessary ground. If instead you just start making those steps, and concentrate on finding a comfortable and consistent pace, you’ll find that before you know it, the distance will take care of itself.

In other words, focus on the next step, because that is what you can most directly control.

In terms of saving money, a great way to make that next step is with a contribution to an IRA — either a traditional or a Roth IRA. To help you make that step, there are a few things you should know about IRAs, including important information on IRA contribution limitations for this year.

1. Traditional and Roth IRA contribution limitations

Both traditional and Roth IRAs have certain tax advantages, which will be discussed below in “Deciding on a traditional vs. a Roth IRA.” However, for anyone considering starting an IRA this year or making continued contributions into an IRA account, it’s critical to know that there are limits on how much you can contribute to IRAs each year.

To start with the simple part, the basic contribution limits for both traditional and Roth IRAs are the same, and are unchanged for 2011. The only difference is that taxpayers who are aged 50 and over are allowed to make higher, “catch-up” contributions.

IRA Contribution Limits

Note that these limits apply to total IRA contributions, so if you have multiple IRAs, including both a traditional and a Roth IRA, any amount you contribute to one reduces the amount you are able to contribute to the other.

Another limitation is that the amount you contribute to an IRA cannot exceed your taxable income for the year. That seems simple enough, but there are complications for higher earners. Depending on your tax status and income bracket, your eligibility to make IRA contributions might be reduced — or eliminated altogether.

2. Income ceilings for traditional and Roth contributions

For both traditional and Roth IRAs, there is an income level at which the amount you can contribute starts to be reduced, and a level at which it is eliminated completely. This is known as a contribution phase-out.

With traditional IRAs, this applies only if you or your spouse were covered by an employer-sponsored retirement plan during the tax year for which you are making the IRA contribution. For Roth IRAs, however, the contribution phase-outs apply to anyone who falls within the applicable income limits.

Income parameters for deduction phase-outs are described in the tables below. In each case, eligible contribution amounts start to be reduced at the lower end of the ranges given, and are eliminated altogether at the upper end of those ranges:

Traditional IRA deduction phase-outs

Roth IRA contribution phase-outs

3. Deciding on a traditional vs. a Roth IRA

So, should you be contributing to a traditional or a Roth IRA? These three key differences can help you decide:

1. Contributions to traditional IRAs are tax-deductible, but distributions from them are taxed, whereas the reverse is true for Roth IRA (as long as distribution guidelines are followed).
2. For traditional IRAs, distributions before you are aged 59 1/2 not only are taxed, but are also subject to a 10 percent penalty, whereas a Roth IRA allows for certain exceptions, such as for buying a first home or in the case of disability.
3. Traditional IRAs require you to start taking distributions after you reach age 70 1/2, whereas you are not required to take distributions from a Roth IRA at any time.

In some ways, this makes a Roth IRA ideal for younger savers who might feel they are in a lower tax bracket now than they will be in when they retire (and thus they would prefer to pay taxes now and get IRA distributions tax-free later). Also, younger savers might like the flexibility of being able to withdraw money from a Roth IRA to buy a home.

Whichever IRA you choose, the important thing is to start contributing to one this year so that you can start harnessing the power of compound interest and make your money work for you. The tax man even gives you a little leeway — IRA contributions for the 2010 tax year don’t have to be made until April 15, 2011. If retirement saving is like a long-distance race, that leeway can help you get a little bit of a head start.

Richard Barrington has earned the CFA designation and is a 20-year veteran of the financial industry, including having previously served for over a dozen years as a member of the Executive Committee of Manning & Napier Advisors, Inc. Richard has written extensively on investment and personal finance topics.

Source URL: 2011 IRA contribution limits: 3 ways to maximize your retirement tax advantages

Copyright Protected © 2010 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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Last year, my sister and brother-in-law wanted to remodel their kitchen. They both have good, secure jobs and great credit scores, and could easily have raised the money they needed, even in this economic climate. However, at the same time my mom had quite a hefty balance in a high yield savings account. With bank rates running low, it didn’t take them long to work out that my mother could earn more interest, and my sister pay less, if they cut out the bank, and worked out loan terms between themselves.

And that, in essence, is what peer-to-peer lending (a.k.a. person-to-person or P2P lending ) is all about. By eliminating the costly overheads and shareholder profits of banks (not to mention those bonuses), a loan between individuals can make both the borrower and lender better off. None of this is new. Families and friends have been helping each other out for millennia.

P2P lending web sites

What is new is the worldwide web. This allows strangers to lend and borrow through a middleman website that charges a small fraction of the mark-up that banks take for, in effect, brokering a loan. The first of these sites in America, Prosper, began in 2006, and by October 2010 had attracted more than a million members and had funded $205 million worth of loans.

The other big player in this country is Lending Club, which was founded the following year and, also by October 2010, had funded 17,630 loans worth over $170 million.

Buddy, can you spare a dime?

You’ve already spotted the flaw in this model. You wouldn’t lend your hard-earned cash to some guy who walked up to you in the street and asked for money, so why would you do so to a total stranger whom you’d never even met?

Well, Prosper, Lending Club and other similar sites do all they can to tell you what you need to know about that stranger. Prosper lets pretty much anyone post a request to borrow money, but it also allows prospective lenders to view each person’s history, credit details and loan-to-income ratio. Lending Club goes even further. It vets every loan application before it’s posted, and 90 percent of those never make it onto the site. And it too provides detailed information on every borrower.

Risky business

If you’re really smart, you may have spotted another problem. Prosper was founded in 2006, Lending Club in 2007, and in 2008… we saw the biggest crash in recent history. People lost huge sums of money in real estate and the stock market. And some did–although usually smaller sums–in peer-to-peer lending too. And, of course, these person-to-person loans aren’t secured by FDIC insurance.

Let’s face it, hard-nosed bank managers and credit card underwriters–all of whom were trained professionals who know a thing or two about risk–also had enormous losses. The same applied in P2P lending. Those who lent to people with poor credit in return for 20 percent plus rates tended to take the biggest hits.

That may explain why Lending Club claims that many fewer of its members–especially those who spread risk widely–made losses than those in some other programs. Its pre-screening prevented lenders from making sub-prime loans.

Eggs and baskets

Of course, not everyone made losses, which is, presumably, why these sites are not only still in business, but also adding lenders and borrowers all the time. And there are ways to spread your risk.

Suppose you have $10,000 to invest. You’d be either mad or very brave to hand the whole lot over to one stranger, no matter how stellar his or her credit score is.

A better strategy is to put a bit of your lump sum into a number of loans–up to 400, in fact. Because $25 is the minimum you can put into one loan note. Now, the only way you could lose all your money would be if all 400 defaulted before their first payments were due, an exceedingly unlikely scenario even today.

Rates

Prosper rates are largely determined by the borrower, who states the highest he or she is prepared to pay. Lenders then review the file, and decide whether or not to invest by balancing risk against return. They can bid under the highest rate that the borrower has indicated, and–when the full amount needed has been subscribed–those who bid the lowest get to make the loan. Obviously, borrowers who set their rates too low don’t get their loans.

Lending Club operates differently. It sets the rate (usually between eight percent and 25 percent) in accordance with its appraisal of the credit risk. Because this site pre-screens borrowers, pretty much 100 percent of applications that appear succeed.

The way forward?

There hasn’t been a significant part of the financial sector that’s escaped the dire consequences of the recent recession. And peer-to-peer lending is no exception. But there are many signs of things improving, and both borrowers and lenders–such as my mom and sister–are again discovering the benefits of person-to-person lending.

Peter Andrew has been writing about–and for–business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.

Source URL: Peer-to-peer lending can benefit borrowers and lenders

Copyright Protected © 2010 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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A year ago, my wife and I switched banks. She was pregnant with our first kid and, like many Americans, we were saving money however we could.

We had our accounts in two different banks — both traditional national chains with thousands of branches in the country and sports stadiums named after them — that offered savings accounts that were accumulating about 0.25 percent interest on a small sum. While we were mostly happy with our banks, our needs had changed, and we wanted better interest rates on our accounts. After fees, we realized that we weren’t saving but losing money.

Employees at both banks essentially admitted they were giving us an inferior product. We sorted through what we thought were the best online banks as well as a few local ones and picked one that offered not only a high interest savings account but interest checking as well. After that, we couldn’t switch banks fast enough. I wanted our money to go toward saving for our future, not domes for basketball games.

How to find the best savings account rates and what to look for

There is a growing trend among banks to offer better savings rates in non-traditional savings accounts. So if you’re thinking about making a switch to capitalize on higher interest rates, keep these five things in mind while hunting for better savings.

1. Interest rate

Is the interest rate high enough to justify switching banks? It was for us. The Federal Reserve has slashed interest rates across the board and savings account rates have been highly affected. While most rates are low, the difference in accounts can be over a percent, making a big impact on your savings accounts rates.

According to Visual Economics, a financial ezine, the average interest rate on traditional savings accounts is 0.56 percent, while their online counterparts average 1.14 percent. Considering that the rate of inflation for this year so far is 0.81 percent, according to inflationdata.com, putting your money into a traditional savings account is a losing battle.

2. Minimum balance

Many banks require that you keep a minimum balance for a high interest savings account, and sometimes those minimums are high. On the flip side, banks often employ tiered interest rate payouts, so the more money you put into your account, the more likely it is that you’ll get a better interest rate.

3. Accessibility

The big national banks have the convenience of being everywhere you are, but often have the lowest interest rates. Regional banks, which typically offer better rates, are just in your town or state. But what if the closest branch is an hour drive away? How does that help you? Many online banks and smaller banks are part of larger ATM networks, negating this potential inconvenience, with ATMs across the country that won’t charge you a fee.

4. Online presence

Not all banks necessarily have a physical branch — some banks are virtual banks with only an online presence. Most traditional banks have latched on to the online trend, and have created an online site, but they still have the overhead costs of running a physical business such as paying for office space and maintenance, so their online interest rates are typically lower than those of virtual banks.

In addition to better high yield savings accounts, another benefit of virtual banks is the convenience online banking has to offer. You can set up your bills to be paid automatically, balance your checkbook, check on payments, download bank statements, and do just about anything else you would normally do with your bank account.

5. Online security

According to the FDIC, online banking is as legitimate and safe as traditional banking. A little common sense can keep you and your money safe. Among other things, the FDIC suggests that you frequently check your bank and credit card balances, never give out your personal information like bank account numbers, social security numbers, etc., and use credit cards for online purchases because they generally offer more help in fighting fraud.

According to Reuters certified financial analyst Manisha Thakor, online banks have invested a great deal of money in security for web transactions. Banks are ready for anyone attempting fraud at your expense. “Online banking is like banking with Kevlar on,” Thakor writes.

Keeping these few pointers in mind will help you get your savings oriented in the right direction.

Matt Riddle is a freelance writer based out of Reno, Nev. A journalism graduate from the University of Nevada, Reno, Riddle was a newspaper reporter and then an account coordinator for a political consultant in Reno where he worked for several successful campaigns. His interests are many, but CrossFit, rock climbing, reading and writing, skiing, snowboarding, fatherhood and acting round up the list.

Source URL: High interest savings accounts are best found online

Copyright Protected © 2010 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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You say tomatoes…

Do you think the Federal Reserve should be more like the Bank of England? No, I’m not suggesting it should employ people with funny accents or lose most of its international influence. But perhaps its people could learn something from their opposite numbers in London about plain speaking. The Daily Telegraph, a UK-based newspaper, reported at the end of September 2010 some remarks by the deputy governor of the Bank of England. He told British savers to, “stop moaning and start spending.”

Well, that’s blunt, and you can’t imagine a senior Fed official coming out with anything like it. However, if you look at what the Fed does, rather than what it says, it’s hard to escape the conclusion that it’s trying to send a similar message to Americans. Perhaps it should just come clean like the Brits.

Saving accounts that lose you money

Partly thanks to the Fed, interest rates right now are generally at or near historic lows. That’s great if you need a mortgage, but bad news if you’re saving up for the down payment you’ll need to get that home loan – or for anything else for that matter. Indeed, if you factor in fees and inflation, you can actually come out at a loss by keeping your money in some savings accounts.

But don’t despair. It may be a long time before we again see the sorts of high rates for savers that were common a few decades ago, but a bit of research and lateral thinking could soon see you accessing yields that make saving worthwhile.

High yield savings accounts a joke?

Recently, The New York Times said that in July 2010 the average rate paid on interest-bearing deposit accounts fell to 0.99 percent. It was the first time that it had been below one percent for 60+ years. And that 0.99 percent is an average! So for every smart person earning, say, 1.7 percent annual percentage yield (APY), there’s probably a sucker getting by on 0.3 percent or less.

The key point here is that just because your bank calls one of its products a “high yield savings account”, that doesn’t mean that the account necessarily returns a high yield. Many bankers are better at marketing than banking, and, unless you’re very lucky, chances are that yours is paying a truly awful rate.

The easiest way to find a genuine high yield savings account (and, remember, that’s a relative term) is to shop around for one online.

Interest-bearing checking accounts can rock

Probably the majority of banks now have interest-bearing checking accounts, and most of them are useless as savings vehicles. But shop around for long enough, and you could find some real gems. For example, one credit union has – at the time of writing – an interest-bearing checking account that’s paying a rate plus dividends that comes in at better than five percent APY, though only on balances below $25,000.

It’s unlikely that you’ll find something as good as that, not least because you’d have to be eligible for membership of that particular credit union, and also jump through some hoops to qualify for the rate. However, there are checking accounts out there that deliver better returns than many savings accounts, money market accounts and even certificates of deposit, and it’s well worth researching this market.

The downside? Well, most of them cap the balance on which high rates are paid, though usually in the tens of thousands of dollars. You’re likely to need to have a high opening deposit, maintain a minimum balance, and comply with other requirements as well.

Certificates of deposit and crystal balls

Unless you’re fortunate enough to find a great interest-bearing checking account, you should probably look at certificates of deposit (CDs). For most banks, these pay the highest interest rates.

So why doesn’t everyone put their money in certificates of deposit? There are three main reasons:

1. You invest a lump sum, so this doesn’t suit those who want to put aside a little every month
2. You have to tie up your savings for a set period, and pay a steep penalty if you need to make an early withdrawal
3. To earn the best rates, you must be prepared to tie up that money for a long period: three, five, maybe even ten years

That last one is the killer. Suppose you were to choose a CD with a five-year term. At the moment, you might get as much as 2.75 percent APY, which is a more than respectable rate in the current market. But what happens if the economy turns around in a couple of years’ time, and interest rates suddenly rocket? You’re stuck with your cash tied up at 2.75 percent for another three years, while much better rates are available elsewhere.

Save anyway

Life’s long and economic downturns tend to be short. Most personal finance advisers say that saving is a good habit to get into, even when rates are low. The money you put aside now could well position you to take advantage of the upturn when it arrives, or – at worst – spare you at some point in the future from the tender mercies of a collection agency.

By all means, shop around for the best rates you can find, but save anyway.

Peter Andrew has been writing about – and for – business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.

Source URL: Savings accounts – nest egg builders or wastes of time?

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When people ask me if they could be successful at day trading, my first response is, “Do you know what day trading is?”

Most people don’t. You might think day trading is about finding the best online brokerage, grabbing a stack of financial reports, arming yourself with financial blogs and news and then diving in.

What many would-be day traders don’t realize is that success doesn’t come from the uncanny ability to analyze balance sheets and fundamentals like Warren Buffett. And even if you have the ability to interpret charts and price action–the primary skill for day trading–this is secondary to having the strict discipline of adhering to specific rules and guidelines.

Without these rules in place, day trading is like a child playing with a chainsaw.

I’m not judging the merits of day trading. I know both very successful day traders and those who blew themselves up financially with day trading. (For what it’s worth, I know many more of the latter variety.) But if you’re going to succeed at this kind of investing, you’d better understand what it takes.

What it takes to succeed

Here are observations from my experience as both a professional trader and money manager about what it takes to succeed at day trading:

• Hard work. Brains don’t hurt, but day trading is a skill, and that skill needs to be developed by treating this as a business. A lot of people day trade as a side avocation or hobby, maybe because it seems like an easy road to riches. Don’t fall for that mentality. I’ve known people with a gambling mentality who have been drawn to trading, only to be chewed up because they treated the markets as a casino and not a business.
• Discipline. Do you ever see the same people wandering around your gym who have no noticeable changes in their appearance from a year ago? It’s from lack of discipline and goal-setting. Trading is no different. People jump from strategy to strategy, or worse, have no strategy at all. The importance of discipline to day trading can’t be overstated. You may think you have discipline, but the true litmus test is your results.
• A keen grasp of probabilities. The best baseball players–the ones who get paid the most–hit the ball around three times for every 10 at-bats. A guy who hits it four times for every 10 at-bats is the best in the business. Put another way, even the best baseball players in the world achieve an undesirable result most of the times they get up to bat. Great traders are the same. Making money through day trading doesn’t mean you make the right call most of the time. The key is to lose a little when you are wrong (which is often) and make a lot when you are right.
• Letting go of the need to be right. Some people would rather be right than make money (or would rather be right than be happy, but that’s another blog post!). This personality trait makes for lousy day traders. In day trading, you will be wrong more than you are right, but that is not failure, it’s probability.

Defining your day trading personality

On a recent episode of “America’s Got Talent” (I admit it, I somehow got hooked on a summer reality TV show) judge Piers Morgan told one performer that he did not know how to define his act and asked the performer how he would define himself. The entertainer looked completely bewildered, and it’s no surprise that his act fell flat.

Ask 100 people to define their “investment personality,” and you’re going to get 90 blank stares. Lacking a clear description of your investment personality–are you a trader, gambler, investor or saver?–is a common error, one that can make or break your results.

In the broadest sense, everyone’s financial goal in investing is to make money. But that’s not enough. You have to find a strategy and set of rules that you’ll stick to and will keep you from an expensive labyrinth of mistakes.

Spending some time doing a little self-discovery can yield a strategy that is more in sync with your personality type, which may help reduce some of the emotional impulses that often lead people astray.

Still think you have what it takes to be a successful day trader? You’re the only one who can really know. But if you lack any of the key traits or a strong investment personality, don’t be surprised if you’re in for a long grind–or a financial meltdown.

Marc Pearlman is the author of the Positive Money Mindset and host of the popular radio show Your Money Matters! For more about Marc, visit marcpearlman.com or www.Yourmoneymattersradio.com.

Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Marc Pearlman, Representative. Your Money Matters! radio show and the Securities America companies are unaffiliated.

Source URL: Day trading: Do you have what it takes?

Copyright Protected © 2010 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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Source URL: Investing tips for today: Q&A with money expert Saly Glassman

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