Saturday, April 9, 2011
The first modern credit card, ‘The Diner’s Club’ card came out in the 1950s and was developed to help customers out, enabling them to carry just one card to pay at different stores. Now, with the passage of time people have come to rely on credit cards namely for two basic reasons, because it is easier and safer to carry than cash or simply to buy something that they cannot afford yet. The ones in the latter category are more likely to fall into credit card debt than the former. In developed countries and major cities in developing countries, credit card debt has become a considerable factor in increasing stress related health problems. The spending power that is offered with a credit card is almost addictive; it has people under its spell right from the first “swipe”. A person is more likely to buy a product that is not a necessity with a credit card than with cash in his/her hand as he/she is less likely to feel ‘the pinch’ while swiping his credit card. Even though credit card bills can be paid off in installments, the interest rates squeeze out lot more than the person would have originally thought of spending on a particular product or occasion. Paying off credit card bills might look like an easy task at first, though it’ll seem to be an almost impossible ordeal to most users. A few simple steps that can be taken to reverse your debt status can be observed below:
Getting Rid Of Credit Card Debts
- Do not keep credit cards in handy places like your wallet and carry just one card with a smaller limit, for emergencies. It is the key to avoid temptation.(A joke doing the rounds in credit card circles portraying a man who refuses to report a stolen credit card because the thief was spending lesser than his wife, paints a clear image of husbands with shopaholic wives or vice-versa.)
- Do not use new credit cards to pay off bills on an older credit card. That would be a recipe for disaster; you might end up paying more interest than you originally would have.
- Start paying with cash rather than “swiping”. Besides, handing over bank notes has always been swankier than handing over a card.
- Create a new budget, keeping in mind all the debts that have been incurred to date, scrimping on daily expenditures and avoid splurging money on unnecessary items. Cut down on household bills, electricity, telephone, fuel, etc.
- Try to prioritize your monthly credit card payments according to interest rates, speed up the payments on the ones with higher interest rates.
- Try to reduce “eating out” and cook a meal at home, give up on a few luxuries like going to the movies, drinking at pubs, fancy restaurants, at least till you can afford it without paying with ‘plastic’.
- Invest in a pair of scissors and start slicing up those credit cards once you’re done with the payments and keep just one in your wallet for emergencies.
Credit cards were seen as a necessary evil for a considerable amount of time. However, it could actually help people out in dire situations if used responsibly; maybe they should in the near future issue statutory warnings with credit cards that scream ‘swipe responsibly’.
at 7:53 PM
With just some years left for your retirement, you would definitely want to retire in the best possible way. And the most ideal retirement plan is one that guarantees a comfortable lifestyle with no financial concerns. With so many pension and retirement products available in the financial market, a person is bound to get confused to pick up the best one that guarantees maximum benefits. One such pension product is annuity. But most people do not have any knowledge about annuities, especially those who are new to the investment market. But with the recent market crash and subsequent losses, annuities are gaining popularity. Though complex, annuities do guarantee you sufficient returns. But before jumping into it, it is important for a person to know what an annuity exactly is and how does it work. It is a kind of investment wherein you make payments for a certain period of time, or pay one large amount of money. This, in turn, gives you a set amount of income at regular intervals for a particular period of time. Let’s find out more about the types of annuities and how do they work in the following lines.
Types of Annuity
A person who wishes to invest in an annuity has several product types to choose from. Depending upon the choice, the return on investment can vary. The different types of annuity are fixed, variable, hybrid, immediate, and deferred.
Fixed annuity offers a fixed rate of return on your money invested. It can either be a set amount or a set percentage of assets in the annuity. It pays out a guaranteed and predictable income amount, irrespective of what’s going in the financial markets. As such, fixed annuities pay a low rate of return since they are considered to be safe, compared to other kinds of annuity.
Variable annuity offers a variable rate of return on your money, though it pays higher returns. It has a minimum guaranteed amount but can increase depending upon how the kind of investments you have selected, such as stocks or mutual funds, perform from time to time. As such, you can expect to get higher returns with a better condition of the financial market and vice versa.
Hybrid annuity combines the features of both fixed and variable annuities. In such an annuity, you can withdraw certain amount of investment from your account while you can leave the remaining with hopes of growth with a variable rate of return.
Apart from the above three kinds of annuity, you have an option of choosing for an immediate annuity. It is a kind of investment that provides you with an immediate income, or at least within a year after you buy it. You pay a large lump sum amount, also known as single premium, and start receiving income from that money every month. Your monthly payment will depend on certain factors, like age, gender, and marital status. The older you are when you buy an immediate annuity, the higher will be the payout.
An investment, when made at a present date, gives you returns at a future date is called a deferred annuity. During the entire annuity’s “saving phase”, you make one or multiple contributions in terms of money and start receiving income as either periodic payments or lump sum with the beginning of the “distribution phase”. Similar to a retirement account, a deferred annuity allows you to deposit money and make use of it in the future.
How Does An Annuity Work
An annuity is a financial contract that is made between a financial institution and an annuitant. The financial institution that sells the annuity product is known as an insurance company, also called an issuer. The annuitant is a person who buys the product and hence, is known as the buyer. The buyer makes a lump sum payment or pays periodic amounts to the issuer on the context of receiving regular payments either immediately or after a certain period. The entire term of an annuity plan is divided into two phases: the accumulation phase and distribution phase.
In the accumulation phase, the buyer begins depositing money to the issuer, either in lump sum or regular fixed payments. The next comes the distribution phase wherein the issuer makes periodic payments to the buyer similar to the income payments made by him. An annuity plan is often accompanied by a life insurance component which requires the payment of a lump sum or periodic payments to the beneficiary, in case the buyer dies before he starts receiving any annuity payment or has received all the payments. The buyer will only start receiving the annuity payments on the completion of a certain age. In most of the cases, the buyer should complete 59½ years after which the periodic money can be withdrawn.
In case the buyer withdraws any amount before reaching the specified age, his amount will be levied with certain charges, such as tax penalties and surrender charges. The tax charges applied include 10 percent of the deposited or investment money plus regular tax payment rate on the interest returns. The issuer, or the insurance company, calculates the surrender charges on the withdrawal time and annuity plan.
To avoid any kind of inconveniences and circumstances, it is best to consult a financial professional to check out which annuity plan is the best for you.
at 7:38 PM