Opening a bank account should be a pretty straight-forward process. You give the bank some money, provide a photo ID and give it some personal information and then you're done, right? The savings and/or checking account is opened and you can bank like the rest of society.
Not so fast. You're credit score is being checked by a bank before it allows you to open even a simple savings account. The bank wants to make sure you manage your credit well and that you won't cost them money as a customer. It doesn't want new customers, or any customers, to abuse overdraft privileges, have an unpaid negative balance, or have fraudulent activity on previous accounts.
Without at least decent credit, you may be denied service or asked to add a spouse or other family member to your account who has good credit.
Or it may offer you an account and a credit card, but the interest rate on the credit card will be a lot higher than it would be if you had good credit.
But applying for a credit card is another issue entirely. Opening a savings or checking account has its own problems if you don't look out for them. Here are three things to check on before and while opening a bank account: ...continue reading
Who wants to buy one car for the price of two? All you have to do is get a loan for six years at a 12% interest rate, and pay it off as scheduled. Gross, isn’t it?
Actually it’s compound interest. It’s bullish if you’re getting it, but a real beast if you’re the one paying it. Most people know about the magic of compounding investments, but it works the other way too. And just as some rates are better for investments than others, debts should also be avoided with certain interest rates, unless you enjoy doubling your debt.
Time isn’t the only factor, but it’s the biggest. The Rule of 72 is Einstein’s simple shortcut to figure out how long it takes for an interest-compounded value to double. It’s not exact, but it’s never more than half a year off. Just divide 72 by your interest rate, and there you have how long it would take for the loan or investment amount to double.
So 1% would take 72 years to double. 5% takes about 15 years to double. 10% takes 7.2 years to double. 20% takes 3.6 years to double, and 36% doubles in just two years. So if your loan duration is long, as in home loans, keep in mind it takes even less time for it to re-double (or quadruple). And it’s usually redoubling about half a year quicker for most good-credit rates. ...continue reading