Online Financial Tips

Archive for June, 2011

Under debt relief programs there are many options available to a debtor. These include Debt Settlement, Debt Consolidation, Debt Management, Debt or Credit Counseling and Bankruptcy. In a comparison between debt settlement vs. debt consolidation, a consumer may get confused. Both these methods are loan relief programs and present an alternative to bankruptcy.

Now, we will first analyze both the programs in detail and then compare debt settlement vs. debt consolidation.

In settlement:

The consumer needs an overall due of $10k or more. The consumer needs to have the dues consolidated. The consumer needs to hire a professional settlement company. The professional company negotiates with the creditors and threatens the lender that the consumer will have to file for bankruptcy in case the creditor turns down the settlement offer. The creditor never wants bankruptcy and eliminates the debt of the consumer by at least 50%. It depends on the negotiator whether the debt is eliminated by even greater percentage. When the settlement deal is signed, the consumer needs to pay the remaining amount to the lender either as one time payment or in six months installments.

In consolidation:

The debt of the consumer is not eliminated. The rate of interest is reduced on request and some of the costs of the debt are wiped off like, service tax, late fee etc. and the loan is re-amortized. The consumer now pays one monthly payment to the consolidator. The consolidator then distributes the same to the creditors.

Now we compare debt settlement vs. debt consolidation face to face.

In debt settlement you can achieve in eliminating 50% to 70% of total unsecured debt. But in debt consolidation you end up reducing loan burden. Debt settlement takes 1-3 years to complete while loan consolidation may take as long as 5 years. In loan settlement the consumer is not charged by the settlement firm in advance. They charge their clients only when they come up with successful results. While in debt consolidation the firms charge them a nominal fee per month. In settlement the consumer loses both the credit score and credibility but only during the settlement process. In consolidation they are intact.

Have you started receiving credit card debt settlement notices in the mail? Have you been receiving collection calls? If this is the case, you have probably been in debt and been dealing with financial difficulties for quite some time.

Creditors are sometimes willing to settle the account for a lesser amount if the credit card account is seriously delinquent or has been written off. This creditor will usually accept the settled amount in one payment and the payment has to be made within a short period of time.

Now you may wonder why a creditor would settle for less than what is owed. Your credit card issuer is trying to reduce their losses and they have concerns about you paying this debt. Your credit issuer feels that recovering some of their money is better than not getting any of it back. Keep in mind that accepting a settlement may affect your borrowing ability in the future with this creditor, but it is a better option than bankruptcy or doing nothing at all.

A creditor will not usually settle on an account that is current. Normally, the account has to be at least 90 days delinquent before they will talk settlement and many credit card companies will wait longer than that. Here are a few things you should be aware of before agreeing to a settlement.

1. Your settlement payment may not completely satisfy the debt. There is a possibility that the uncollected portion of the debt could be turned over to another collection agency for further collection activity, but this is not the norm.

2. The IRS considers the amount of the debt that has not been satisfied as income. Any amount that exceeds $600 will be report on a 1099, to the IRS, by your creditors. You will be required to pay taxes on this amount.

3. Know what’s on your credit report. If the debt is not on their at all, it is not recommended that you do anything with this debt. If it is showing as being “charged off,” this is negative note on your credit report. If you settle, it will be noted as “settled for a lesser amount” which as also somewhat negative, but not as bad as doing nothing about it at all.

The best thing to do is to try to deal with the original creditor. Communicate with them in writing. If they will not deal with you, contact the collection agency in writing. If at all possible, try to negotiate a repayment plan on the balance. If you decide to settle the debt, get the terms of the settlement in writing to avoid problems on down the road. Once you have paid the debt, ask for a “release of debt” as proof that the company has agreed that the debt has been satisfied.

The best thing that you can do for yourself is to examine the curcumstances that caused your debt to get to this point and to put a plan in place that will prevent you from ending up there again.

Current research figures suggest that over 80% of all internet users do online banking, and that the demand for the online savings account is at an all time high. Online banking has created some win-win situations for both the banks and for consumers. Online only banks have significantly lower overheads than traditional banks as they do away with the need for expensive branch networks. The win for consumers not only comes in the form of added convenience with access to your account 24/7 but because banks can pass the savings onto consumers in the form of lower fees and higher returns. The key reason quoted for the attractiveness of the online savings account, is the higher interest earnings draw card.

When selecting an online savings account, there is no one size fits all product. Your financial behaviour is a key factor in choosing an online savings account- especially in as far as transacting volume and saving patterns are concerned.

Here’s what to look out for when comparing online savings accounts.

Interest Rates

Check the interest rates payable on the account and compare them to others on the market to ensure they are competitive. Make sure you know if the interest rate is a standard variable rate or simply an introductory rate for a fixed period, e.g. 6% for 12 months. Check how interest is calculated and paid. The most common method used is to calculate interest daily and for it to be paid monthly.

Minimum Deposit

Look out for the minimum deposit required when opening an account. Many online high interest saving accounts have no minimum deposit required but there are some that may require an initial lump sum, say $2,000 to open the account.

Account Fees

Check whether there is any fees payable on the account. These may be in the form of a monthly account fee or usage related fees such as charges for making a transaction or contacting customer services via phone instead of online.

Interest Penalties

There may be indirect account fees payable too. Look out for online saving accounts that charge an interest penalty when withdrawing money from your account. A common penalty is that you may earn no interest for the entire month in which a withdrawal is made.

Read beyond the headlines

Make sure you understand the full details of the online savings account offer that you see. A promotion may advertise ‘earn up to 6% interest’. In this case you’d want to see if all your money would be earning the 6%. Some banks have a range of interest rates that apply depending on how much money you have in the account. Ideally every dollar should be earning the same high interest rate.

Accessing your money

Before applying for an account, think about how you may need to access the money and how quickly you’d need to access it. Many online banks work by linking your savings account to your normal everyday bank account. This is cost effective and often fee free but may take a couple of days for the money to get to your bank account. Some online banks provide an ATM card providing instant access to your funds.

Build your savings wealth faster

It’s easier to set up an online savings account and then neglect to add money on a regular basis. When applying for an account you should think about setting up a regular direct debit from your everyday bank account. By making a regular deposit each month you’ll soon find your savings and interest earnings starting to add up.

The Good News

The good news is that many of the online saving account offers on the market are very competitive and you will find a range of offers with high interest rates, no minimum balance requirements and no fees or penalties. Just be sure to compare the variety of online savings accounts available before you apply online.

Several online vendors utilize multiple payment options to enhance the chances of making a sale. Offering several payment options is a very good idea if you’re selling products/services online, but beware, processing your own credit card payments can be dangerous and the potential to even be financially crippling to the new merchant.

Accepting payment methods such as PayPal offers peace of mind through security checks that assist an online retailer in ensuring the payment was authorized from the financial holder, such as offering an address confirmation and a verification process to ensure that PayPal users are legitimate. This service can be very helpful, however PayPal is typically more expensive to use on a per transaction basis, not to mention loosing additional funds on international currency exchanges can be costly to the average PayPal user. I’ve personally used PayPal for several years and they’ve changed policies, website features, fund holds and more way too many times to keep confident in using them as a sole processor. I’ve also used other credit card processors. The per transaction rates are typically more aggressive and if you find the right one, the fraud prevention tools are pretty good for the most part, however dealing with a large amount of fraud on a daily basis, one must keep several points in mind when processing cards directly.

Below are some good tips to use when processing credit card payments on your own to ensure your odds of shipping a fraudulent transaction and receiving a credit card charge back are minimal.

1. Never ship to a shipping address that doesn’t correlate with the buyers billing address. Ensure the credit card processor you’re contemplating offers an address verification service (most do). They typically have a legend of letters (sometimes fairly random), which provide detail regarding the order. For instance, when an order comes in to one of my websites I can clearly see if there’s an address match. If not, I immediately void the transaction.

2. Always track IP addresses and check each order. Most online processors clearly show the buyers IP address. Verify that the buyers IP address originates from an area in which you ship to. Also confirm that the IP address used to place the order matches the IP address used to create an account with your website. If possible utilize fraud prevention tools that your processor may offer to block high fraud countries. I’m not going to get in to the highest fraud countries, that information is readily available online, do a quick Google search. I can say that 90% of the fraud that has come through on my websites originate from either Africa, or Venezuela.

3. Void a transaction as soon as you possibly can if you suspect fraud. Voiding a transaction before it has batched will save you a ton of money int he long run. Once a payment batches (charges the clients card), there is a processing fee. The fee ranges for online transactions, dependent on your product, market and risk to the processor. Voiding a transaction will typically still incur a small per transaction fee, but it’s much less than an actual processing fee. My transaction fee is $0.10.

4. Call your customers to confirm orders if you have any suspicion. If the customer hasn’t provided a phone number, email them and request that it’s mandatory to provide a phone number for shipping purposes. This can help you qualify who you’re dealing with by having a quick conversation to verify the contents/shipping address of the order.

5. Clearly display a fraud warning on your checkout pages. I’ve found that this can cut down on fraudulent transactions by at least 50%. One of the notices I use goes something along the lines of “All fraudulent transactions are immediately reported to authorities for investigation. Fraudulent transactions will be prosecuted to the fullest extent of the law.” I also clearly outline that absolutely no orders will be shipped to addresses other than the card holders billing address for any reason. These tactics can greatly reduce fraud and wasted time.

After years of processing payments through PayPal and other processors, I must say that the above has been acquired through several experiences of tough learning. Create rules and abide by them. If you have a bad feeling about a transaction, take steps to confirm who you’re dealing with. If you can’t effectively do so, don’t ship the order.

Thinking about a second mortgage before divorce?

Virtual terminal credit card processing is actually done in an online environment, using software that is supplied by the processing company. While this is an option for accepting payment cards that business owners love and take full advantage of, it doesn’t always work for all venues. For example, if you will be participating in expositions, fairs, seminars, or other types of events where you will be making sales, unless you have a laptop, and the processing company allows you to operate outside of your usual IP address, you will not have any way to collect credit card payments.

The companies that process credit cards for you, through their virtual system, have many security features in place to protect you and your customers. When your customer makes a purchase, it generally doesn’t matter where they are located when you have virtual terminal credit card processing in place. However, when you need to enter the payment card number yourself, such as when you take a telephone order, the processing company checks your login information and your IP number to make sure that it is actually you doing this. If the information that they see – such as the IP address – isn’t correct, the card cannot be processed.

Unfortunately, many business owners are not fully aware of these security measures, and they carry their laptops for credit card processing to these types of events, only to find that they cannot accept card payments until they return to their normal place of business – where their IP address is. This is a huge issue, that costs many business owners a great deal of money in lost sales – and there is little or nothing that can be done about it. You need virtual terminal credit card processing with a mobile device that is designed for these types of events.

While these devices are not overly expensive, there are lease options that make them more affordable if they will just be used for one event. You can even use these devices at your place of business, or at other venues in place of the system that you currently use for collecting credit card information. Even if this is your intent, you still have the option of purchasing the device, or leasing the device with a short term or long term lease.

Whether you lease or purchase a device for virtual terminal credit card processing, you should have twenty four hour technical support available to you, and your device should be previously set up for your use, before it is shipped to you. Don’t make the mistake of thinking that these devices are only suitable for point of sale transactions, as they can also be set up to accept credit card online, with the help of a qualified sales team and top notch technical support, you can easily get set up for this. A good company that sales or leases these devices will also offer processing services as well, which may be required as your current processing service may not allow for the use of anything other than their software.