What is Global Credit Crunch

Lately we have been hearing a lot about the 'Global Credit Crunch'. This Credit crunch started in the American Mortgage Markets. So lets begin by trying to understand how the mortgage market works in America:
Like in other countries, American home buyers approach banks and non banks for money. To lend to the home buyers, these banks and non banks get hold of money in two places :
Access to deposits: This is however only applicable to the banks and not the non-banks.

Global Credit Market: This is used by both non-bank lenders and the bank lenders. The bank and non bank lenders basically borrow from other international bank lenders and mortgage funds. These international bank lenders and mortgage funds in the global credit market are lending in the hope that the money will be paid back (with some additional interest). And the borrowers assume they can pay back to the global credit market because the home buyers they are lending to will pay them back.

So if everything was proper it should work like this:

• Home Buyers Approach Lenders For Money
• Lenders Borrow Money From International Bank Lenders Plus Mortgage Funds
• Lenders Use This Borrowed Money To Lend To Home Buyers
• Home Buyers Pay Back Bank And Non Bank Lenders
• Lenders Now Pay Back To International Lenders Plus Trusts

The US mortgage lending market has been very relaxed for a few years now. Credit has been readily available for home buyers. There was no proper credit checking.It has been very easy for people without good credit history to get loans.

So the above five step scenario is now a bit different:

• Home Buyers Approach Lenders For Money
• Lenders Borrow Money From International Bank Lenders Plus Funds
• Lenders Use This Borrowed Money To Lend To Home Buyers
• Only some Home Buyers Pay Back Bank And Non Bank Lenders. Since no proper credit checks done there is a huge number of defaults.
• Lenders Cannot Pay Back All the International Bank Lenders Plus Trusts
The major outcomes as a direct result of this are -
• The Banks have tightened their lending to home buyers. The credit check process is now more stringent.
• Since not all the of credit has been paid back to the global credit market (due to defaults), the global credit pool has considerably reduced. This has resulted in a huge credit crunch. Banks and Non Bank Lenders from across the globe access the same credit pool...Hence they are all facing a crunch - a global credit crunch.
• Due to reduction in the credit pool the costs of borrowing for all banks across the globe has increased....(when there is less money you have to pay more to borrow). So the banks and non-bank lenders will now pass on this additional borrowing costs to their mortgages by increasing the interest rates. Hence all home owners with home loans will be affected.
• Due to reduction in the credit pool the costs of borrowing for all corporations across the globe has increased....(when there is less money you have to pay more to borrow). Corporations cannot pass on their increased credit costs across to anyone - The only outcome for corporations from this is a drop in their profits. This is the reason why the share markets have not been performing well since the Global Credit Crunch started.

So what are the lessons for common investors here?

Even if you have ignored the previous paragraphs and are reading only this one its good enough. This is a time to be very cautious. The interest rates are going to rise - So resist the temptation to borrow for unnecessary items. This is a good time to return to saving for purchases rather than just financing them with debt.

Guide on Establishing Your Business Credit

Why should you start establishing your business credit now? Establishing your credit history from the time you've launched your business is definitely an advantage. The older your business credit is, the more confident lenders would be on your ability to keep up with your payment obligations. Why is this important?

Sooner or later, as your business grows and expands, you'll need to apply for new loans and other business financing options. As we've said, the more impressive your business credit history is, the better your chances are of getting the best of what lenders has to offer.

In addition, having a corporate credit protects your personal credit history from risks. If you fail to meet your deadline of payment on your business credit card, only your business credit will be affected and your personal credit history won't have to suffer. Let's discuss the requirements and information you'll need to prepare before you can start building your business credit.

Legal entity. First of all, you need to clearly define the type of your business. To qualify for corporate credit, your business should be a corporation or an LLC (Limited Liability Corporation).

Physical Address. A legitimate business must have a physical address and telephone number. These two important contact details confirm that your business is really existent and not just a name.

Investor. Who is funding your business? Whether you have sought help or financial assistance from a lending company or a private investor, you must provide this information when applying for business credit.

What is Your Credit Score?

With the economic slump all over the world right now, you're probably seeing a lot of commercials on TV advertising free credit reports, complete with projections of a good credit score. But all of these advertisements can be confusing if you don't know what in the world they're talking about. Let me alleviate some of the confusion:

A credit score is simply a three-digit number that expresses how likely you are to pay your bills. It's based on a mathematical formula, called an algorithm, based on information from your credit report and compared to millions of other people all over the developed world. Though it doesn't seem like much, this little number determines interest rates in any number of things you might encounter throughout your life: a car, a house, a credit card, insurance...pretty much anything you can have interest on. The higher your credit score, the lower the interest you pay, because they're expecting that you'll pay your bills in a timely manner.

There are three major credit bureaus in the United States today: Equifax, Experian, and TransUnion. There are several different scoring methods, but one of the most popular scoring methods is the FICO score. Right now, each credit bureau uses its own version of FICO: BEACON, Experian/Fair Isaac Risk Model, and EMPIRICA, respectively. Though they are all fairly the same, they use different algorithms, so they usually vary.

The credit score runs from 300 to 850. Most people have scores anywhere between 600 and 800. 720 is the point where the consumer gets the most favorable interest rates, especially on mortgages. In America, 27 percent of people have a credit score between 750 and 799. This is the highest percentile in the credit score breakdown.

Visa Gift Cards

I think we all know what a credit card is for: they are great for online and personal transactions, along with bill payments and leisure activity purchases. They are akin to borrowing money and, like all loans, must be paid back in a timely manner. They can help or hurt your credit score. Gift cards, however, are a little different.

Like credit cards, gift cards are good for buying things online or in person, or for simple leisure activities. Unlike credit cards, however, the amount of money already on the card has already been paid, so it is less like borrowing money and more like spending money you already have. There is a very definite limit to the amount of money you can spend (obviously, you can only spend what is on the card), and so you never have to worry about going over. One downside, however, is that it can't help your credit score like credit cards paid on time can. As there are two sides to every coin, however, there is a good side to this: if your credit score can't be helped, you can't hurt it, either. This is a very good option for people who have a tendency to buy more than is really necessary.

With Visa, gift cards can be replaced if lost or stolen, and the recipients are guaranteed a wide variety of choices for their gift: the Visa Gift Card is accepted wherever Visa credit cards are accepted, and since Visa is one of the biggest credit card companies in the world, you are pretty much guaranteed great service anywhere in the world. And some Visa gift cards are even reloadable! This makes for a great present for teens, as they can learn the responsibility of credit cards with the safety net of parental controls!

So, gift cards, though limiting, have many of the same benefits of a credit card, while being safer for young adults to start to explore the wide world of credit cards.

Credit Cards - Two Cycle Billing and the Disappearing Grace Period

Most people are unaware of the "two cycle" billing method used by many credit card issuers today. This billing method actually makes consumers pay interest twice for charges that they put on their credit cards. Two cycle billing can even apply to those consumers who pay their credit card balance off each month. That's not all either; credit cards that have two cycle billing effectively rob card holders of their grace period if they carry a balance from month to month.

Almost all credit cards offer a grace period that allows consumers to pay off their charges without having to pay interest. For our example let's assume its 30 days. So, if you were to make a $1000 purchase in January 1st and pay it off in March 1st you would expect to pay interest for the month of February, right? With single cycle billing you will, however with two cycle billing you will pay interest for January and February.

Without getting too deep into the math, credit card companies charge interest on your average daily balance (balance divided by 30 days). If you pay your bill in full at the beginning of February, your next statement should have a zero balance. Two cycle billing calculates your interest on a 60 day average instead of dividing by 30 days. So, when your bill arrives in February you will pay your minimum payment, or your balance, plus interest for the first 30 days.

This interest charge on your first statement will actually be lower than the single billing cycle because it has been calculated with 60 days instead of 30 days. However, when your bill arrives in March you will receive another interest payment for the remainder of the 60 day cycle, regardless of your balance. The truth is, the difference in interest between the two methods is only a couple of bucks, assuming that you pay the $1000 off in a month's time. However, for those who carry a balance from month to month this additional interest can begin to add up. Not to mention the two cycle method will essentially rob you of your provisional grace period that is allowed on new purchases.

For example, when you carry a balance from month to month, your first statement will show your initial interest charges, less the original grace period. However, using the two cycle billing method, all new purchases will be added to the 60 day average and interest calculated on that new balance. This means, that even if you pay your new purchases off in full the next month, you will still be paying interest on them the following month.

The best way to avoid the double cycle billing is to read the fine print before you apply, and then simply avoid the cards that use this method. Where it gets tricky is; what if the card that you are considering has a significantly lower rate than a comparable card that uses the two cycle billing method? If you are someone who pays the balance off each month, it's a no-brainer, take the lowest rate. Just be sure that you pay within the grace period. If you are considering a balance transfer, you need to realistically, calculate how long it will take you to pay off your credit card balance.

Balance transfers require some math, if you follow the link below to Direct Banc, you can use our balance transfer calculator to get a better idea of which card will be the best for you. As always, we suggest that you read the "fine print" before applying for any credit card to avoid any surprises. Remember, if you get a card that you don't like, you can simply cancel the card when it arrives at no cost to you.

Skimming of Credit Cards

What is skimming. Skimming is a fraudulent activity involving the illegal copying, or "skimming", of the account information, stored in the magnetic stripe of a credit or debit card. It usually happens after the card has been presented to be used in a legitimate transaction. The skimmed information is subsequently used to make copies of the payment card to be used in fraudulent transactions or the information itself may be sold to criminals.

How the skimming of payment cards is done. Unfortunately it is way too easy to skim the information off of a credit or check card. The information theft is usually committed in a card-present setting, for example in a restaurant, a bar or in other similar establishments where the swiping of the payment card takes place out of sight of the cardholder. Once the customer submits his or her card and it is taken to the processing terminal, it is run through a small mobile device which copies the information contained in the magnetic stripe. Then the card is also run through the terminal's slot to complete the legitimate transaction and it is eventually returned to the unsuspecting cardholder.

How to prevent skimming. Skimming is illegal and it is every merchant's responsibility to ensure that it is not taking place in his or her establishment. You and your personnel should be on guard against:

• The use of all electronic devices that are not needed or normally used in your type of business. If you are not sure exactly what a particular device is used for, you should investigate.
• Any offers to record payment card account information for whatever reason.

If you believe or suspect that skimming might be taking place in your establishment, you should immediately contact your merchant account provider and take the appropriate measures against the employee(s) involved.

The Real Deal Behind 0% APR Offers

Creditors use the 0% APR as a marketing maneuver to entice prospective debtors to their offer. This offer is good usually for the initial six to twelve months following account activation and is basically free money. But like anything, 0% APR has both its pros and cons. Through a careful analysis of both sides, you will be better equipped to determine if 0% APR is right for you.

Obviously, the good part to the 0% APR is the rate itself. At first glance, it seems odd that credit card companies would be willing to give away free money. In reality, as people are often foolish with their finances, the credit card companies will earn much more money in the long run, as the offer hooks new credit card holders. From the time you receive your credit card, you will have a very low rate, as much as 0%, and not have to worry about interest charges for the first six to 12 months. You might think of this as a honeymoon period with your new card. Compound this with a no annual fee credit card, and you can save a lot of money during this period.

The downside to the 0% intro APR is when the offer ends. The credit card issuer will no doubt attempt to retrieve their deficit from the introductory period. In response to this, they will most likely raise the interest rate higher than normal. So at the end of the day, it is a race to try and pay down your balance in time. After the introductory offer expires, the remaining balance will be transferred to your next months bill, and you will have to pay the higher interest rate quoted by the company. At this point it becomes just another high interest rate credit card, tempting you to spend additional money.

If you think you might have difficulty with paying down your balance before the introductory offer ends, you better think again. The interest rate you're left paying will be more expensive than simply using any low-interest credit card.

Earn Airline Rewards With Credit Cards

You may have heard of frequent flyer programs, where participants earn points which award free airfares and benefits not available otherwise. But did you know that you do not have to actually fly in an airplane to earn these rewards?

There are many credit card companies today which offer customers the benefit of frequent flyer points. These credit cards have a special partnership with designated airline companies, awarding points to consumers based on certain types of purchases, cash advances, or other transactions. By making regular, everyday purchases, cardholders receive additional points. Different cards will offer different benefits or incentives. Participating cardholders commonly earn one or two free airline tickets every year.

Airline frequent flyer rewards credit cards come in two distinctive types. The first type of card is issued through an affiliated airline carrier, and is a good option for those who travel often. These cards are also wonderful for those who fly regularly for business purposes. If you have a tendency to use different airlines, or if you do not travel often, then you would be wise to choose the second type of card, which awards all-inclusive points. With this type of card, you will be allowed to use your frequent flyer points for travel on any airline, rather than being obligated to any one particular airline company.

Most major credit card companies offer frequent flyer incentive programs. For example, American Express offers a credit card with no expiration date on corresponding airline points, with double rewards for dining, travel, leisure, or entertainment purchases. A card through Bank of America offers no black out dates and rewards for all types of purchases. Visa, MasterCard, and Discover cards also have numerous cards through various companies, many of which also offer frequent flyer incentives.

If you are a frequent traveler, and tend to use credit cards during your excursions, then it makes logical sense to transfer your balances to a credit card which offers miles rewards. You will earn free travel incentives as a reward for what you are already doing, using your credit card! Airline credit cards also tend to offer exceptional interest rates, quality customer service, and amazing travel opportunities. Most cards also have no restrictions or blackout dates when it comes to using the accrued frequent flyer points.

Airline rewards credit cards are the most popular type of plastics, according to recent cardholder polls. Naturally so, since these cards were the original companies to offer rewards. In order to earn the very best incentives, there are a few tips and tricks to follow. Make sure to pay your bills in full every month. Choose a card with flexible reward schemes. Do you homework to discover the various benefit packages, such as special purchase incentive, redemption policies, or promotions.

Regardless of which frequent flyer airline rewards credit card that you choose, always remember that these cards have credit fees and a corresponding APR rate, just as any other card does. Keep careful records of your purchases and related point earnings, so that you always know where you stand. Pay close attention to the conditions and terms of the card, so that your hard earned rewards are not in vain!

First Credit - Student Credit Cards

Once a young person enters college, there's a whole range of new responsibilities that have to be faced. One of the most important is the art of managing often limited finances. Student credit cards are specialty cards offered to initiate young people in the use of credit. No income? No credit record? No problem! The only qualifying factor is that they an enrolled student at a four-year university.

Anyone, including high school students, can apply for one of these credit cards, but they're generally meant for college students. Although these cards may be easy to get, they typically charge heftier fees and interest rates, and smaller credit limits.

Young adults generally have no established credit history. Young people with limited experience and no established credit history are often frowned upon by credit card companies. However, those who are attending college with their focus on the future demonstrate a degree of maturity and responsibility that gives companies a bit of assurance that they will be able and willing to take care of their debts. Also, parents are often willing to come to the rescue to pay the bill, especially if they've co-signed for the credit card.

Two Types of Credit Cards

Secured Credit Cards - The student will be spending money that has been deposited in a bank account in advance. With this type of card there is no risk of accumulating long-term debt or interest. Cards are also available that allow parents to link a student's card to their personal account, or let them keep refilling the teen's or student's accounts as they go along. It will cost an enrollment or annual fee and additional fees each time money is added to the card.

Unsecured Credit Cards - This is a traditional credit card that is an actual loan from the bank. No advance deposit of funds is required. Interest is applied to the balance carried from month to month and is often substantially higher than other credit cards. This type of card is much harder to get approval than a secured credit card.

Details of the Best Offers for Students

• The lowest APR card will help when a balance must be carried from one month to the next. An interest rate in the mid-teens is reasonable for students.
• A long grace period will allow for a longer period of time before you have to pay interest.

• Look for a 'no annual fee' offer.

• Employed students are more likely to be approved, as it shows responsible behavior.
• Be truthful on your application. It will increase the probability of getting the best rates, as the company will verify all the information on your application.
• Online account access is a plus to easily keep track of balances and payments.

Using Student Credit Cards Wisely

Begin with a budget that can be easily managed each month and stick with it. Even though new credit card consumers are typically offered a limit of $500 to $1,000, limit yourself to what you can repay each month. Safer than cash, use your credit card to purchase student necessities.

Student credit cards that include rewards are available through major issuers like Citibank and Chase who has partnered with retailers like Starbucks, Amazon, and the Gap. Be careful that the rewards don't entice you to spend outside your budget just to earn the reward.

Who Wants a Better Interest Rate on Their Credit Cards? You Do! Here's How!

Can you imagine a world without credit cards? Now we hear words like credit score, bad credit, and credit cards every day, but if you are over 50 you remember a world without those things and we got by - somehow.

Credit cards are much more convenient than carrying wads of cash (not that I ever did) and it's hard to imagine life without them. The credit card industry has evolved over the last 30 years, part of a long-term plan by the industry, and it is very appealing.

Since this is the world we live in you need to know how to get the most out of it by getting the best interest rates on those credit cards you have. Here how:

· In the world of plastic (credit cards) you must have a good credit rating. Life is hard enough without adding unnecessary headaches.

· Pay all your credit card bills on time and it's best if you keep your credit card debt at 20 to 30% of your limit.

· Be careful not to acquire too many credit cards. You should have no more than 2 or 3. This will keep your debt manageable. Most of the time when people get into credit trouble it's because they have too many credit cards.

· If you follow step #2 you will begin to establish yourself as someone who can be trusted, something we all would like to be. Which means when you apply for larger debts, like a home or car, the lenders will give you a better interest rate.

· Using your credit cards wisely will boost your credit score and also enable you to qualify for low interest credit cards as well.

· Protect your major purchases - Under the Fair Credit Billing Act of 1999 if you buy something that is damaged or defective with your credit card, you have the right to stop payment until it is made right. You need to make a good-faith effort to work things out. If you can't solve the problem you can ask your credit card company to investigate and solve the problem.

· Note - if you used a debit card this law does not address that. That's why it is best to use a credit card.

· Using a credit card for online shopping is safer

· The Fair Credit Billing Act also covers online purchases. Many people are still wary about shopping online with a credit card. You don't need to be. The credit card industry has made a great effort to make online shopping safer and the sites that take credit cards use an encrypted method to make certain your numbers are safe. Of course we all know in this life nothing is certain except death and taxes, so theoretically it is not safe, but it is 99.9% safe - and that's pretty safe.