NEW YORK — It’s no mistake. This credit card’s interest rate is 79.9 percent.
The bloated APR is how First Premier Bank, a subprime credit card issuer, is skirting new regulations intended to curb abusive practices in the industry. It’s a strategy other subprime card issuers could start adopting to get around the new rules.
Typically, the First Premier card comes with a minimum of $256 in fees in the first year for a credit line of $250. Starting in February, however, a new law will cap such fees at 25 percent of a card’s credit line.
In a recent mailing for a preapproved card, First Premier lowers fees to just that limit — $75 in the first year for a credit line of $300. But the new law doesn’t set a cap on interest rates. Hence the 79.9 APR, up from the previous 9.9 percent.
“It’s the highest on the market. It’s the highest we’ve ever seen,” said Anuj Shahani, an analyst with Synovate, a research firm that tracks credit card mailings.
The terms are eyebrow raising, but First Premier targets people with bad credit who likely can’t get approved for cards elsewhere. It’s a group that tends to lean heavily on credit too, meaning they’ll likely incur steep financing charges.
So for a $300 balance, a cardholder would pay $20 a month in interest.
First Premier said the 79.9 APR offer is a test and that it’s too early to tell whether it will be continued, according to an e-mailed statement. To comply with the new law, the bank said it will no longer offer the card that has $256 in first-year fees as of Feb. 21, 2010. However, customers will still be able to use their existing cards.
According to First Premier’s Web site, the credit cards are issued by its sister organization Premier Bankcard. The company, based in Sioux Falls, S.D., says Premier Bankcard is the 10th largest issuer of MasterCard and Visa cards in the country, with more than 3.5 million customers.
In a mailing sent to prospective customers in October with the revamped terms, First Premier writes “…you might have less-than-perfect credit and we’re OK with that.” The letter notes that an online application or phone call is still required, but guarantees a 60-second status confirmation.
The letter also states there are no hidden fees that aren’t disclosed in the attached form. That’s where the 79.9 percent interest rate and $75 annual fee are listed. There’s also $29 penalty if you pay late or go over your credit limit. The credit limit is $300.
The bank did not say how many people were offered the 79.9 APR card, but noted that it needed to “price our product based on the risk associated with this market.”
Even if First Premier doesn’t stick with the 79.9 APR, it will likely hike rates considerably from the current 9.9 percent to offset the lower fees, said Shahani of Synovate.
The revamped terms may not be the only changes; First Premier also appears to be moving away from the riskiest borrowers.
The bank typically mails offers to subprime households, meaning those with credit scores below 700. In the third quarter, however, 84 percent of its offers were sent to subprime households, down from 91 percent the same period last year, according to Synovate.
First Premier could be cleaning up its credit card portfolio since the new regulations will limit its ability to raise interest rates. That could mean First Premier won’t issue cards as liberally to those with bad credit.
As harsh as First Premier’s terms seem, that could be a blow to those who rely on the card, said Odysseas Papadimitriou, CEO of CardHub.com.
“Even when the cost of credit is astronomical, for people in true emergencies, it’s much better than not having access to credit,” said Papadimitriou.
Until Feb. 21, First Premier is still offering its even-higher-fee card online. So the price for credit the bank charges is at least $256 in first-year fees.
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First Premier Bank Charges 80% Credit Card Interest
I am sure most of you don’t watch AlJazeera especially those who are in the States. So if you have missed, here is an interview with Robert Kiyosaki on AlJazeera with Riz Khan.
What’s your opinion on the education system of your country? Does it prepare you to be successful businessman or good employee? I think in almost all countries in the world, it’s the latter. Please share your thoughts on this in the comments section.
By Louis Lim, Business Correspondent
In view of the current economic difficulties facing many, people ought to be more ware of what’s happening in the world and how what’s happening can adversely affect their financial securities and lives; if it has not done so already!
It is not a well known secret that one can avoid being a financial casualty by simply acquiring a set of skills different from what we are usually programmed from young to have. The latter has to do with being enslaved to a job or business controlled by others; the other being about having skills to generate an income independent of any circumstance or other people.
Anyone depending solely on a job for a living would be almost completely lost if he loses his job. The unfortunate fact is that since the Multi-Nationals Companies began institutionalizing the treatment of employees as just another business resource, albeit commodity, the age of life-long employment seizes.
Financial results associated with satisfying shareholders’ expectations became the main reason for a business enterprise. Coupled with the practice of achieving short term objectives and the need to maintain share prices, retrenching workers became a normal business practice. Words like ‘downsizing’ and ‘business rationalizing’ became common business parlance.
This dehumanizing of business enterprises, prevalent throughout 18th and 19th century industrializing Britain was revived and practice by American businesses. The new reality in a capitalist environment anywhere means a worker is subject to his job being taken away any day. More importantly, this means also that the individual worker must realize quickly the insecurity of a job.
What then is a worker to do to secure himself? Off course there are skills like being a doctor or dentist and others which are not down sizable. However, most workers are dispensable!
Men are, however, born with an innate creativity which can be described as entrepreneurial but this has historically been replaced by skills which are intended for us to work for someone else. The result is that only the top five per cent or so of employees can acquire financially independence (with high salaries) while the rest remained dependent and vulnerable all their lives.
To acquire these forgotten skills would require a change in mindset from one of being a worker (a worker’s mindset) to that of being a boss (an entrepreneurial mindset). The latter entails having a ‘Possibilities Mindset” which would enable one to know how to garner resources and knowledge and, to apply them to secure one’s own financial objectives.
Henry Ford, the car genius, once said that ‘money is not a man’s security; he is his own security’. What he meant was that a man’s security lies in his knowledge and skills. However, if your skill and knowledge is tied to working for someone then those skills and knowledge can be replaced any time.
However, Henry Ford is not wrong; if a man’s skills and knowledge is in the area of creating a money making enterprise. Robert Kiyosaki, a very successful entrepreneur, said that ‘every man must mind his own business’. He didn’t express it too well but what he meant is that ‘to have financial security a person must learn to develop his own money making business’. Is this possible? Every man? In my opinion, in today’ new reality, any worker who wants financial security has no other option!
Off course, whenever an uninitiated thinks of starting a business he thinks of big capital, connections, special knowledge and skills. For a man who has little money and has just lost his job, it’s even more unrealistic to think of starting his own business. However, many have done it, albeit, at great odds.
But what if you are not retrenched yet? And you have some time to learn. Could you invest in a money-making skill that can provide an alternative income? Could you learn to be an entrepreneur with little resources and connections?
The answer is yes but you have to adopt an entrepreneur mind-set; which really means that you to start believing in possibilities! Remember that when Bill Gates and Steve Jobs started their little enterprises in garages all they had mainly were their belief in possibilities. The amazing fact is that because of them the possibilities have increased exponentially with the advent of the internet.
Besides a strong belief in possibilities, an entrepreneur is one who learns to gather resources, knowledge and skills and organize them into money making processes. In most conventional businesses, this is usually a huge ask for any newcomer. Fortunately,, there are now other avenues where starting a business is made more possible for any one with little money and is prepared to spend time learning.
For example, the internet has made it easier to start your own business. The main thing you would need is a good PC, some affordable money, a willingness to learn and a lot of belief in yourself. What is to be learned is seldom difficult; a man’s limitation to success is often his own lack of self-belief!
If your motivation is create a secure financial situation for you and your loved ones, you need to be an entrepreneur. The days of secure employment is long over and moreover, personal wealth is seldom acquired by working for others.
See original here:
Entrepreneurship – A Panacea For Job Insecurity?
1. Simplify and get out of the rat race faster
I noticed that whenever I played the cashflow 101 game and was able to choose a “simple” profession like a truck driver for example, I was able to get out of the rat race faster.
As a truck driver, although my salary was low, my monthly expenses were also very low. Because I had low monthly expenses, I already had a positive cashflow and all I needed to do was just get those passive income generating deals.
After each payday, I had more money to invest, and with just a few passive income generating deals, I had enough passive income that exceeded my monthly expenses, and I was able to get out of the rat race faster.
In real life, I am applying the same strategy by reducing my monthly expenses by leading a simple life. This was also described by Bo Sanchez in his book “Simplify and Live the Good Life ” and T. Harv Eker in his book “Secrets of the Millionaire Mind”.
My family and I lead simple lives, which explains my very low target monthlypassive income which is why I know I am going to get out of the rat race in real life very soon!
2. Start with small deals first, and the big deals will follow
In the beginning of the game, I always chose small deals even if they produced little cashflow. Later on, when the market presents good opportunities, I was able to sell or “flip” these small deals and then I used the profit to buy the bigger deals that produced greater cashflow, allowing me to get out of the rat race.
In real life, I am also following the same path. I focus on single family homes or properties which may produce little cashflow at the very least, but can actually generate significant profits if “flipped” or sold through “rent-to-own”. I can then use the profit later when they are enough to get bigger deals that can produce bigger positive cashflow.
3. Over-leverage often leads to bankruptcy
During the game, we often encounter great deals that produce a lot of positive cashflow but require a big downpayment and it is tempting to borrow money from the bank just to be able to buy those great deals. However, there is such a thing as becoming over-leveraged which can produce negative cashflow situations because of the high monthly payments for those loans.
Even if one’spassive income is enough to cover the monthly payments for those loans, imagine if something happened and the monthly income of one’s investment properties were affected, suddenly the monthly payments for the loans cause a negative cashflow and can lead to bankruptcy. The same can also happen when one is downsized. This is the reason why one should avoid deals that lead to too much exposure or over-leverage.
Applying this is real life is a no brainer. I would not dare buy those multi-unit apartments unless they were in the same price range as the single family homes I focus on. As mentioned in lesson number 2 above, I can go for those bigger deals later when profits from my small deals are enough.
4. It is better to wait for a good opportunity than settle for those not so good deals
In the game, good opportunities come in the form of deals that have big ROI potential, and can be bought with little or no downpayment, while producing positive cashflow. If any of these elements are missing, I consider a deal as “not so good” and I pass them up and just wait for the good deals.
In real life, I do the same and patiently wait for good opportunities. If a not so good deal comes my way, I can either look for ways to make it into a good deal, or I just pass it up and wait for another more worthwhile deal to pursue.
5. Learn how to spot a good deal and grab it
One of the biggest challenges one faces in the game is how to spot those good deals so that you can grab them. Sometimes a good deal is right under your nose and it slips away because you didn’t realize soon enough that it was a good deal.
I believe spotting good deals is a skill and you can only learn this skill by continuously analyzing deals. Once you get the hang of it, you will start seeing those good deals more often. Normally those deals would have normally slipped away without you knowing it. If you see good deals often, it’s just logical that you will eventually grab one of those deals right?!
6. Learn how to protect your investments
I distinctly remember games where apartment buildings getting toppled by mud and all the cashflow generated by these properties are gone, unless I am covered by insurance.
Does Ondoy and Pepeng ring a bell? Who would have thought that a game like cashflow 101 actually teaches us to protect our investments from such disasters and calamities. Better get your investments insured with “Acts of God” coverage pronto!
7. Net worth is worth less, cashflow is king
Once you play cashflow 101, you will notice its emphasis on the importance of cashflow over one’s net worth. You will see that it really is more important to have positive cashflow frompassive income. What is the use of having a big net worth if you don’t have any positive cashflow?
In real life, we should apply this by focusing on building our positive cashflow with income generating assets. Even if we have to use leverage to buy these assets, it really is okay. We call this good debt. Don’t be afraid to have good debts that buy real assets that produce the cashflow we need to get out of the rat race for real!
Get out of the rat race in the game, and in real life!
So you got out of the rat race when you played cashflow 101. So what?! That’s useless if you don’t take action and apply the lessons you have learned from the game in real life. But playing a game is one thing, doing it in real life is an entirely different thing… or is it?
I can truly say that Robert Kiyosaki’s Cashflow 101 game is a “life changing” game because my life has really changed ever since I decided to apply in real life the lessons I have learned from it. Take note that I only listed the top 7 lessons I have learned and I can assure all of you that there are more lessons one can learn from this game.
People may find it hard to believe that one can learn so much from a game and can have such a huge impact in life. I guess you just have to play the game and experience it for yourselves.
How about you, have you played Rich Dad’s cashflow 101 game? What did you learn? Are you applying them in real life?
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Top 7 lessons I learned from playing Rich Dad’s Cashflow 101 game
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On a sunny autumn Friday, Bader Bahmad and fellow members of a financial education seminar at the Fort Washington Public Library branch were discussing rudimentary principles, such as the difference between needs and wants.
In a run-down conference room on the library’s deserted second floor, they talked about saving money. Asked to give examples of items they should save for, one woman mentioned a $7.99 blouse she saw earlier in the week and another said a pack of cigarettes. A talkative blonde said she has never saved for anything.
Cheryl Hines of Cornell University’s Cooperative Extension community program led the discussion. She provided handouts that explained the difference between short, medium and long-term savings goals; she offered tips for tracking money, like using a notebook to record expenditures.
Bahmad, 39, found the seminar a bit basic, but she liked the reminders because she and her three children are supported solely by her husband’s earnings as a taxi driver. She strictly limits spending on discretionary goods. “In every hour of the day, if I don’t need it, I’m not doing it,” Bahmad said.
Badmad’s struggle is complicated. In Washington Heights where she lives, families are lucky to have a bank account. While 12 percent of Manhattan households don’t have a standard checking account, 25 percent of African Americans and 27 percent of Hispanics in Manhattan – the majority populations uptown – live unbanked, according to a survey last year by Pew Charitable Trusts. In effect, they pay an average $1,042 annually in check cashing fees.
Bahmad has been trying to make ends meet in the U.S. for close to 15 years. An immigrant from Lebanon, she used to sew scarves and dresses for stores in Brooklyn and Manhattan. When she returned to her home country three years ago to be closer to her family, leaving her husband behind in New York, she sold her sewing machines.
But the distance strained her marriage, and Bahmad returned to New York after two years. “Here you’re missing something, over there you’re missing something,” she said.
Now back in America without a job, Bahmad is looking for financial advice. As a start, she attended the free seminar at the Public Library.
Instructor Milly DuBouchet, who teaches similar classes in Washington Heights, finds it hard to address intricate financial problems because her audience has never had the means to save money. “It’s hard for them to save 10 percent of their income monthly when they can’t necessarily pay their phone bill every month,” she said. “Financial literacy is at a bare minimum in our community.”
To help, the Bloomberg administration created the Office of Financial Empowerment, where DuBouchet also works. It offers personal finance workshops and free private counseling.
Lower-income people may lack a basic understanding of credit ratings and the principles of debt, according to DuBouchet. Many of her clients have been denied loans and “they want to see why,” she said. Moreover, “A lot of people consider credit cards quote unquote free money.” She tries to tell her seminar members and private clients how FICO scores are compiled and reminds those in debt, “If you stop paying it, they don’t forget about you.”
Workshops offering basic financial information can be found all over upper Manhattan. Friends Jenny Gil and Angela Ariza attended one specifically for women at City College. Both women, immigrants from Colombia, readily admit they know little about personal finance.
Gil, 27, is lucky to have less than $5,000 in debt, which she described as “not impossible.” She works in a restaurant office and is trying to repay what she owes so that she can start saving and investing – only she doesn’t know how.
She blames her financial illiteracy on Colombian cultural norms. She was raised with the belief that women don’t handle finances because they are too complex. “It’s the new days and now women take care of their own business,” she said.
Gil has done some reading on her own, like “Rich Dad, Poor Dad” by Robert Kiyosaki, but still has trouble grasping certain fundamental financial concepts. To remedy the problem, she thinks personal finances should become part of the high school curriculum.
Donny Lynn Burton agrees. A vice president at the Harlem office of the non-profit Operation Hope, which offers seminars in credit and money management as well as individual credit counseling, she constantly meets people in similar situations.
Her clients live very differently from the middle class. “They live paycheck to paycheck,” Burton said. “They don’t understand the benefits of having an account” in a bank. She shows them how to create budgets and has them come in regularly to stay on track.
But often they start much too late, which she blames on pride. It frustrates her that most people in foreclosure know what lies ahead but don’t take action. ‘They never try to call their bank to work something out,” Burton said. She spends a lot of time assuring her clients that they can negotiate because the bank is better off if they stay in their homes.
She, too, would like to see financial education begin in high school, before people wade into major financial decisions.
Original post:
Seeking Basic Financial Education
