Guide to Finding the Best Fixed Rate Cash ISA: How to Identify a Best Buy Cash ISA – Higher ISA Interest Rates

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With the Bank of England holding base rates at their lowest level since 1694 (currently just 0.5%), achieving a decent return can represent something of a challenge. Barclays and Halifax cash ISA’s currently offer savers just 0.1%. Whilst many people settle for these rates, it is possible to perform a cash ISA transfer to a fixed rate cash ISA. This allows the saver to enjoy a better return in exchange for locking up their money for a specific period of time.

Fixed Rate Cash ISA

From April, it will be possible to invest up to £5,100 into a best buy cash ISA. The figure is currently capped at £3,600. The longer the fixed period, the higher the ISA interest rate banks will offer. This is because the likelihood of the Bank of England increasing base rates grows over time. Whilst there is a degree of risk involved for the saver in terms of rates increasing, it does allow someone who is retired to enjoy a more stable, dependable monthly income.

Perform a Cash ISA Comparison

An online comparison site, such as moneysupermarket.com, allows a saver to compare ISA interest rates. Whilst it is possible to visit each bank or website individually, this can prove an extremely time consuming process. All that the saver needs to do is specify their requirements (account type, amount of investment capital, required timeframe etc) and the market will be trawled for the best buy cash ISA.

Cash ISA Transfer

Once a cash ISA comparison has been performed, it is possible to transfer the proceeds. Whilst current guidelines state that this shouldn’t take more than 30 days, it can take longer towards the end of the tax year as business volumes are considerably higher. It is imperative that a saver checks to ensure that there isn’t a penalty for early withdrawal as this will erode the majority of the financial benefits.

Rachel Thrussell of Money Facts, stated that: “With rates so low it is even more important than ever that consumers check what rate they are being paid on their ISA, as many institutions offer several different ISA’s paying vastly different rates. One thing they need to watch out for is ‘transfer-out’ penalties, otherwise they could find out that any increase in interest is wiped out by this charge.”

A fixed rate cash ISA will provide a saver with a higher rate than can be achieved through an account offering a variable rate. It is important to be aware of any early withdrawal charges as these could undermine the benefits of a cash ISA transfer. Never lock away money that may be needed for an emergency. Those seeking a potentially higher return should consider a stocks and shares ISA.

How a Balance Transfer Could Lower a FICO Score: Interest-Free Credit Card Transfer without Hurting Your Credit Score

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Consumer debt has risen sharply over the past decade. The Nilson Report showed that the median credit card debt stood at $10,679 at the end of 2016. Not surprisingly, this has led many U.S. consumers to turn to interest-free credit card transfers in order to reduce any outstanding personal debt.

A balance transfer performed incorrectly could damage a FICO score and make other borrowing sources, such as home equity loans, less affordable. It is important to establish the correct approach to reduce interest payments on credit card debt in order to protect a personal credit score.

What Does an Interest-Free Credit Card Transfer Involve?

After using a comparison site to trawl the market, select the best credit card deal. An interest-free credit card transfer or a transfer at a low rate for the life of the balance is most preferable. Select the right card, provide all the requested information, enter the balance transfer details and the FICO score will be checked by the lender. The new card provider will carry out the balance transfer. It will take a few weeks to take place and most lenders charge a transfer fee of approximately 3%.

How Not Making Interest Payments Helps to Clear Credit Card Debt

A consumer has $10,000 of credit card debt at 15% APR. An interest-free credit card transfer fee of $300 will be added to the amount owed. However, after a period of 12 months, the balance transfer will help save $1,200 in further interest payments. This gives a consumer the opportunity to reduce personal debt.

Why Does a Balance Transfer Reduce a FICO Score?

  • Each credit search is recorded and will cause a credit score to go down slightly.
  • A balance transfer from a card with a high credit limit to one with a low limit will negatively affect a FICO score. Provided that the consumer pays-down the level of credit card debt, a FICO score will recover within a few months.

Interest Free Credit Card Transfers May Soon End

President Obama changed the law with regard to the application of card fees and charges. Credit card debt is no longer the cash cow it once was which means that balance transfer deals will shortly become fewer in number. Providers have traditionally banked on the fact that they were able to apply fees and charges to client balances for making late payment. They have enjoyed the complete freedom to increase the rate of APR on a balance at any time. Neither of these will be possible from February 2018.

* Legal changes were introduced by the Credit Card Accountability, Responsibility and Disclosure Act.

It is sensible to take advantage of interest-free credit card transfer whilst they are still available to consumers. Always pay-down the debt if transferring from a card with a high to a low credit limit in order to ensure that a FICO score isn’t negatively affected. Balance transfers normally involve a fee of 3% which will increase the level of personal debt in the short term.

Consumer Credit and Debt Counseling: Receive Financial Help and Learn Essential Economic Instruction

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In the current economy, more and more people are facing debt issues. Debt is piling up and many people no longer have the appropriate means to handle the situation. Many consumers are reluctant to ask for professional financial help, and insist on handling the situation by making private financial adjustments.

Sadly, if an individual is in moderate or severe debt, imposing personal economic restriction rarely succeeds. Due to this issue, when a consumer finally turns for professional help to address debt concerns, the problem has become critical and paramount.

When fiscal hardships can no longer be handled in a proper fashion, consumer credit and debt counseling can provide relief as well as essential financial education.

Credit Counseling

The job and objective of a credit counselor is to look over an individual’s entire financial history. Credit counselors not only review debt, but income, expenses, and personal finances as well. Using the entire financial picture, counselors are able to determine the proper credit solution for an individual’s situation.

Credit counselors will also discuss the consumer’s credit debt with that individual’s credit card company. This process allows the credit card companies to possibly lower the interest rates so the individual in question can pay off debt in a sensible fashion.

Debt Management Programs

When a consumer becomes enrolled in a debt management program, all of that individual’s debt is entered into the program and all credit is halted. The individual is also forbidden from applying for additional credit. This process allows the “brakes” to be applied and the consumer can focus on paying off the mature debt rather than accumulating new financial difficulties.

In the debt management agenda, the consumer makes a monthly payment to the debt management counseling service. The counseling service will then compensate the creditors.

Debt Settlement Plan

When an individual doesn’t qualify for a debt management program, debt consolidation is always a recommended option as well as the idea of debt settlement. In the debt settlement process the counseling service will consult with the individual’s creditors for a reduced balance.

Debt settlement allows the individual to pay the reduced balance instead of the original balance. Debt settlement is usually the last debt counseling option and is usually reserved for those in very large debt.

Live Debt Free

When a consumer takes advantage of these debt recovery options he or she can regain financial stability. Through the consumer credit and debt counseling process an individual can learn better spending habits and money management skills.

How to Pay off Your Debts: What to Do in Order to Become Debt-Free

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The following is a guest post from Brabble Director of Business Development Patrick Mackaronis.

There is no magical way to get out of debt. It requires careful planning, sticking to a budget, consolidation of debts, and then calculating the best order in which to pay them off.

Controlling Expenses by Sticking to a Budget

In order to control expenses, one must first know what they are. So the first step is to record everything that is being spent. This is difficult to do, but quite possible. The individual should then work out where money can be saved, perhaps on food by shopping at cheaper supermarkets, or on fuel bills by changing supplier. Money can be saved on things like car insurance and home insurance by shopping around, and every little bit saved can go towards making you debt-free.

Consolidating Debts

All debts have different interest rates. Many people have a great deal of credit card debts at a high rate of interest, because over-spending on credit cards is so easy. Bank loans, on the other hand, have a much lower rate of interest. If possible, get a relatively low interest loan, and use it to pay off the credit card and other high interest debts.

What Order to Pay off Debts – the ‘Debt Snowball’

The ‘Debt Snowball’ is the tried and tested way of paying off debts – and it works.

Basically one pays off the debts with the highest interest rate first. The individual first needs to list all their debts in descending order of interest rate, regardless of the balance. Determine the most money you can make available from your budget to pay off debts, and apply that to the debt with the highest interest rate. As soon as one does that, the amount owing will be reduced. The next month, the individual pays off the same amount of the debt with the highest interest rate. On all other debts, continue to make the minimum payment.

When the first debt is paid off, continue the process with the debt with the next highest interest rate. At all times, stick to your budget, and continue to pay off the same amount each month.

As the individual continues to do this, the amount of interest gradually reduces, and more money is being used to pay off the actual debt, ie the process ‘snowballs’.

Various websites provide online Snowball calculators so that the individual can see for himself how the process would work for him.

If a person follows the above process, he or she can become debt-free in a surprisingly short time. It is not easy, but the main things that are required are planning, self-discipline, and organization. It can be done!

The Causes of Economic Bubbles

This article explores some of the factors that contribute to the creation of economic bubbles. The subprime bubble is the most recent bubble, but it is not an isolated case. It comes as the latest in a long line of economic bubbles. Over the last 50 years we have seen major bubbles in things like conglomerates, inflation, commodities, Japanese real estate, dotcom, and subprime mortgages. Clearly, there is something intrinsic to human nature which creates bubbles.

Bubbles in themselves are not a problem. The real problem is caused by the increase in relative pricing levels. This causes misallocations of capital towards the areas achieving high price rises. The subsequent correction (as the trend proves unsustainable) causes severe structural difficulties in the economy.

A lot of books and ‘after the event’ wisdom has been published on the subject of bubbles. However, very few of them, go into explaining how you can actually profit from future situations. This article looks at some of the mechanisms by which bubbles takes place. It outlines some examples of the causes and, suggests ways in which investors can recognise bubbles.

Anchoring

Anchoring is the behavioural finance perspective whereby people have the tendency to over emphasise one specific value and then adjust to that value. That ‘anchor’ is laid down and decisions are made with a bias towards that value.

A classic example would be with the housing market, whereby whole neighbourhoods ‘adjust’ to rising home prices. The price becomes the anchor, to then spur prices higher, as everybody focuses on rising prices. However, what they are not focusing on are values such as house price to income, house price to monthly mortgage payments and other mortgage affordability metrics. The result is a severe dislocation in the allocation of resources with an economy. This can be seen in the continuing oversupply of housing in the US.

Soros’ Reflexivity in Markets

Reflexivity in bubbles is the process whereby the fact that prices are rising causes the underlying fundamentals to improve, which then feeds back into higher prices as agents see better fundamentals. This positive feedback loop grows until, at some point, this relationship breaks down and, the positive feedback loop then becomes a negative one. It is easy to confuse this process with anchoring-in fact anchoring contributes to reflexivity-however it should be noted that with reflexivity, the underlying fundamentals are, in fact, improving. This makes this type of bubble, even more dangerous.

An example of this can be seen with gold, whereby increasing prices have seen sentiment shift towards gold being seen as a ‘safe haven,’ uncorrelated asset class, for investors. Similarly, rising prices have seen an increase in Exchange Traded Funds ETF issuance, which has encouraged new investment. The increase in ETF investment then fuels further higher prices and the positive feedback loop goes on.

Structural and Cultural Causes

Not all economies are driven by free market supply and demand. Furthermore, different cultures value economic ends differently. Furthermore, many countries are at different stages of development to each other, In other words, economies and asset prices are driven by other considerations than purely supply and demand. This can create a bubble if the marginal increase in demand from one culture or country causes price inelasticity.

For example, consider that most of the Far East Asian countries (particularly China and India) are in early stage development. In these countries, significant social unrest would ensue if employment or living conditions got noticeably worse for the large poorer section of their populations. Therefore, as oil prices rose in 2008, many of these countries (China, India, Malaysia) continued to use their public surplus to subsidise Oil prices for the poorer segments of their populations. The subsidies helped mask the underlying price rise and this caused global Oil demand to be price inelastic. Whether this is sustainable longer term is another question.

Corporate Necessity, Fear and Greed

Corporate decision making isn’t necessarily driven by profit maximisation, or following shareholder interests, or even adherence to the underlying fundamental metrics in their industry. Directors may decide to acquire companies simply because they want to further their own careers (conglomerate boom) or they fall foul to the latest fad (dotcom boom).

Furthermore, they could driven by their own self-interest in grabbing short term profit, even if they know it is detrimental to the long term interests (subprime mortgage, SIVs and mortgage bonds) of their shareholders. Similarly, the staff of these companies could be made aware that if they do not adhere to this mania, then they will be replaced by someone who does!

Another factor is that corporations could be forced to exacerbate bubble conditions further, even if they know that their industry is on an unsustainable trend. An example of this was the issuance of 3G licences in the UK. This is seen as the pinnacle of the dotcom bubble, but what else were the incumbent mobile telecom companies supposed to do?

Their raison d’etre is to offer upgraded services to their customers. The licences were limited in number and, they had to have them, even if the price they paid (to outbid newcomers who were flush with investor cash) might have been seen as ‘bubbly.’ They weren’t paying what they thought was fundamentally sound, but rather what they had to pay in order to keep their company offering updated 3G services.

Behavioural Finance Explains Bubbles

All of the factors outlined in this article are intrinsic to human behaviour and, illustrative of the point that human behaviour creates bubbles. Therefore, bubble behaviour will always be around. Greater understanding of these causes can create opportunity for investors to take advantage and avoid potential bubble scenarios.